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SATHOSA MOTORS PLC

Annual Report 2014/15

Passion forSatisfaction

SATHOSA MOTORS PLC

ANNUAL REPORT 2014/15

Service is at the heart of the operational being of Sathosa Motors. In becoming the dynamic visionary leader, we’ve acknowledged the role service excellence plays in developing our position within the Industry. Driven by a high sense of customer satisfaction, our passion for service is derived through the provision of quality products at competitive prices. Our team of highly motivated staff has dedicated themselves to serve passionately, serve from the heart with the commitment of maximising returns to all stakeholders. That is why Sathosa Motors is increasingly becoming every Automobile Enthusiast’s preferred choice in the 21st Century.

Passion forSatisfaction

SATHOSA MOTORS PLC

SATHOSA MOTORS PLC | Annual Report 2014/152

Our VisionTo be the trusted leader in the Sri Lankan Automobile vehicle industry by ensuring that we deliver only the best quality to our valued customers.

Our MissionTo achieve excellence in customer satisfaction by cultivating a dynamic and productive organizational culture with highly motivated staff to provide the best quality vehicles at competitive and affordable prices, thereby generating the maximum benefit to all our stakeholders.

Key Corporate Values• Wevalueandbelieveinmaintainingthehigheststandards

of integrity, honesty, transparency, responsibility and ethical behaviour in all our dealings and transactions.

• Werespectthedignityofpeople

• Wearepassionateaboutdeliveringthehighest levelsofservice quality to all our internal and external stakeholders.

• Weencourageandrespectdiversityamongour team inorder to create an inclusive organizational culture.

• Webelieveinleadingbyexample.

• We firmly believe in taking all prudent and responsiblemeasures to strengthen our Company’s financial foundation.

• Webelieve in the importanceof ensuring excellence inall our processes and systems as a means of maintaining a strong niche position in the Sri Lankan market: from expanding our dealership network, to introducing innovative product ranges to the market, to market development, to leveraging training as an opportunity to enhance expertise and productivity.

• We are committed at all times to strengthening thecorporate image of Sathosa Motors by communicating and delivering on our core values.

3

�History of Sathosa Motors PLC 4 �Financial Highlights 6 �The New Isuzu Series Reward 8

�Chairman’s Review 10 �Managing Director Review 14 �Board of Directors 18

�Management Discussion and Analysis 24 �Corporate Governance 30 �Risk Management Review 32

�Annual Report of the Board of Directors on the Affairs of the Company 38

�Independent Auditors’ Report 41 �Statement of Profit or Loss and Other Comprehensive Income 42

�Statement of Financial Position 43 �Statement of Changes in Equity 44 �Statement of Cash Flow 46

�Notes to the Financial Statements 47 �Report of the Audit Committee 89 �Information to Investor 91

�Statement of Value Added 93 �Notice of Annual General Meeting 94 �Form of Proxy 95

�Corporate Information Inner Back Cover

Contents

2007The Company was re-registered under the Company’s Act

No 7 of 2007, as Sathosa Motors PLC (SML).

2012The controlling stake of SML was acquired by Access Engineering Company

Limited.

1962The Isuzu Agency was secured by the Co-operative

Wholesale Establishment (CWE), under their New

Vehicles and Machinery Department.

1978Strengthens its foothold in the industry after the liberalization of imports.

1985Converts the New Vehicles and Machinery Department into a

fullyownedsubsidiaryof theCWE,under theauspicesof

the Ministry of Trade and Commerce as “Sathosa Motors

Limited” to enable the Company to operate more

independently and efficiently, catering to the

growing demand.

Company HistoryWith a history that spans over five decades in time, SathosaMotors PLC has established its name as a

trustedleaderintheautomotiveindustryofSriLanka.Withacomprehensiveproductofferwhichcaterstodifferent

economic segments, the Isuzu range of vehicles include Double Cab Pickup Trucks, Light and Heavy Duty Commercial

vehicles, luxury passenger coaches and special purpose vehicles. Further enhancing this growing vehicle portfolio is its latest

addition, the Isuzu Sports Utility Vehicle range.

The Head Office at No.25, Vauxhall Street, Colombo 02 comprises of a state of the art new vehicle

showroom, a spare part department and a workshop capable of handling all Isuzu vehicle repairs.

Equipped with modern technology, the main workshop at Peliyagoda is renowned for both

problem identification as well as rectification of all models under the prestigious

Isuzu brand. For the convenience of customers, a spare parts unit has also

been established at Panchilawathtaha.

2007The Company was re-registered under the Company’s Act

No 7 of 2007, as Sathosa Motors PLC (SML).

2012The controlling stake of SML was acquired by Access Engineering Company

Limited.

1962The Isuzu Agency was secured by the Co-operative

Wholesale Establishment (CWE), under their New

Vehicles and Machinery Department.

1978Strengthens its foothold in the industry after the liberalization of imports.

1985Converts the New Vehicles and Machinery Department into a

fullyownedsubsidiaryof theCWE,under theauspicesof

the Ministry of Trade and Commerce as “Sathosa Motors

Limited” to enable the Company to operate more

independently and efficiently, catering to the

growing demand.

2013A strategic decision was made to acquire 50% stake in

Frontier Automotive Pvt Ltd, the exclusive distributor for Land

Rover in Sri Lanka, a luxury European Brand, best known as the ‘Sri

Lankan Military’s Vehicle of Choice’.

2014Further strengthening the product offer with the

Introduction of Isuzu SUV with distinctive styling,

spacious interiors and the promise of a smooth

drive, complementing the existing Isuzu

heavy and light commercial trucks and

Isuzu luxury buses and double cabs.

1992Partial privatization of Sathosa Motors Limited, in line

with the government policy. 60% of the issued

capital was acquired by M/s Itoch & Co limited

(ITOUCH Corporation, Tokyo Japan, a leading

trading organization in Japan, 10% of

the balance shares were gifted to

employees, and 30% was issued

to the general public.

SATHOSA MOTORS PLC | Annual Report 2014/156Financial Highlights

Rs. 2,737 Mn.

Net Revenue

Company

Rs. 253 Mn.

PAT

Rs. 41.93EPS

21.18%ROCE

Company Group

06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 13/14 14/15

Gross Turnover (Rs.000) 1,110,934 1,411,026 885,743 824,765 1,449,396 1,902,741 2,334,937 2,459,490 2,752,023 3,075,580 3,527,240

Profit before Taxation (Rs.000) 144,891 164,137 73,981 42,513 175,775 242,311 286,342 322,327 349,652 415,067 382,172

Profit after Taxation (Rs.000) 92,562 100,732 55,352 26,995 110,512 173,026 205,752 231,771 252,968 288,233 269,805

Property Plant & Equipment (Rs.000)& pre paid Lease Payment 33,165 31,768 51,364 45,393 41,349 39,012 44,897 74,465 118,079 178,779 337,928

Investment Property ( Rs.000) - - - - - 21,683 24,192 24,192 24,192 24,192

Gross Dividends Paid (Rs.000) 60,336 96,538 36,202 12,067 30,168 30,168 30,168 30,168 30,168 30,168 30,168

Gross Dividends Proposed (Rs.000) - - - - - - - 30,168 42,235 30,168 42,235

Dividend Per Share Paid / Propose (Rs.) 10.00 16.00 6.00 2.00 5.00 5.00 5.00 5.00 7.00 5.00 7.00

Dividend Cover (Times) 1.53 1.04 1.53 2.24 3.66 5.74 6.82 7.68 5.99 8.62 6.18

Earnings Per Share (Rs.) 15.34 16.70 9.17 4.47 18.32 28.68 34.10 38.41 41.93 43.09 43.32

Net Asset Per Share (Rs.) 60.35 67.04 60.22 58.69 74.51 98.64 127.76 161.08 197.96 165.76 204.02

Net Profit to Revenue (%) (Before tax) 13.16 11.74 8.42 5.20 12.28 13.02 12.39 13.24 12.77 13.65 10.91

Current Ratio (Times) 2.57 2.85 2.69 4.69 1.77 1.73 2.14 2.36 2.50 1.99 1.96

Quick Assets Ratio (Times) 1.65 1.68 0.87 2.61 0.85 0.83 0.74 1.30 1.14 1.15 0.97

Return on Capital Employed (%) 25.42 24.90 15.24 7.62 24.58 29.07 26.69 23.85 21.18 28.82 21.92

7Revenue Analysis

of Year 2014/15

(Gross)

Revenue(Gross)

Rs.

New Vehicles 2,367,465,952

Spareparts 174,910,967

Workshop 160,396,871

Others 49,248,284

Total 2,752,022,074

Return on Capital Employed

(After Tax)

Profitability

Earning & Dividend Per

Share

1.79%5.83%

6.36%

86.03%

0

500

1000

1500

2000

2500

3000

14/1513/1412/1311/1210/11

5

10

15

20

25

30

14/1513/1412/1311/1210/11

100

150

200

250

300

350

14/1513/1412/1311/1210/11

0

10

20

30

40

50

14/1513/1412/1311/1210/11

In Rs. Mn.

Year 10/11 11/12 12/13 13/14 14/15

Revenue 1449.4 1902.74 2334.94 2459.49 2752.02

In Rs. Mn.

Year 10/11 11/12 12/13 13/14 14/15

Profit Before Tax 175.78 242.31 286.34 322.33 349.65

Profit After Tax 110.51 173.03 205.75 231.77 252.97

In Rs.

Year 10/11 11/12 12/13 13/14 14/15

Dividend Per Share 5.00 5.00 5.00 5.00 7.00

Earning Per Share 18.32 28.68 34.10 38.41 41.93

Year 10/11 11/12 12/13 13/14 14/15

Return on Capital Employed % 7.62% 24.58% 26.69% 23.85% 21.18%

Capital Employed Rs. Mn. 449.55 595.17 770.83 971.90 1,194.39

Net Profit After Tax Rs. Mn. 110.51 173.02 205.75 231.77 252.97

THE NEW ISUZUSERIES REWARD

SATHOSA MOTORS PLC | Annual Report 2014/1510Chairman’s Review

Dear Valued Shareholders,

It gives me immense pleasure to share with you the performance and outlook of the Sathosa Motors

PLC (SML) Group as it recorded the highest-ever profitability in the group’s history. Sathosa Motors PLC’s

group revenue rose by over 15.13% during the Financial Year 2014/15 from Rs.3.04 billion in the previous

year to Rs.3.50 billion, while the company revenue rose by 12.34% from Rs.2.43 billion to Rs.2.73 billion.

As a result, the profit attributable to the owners or the ordinary shareholders of the Sathosa Motors

group rose from Rs.260.00 million to Rs.261.38 million during the year under review.

Despite the by now routine ad hoc nature of imposing taxes on the automobile sector and the fiercely

competitive market conditions, the Group recorded an outstanding financial performance supported

by a high level of strategic management expertise, which helped us achieve the ambitious goals we had

set for ourselves in the previous financial year. I would like to bring to your notice that Sathosa Motors is

highlightedasthehighestReturnonEarnings(ROE)generatingcompanyinthesectorbyanalysts.We

are in the leading position in the Light Commercial Vehicle segment, being the exclusive distributor of

Isuzu and Land Rover brands in Sri Lanka. Overall, despite severe pressure from local market conditions,

the macro economic climate proved to be reasonable during the period under review.

Economic Climate in Sri LankaIn Sri Lanka, the macro economic policies set in motion in 2014 resulted in low levels of inflation of

3.3% and an economic growth rate close to 7.8% as targeted in the Central Bank of Sri Lanka’s roadmap

for 2014. This was achieved amidst a global economy where the US showed signs of recovery and

other major economies such as Europe, Russia, China and Australia exhibited low moderate economic

climate. Sri Lanka experienced Foreign Direct Investments (FDIs) of over US $1 billion and the Colombo

Stock Exchange All Share Index rose from 5,913 points to 7,299 points, marking a growth of 23.4%. The

fiscal policy has targeted capital formation in both hard and soft infrastructure, while state investments

in road and transport, aviation, port, irrigation, telecommunication and knowledge continued. The Sri

Lankan Rupee has been through one of its least volatile phases, with monthly averages not exceeding

the Rs. 131 per USD mark in the first half of FY2014/15. As such, the Sri Lankan rupee remained stable

against the US Dollar with a marginal depreciation of 0.3 % by the end of 2014. During the year under

review, Sri Lanka’s higher expenditure on imports of motor vehicles for personal use was the main

contributor to the growth in consumer goods imports.

Automobile IndustryGlobal Trends

Analysts note that the world market for cars and other light vehicles will expand from the current rate

of 80 million units a year to well over 100 million by 2020, reflecting the enormous growth potential

of emerging economies. By present estimates, the global automotive industry is worth US $ 800

billion. Analysts forecast that the world market for cars and other light vehicles will expand from the

I would like to bring to your notice that Sathosa Motors is highlighted as the highest Return on Earnings (ROE) generating company in the sector by analysts. We are in the leading position in the Light Commercial Vehicle segment, being the exclusive distributor of Isuzu and Land Rover brands in Sri Lanka.


current rate of 80 million units a year to well over 100 million by 2020. The global automotive industry

is currently witnessing a widespread adoption of advanced technologies to increase fuel efficiency,

reduce emission levels and to enhance the driving dynamics of the vehicle.

Local Trends

The number of new vehicles registered during 2014 increased by 31.5% to 429,556 following a decrease

of 18% in the previous year. The increment could be largely attributed to the favourable interest rates

on leasing facilities, the depreciation of the Japanese Yen against the Sri Lankan Rupee, the increased

importation of hybrid vehicles to the market and the increase in the registration of motor cycles. The

number of cars registered increased by 36.6% while the registration of three wheelers declined by 5.5%

during 2014.

Company Performance in 2014/15During the year, fluctuating tax increases had a severe negative impact on demand in the automobile

sector in the industry. Over the years, the organization has been traditionally dependent on revenue

from mid-range commercial vehicles. However, during the year under review, we witnessed larger

revenue contribution from two new main segments, the first being the Isuzu Bus segment and the

other, SUVs. It is also pertinent to note that Isuzu’s MU-X SUV is already performing well in Australia

andThailand.WesuccessfullylaunchedIsuzuSUVsinSriLankainOctober/November2014.Duringthe

year under review, we capitalized on the fluctuations of the Japanese Yen to enhance our profitability

through forward exchange contracts.

Future OutlookThe strong backing of Access Engineering, which has increased its ownership stake in the company to

over 84%, played a vital role in our strong performance. The all-new Land Rover ‘Discovery Sport’ has

been made available to the brand’s ever-growing customer base across the island and we believe this

model will become the industry leader in its class. Sathosa Motors PLC has a 50% stake in SML Frontier

AutomotivePvtLtd,whichwillenhanceourprofitabilityfurther.Weexpecttheupcomingfinancialyear

to be a definitive one for the Group as we position ourselves to become a leading luxury brand with a

new showroom at Colombo 7. Sathosa Motors PLC is looking to expand its business in partnership with

suchsuperluxuryautomobilebrandsaspartofitslongtermgrowthstrategy.Weremaincommitted

to consolidate our after sales and dealer network while investing in expanding our product range to

strengthen our market position and to offer local consumers wider choices across the pricing spectrum.

Chairman’s Review

13

AcknowledgementsI wish to extend my sincere thanks to my colleagues on the board for their continued support and also take this opportunity to thank the former Chairman Mr. Ajita de Zoysa, who is a veteran in the Sri Lankan automobile industry and who steered the Group astutely during his tenure. My appreciation also goes to our Managing Director, Deshamanya Tilak Dias Gunasekera, and to the management team and members of staff for their valuable contribution during the year. Finally, I would also like to thank our shareholders for placing their trust in the company.

Sumal PereraChairman

SATHOSA MOTORS PLC | Annual Report 2014/1514Managing Director Review

Dear Shareholders,

I would like to place on record my sincere gratitude for your continued support and understanding.

Sathosa Motors PLC encountered a retinue of challenges during the year, but our high levels of

operational excellence and our sustainable business model helped us surmount the financial year

under review vigorously. I believe that we are now in a position to take definitive steps forward towards

reinforcing the sustainable growth of the company.

Our enduring vision to achieve sustainable growth necessitates that we remain constantly focused

on our core strengths & develop new skills & technologies to face the future challenges. At the same

time, we take calculated risks to direct management resources to areas that demonstrate potential for

growth, a quality that enabled us to pursue bold innovation for our company’s growth during the year.

The year under review was quite challenging with ad hoc duty changes, unstable political conditions

coupled with an unexpected presidential election. However, your Company achieved considerable

growth in its top line, marking a 12.45% increase. Since the beginning of the financial year, the Company

has been progressing positively to record a 9.15% increase in the bottom line.

The recent budget in the last quarter of the 2014/15 financial year included a few key measures which

are likely to positively impact players in the automobile sector. In lieu of all multiple taxes, a special

provision tax on motor vehicle imports has been introduced. Meanwhile, the reduction in value added

tax to 11% from the present rate of 12% coupled with the simplified tax structure is expected to result

in an overall reduction in vehicle import taxes.

Company PerformanceThe company’s profitability rose in the year under review amid stiff competition and an unpredictable

tax regime that proved to be a drag on motor vehicle sales. The Sathosa Motors PLC (SML) Group

recorded a total turnover of Rs. 3.50 billion in FY 2014/15 from all segments, compared to Rs.3.04 billion

in the previous financial year.

Accordingly, a total of 452 vehicles were sold during the year compared to 449 vehicles in the preceding

year. As a result, the Profit after tax of the company recorded Rs. 252.97 million in comparison to Rs.

231.77 million in the previous financial year. Subsequently, the company’s asset position was further

improved from Rs. 1.59 billion in the previous financial year to Rs. 1.85 billion in the period under review.

The SML Group recorded over 18.52% growth from new vehicle sales with segmental revenue of Rs.

2.56 billion compared to Rs. 2.16 billion in the previous year. Further, revenue from sales of Spare Parts

recorded a healthy growth of over 16.69% - from Rs. 432.79 million to Rs. 505.04 million in the financial

year under consideration. I am pleased to report that income generated from workshop services repairs

increased from Rs. 218.38 million to Rs. 235.67 million during the financial year 2014/15.

The company’s profitability rose in the year under review amid stiff competition and an unpredictable tax regime that proved to be a drag on motor vehicle sales. The Sathosa Motors PLC (SML) Group recorded a total turnover of Rs. 3.50 billion in FY 2014/15 from all segments, compared to Rs.3.04 billion in the previous financial year.


During the year, a number of steps were taken to improve Spare Parts sales as a result of lower price

demands from fleet-owning customers, who have proved to be loyal clients and the main contributors

to our sales growth. In due recognition of their loyalty and support, we offered discounted services,

sacrificing our profit margins in the Spare Parts segment sales to retain our loyal client base.

Although Isuzu has garnered a lion’s share of the Trucks segment in the country for years, we have

been facing a challenging period in Spare Parts sales, amidst growing spurious Spare Parts sellers. It is

also important to stress that currently there is no proper governance or tax policy implemented for the

segment by authorities.

During the year under review, we established a new workshop for Isuzu MU-X SUVs with an investment

of Rs. 30 Mn at Vauxhall Street, Colombo 02. Our subsidiary, SML Frontier Automotive (Pvt) Ltd, is in

the process of constructing a modern showroom at international standards at an upscale location in

Colombo 07. Also, a state-of-the-art workshop was established at Boralesgamuwa to offer repairs and

lubrication services for Land Rovers.

Despite severely competitive market conditions, our Isuzu truck range has been able to hold its

leadership position, evincing a higher demand despite competition from Japanese, Chinese and Indian

brands that are presently operating in the country. Our excellent performance during the year under

review was achieved as a result of maintaining a loyal client base along with new product launches,

including a 46-seater luxury bus that was launched during the second quarter of the financial year,

which witnessed record sales. Furthermore, as a result of the prudent financial management strategies

adopted by us in the year under review, our treasury department was able to post Interest Income of

Rs. 17.65 million.

The depreciation of the Japanese Yen against USD has benefited your Company in the exchange gains

during the year under review.

Future OutlookThe automobile sector has become an extremely challenging marketplace, but despite this we were

abletorecordexcellentprofitability.Webelievewewouldhaverecordedevenhigherrevenuesifnot

for ad hoc duty fluctuations, an unstable political climate and prevailing sluggish economic climate.

Maintaining adequate liquidity is essential to the implementation of forward-looking investment

aimed at enhancing product appeal along with development of next generation technologies and the

necessaryinfrastructure.Wewillcontinuetopursueimprovementsincapitalefficiencyandcashflow

of the company to deliver adequate returns for our shareholders. Our performance is indicative of our

ability to respond quickly to macro challenges and we will continue to seize emerging opportunities

as they unfold.

The Group leverages on its pillars of integrity, honesty, transparency, responsibility and ethical behaviour

in all its dealings and transactions. Our passion for delivering the highest levels of service quality to all

our stakeholders drives our growth.

Managing Director Review

17

AppreciationI take this opportunity to express my sincere appreciation to the Chairman, Board of Directors, the Audit

Committee, our trading partners, M/s ITOCHU Corporation & Isuzu Motors, the management team, and

all employees of Sathosa Motors for their tremendous support during a particularly challenging year. I

would also like to thank all our stakeholders, including our customers, auditors, banks, secretaries and

lawyers for their cooperation and support, as we forge ahead to lead Sri Lanka’s automobile industry

into the future.

Deshamanya Tilak Dias GunasekeraManaging Director

18Board of Directors

1

3

4

2


19

1. Mr. Sumal PereraChairman

2. Deshamanya Tilak Dias GunasekeraManaging Director

3. Mr. Shevantha MendisNon-Executive Director

4. Mr. Dharshana MunasingheNon-Executive Director

5. Mr. Joseph Christopher JoshuaNon-Executive Director

6. Mr. Rohana FernandoNon Executive Director

7. Mr. Ranjan John Suriyakumar GomezNon- Executive Director

8. Mr. M M Nelson De SilvaIndependent Non-Executive Director

9. Mr. Chiran WijesingheIndependent Non-Executive Director

5

6

9

8

7


Mr. Sumal PereraChairman

Mr. Sumal Perera was appointed to the Board of Sathosa Motors PLC on 12th June 1998. He is the Founder Chairman

of the Access Group of Companies founded in 1989. He is a Fellow Member of the Chartered Institute of Management

Accountants – UK (FCMA).


Mr. Gunasekera joined Sathosa Motors PLC as Senior Deputy General Manager (Marketing) in 2003. He was promoted to

the Deputy CEO position in 2005. In the year 2007 he was further promoted to the Board of Sathosa Motors PLC as the

Executive Director.

He counts over 30 years of experience in the fields of Marketing Management and Administrative Management in well

established Companies. He is a fellow of the Institute of Administrative Management, United Kingdom. He also holds

qualifications in Marketing. He has been the Chairman of Ceylon Motor Trading Association (CMTA), which is an umbrella

organization of Ceylon Chamber of Commerce (CCC) since 2010.

He is also a Director at SML Frontier Automotive (Pvt) Limited.

Mr. Shevantha MendisNon-Executive Director

Mr. Shevantha Mendis was appointed to the Board of Sathosa Motors PLC in April 2012. Mr. Mendis has been attached

to the Access Group since 1994 holding several positions over the years. He currently holds the position of Director

Business Development at Access Engineering PLC and is a Director of Access International (Pvt) Ltd and SML Frontier

Automotive (Pvt) Limited.

Mr. Dharshana MunasingheNon-Executive Director

Mr. Dharshana Munasinghe was appointed to the Board of Sathosa Motors PLC in April 2012. He has been attached to the

Access Group since 1996. Having held several positions in the Group, he now functions as Director – Business Development

at Access Engineering PLC and as a Director of Access International (Pvt) Ltd and SML Frontier Automotive (Pvt) Limited.

Mr. Joseph Christopher JoshuaNon-Executive Director

Mr. Christopher Joshua was appointed to the Board of Sathosa Motors PLC in April 2012. He is one of the Founder Directors

and Shareholders of Access Group of Companies and currently serves as the Managing Director of Access Engineering PLC.

He is also the Joint Managing Director of the Access Group of Companies. He was instrumental in heading some of the

most successful business units within the Access Group.

Board of Directors

21

Mr. Rohana FernandoNon Executive Director

Mr. Rohana Fernando joined the Board of Sathosa Motors PLC in September 2012. He is an Engineer by profession and has

been attached to the Access Group since 1998. He currently holds the position of Director / COO of Access Engineering PLC

and serves as a Director of Access International (Pvt) Ltd and SML Frontier Automotive (Pvt) Limited.

He is a Corporate Member of the Institution of Engineers, Sri Lanka (IESL) and has a BSc Degree in Civil Engineering from

the University of Peradeniya.

Mr. Ranjan John Suriyakumar GomezNon- Executive Director

Mr. Ranjan Gomez was appointed to the Board of Sathosa Motors PLC in April 2012. He is also one of the Founder Directors

and Shareholders of the Access Group of Companies and has functioned as the Joint Managing Director of the Access

Group and CEO of many businesses units within the Access Group.

Mr. M M Nelson De SilvaIndependent Non-Executive Director

Mr. Nelson De Silva who joined the Board of Sathosa Motors PLC on 11th February 2009, is an Associate Member of the

Institute of Chartered Accountants of Sri Lanka. Graduated with a B.Sc in Public Administration from Sri Jayawardenapura

University.

He serves as the Managing Director of Ned Management Consultants (Pvt) Ltd and he is the sole Proprietor of M M N De

Silva & Company.

He has been the Group Accountant of Tisara Group, Senior Accountant of John Keells Group, Finance Manager of Finlay

Chemicals & Dyes (Pvt) Ltd, Director of PE Management Consultants (Pvt) Ltd and Partner of HLB Edirisinghe & Company.

Mr. Chiran WijesingheIndependent Non-Executive Director

Mr.Wijesinghehasapproximately07yearsofexperienceinSeniorManagementpositionsindifferentorganizationsinSri

Lanka. Manager in Risk Advisory Services of KPMG Sri Lanka, Group Internal Auditor of Oman Hotels & Tourism Co. SAGO

(OHTC) managed by Aitken Spence Hotels (Pvt) Ltd.

Work Experience Current: Chief Risk Officer of Hirdaramani Group of Companies

Professional and Academic Qualifications

• Master of Business Administration (MBA) from the University of Southern Queensland (USQ)

• Associate Member of Institute of Chartered Accountants of Sri Lanka (ICASL)

• BSc. Business Administration (Special) – University of Sri Jayewardenepura

• Member of Institute of Internal Auditors (IIA) USA

Management Information

SATHOSA MOTORS PLC | Annual Report 2014/1524Management Discussion and Analysis

Sathosa Motors PLC is the franchise holder for Isuzu vehicles and spare parts manufactured by M/s Isuzu

Motors Ltd. Our Organization’s vision is to be the trusted leader in the Sri Lankan Automobile Industry

by ensuring that we deliver only the best quality to our valued customers.

Isuzu range of vehicles

• Double Cab Pickup Trucks

• Light, Medium & Heavy Duty Commercial Vehicles

• Luxury Passenger Coaches

• MU-X SUVs

• SpecialPurposeVehicles:FireTrucks,LoggingTrucks,DumpTrucks,Water&FuelBowsersand

various other types of vehicles required in building construction, distribution of goods etc.

HistoryA premier organization in Sri Lanka’s automobile sector, Sathosa Motors PLC’s humble beginning dates

backto1962,whenSriLanka’sIsuzuAgencywassecuredbytheCo-operativeWholesaleEstablishment

in 1962. The first agreement was signed between M/s Isuzu Motors Limited, Tokyo, Japan (Manufacturer);

M/sC Itoch&Co.Ltd., (Distributor);andtheCo-operativeWholesaleEstablishmentC.W.E. (Franchise

holder). Soon, with the liberalization of imports in 1978 and the open economic policy, Isuzu became

the most sought-after brand by fleet owners, the government sector and so on.

As a consequence of tremendous demand for Isuzu products in the Sri Lanka market, The Ministry of

TradeandCommerce(underwhosepurviewC.W.E.operated),decidedtoconverttheNewVehicles&

MachineryDepartmentasafully-ownedsubsidiarycompanyoftheC.W.Eandthusestablished‘Sathosa

Motors Limited’ on 1st January 1985, in order to provide more freedom to carry on efficient business

operations.

The company commenced operations with an issued capital of Rs 15,000,007 in 1985. In keeping with

government policy, the Company was people-ised on 26th August 1992 and 60% of issued capital

was acquired by M/s C Itoch & Co., Limited (ITOCHU Corporation) Tokyo, Japan, one of the largest

trading organizations in Japan. Of the remainder, 10% was gifted to employees and 30% was issued

to the general public. In order to comply with the new Companies Act No. 7 of 2007, the company

was re-registered as Sathosa Motors PLC. Soon after, Access Engineering Company Ltd (AEL), which

went public, acquired a major controlling stake in Sathosa Motors PLC (SML) on 29th February 2012.

Land Rover, the Sri Lankan military’s ‘vehicle of choice’ and a top European luxury brand in the country

received a new lease of life with the brand being exclusively distributed under SML Frontier Automotive

Pvt Ltd , in which Sathosa Motors PLC holds a 50% ownership.

Domestic Automobile MarketThe year 2014 was one of recovery for the domestic automobile sector - with motor vehicle registrations

recording a 31.5% increase over the preceding year to reach 429,556. In 2011, motor vehicle registration

reached 525,421, which is said to be the highest-ever in the sector’s history. Subsequently, 2012 and

2013 reflected a decline down to 397,295 and 326,651 respectively. Fortunately, in the financial year

25

under review, the recent budgetary measures which proposed lower taxes for specific categories of

motor vehicles has reversed the fortunes of Sri Lanka’s automobile sector, with rising vehicle registrations

putting the industry on a strong growth trajectory.

According to statistics, brand new four-wheel vehicles performed well in 2014, the numbers growing

to 45,112 in total, marking an increase by 9,048 vehicles or 25% over that of the previous year. Indian,

Korean and Chinese vehicles also recorded significant increases in vehicles volumes in 2014 in line with

growth over the last few years. The expenditure on vehicles imports in 2014 was US$897 million, which

reflects an increase of US$315 million or a 54% increase over the year 2013. The automobile industry

is currently witnessing a widespread adoption of advanced technologies to increase fuel efficiency,

reduce emission levels and enhance the performance dynamics of the vehicle.

Analysts project new vehicle registrations to grow at a Cumulative Annual Growth Rate (CAGR) of 6%

over the 2014-2016 period, resulting in the total vehicle numbers in the country surpassing 6.5 million,

led by simplified taxes and improved consumer confidence.

Operational ReviewDuring the year under review, a total of 452 vehicles were sold, compared to 449 vehicles in the previous

year. Isuzu heavy vehicles have helped drive Sri Lanka’s economic growth over years by facilitating the

mobility of people and goods for over a half-a-century. The brand enjoys over a market leadership of

35% due to high performance trucks repaying multi-fold. The company currently has two distributors

at Kandana and Vavuniya.

Spare parts dealerships were increased to 123 during the period from 78 in the previous year. The

objective is to increase dealerships to 175 in the upcoming financial year in tandem with growth in the

company’s capacity and financial strength. The company also has 2 mobile Lorries to cater to customer

demand, with 2 branches operating at Panchikawatta and Peliyagoda.

In an attempt to diversify the product portfolio to propel the company’s growth, a new workshop

for Isuzu MU-X SUVs with an investment of Rs. 30 Mn at Vauxhall Street, Colombo 02 was established.

SML Frontier Automotive (Pvt) Ltd, a subsidiary of SML laid the ground work to construct a modern

showroom at international standards at an upscale location in Colombo 07. Also, a state-of-the-art

workshop was established at Boralesgamuwa to offer repairs and lubrication services for Land Rovers.

The company introduced various dealer incentive schemes to motivate sales and will continue to focus

on expanding its ‘Supply Ratio’, which is the availability of spare parts for each dealer location in order to

secure more market share from the spare parts sales.

The company aims to expand its sales via expansion of its franchise holders in four major cities including

Ampara , Matara, Kandy and Kurunegala within the next two years. Plans have also been drawn up to

upgrade 10 to 25 franchise dealer points to 3S (Sales, Services, Spare parts) category in the coming year,

with dealerships already covering all provinces and districts in the country.


Engaging Customers

As part of customer care and awareness raising programme, during the current year the company

continued the Service Clinic concept in the regions, where SML provides free service advice to fleet

owners. This process involves Japanese engineers from Isuzu, which allows local customers to gain a

high level of technical exposure regarding the maintenance of their Isuzu vehicles.

During the year, the SML team worked tirelessly to achieve excellence in customer satisfaction by

cultivating a dynamic and productive organizational culture with highly motivated staff. The focus on

providing the best quality vehicles at competitive and affordable prices was sustained throughout the

year, thereby generating the maximum benefit for all stakeholders of the company.

Participation at the World Grand Prix Isuzu Technical Competition

In order to offer more efficient services parallel with Japanese Isuzu technology, delegates including

SML Managing Director, Assistant General Manager - Spare Parts, and selected workshop staff members

tookpartintheWorldGrandPrixIsuzuTechnicalCompetition,heldduringtheyear.

Future Outlook

Given the market uncertainty, we continue to adopt a strategy of product diversification, targeting a

range of suitable market segments for expansion.

The luxury motor vehicle industry of Sri Lanka and for that matter, the entire automobile industry is

currently facing challenging times mainly due to the unstable political environment and the fluctuations

in the duty structure that exists for various vehicle product ranges.

The company is optimistic of a more favourable political environment after the general elections in

the new financial year which is hoped would pave the way for a more stable economy and political

environment in the country. The commencement of infrastructure development once more will

fuel the construction industry and in turn create more demand for vehicles. Future concessions and

measures adopted by the government to improve the agriculture sector are expected to drive the

demand for commercial vehicles.

IT ReviewDuring the financial year 2014/15, SML continued its focus on connecting and networking all Sathosa

Motors branches and offices, with main supporting systems functioning effectively to provide seamless

operationsacrosstheorganization.Withthis,alloperational/servicedepartmentswillbefullyintegrated

duringthenextfinancialyear.Wealsointendtorevampourcorporatewebsiteinthecomingyear.Our

IT staff alsounderwent aMicrosoftWindowsServerAdministrationTrainingprogrammeduring the

year.

HR ReviewEmployeeengagementisasalientpriorityatSML.Webelievethatemployeeengagementbringsout

the best of innovation, productivity and bottom line performance, while reducing costs related to

hiring and retention in highly competitive talent markets. Our group’s employment policy ensures that

we recruit the candidates best suited for the relevant positions. Our recruitment procedures are marked

by fair, objective and accepted evaluation methods.

Management Discussion and Analysis

27

Generating Employment Opportunities

Our employees are always made aware of the company’s shared vision, mission, objectives, policies,

procedures, rules, regulations and day to day business practices through various programmes and

initiatives. During the year under review, our group provided employment opportunities to 212

applicants compared to 202 in the previous financial year. Apart from the group, SML as a company has

created employment opportunities for 122 staff. There were no major large scale recruitments carried

outtoincreasethestaffduringthefinancialyear.Weintendtoincreaseourstaffstrengthby15%during

the coming financial year.

The majority of our staff is in the permanent cadre and over 62% are in the age group of 30-50 years,

whilst 20 % are below 30 years. Staff members above 50 years account for about 18%. Out of the total

staff strength, 76.2% are males and 23.8% are female employees, whilst nearly 15.5% are Executives and

79.5% among them are Non-Executives. The Casual Staff only accounts for 5%.

Training and development

During the 2014/15 financial year, selected staff members participated in foreign training programmes

and annual training programmes conducted by Isuzu in Japan and Thailand. All our employees are

encouraged to actively participate in idea generation and problem solving in the organization.

Unique Corporate Culture

SML has engendered a unique corporate culture, which encourages employees and management

to work together towards achieving corporate goals. Employees are continually encouraged to

pursue professional development via various training and career guidance programmes. During the

year under review, we carried out 3 Sales Effectiveness Training programmes in which a total of 48

members participated. Further, a Secretarial Excellence Training program was also conducted in which

2 employees participated, whilst another employee was given an opportunity to follow a Sales Territory

Training programme. Further, executive and non-executive staff members were given an opportunity to

participate in a training programme entitled ‘Be a Brand’, which was conducted by famous Motivational

Speaker and Trainer Mr. Mohan Palliyaguru, the founder of the ‘Turning Point’ programme series.

Employee Welfare

Wecontinuedtoenhanceourhumancapitalbase,theircapacityandpotentialwithperformancebased

motivational compensation rewards such as a bonus scheme that pays two months’ salary equivalent

to each employee on April and December each year, and a profit bonus of two months during the

month of August for the year under review. Our staff and their family members took part at the social

events including the Christmas Carnival, Six a Side Cricket Tournament, Netball Tournament and the

Art Competition organized by our parent company Access Engineering PLC (AEL). The annual staff and

their families ‘Day-Out’ was a trip to Anantaya Resort & Spa at Chilaw.

Corporate Social Responsibility ReportEducation and Learning

In keeping with our Corporate Social Responsibility (CSR) vision, SML continued its in-house scholarship

scheme for children of employees, who qualify for Advanced Level education under ‘Sisu Nena’ scheme


and for students who qualify for university education under ‘Vishwa Pravesha’ scheme. Our employees

and their family members are also included in a comprehensive insurance scheme.

During the year, we continued to train personnel from the Defence Forces, free of charge, at our

workshops, to enhance their skills and capabilities.

Weabsorbednearly15 individualsunder the‘ApprenticeTrainingProgramme’ intoourorganization

from various educational and vocational training institutes partnered with us, including International

College of Business and Technology (ICBT), German Technical Training Institute (GTTI) and National

Apprentice and Industrial Training Authority (NAITA).

Community Welfare

During the year under review, we took steps to distribute dry rations pack for employees in April, for the

Sinhala and Tamil New year.

Extending beyond the company, we participated at a blood donation campaign organized by our

parent company, Access Engineering PLC (AEL), which was held at the Foundation Institute of Colombo.

Wealsoextendeddonationstoreligiousorganizations,GangaramayaTemple’s‘NawamPerahera’,the

armed forces and government entities, to support their welfare activities.

The Company sponsored the refurbishment of RMV reception during the year under review.

All night pirith chanting ceremony was held at the company premises during February 2015.

Financial ReviewGross Revenue

Sathosa Motors PLC’s group revenue rose by over 15.13% during the Financial Year 2014/15 from Rs.3.04

billion in the previous year to Rs.3.50 billion, while the company revenue rose by 12.34% from Rs.2.43

billion to Rs.2.73 billion.

The group’s other income also significantly surged from Rs. 25.74 million to Rs. 42.66 million recording

over 65.73% increase during the financial year 2014/15.

Profit After Tax

During the financial year 2014/15 Sathosa Motors PLC group recorded a 6.39% drop in group Profit After

Tax (PAT) amounting to Rs. 269.80 million compared to Rs. 288.23 million in the previous year. However,

the company alone recorded a 9.14% increase in PAT from Rs. 231.77 million to Rs. 252.96 million in

the year under review. The group profit attributable to Non-Controlling interest dipped from Rs. 28.23

million in the previous year to Rs. 8.42 million during the financial year 2014/15 due to ownership

structural changes that took place.

Profit Before Tax

There was a slight drop in Sathosa Motors PLC group Profit Before Tax (PBT) by 7.92% from Rs. 415.07

million in the previous year to Rs. 382.17 million in the year under review. The company’s PBT rose by

Management Discussion and Analysis

29

8.47% to Rs. 349.65 million from Rs. 322.32 million in the previous year. As a result, the profit attributable

to the owners or the ordinary shareholders of the Sathosa Motors group rose from Rs. 260.00 million to

Rs. 261.38 million during the year under review.

Sales Earnings

During the financial year 2014/15 Group’s Spare Parts sales rose from Rs. 432.79 million to Rs. 505.04

million with over a 16.69% rise and the Group’s new vehicle sales topped Rs. 2.56 billion compared to a

Rs.2.16billionyearago.Group’sWorkshoprepairscontributedRs.235.67milliontotheincomeduring

the year compared to Rs.218.38 million in the previous year.

Cost of Sales and Gross Profit Margins

The cost of sales of the group rose to Rs. 2.65 billion during the year under review against Rs. 2.19 billion

in the previous year whilst the gross profit marginally increased from Rs. 846.51 million to Rs. 848.88

million in the financial year 2014/15.

Assets

During the year, the group’s asset value increased from Rs. 2.01 billion to Rs. 2.48 billion, rising by 23.38%.

The company’s asset value increased from Rs. 1.59 billion to Rs. 1.85 billion, which is an increase of over

16.35%. The Stated Capital of the group stood at Rs. 115.92 million, whilst retained earnings rose from

Rs. 884.20 million to Rs. 1,115.04 million in the financial year under consideration.

Administration & Other Expenses

During the financial year our group administration expenses rose 22.46% from Rs. 314.02 million to Rs.

384.54 million. However, Selling and Distribution expenses of the group slightly dipped by 6.01% to Rs.

105.72 million compared to Rs. 112.49 million in the previous year. Consequently, results from operating

activities of the group also dipped by over 5.51% from Rs. 424.27 million in the previous year to Rs.

400.88 million in the financial year 2014/15.

Meanwhile, the company’s earnings from operating activities rose from Rs. 329.66 million in the previous

year to Rs. 349.66 million in the year under review.

Our group’s finance cost doubled, increasing by over 103.15% from Rs. 9.21 million in the previous

financial year to Rs. 18.71 million in the year under review. This was mainly because of an Import Loan

and Overdraft Interest that amounted to over Rs. 18.69 million.

Income Tax Expenses

Our group Income Tax expenses were reduced by 11.41% to Rs. 112.36 million compared to Rs. 126.83

million in the preceding year. However, the company’s Income Tax expenses rose by 6.76% from Rs.

90.55 million to Rs. 96.68 million during the year under review.

Earning per Share

Sathosa Motors PLC has 6,033,622 (Numbers) ordinary voting shares in issue and accordingly group

Earnings per Share (EPS) increased from Rs. 43.09 to Rs. 43.32 during the year under review. The

company’s EPS increased from Rs. 38.41 to Rs. 41.93.

SATHOSA MOTORS PLC | Annual Report 2014/1530Corporate Governance

IntroductionCorporate Governance deals with the role of the Board of Directors, the framework of internal controls

and the manner in which Companies are led and managed. The Board is committed to reviewing and

updating the Company’s corporate governance structure, taking into consideration current market

practice and the best practice guidelines issued by the Institute of Chartered Accountants of Sri Lanka.

The following sections explain how the Company has applied these principles.

Board of DirectorsThe Board of Directors is responsible for the corporate governance of the Company. The main function

of the Board is to oversee the business and the affairs of the Company. It is also responsible for the

formulation of strategic objectives, policy framework, the approval of annual budgets (including major

capital expenditure), regular reviews of financial performance compared to budgets, the appointment

and evaluation of the performance of the Executive Director, and the periodic and timely reporting to

shareholders.

It also has the task of ensuring that the Senior Management team has the necessary skills and experience

to perform the functions effectively in the best interest of the company and that there are sufficient

parameters in place for monitoring the performance of the management.

The Board comprises of Nine Directors including the Chairman. All the Directors are non-executive

DirectorsexcepttheChairmanandtheManagingDirector.Whendecisionshavetobetakenonurgent

matters, Board decisions are taken by circulation.

TheBoardhasdeterminedthatMr.MMNdeSilvaandMr.ChiranWijesingheareindependentasper

the criteria set out in the Listing Rules of the Colombo Stock Exchange, and the said Directors have

submitted signed declarations in this regard.

Board MeetingsThe Board has met on 4 occasions during the last financial year. All directors receive a comprehensive

package of information prior to each Board Meeting thus ensuring that they are well informed in

advance.

PWCorporate Secretarial (Pvt) Ltd,who act as Secretaries to the Company, are qualified to act as

Secretaries as per the provisions of the Companies Act No.7 of 2007. Directors have access to the advice

and services of the Company Secretaries, who are responsible to the Board for ensuring that Company

Secretarial procedures are followed and that applicable rules and regulations are complied with.

Audit CommitteeThe Audit Committee consists of two non-executive Directors, one of whom is independent. The

Audit Committee is chaired by Mr. M M N de Silva who is a Chartered Accountant. There were 4 Audit

Committee meetings during the year.

Mr.ChiranWijesinghewasappointedtotheAuditCommitteeon15thJuly2015.

The Managing Director and the Head of Finance attend meetings of the Audit Committee by invitation.

31

Remuneration CommitteeThe Remuneration Committee consists of two non-executive Directors, one of whom is independent.

Mr. A de Zoysa served as the Chairman of the Remuneration Committee until 31st March 2015.

Remuneration PolicyWiththeprimaryobjectiveoftheGroup’sremunerationpolicybeingeffectiveenoughtoattractand

retain the best human capital to sustain operations while rewarding performance, the Remuneration

Committee is tasked with recommending the remuneration payable to the Chairman and Managing

Director of the Company and/or equivalent position thereof. This recommendation is made to the

Board, which is responsible for the final determination upon consideration of such recommendations.

Refer Note 13 to the Financial Statements for a disclosure of the aggregate remuneration paid to the

Directors.

Financial Disclosures and TransparencyThe Company’s financial statements are prepared in accordance with the Sri Lanka Accounting

Standards IFRS guidelines and Companies Act, No. 07 of 2007. The financial statements are published

quarterly and annually on time in compliance with the disclosure requirements of the Colombo Stock

Exchange.

The Statement of Directors Responsibilities for the Financial Statements is given on page 29

of this Report.

Internal ControlsThe Board acknowledges overall responsibility and ensures that a sound internal control system is

maintained to safeguard shareholders’ investments and company assets.

Going ConcernThe Board is satisfied that the Company has adequate resources to continue in business for the

foreseeable future. For this reason it continues to adopt the going concern basis when preparing a

presenting financial statements.

By Order of the Board

Sathosa Motors PLC


15th July 2015

SATHOSA MOTORS PLC | Annual Report 2014/1532Risk Management Review

The Risk Management Review aims to provide an inclusive view of the Risk Management Systems,

procedures and protocols that operate throughout the group. The Risk Management Review also seeks

to provide assurance that activities undertaken by the business contributes towards an organization

which constantly works towards the better understanding and efficient mitigation of various risk factors

that may affect the group.

SML group defines the pivotal area of Risk Management as the organized application of

management Policies, procedures and practices for the establishment of relevant context,

identification,analysis,mitigation,monitoringandtherebyandcommunicationofallrisks.While

the Group’s Risk Management framework is efficiently incorporated into the planning process,

itself focuses on the effective achievement of objectives through mitigation, monitoring and

therebyandcommunicationofallrisks.Whilethegroup’sriskManagementframeworkisefficiently

incorporated into the planning process, the planning process itself focuses on the effective

achievement of objectives through mitigation of relevant and related risks. Through a dynamic

process, risks are identified and evaluated at appropriate levels throughout the parent company

and the subsidiary . This process is regularly reviewed by the Management Committee as a part of

the group’s organizational and operational approach to Risk Management.

The group’s Risk Management Process ensures comprehensive identification and understanding of the

risks, and enables the design and implementation of an effective plan to prevent losses or minimize the

impact of any loss in the event that it occurs. The timely recognition and appropriate handling of these

operational threats is incorporated into the group’s Risk Management process.

Substantial strategic controls of operational risks which require efficient management is enabled

through policies and procedures which are covered by the group’s internal audit process. This

includes the strict financial controls, and processes and systems which focus on monitoring

and reporting matters related to the continued effectiveness of the system of internal controls.

Having an accurate understanding of all possible risks enables the group to mitigate risks by

implementation of timely decisions.

In addition to the above the group’s Risk Management process would cover curbing the loss of

valuable resources including time, assets, income, property and people, protecting the reputation

and public image of the organization, preventing or reducing legal liabilities and enhancing the

Company’s smooth operations.

SML considers Risk Management process within the Company as an integral part of good management

practice which makes it an intimate part of its business planning and continuity.

33

The principal risks associated with the Group’s activities and their mitigation strategies are as follows.

Risk Factor Risk Mitigating Strategies

Credit Risk

This refers to risk of financial losses arising due

to the unwillingness or inability of counter-

parties to meet their financial or contralactual

obligations in time and in full.

The group has introduced different discount slabs

for it’s dealers who settle dues at different Intervals.

The group has introduced different targets for

different customers. If the set targets are exceeded

then based on same the dealers are rewarded.

The group’s Finance and Sales divisions closely

monitor credit sales to ensure repayment on due

dates and tie future sales based on outstanding

value and customer performance.

Bank guarantees are obtained from dealers who

purchase on credit terms.

The group conduct Credit Risk Management

meetings every month in order to review the

credit policies and adherence to them.

Credit ceilings are introduced to dealers who

purchase on credit terms.

Discounts are offered to dealers having carefully

evaluated the performance during a particular

period.



Human Capital and Labour Risk

This is associated with losing experienced

employees and experiencing an environment of

unpleasant labour relations.

The group use a series of strategies in motivating,

developing and retaining it’s human capital.

The group has a continuous provision for a

comprehensive career development program

for its staff, which focuses on helping employees

to achieve their optimum potential and thereby

improve job performance and satisfaction.

Wherebytechnical staff is sent to IsuzuJapanon

training and to face the technical competitions

organized by Isuzu Japan.

Group strives to maintain healthy relationships

with all employees through regular dialogues

and discussions. The Company also ensures

compliance with all regulatory requirements with

regard to benefits applicable to employees.

SML provides attractive financial and performance

based incentives.

The Group carefully monitors that all decisions

taken with respect to employees are within the

purview of the “Shop and Office Employees Act”.

Information Technology Risk

IT Risk is the risk associated with computer

Security, hardware, software and other

information technology systems failing and

causing disruption to business operations.

A well designed and secured Information

Technology security infrastructure has been

implemented throughout the organization. The

security infrastructure includes: recovery strategies,

data back –ups stored at off- site locations, virus

scanners, proxy servers. Compliance of security

infrastructure is regularly monitored.

The company carries out regular meetings with

the IT service provider to identify the requirement

to upgrade the present system.

Risk Management Review

35


Regulatory and Compliance Risk

This risk is associated with changes in

Government policies, laws, regulations and

statutes. Compliance Risk relates to a company

being able to comply with all the laws,

regulations and statutes applicable to a country.

Both Regulatory and Compliance Risk factors

can affect the business activities of the Company.

The Company constantly keeps abreast of changes

to the Regulatory framework to mitigate the risk

associated therein.

Competitive Risk

This relates to customers will buy competitor

products due to variances in the product

offering. The management maintains a good

relationship with it’s customers.

Availability of non genuine spare parts in the

market where prices are very low.

The group offers free service clinics in different

locations with the presence of Japanese engineers

and offering a warranty period , free of charge

services during the warranty period

Our dedicated sales team explains to the customers

the advantage of using genuine spare parts.

Wehavea24houroncallmobileclinicattending

to break downs at a request of a customer.Risk of Environmental issues

Refers to environmental issues which can take

place due to disposal of solid waste.

The group releases waste water after purifying in

3 under ground treatment plants. Purified water is

released to the Municipal Council Storage System.Depreciation of the Rupee The adverse impact through depreciation of the

Rupee against the other currencies is mitigated

by pre agreeing upon the rate with the Bank. The

main currencies through which the company

transacts are THB, USD and JPY.

The subsidiary transacts through GBP. Sales takes

place on indenting basis and through TT’s.Interest Rate Fluctuations The adverse impact is mitigated by pre agreed

rates entered into through with the Banks. All

such transactions are backed by offer letters.

Such transactions are processed after obtaining

the approval of the Managing Director. The

transactions are under direct purview of the

Managing Director. All negotiations are channeled

through the Managing Director who directly

supervises the financing of the company, s

requirements.

Financial Information

SATHOSA MOTORS PLC | Annual Report 2014/1538Annual Report of the Board of Directors on the Affairs of the CompanyThe Directors of Sathosa Motors PLC have pleasure in presenting

their Annual Report together with the Audited Financial Statements

of the Company for the year ended 31st March 2015.

This Report contains the information required in terms of the

Companies Act, No. 7 of 2007, the Listing Rules of the Colombo Stock

Exchange and guided by the recommended best practices.

GeneralSathosa Motors PLC is a public limited liability Company which was

incorporated under the Companies Ordinance (Cap.145) as a public

limited liability company on 11th March 1982 and re-registered as

per the Companies Act, No.7 of 2007 on 13th December 2007 with

PQ 105 as the new number assigned to the Company.

Principal activities of the Company and review of performance during the yearThe Company’s principal activity is the import and sale of Motor

Vehicles and spare parts together with the repair and maintenance

of such Motor Vehicles.

The Company made an investment of Rs.65mn constituting 50% of

the shares in issue of a Company named SML Frontier Automotive

(Pvt) Ltd for the purpose of managing the Land Rover and Range

Rover Agency in Sri Lanka.

A review of the business of the Company, its performance during the

year and its future prospects are contained in the Chairman’s Review,

which forms an integral part of this Report.

This Report and the Financial Statements, therefore reflect the state

of affairs of the Company.

Financial StatementsThe complete Financial Statements of the Company, prepared in line

with applicable accounting standards and regulatory requirements,

inclusive of specific disclosures, duly signed by two Directors on

behalf of the Board of Directors and the Auditors are given on pages

41 to 88.

Property, Plant & EquipmentThe Company expenditure on the acquisition of property, plant

& equipment during the year amounted to Rs. 58.49 Mn and

information relating to movements in fixed assets is given in Note

16.2 of the accounts.

InvestmentsDetails of the Company’s quoted and unquoted investments as at

31st March 2015 are given in Note 38.1 to the Financial Statements

on pages 81 to 83.

ReservesThe reserves of the Company with the movements during the year

are explained under the “Statement of Changes In Equity.”

Accounting PoliciesThe Financial Statements of the Company have been prepared in

accordance with the revised Sri Lanka Financial Reporting Standards

(SLFRS / LKAS) and the policies adopted thereof are given on pages

47 to 59. Figures pertaining to the previous periods have been re-

stated where necessary to conform to the presentation for the year

under review.

Interests RegisterThe Company maintains an Interests Register in terms of the

Companies Act No.7 of 2007, which is deemed to form part and

parcel of this Annual Report and available for inspection upon

request.

All related party transactions, which encompasses the transactions

of Directors who were directly or indirectly interested in a contract or

a related party transaction with the Company during the accounting

period, are recorded in the Interests Register, in due compliance

with the applicable rules and regulations of the relevant Regulatory

Authorities.

The relevant interests of Directors in the shares of the Company as at

31st March 2015 as recorded in the Interests Register are given in this

report under the caption of “Directors’ Shareholding”.

DirectorsThe names of the Directors who held office as at the end of the

accounting period are given below, with their brief profiles appearing

on page 20.

Executive DirectorsMr. S J S Perera Managing Director – Appointed

Chairman w.e.f. 1st April 2015

Deshamanya Tilak Dias Gunasekera Executive Director – Appointed

Managing Director w.e.f. 1st April

2015

39

Non-Executive Directors*Mr. Ajita de Zoysa Chairman - Retired on 31st March 2015

*Mr. M M N de Silva Director

Mr. J C Joshua Director

Mr. R J S Gomez Director

Mr. S H S Mendis Director

Alternate Director to Mr. J C Joshua

Mr. S D Munasinghe Director

Alternate Director to Mr. R J S Gomez

Mr. D A R Fernando Director

* Independent Non-Executive Directors

In accordance with Article 88(i) of the Articles of Association of the

Company, Mr. M M N de Silva retires by rotation and being eligible,

offers himself for re-election.

Mr. A I Lovell resigned from the Board on 1st September 2014.

Mr. Ajita de Zoysa retired from the position of Chairman and from the

Board on 31st March 2015.

Mr. S J S Perera was appointed Chairman of the Company with effect

from 1st April 2015.

Deshamanya Tilak Dias Gunasekera was appointed the Managing

Director of the Company with effect from 1st April 2015.

Mr. Chiran Wijesinghe was appointed as an Independent Non-

Executive Director on 15th July 2015. In accordance with Article 95

oftheArticlesofAssociationofthecompany,Mr.ChiranWijesinghe

retires as a Director and being eligible, offers himself for re-elechion.

Directors’ RemunerationThe total remuneration of the Directors during the year under review

amounted to Rs. 7.99 Mn (Company) and Rs. 13.99 Mn (Group).

Directors’ responsibility for Financial ReportingThe Directors are responsible for the preparation of the Financial

Statements of the Company to reflect a true and fair view of the state

of its affairs. A further statement in this regard is included on page

43 and 58.

AuditorsMessrs KPMG, Chartered Accountants served as the Auditors during

the year under review and also provided tax related services. Based

on the written representation made by the Auditors, they do not

have any interest in the Company other than those referred to herein.

The Auditors were paid a sum of Rs. 775,000 as Audit fees by the

Company for the financial year under review. As far as they are aware,

the Auditors do not have any relationship with the Company other

than carrying out External Audits.

The Auditors have expressed their willingness to continue in office. A

resolution to re-appoint the Auditors and to authorise the Directors

to determine their remuneration will be proposed at the Annual

General Meeting.

Tax Related ServicesAll tax related services are provided by Ms. Ernst & Young, Chartered

Accountants.

Stated CapitalThe Stated Capital of the Company is Rs. 115,924,290/-

The number of shares issued by the Company stood at 6,033,622

ordinary shares as at 31st March 2015.

Directors’ ShareholdingThe relevant interests of the Directors in the shares of the Company

as at 31st March 2015 are as follows.

Shareholding Shareholding

as at as at

31/03/2015 31/03/2014

Mr. Ajita de Zoysa Nil Nil

Mr. S J S Perera Nil Nil

Deshamanya Tilak Dias Gunasekera 4,648 1,040

Mr. M M N De Silva 1,100 1,100

Mr. J C Joshua Nil Nil

Mr. R J S Gomez Nil Nil

Mr. S D Munasinghe Nil Nil

Mr. S H S Mendis Nil Nil

Mr. D A R Fernando Nil Nil

ShareholdersThere were 1,196 shareholders registered as at 31st March 2015

(1,206 shareholders as at 31st March 2014). The details of distribution

are given on page 91 of this report.


Major Shareholders, Distribution Schedule and other informationInformation on the distribution of shareholding, analysis of

shareholders, market values per share, earnings, dividends, net

assets per share, the twenty largest shareholders of the Company,

percentage of shares held by the public as per the Listing Rules

of the Colombo Stock Exchange are given on page 91 under the

caption “Information to Investors”.

DonationsThe Company did not make any donations during the year under

review and the previous year.

DividendThe Company declared a final dividend of Rs. 7/- per share amounting

to Rs. 42,235,354/-, which will be paid on 05th August 2015.

Statutory PaymentsThe Directors confirm that, to the best of their knowledge, all taxes,

duties and levies payable by the Company, all contributions, levies

and taxes payable on behalf of and in respect of the employees of

the Company and 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.

Contingent LiabilitiesThere were no material Contingent Liabilities as at the Balance Sheet

date, except as disclosed in Note No. 32 to the Financial Statement

on page 74.

Events occurring after the Reporting PeriodNo events have occurred since the balance sheet date which would

require adjustment to, or disclosure in the Financial Statements, other

than what is disclosed in Note No. 33 to the Financial Statements on

page 75.

Corporate GovernanceThe Board of Directors are responsible for the governance of

the Company. The Board has placed considerable emphasis on

developing rules, structures and processes to ensure integrity

and transparency in all the dealings of the Company and its best

effort in achieving performance and quality profits, adopting good

governance in managing the affairs of the Company. The Directors

confirm that the Company is in compliance with the Rules on

Corporate Governance contained in the Listing Rules of the Colombo

Stock Exchange.

An Audit Committee and a Remuneration Committee function as

Sub-Committees of the Board and the members of these Committees

posses the requisite qualifications and experience. The composition

of the said Committees are as follows;

Audit CommitteeMr. M M N de Silva - Chairman

Mr. J C Joshua

Mr.ChiranWijesnghe-appointedon15thJuly2015

Remuneration CommitteeMr. A de Zoysa - Chairman - resigned on 31st March 2015

Mr. M M N de Silva

Mr. A I Lovell - resigned on 1st September 2014

Going ConcernThe Board of Directors is satisfied that the Company has adequate

resources to continue its operations in the foreseeable future.

Accordingly, the Financial Statements are prepared based on the

going concern concept.

Annual General MeetingThe Notice of the Thirty First (31st) Annual General Meeting appears

on page 94.

This Annual Report is signed for and on behalf of the Board of

Directors by

S J S Perera Deshamanya Tilak Dias GunasekeraChairman Managing Director

P W Corporate Secretarial (Pvt) LtdSecretaries

15th July 2015

Colombo

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

41Independent Auditors’ Report

To the Shareholders of SATHOSA MOTORS PLCReport on the Financial Statements

WehaveauditedtheaccompanyingfinancialstatementsofSathosa

Motors PLC, (“the Company”), and the consolidated financial

statements of the Company and its Subsidiary (“the Group”), which

comprise the statement of financial position as at March 31, 2015, and

the statements of profit or loss and other comprehensive income,

changes in equity and, cash flows for the year then ended, and a

summary of significant accounting policies and other explanatory

information set out on pages 42 to 88 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

Board determines is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due

to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with Sri Lanka Auditing Standards. Those standards

require that we 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’ judgment, 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.

Webelieve that theaudit evidencewehaveobtained is sufficient

and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and

fair view of the financial position of the Group as at March 31, 2015,

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 Requirements

As 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:

- Wehaveobtainedalltheinformationandexplanations

that were required for the audit and, as far as appears

from our examination, proper accounting records have

been kept by the Company,

- The financial statements of the Company, give a true and

fair view of its financial position as at March 31, 2015, and

of its financial performance and cash flows for the year

then ended in accordance with Sri Lanka Accounting

Standards.

- The financial statements of the Company, and the Group

comply with the requirements of sections 151 and 153 of

the Companies Act No. 7 of 2007.

CHARTERED ACCOUNTANTSColombo

15th July 2015

SATHOSA MOTORS PLC | Annual Report 2014/1542Statement of Profit or Loss and Other Comprehensive Income

Group Company

For the year ended 31 March, 2015 2014 2015 2014

Note Rs. Rs. Rs. Rs.

Restated

Revenue 9 3,502,513,626 3,040,851,595 2,737,582,357 2,434,315,262

Cost of Sales (2,653,631,498) (2,194,346,263) (2,163,156,898) (1,910,733,894)

Gross Profit 848,882,128 846,505,332 574,425,459 523,581,368

Other Income 10 42,667,566 25,740,765 38,997,239 18,974,257

Administrative Expenses (384,544,473) (314,026,523) (218,073,145) (182,717,833)

Selling and Distribution Expenses (105,719,627) (112,496,745) (45,680,899) (30,172,956)

Other Operating Expenses 11 (403,493) (21,442,877) - -

Results from Operating Activities 400,882,101 424,279,952 349,668,654 329,664,836

Finance Cost 12 (18,710,118) (9,213,012) (16,367) (7,337,648)

Profit before Tax 13 382,171,983 415,066,940 349,652,287 322,327,188

Income Tax Expense 14 (112,367,176) (126,833,983) (96,684,257) (90,556,045)

Profit for the Year 269,804,807 288,232,957 252,968,030 231,771,143

Other Comprehensive Income

Actuarial Losses on Employee Benefits (633,424) (738,676) (434,885) (738,676)

Tax on Other Comprehensive Income 177,359 206,829 121,768 206,829

Other Comprehensive Income for the Year, Net of Tax (456,065) (531,847) (313,117) (531,847)

Total Comprehensive Income for the Year 269,348,742 287,701,110 252,654,913 231,239,296

Profit attributable to:

Owners of the Company 261,386,419 260,002,050 252,968,030 231,771,143

Non-Controlling Interest 8,418,388 28,230,907 - -

Profit for the Year 269,804,807 288,232,957 252,968,030 231,771,143

Total Comprehensive Income attributable to;

Owners of the Company 261,001,828 259,470,203 252,654,913 231,239,296

Non-Controlling Interest 8,346,914 28,230,907 - -

Total Comprehensive Income for the Year 269,348,742 287,701,110 252,654,913 231,239,296

Earnings Per Share 15.1 43.32 43.09 41.93 38.41

Figures in brackets indicate deductions.

The accounting policies and notes from 47 to 88 form an integral part of these financial statements.

43Statement of Financial Position

Group Company

As at 31 March, 2015 2014 2015 2014


Restated

ASSETSNon - Current AssetsProperty, Plant and Equipment 16 332,489,269 173,264,434 112,640,230 68,950,341Intangible Assets 17 4,495,734 5,736,942 - -Prepaid Lease Payments 18 5,438,809 5,515,076 5,438,809 5,515,076Investment Property 19 24,191,513 24,191,513 24,191,513 24,191,513Investment in Subsidiary Company 20 - - 65,000,020 65,000,000Investment in Debentures 84,113,507 38,485,323 84,113,507 38,485,323Total Non Current Assets 450,728,832 247,193,288 291,384,079 202,142,253

Current AssetsInventories 21 1,027,412,149 746,821,801 848,623,101 622,399,932Trade and Other Receivables 22 847,395,487 968,476,597 627,649,379 742,338,242Amounts due from Related Parties 23 72,925,958 26,429,821 - -Cash and Cash Equivalents 24.1 86,892,429 24,872,486 83,374,701 23,441,196Total Current Assets 2,034,626,023 1,766,600,705 1,559,647,181 1,388,179,370Total Assets 2,485,354,855 2,013,793,993 1,851,031,260 1,590,321,623

EQUITYStated Capital 25 115,924,290 115,924,290 115,924,290 115,924,290Retained Earnings 1,115,041,617 884,207,899 1,078,463,795 855,976,992Total Equity attributable to Owners of the Company 1,230,965,907 1,000,132,189 1,194,388,085 971,901,282Non -Controlling Interest 101,577,841 93,230,927 - -Total Equity 1,332,543,748 1,093,363,116 1,194,388,085 971,901,282

Non - Current LiabilitiesInterest Bearing Borrowings 26 74,300,000 - - - Assets Related Grants 27 6,581,652 6,801,041 6,581,652 6,801,041Employee Benefits 28 26,026,219 21,227,139 22,638,976 19,999,428Deferred Tax Liabilities 29 6,019,604 3,615,883 3,294,927 1,880,350Total Non Current Liabilities 112,927,475 31,644,063 32,515,555 28,680,819

Current LiabilitiesTrade and Other Payables 30 792,270,482 750,583,860 593,767,592 558,729,265Amounts due to Related Parties 31 1,034,343 431,513 - -Interest Bearing Borrowings 26 139,021,939 58,876,643 - -Dividend Payable 1,227,902 1,336,729 1,227,902 1,336,729Current Tax Liabilities 64,495,719 58,909,735 29,132,126 29,673,528Bank Overdraft 24.2 41,833,247 18,648,334 - -Total Current Liabilities 1,039,883,632 888,786,814 624,127,620 589,739,522Total Liabilities 1,152,811,107 920,430,877 656,643,175 618,420,341Total Equity and Liabilities 2,485,354,855 2,013,793,993 1,851,031,260 1,590,321,623


It is certified that the Financial statement have been prepared in compliance with the requirements of the Companies Act. No. 07 of 2007.

Thejani KodithuwakkuFinance Controller

The Board of Directors is responsible for the preparation and presentation of these financial statements. Approved for and on behalf of the

Board of Directors :

Deshamanya Tilak Dias Gunasekera Sumal PereraManaging Director Chairman

15th July 2015,Colombo

SATHOSA MOTORS PLC | Annual Report 2014/1544 Statement of Changes in Equity

Attributable to equity shareholders of parent

GROUP Stated Retained Non Controlling

Capital Earnings Total Interest Total

Rs. Rs. Rs. Rs. Rs.

Balance as at 1st April 2013 115,924,290 654,905,806 770,830,096 - 770,830,096

Acquisition of SML Frontier Automotive (Pvt) Ltd - - - 65,000,020 65,000,020

Comprehensive Income for the Year

Profit for the year - 260,002,050 260,002,050 28,230,907 288,232,957

Other Comprehensive Income (net of tax) - (531,847) (531,847) - (531,847)

Total Comprehensive Income - 259,470,203 259,470,203 28,230,907 287,701,110

Transactions with owners of the Company recognized directly in equity

Dividend Paid - (2012/2013) - (30,168,110) (30,168,110) - (30,168,110)

- - - - -

Balance as at 31st March 2014 115,924,290 884,207,899 1,000,132,189 93,230,927 1,093,363,116

Balance as at 1st April 2014 115,924,290 884,207,899 1,000,132,189 93,230,927 1,093,363,116


Profit for the year - 261,386,419 261,386,419 8,418,388 269,804,807

Other Comprehensive Income (net of tax) - (384,591) (384,591) (71,474) (456,065)

Total Comprehensive Income - 261,001,828 261,001,828 8,346,914 269,348,742


Dividend Paid - (2013/2014) - (30,168,110) (30,168,110) - (30,168,110)

Balance as at 31st March 2015 115,924,290 1,115,041,617 1,230,965,907 101,577,841 1,332,543,748

45

COMPANY Stated Retained Total

Capital Earnings

Rs. Rs. Rs.

Balance as at 1st April 2013 115,924,290 654,905,806 770,830,096


Profit for the year - 231,771,143 231,771,143

Other Comprehensive Income (net of tax) - (531,847) (531,847)

Total Comprehensive income - 231,239,296 231,239,296


Dividend Paid - (2012/2013) - (30,168,110) (30,168,110)

Balance as at 31st March 2014 115,924,290 855,976,992 971,901,282

Balance as at 1st April 2014 115,924,290 855,976,992 971,901,282


Profit for the year - 252,968,030 252,968,030

Other Comprehensive Income (net of tax) - (313,117) (313,117)

Total Comprehensive Income - 252,654,913 252,654,913


Dividend Paid - (2013/2014) - (30,168,110) (30,168,110)

Transfer to Retained Earnings - - -

Balance as at 31st March 2015 115,924,290 1,078,463,795 1,194,388,085



SATHOSA MOTORS PLC | Annual Report 2014/1546Statement of Cash Flow

Group Company



Restated

CASH FLOWS FROM OPERATING ACTIVITIESProfit before Tax 382,171,983 415,066,940 349,652,287 322,327,188

Adjustments for:Depreciation & Amortisation 32,497,274 24,552,609 14,874,139 13,397,463Provision for Gratuity 5,683,847 4,810,154 3,722,854 3,582,443Amortisation of Grants Received (219,389) (219,389) (219,389) (219,389)(Provision)/ Reversal for Bad and Doubtful Debts & Inventories 1,889,762 1,182,086 1,889,762 1,182,086Impairment Provisions made for Trade Receivable - (1,622,969) - -Interest Expense 18,710,118 9,213,012 16,367 7,337,648Profit on Sale of Property, Plant and Equipment (10,032,544) (4,550,939) (10,032,544) (4,550,939)Interest Income (17,834,664) (2,473,384) (17,834,664) (2,473,384)Writebackofunclaimeddividend (295,137) - (295,137) -Writebackofoverprovisionsforexpenses (1,000,000) (6,000,000) (1,000,000) (6,000,000)Writebackofwarrantyclaimandother (5,749,138) (2,653,449) (5,749,138) (2,653,449)Operating profit before working capital changes 405,822,112 437,304,671 335,024,537 331,929,667

Changes in working capitalInventories (282,480,110) 148,981,215 (228,112,931) 273,403,084Trade and Other Receivables 123,242,764 (587,581,240) 116,850,517 (363,065,854)Amount Due to Related Parties 602,830 431,513 - -Amount Due From Related Parties (46,496,137) (26,429,821) - -Trade and Other Payables 46,569,263 140,352,980 39,920,948 (51,501,599)Cash generated from/(used) in operation 247,260,722 113,059,318 263,683,071 190,765,298

Income Tax Paid (104,200,136) (92,066,178) (95,689,318) (86,759,996)Gratuity Paid (1,518,191) (3,714,900) (1,518,191) (3,714,900)Net Cash flows from/(used in) Operating Activities 141,542,395 17,278,240 166,475,563 100,290,402

Cash Flows From Investment ActivitiesAcquisition of Property, Plant & Equipment (190,404,635) (157,965,409) (58,487,761) (42,965,267)Acquisition of Intangible Assets - (6,206,040) - -Proceeds from Sale of Property, Plant & Equipment 10,032,544 4,550,939 10,032,544 4,550,939Acquisition of Investment Property - (2,508,112) - (2,508,112)Investment in Subsidiary company - - (20) (65,000,000)Investment in Debentures (45,628,183) (37,290,000) (45,628,183) (37,290,000)Interest Received 17,834,664 2,473,386 17,834,664 2,473,386Net Cash Flows from/(used) in Investing Activities (208,165,606) (196,945,236) (76,248,753) (140,739,054)

Cash Flows From Financing ActivitiesInterest Paid (18,710,118) (9,213,012) (16,367) (7,337,648)Proceed From Issued Shares to Non-Controlling Interest - 65,000,020 - -Proceed From Borrowings 359,262,243 58,876,643 - -Loan Repayment (204,816,946) - - -Dividends Paid (30,276,938) (30,168,559) (30,276,938) (30,168,559)Net Cash Flows used in Financing Activities 105,458,241 84,495,092 (30,293,305) (37,506,207)

Net Increase/ (Decrease) in Cash and Cash Equivalents 38,835,030 (95,171,903) 59,933,505 (77,954,859)Cash and Cash Equivalents as at 1st April 6,224,152 101,396,055 23,441,196 101,396,055Cash and Cash Equivalents as at 31st March 24 45,059,182 6,224,152 83,374,701 23,441,196



47Notes to the Financial Statements

1 CORPORATE INFORMATION

1.1 Reporting Entity

Sathosa Motors PLC is a public limited liability company

incorporated and domiciled in Sri Lanka and is listed on

the Colombo Stock Exchange. The registered office and

principal place of business of the Company is situated at

No. 25, Vauxhall Street,Colombo 02.

The consolidated Financial Statements of Sathosa Motors

PLC as at and for the year ended 31st March 2015 comprise

the Company and its Subsidiary, SML Frontier Automotive

(Pvt) Ltd. (together referred to as the ‘Group’). Sathosa

Motors PLC holds 50% of SML Frontier Automotive (Pvt) Ltd.

The Financial Statements of the Company and its subsidiary

have a common financial year which ends on 31st March.

1.1.2 Total number of employees

Company -122 (2014: 122)

Group - 212 (2014: 202)

1.2 Principal Activities and Nature of Operations

The principal activity of the Company is importing and

distribution of Isuzu new vehicles and spare parts and

operating workshops for vehicle repairs.

SML Frontier Automotive (Pvt) Ltd (SMLF) is the subsidiary of

Sathosa Motors PLC. SMLF is in the business of importation

and sale of Land Rover vehicles, the Subsidiary Company

operates workshops and sale of Land Rover spare parts too.

1.3 Parent Company

The Parent Company of Sathosa Motors PLC is Access

Engineering PLC ( AEL). AEL is primarily involved in the

business of construction activities.

2 BASIS OF PREPARATION

2.1 Statement of Compliance

The Financial Statements of the Company and those

consolidated comprise the Statement of Financial Position,

the Statement of Profit or Loss and other Comprehensive

Income, Statement of Changes in Equity, and Cash Flow

Statement together with the Accounting Policies and

Notes to the Financial Statements.

These Financial Statements have been prepared in

accordance with Sri Lanka Accounting Standards (SLFRSs /

LKASs) as issued by the Institute of Chartered Accountants

of Sri Lanka (CA Sri Lanka) and with the requirements of the

Companies Act No. 7 of 2007.

The consolidated and separate Financial Statements were

authorized for issue by the Board of Directors in accordance

with the resolution passed by the Board of Directors on

15th July 2015.

2.2 Basis of Measurement

The consolidated Financial Statements have been prepared

on the historical cost basis except for the following material

items in the Statement of Financial Position.

• Financial Assets and Financial Liabilities that have

been measured at fair value

• Employee benefit liability recognized based on the

actuarial valuation (LKAS 19)

• Land and building stated at revalued amounts -

(revaluation has not been carried out during the

current financial year)

• Investment property measured at fair value

The Directors have made an assessment of Group’s ability

to continue as a going concern in the foreseeable future

and they do not foresee a need for liquidation or cessation

of business.

2.3 Functional and Presentation Currency

The financial statements are presented in Sri Lankan Rupees

(Rs.), which is the Group’s functional currency.

2.4 Use of Estimates & Judgments

The preparation of the Financial Statements in conformity

with Sri Lanka Accounting Standards (SLFRSs / LKASs)

requires management to make judgments, estimates and

assumptions that affect the application of accounting

policies and the reported amounts of assets, liabilities,

income and expenses. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed

on an ongoing basis. Revisions to accounting estimates are

recognized in the period in which the estimates are revised

and in any future periods affected.


Information about assumptions and estimate uncertainties

that have a significant risk of resulting in a material

adjustment in the financial statements are stated below.

Note 28 - Employee Benefits

Note 29 - Deferred Taxation

Note 32 - Contingent Liabilities

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied

consistently to all periods presented in these financial

statements, unless otherwise stated.

The accounting policies have been applied consistently by

its Group entities.

3.1 Basis of Consolidation

3.1.1 Business Combination

Business combinations are accounted for using the

acquisition method as at the acquisition date - i.e. when

control is transferred to the Group. Control is the power to

govern the financial and operating policies of an entity so

as to obtain benefits from its activities. In assessing control,

the Group also takes into consideration potential voting

rights that are currently exercisable.

The Group measures goodwill at the acquisition date as

• The fair value of the consideration transferred plus

• The recognized amount of any non-controlling

interests in the acquiree plus

• If the business combination is achieved in stages, the

fair value of the pre-existing equity interest in the

acquiree less

• The net recognized amount (generally fair value) of

the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is

recognized immediately in profit or loss.

The consideration transferred does not include amounts

related to the settlement of pre-existing relationships,

such amounts are generally recognized in profit or loss.

Transactions costs, other than those associated with the

issue of debt or equity securities, that the Group incurs in

connection with a business combination are expensed as

incurred.

3.1.2 Non-Controlling Interests

The total profit or loss for the year of the Company and

its subsidiary included in consolidation are shown in

the consolidated Statement of Profit or Loss and other

Comprehensive income with the proportion of profit or

loss after taxation pertaining to minority shareholders of

subsidiary being deducted as “Non controlling interest”. All

assets and liabilities of the Company and of its subsidiary

included in consolidation are shown in the consolidated

Statement of Financial Position. The interest of minority

shareholders of subsidiary in the fair value of net assets

of the Group is indicated separately in the consolidated

Statement of Financial Position under the heading “Non-

controlling interest”. Changes in the Group’s interest in

a subsidiary that do not result in a loss of control are

accounted for as, equity transactions. Adjustments to non-

controlling interests are based on a proportionate amount

of the net assets of the subsidiary. No adjustments are

made to goodwill and no gain or loss is recognized in profit

or loss.

3.1.3 Subsidiary

Subsidiary entity is controlled by the Parent. The financial

statements of subsidiary is included in the consolidated

financial statements from the date that control commences,

until the date that control ceases. In separate financial

statements, investment in subsidiary is stated at cost.

3.1.4 Transactions Eliminated on Consolidation

Intra-group balances and transactions, and any unrealized

income and expenses arising from intra group transactions,

are eliminated in preparing the consolidated financial

statements. Unrealized losses are eliminated in the same

way as unrealized gains, but only to the extent that there is

no evidence of impairment.

Notes to the Financial Statements

49

3.2 Foreign Currency

3.2.1 Foreign Currency Transactions

All foreign exchange transactions are converted to

functional currency, at the rates of exchange prevailing at

the time the transactions are effected.

Monetary assets and liabilities denominated in foreign

currency are re-translated to functional currency

equivalents at the spot exchange rate prevailing at the

reporting date.

Non-monetary items that are measured in terms of

historical cost in a foreign currency are translated using the

exchange rates as at the dates of the initial transactions.

Non-monetary assets and liabilities are translated using

exchange rates that existed when the values were

determined. The gain or loss arising on translation of non-

monetary items are recognized in line with the gain or loss

of the item that gave rise to the translation difference.

3.3 Assets and Bases of their Valuation

Assets classified as current assets in the Statement of

Financial Position are cash and bank balances and those,

which are expected to be realized in cash during the

normal operating cycle, or within one year from the

Statement of Financial Position, whichever is shorter. Assets

other than current assets are those, which the Company

intends to hold beyond a one year period calculated from

the reporting date.

3.3.1 Property, Plant & Equipment

3.3.1.1 Recognition and Measurement

Property, Plant and Equipment are stated at cost/

revaluation less accumulated depreciation and

accumulated impairment losses.

3.3.1.2 Owned Assets

The cost of an item of property, plant and equipment

comprise 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 labor, and any other costs

directly attributable to bringing the asset to the working

condition for its intended use. This also includes cost of

dismantling and removing the items and restoring in the

site on which they are located and borrowing costs on

qualifying assets.

Purchased software that is integrated to the functionality of

the related equipment is capitalized as part of equipment.

WhenpartsofanitemofProperty,PlantandEquipment

have different useful lives, they are accounted for as

separate items (major component) of Property, Plant

and Equipment.

3.3.1.3 Leased Assets

Leases in terms of which the Group assumes substantially

all the risk and rewards of ownership are classified as

finance leases. Upon initial recognition the leased asset is

measured and capitalized at an amount equal to the lower

of its fair value and the present value of minimum lease

payments. Subsequent to initial recognition, the asset is

accounted for in accordance with the accounting policy

applicable to that asset.

Other leases are operating leases and, except for

investment property, the leased assets are not recognized

in the Group’s Statement of Financial Position.

3.3.1.4 Subsequent Costs

The cost of replacing part of an item of Property, Plant

and Equipment is recognized in the carrying amount of

the item if it is probable that the future economic benefits

embodied within the part will flow to the Group and its

cost can be measured reliably. The carrying amount of the

replaced part is de-recognized.

The costs of the day to day servicing of Property, Plant and

Equipment are recognized in profit or loss as incurred.

3.3.1.5 De-Recognition

The carrying amount of an item of Property, Plant and

Equipment is de-recognized on disposal or when no future

economic benefits are expected from its use or disposal.

Gains or losses on de-recognition are recognized within

other income in profit or loss.

3.3.1.6 Revaluation

Revaluation Model is applied for freehold land and building

by professionally qualified valuers using the open market

value at least once in every three to five years. The valuation


surplus is recognized on the net carrying value of the asset

and is transferred to a revaluation reserve after restating

the asset at the revalued amount. The revaluation reserve

is transferred to retained earnings at the point of de-

recognition.

3.3.1.7 Depreciation

Depreciation is recognized in Statement of Profit or Loss

and other Comprehensive Income on the straight-line

basis over the estimated useful lives of each part of item

of Property, Plant and Equipment. Leased assets are

depreciated over the shorter of the lease term and their

useful lives unless it is reasonably certain that the Group

will obtain ownership by the end of the lease term.

Depreciation of an asset begins when it is available for use

whereas depreciation of an asset ceases at the earlier of the

date that the asset is classified as held for sale (or included

in a disposal group that is classified as held for sale) and

the date that the asset is de-recognized. Depreciation is not

chargedonFreeholdLandandCapitalWorkinProgress.

The estimated useful lives are as follows:

Asset Category Useful Lives Years

Building–Peliyagoda -SML 50

LeaseholdBuilding–Welisara-SMLF 15

Plant & Machinery 8

Motor Vehicles 5

Office Equipment 5

Furniture & Fittings 5

Tools-Workshop 5-8

Computers 5

99 years Lease Agreement of SML Peliyagoda land would

continue until 2086.

15 years Lease Agreement of SMLF Welisara workshop

would continue until 2021. This lease agreement is between

SMLFWelisaraworkshopandCEY-NORFoundationLTD.

Depreciation methods, useful lives, and residual

values are reviewed at each reporting date and

adjusted if appropriate.

3.3.1.7.1 Leasehold Right – Land

Leasehold property comprise of land use rights and is

amortized on a straight line basis over the period of the

lease in accordance with the pattern of benefits expected

to be derived from the lease. Leasehold property is tested

for impairment annually and is written down where

applicable. The impairment loss if any is recognized in the

Profit or Loss.

The estimated useful life for the current periods is as follows:

Item Useful Life

Leasehold rights 71 Years (Remaining Lease Period)

3.3.1.8 Capital Work in Progress

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. This also includes cost of dismantling

and removing the items and restoring in the site on which

they are located and borrowing costs on qualifying assets.

3.3.2. Intangible Assets

Intangible Assets are recognized if it is probable that

economic benefits are attributable to the assets will flow to

the entity and cost of the assets can be measured reliably.

Intangible assets that are acquired by the Group/Company

are measured at cost less accumulated amortization and

accumulated impairment losses.

3.3.2.1. Software

All computer software cost incurred, which are not

internally related to associate hardware, which can be

clearly identified, reliably measured and its probable that

they will lead to future economic benefits, are included in

the Statement of Financial Position under the category of

intangible assets.

3.3.2.2. Subsequent Expenditure

Subsequent expenditure is capitalized only when it

increases the future economic benefits embodied in the

specific asset to which it relates. All other expenditure is

recognized in profit or loss as incurred.


51

3.3.2.3. Amortisation

Amortisation is calculated over the cost of the asset, or

other amount substituted for cost, less its residual value.

Amortisation is recognized in the profit or loss on a straight

line basis over the estimated useful lives of intangible assets,

other than goodwill, from the date that they are available

for use, since this most closely reflects the expected pattern

of consumption of the future economic benefits embodied

in the asset. The estimated useful lives and amortization

rates are as follows:

Asset Category Useful Life (Years)

Depreciation Rate (%)

Computer Software 05 20%

Amortisation methods, useful lives and residual values

are reviewed at each financial year end and adjusted

prospectively, if appropriate.

3.3.3 Investment Properties

Investment property is property held either to earn rental

income or for capital appreciation or for both, but not for sale

in the ordinary course of business, use in the production or

supply of goods or services or for administrative purposes.

3.3.3.1 Recognition and Measurement

Investment properties are measured initially at cost. The

carrying amount includes the cost of replacing part of

an existing investment property at the time that cost is

incurred if the recognition criteria are met and exclude the

costs of day-to-day servicing of an investment property.

Subsequently, investment properties are stated at fair

value, which reflects market conditions at the reporting

date. Gains or losses arising from changes in the fair values

of investment properties are included in the Statement of

Profit or Loss and other Comprehensive Income in the year

in which they arise. Fair values are evaluated at least every

three years by an accredited external, independent valuer.

3.3.3.2 De-recognition

Investment properties are de-recognized either when

they have been disposed of or when the investment

property is permanently withdrawn from use and no

future economic benefits are expected from its disposal.

Any gains or losses on the retirement or disposal of an

investment property are recognized in the Profit or Loss

in the event of retirement or disposal.

Transfers are made from investment property only when

there is a change in use. For a transfer from investment

property to owner occupied property, the deemed cost

for subsequent accounting is the fair value at the date of

change in use.

WhereGroup companies occupy a significant portion of

the investment property of a subsidiary, such investment

properties are treated as property, plant and equipment

in the consolidated financial statements, and accounted

using Group accounting policy for property, plant and

equipment.

3.3.4 Investment in Subsidiary

Investment in Subsidiary is treated as long - term investment

and valued at cost in separate financial statements of the

Company.

3.3.5 Inventories

Inventories are stated at the lower of cost and net realizable

value, after making due allowance for obsolete and slow

moving items.

The cost of inventories is comprised of all costs of purchase,

costs of conversion and other costs incurred in bringing

the inventories to their present location and condition.

Net realizable value is the estimated selling price in the

normal course of business less estimated cost of realization

and/or cost of conversion from their existing state to

saleable condition.

Inventory movement, mainly with respect to spare

parts is reviewed at the end of reporting period by

an experienced staff member ( head of the division)

who has a fair knowledge / expertise to assess the

recoverability of inventory and the items that are

identified as irrecoverable are written off during the

year. For this purpose the Company gets the support of

the workshop manager who possesses a fair amount of

technical expertise, which helps to identify the technical

obsolescence of the inventory items.


The cost of each category of Inventory of the Group /

Company is determined on the following basis:

Spare Parts - At actual cost on a weighted average basis

New Vehicles - At actual cost

Goods in transit - At Actual cost

Work-in-Progress - Includesonlythecostofmaterialandlabour

3.3.6 Cash and Cash Equivalents

Cash and cash equivalents are defined as cash in hand,

demand deposits and short term highly liquid investments,

readily convertible to known amounts of cash and subject

to insignificant risk of changes in value.

For the purpose of cash flow statement, cash and cash

equivalents consist of cash in hand and deposits in banks

net of outstanding bank overdrafts. Investments with

short maturities i.e. three months or less from the date of

acquisition are also treated as cash equivalents.

3.3.7 Impairment of Non-Financial Assets

The Group assesses at each reporting date, whether

there is an indication that an asset may be impaired. If

any indication exists, the Company estimates the asset’s

recoverable amount. An asset’s recoverable amount is the

higher of an asset’s or cash-generating unit’s (CGU) fair value

less costs to sell and its value in use and is determined for

an individual asset, unless the asset does not generate cash

inflows that are largely independent of those from other

assetsorgroupsofassets.Wherethecarryingamountofan

asset or CGU exceeds its recoverable amount, the asset is

considered impaired and is written down to its recoverable

amount. In assessing value in use, the estimated future cash

flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of

the time value of money and the risks specific to the asset.

In determining fair value less costs to sell, recent market

transactions are taken into account, if available. If no such

transactions can be identified, an appropriate valuation

model is used. These calculations are corroborated by

valuation multiples, quoted share prices for publicly traded

Companies or other available fair value indicators.

Impairment losses of continuing operations are recognized

in the Profit or Loss in those expense categories consistent

with the function of the impaired asset, except for a

property previously revalued where the revaluation was

taken to other comprehensive income. In this case, the

impairment is also recognized in other comprehensive

income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at

each reporting date as to whether there is any indication

that previously recognized impairment losses may no

longer exist or may have decreased. If such indication

exists, the Group estimates the asset’s or cash-generating

unit’s recoverable amount. A previously recognized

impairment loss is reversed only if there has been a

change in the assumptions used to determine the asset’s

recoverable amount since the last impairment loss was

recognized. The reversal is limited so that the carrying

amount of the asset does not exceed its recoverable

amount, nor exceed the carrying amount that would have

been determined, net of depreciation, had no impairment

loss been recognized for the asset in prior years. Such

reversal is recognized in the Profit or Loss unless the asset

is carried at a revalued amount, in which case the reversal

is treated as a revaluation increase.

3.3.8 Financial Assets

3.3.8.1 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, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognized initially at fair value plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

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

The Group’s financial assets include cash and cash

equivalents, short term deposits, trade and other

receivables, loans, and related party receivables.

The subsidiary company has obtained long term loans for

capital expenditure ( showroom and a workshop) and short

term loans during the current financial year.


53

3.3.8.2 Subsequent Measurement

The subsequent measurement of financial assets depends

on their classification as described below:

3.3.8.3 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 amortized cost using

the effective interest rate method (EIR), less impairment.

Amortized 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 amortization is

included in finance income in the Statement of Profit or

Loss and other Comprehensive Income. The losses arising

from impairment are recognized in the profit or loss in

finance cost.

3.3.8.4 Held-to-Maturity Investments

Non-derivative financial assets with fixed or determinable

payments and fixed maturities are classified as held-to-

maturity when the Group has the positive intention and

ability to hold them to maturity. After initial measurement,

held-to-maturity investments are measured at amortized

cost using the effective interest method, less impairment.



that are an integral part of the EIR. The EIR amortization is

included in finance income in the Profit or Loss. The losses

arising from impairment are recognized in profit or loss in

finance costs.

3.3.8.5 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 recognized as other

comprehensive income in the available-for-sale reserve

until the investment is de-recognized, at which time the

cumulative gain or loss is recognized in other operating

income, or determined to be impaired, at which time

the cumulative loss is reclassified to the finance costs in

statement of Profit or Loss and removed from the available-

for-sale reserve. Interest income on available-for-sale debt

securities is calculated using the effective interest method

and is recognized in profit or loss.

The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in theneartermisstillappropriate.WhentheGroupisunableto trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intention and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

For a financial asset reclassified out of the available-for-sale

category, any previous gain or loss on that asset that has

been recognized in equity is amortized to profit or loss

over the remaining life of the investment using the EIR.

Any difference between the new amortized cost and the

expected cash flows is also amortized over the remaining

life of the asset using the EIR. If the asset is subsequently

determined to be impaired, then the amount recorded in

equity is reclassified to the profit or loss.

3.3.8.6 De recognition

A financial asset (or, where applicable a part of a financial

asset or part of a group of similar financial assets) is de

recognized when:

• The rights to receive cash flows from the asset have

expired,

• The Group has transferred its rights to receive cash

flows from the asset or has assumed an obligation

to pay the received cash flows in full without

material delay to a third party under a ‘pass-through’

arrangement; and either (a) the Group has transferred

substantially all the risks and rewards of the asset, or

(b) the Group has neither transferred nor retained

substantially all the risks and rewards of the asset, but

has transferred control of the asset.


WhentheGrouphastransferred its rightstoreceivecash

flows from an asset or has entered into a pass-through

arrangement, and has neither transferred nor retained

substantially all of the risks and rewards of the asset nor

transferred control of it, the asset is recognized to the

extent of the Group’s continuing involvement in it.

In that case, the Group also recognizes an associated

liability. The transferred asset and the associated liability are

measured on a basis that reflects the rights and obligations

that the Group has retained.

Continuing involvement that takes the form of a guarantee

over the transferred asset is measured at the lower of the

original carrying amount of the asset and the maximum

amount of consideration that the Group could be required

to repay.

3.3.8.7 Impairment of Financial Assets

The Group assesses at each reporting date whether there

is any objective evidence that a financial asset or a group

of financial assets is impaired. A financial asset or a group

of financial assets is deemed to be impaired if, and only

if, there is objective evidence of impairment as a result

of one or more events that has occurred after the initial

recognition of the asset (an incurred ‘loss event’) and that

loss event has an impact on the estimated future cash

flows of the financial asset or the group of financial assets

that can be reliably estimated.

Evidence of impairment may include indications that the

debtors or a group of debtors is experiencing significant

financial difficulty, default or delinquency in interest or

principal payments, the probability that they will enter

bankruptcy or other financial reorganization and where

observable data indicate that there is a measurable

decrease in the estimated future cash flows, such as

changes in arrears or economic conditions that correlate

with defaults.

3.3.8.8 Financial Assets Carried at Amortized Cost

For financial assets carried at amortized cost, the Group

first assesses whether objective evidence of impairment

exists individually for financial assets that are individually

significant, or collectively for financial assets that are not

individually significant. If the Group determines that no

objective evidence of impairment exists for an individually

assessed financial asset, whether significant or not, it

includes the asset in a group of financial assets with

similar credit risk characteristics and collectively assesses

them for impairment. Assets that are individually assessed

for impairment and for which an impairment loss is, or

continues to be, recognized are not included in a collective

assessment of impairment.

If there is objective evidence that an impairment loss

has been incurred, the amount of the loss is measured

as the difference between the assets carrying amount

and the present value of estimated future cash flows

(excluding future expected credit losses that have not yet

been incurred). The present value of the estimated future

cash flows is discounted at the financial asset’s original

effective interest rate. If a loan has a variable interest rate,

the discount rate for measuring any impairment loss is the

current effective interest rate.

The carrying amount of the asset is reduced through

the use of an allowance account and the amount of the

loss is recognized in the profit or loss. Interest income

continues to be accrued on the reduced carrying amount

and is accrued using the rate of interest used to discount

the future cash flows for the purpose of measuring the

impairment loss. The interest income is recorded as part of

finance income in the Profit or Loss. Loans together with

the associated allowance are written off when there is no

realistic prospect of future recovery and all collateral has

been realized. If, in a subsequent year, the amount of the

estimated impairment loss increases or decreases because

of an event occurring after the impairment was recognized,

the previously recognized impairment loss is increased or

reduced by adjusting the allowance account. If a future

write-off is later recovered, the recovery is credited to

finance costs in the profit or loss.

3.3.9 Financial Liabilities

3.3.9.1 Initial Recognition and Measurement

Financial liabilities within the scope of LKAS 39 are classified

as financial liabilities at fair value through profit or loss,

loans and borrowings, or as derivatives designated as

hedging instruments in an effective hedge, as appropriate.

The Group determines the classification of its financial

liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and,

in the case of loans and borrowings, carried at amortized

cost. This includes directly attributable transaction costs.


55

The Group’s financial liabilities include trade and other

payables, bank overdrafts, loans and borrowings and

related party payables.

3.3.9.2 Subsequent Measurement

The measurement of financial liabilities depends on their

classification as follows:

3.3.9.3 Loans and Borrowings

After initial recognition, interest bearing loans and

borrowings are subsequently measured at amortized cost

using the effective interest rate method. Gains and losses

are recognized in the Profit or Loss when the liabilities are

de-recognized as well as through the effective interest rate

method (EIR) amortization process.



that is an integral part of the EIR. The EIR amortization is

included in finance costs in the income statement.

3.3.9.4 De-recognition

A financial liability is de-recognized when the obligation

under the liability is discharged or cancelled or expires.

Whenanexisting financial liability is replacedbyanother

from the same lender on substantially different terms, or

the terms of an existing liability are substantially modified,

such an exchange or modification is treated as a de-

recognition of the original liability and the recognition of

a new liability, and the difference in the respective carrying

amounts is recognized in profit or loss.

3.3.10 Off setting of Financial Instruments

Financial assets and financial liabilities are offset with the

net amount reported in the Statement of Financial Position

only if there is a current enforceable legal right to offset the

recognized amounts and intent to settle on a net basis, or

to realize the assets and settle the liabilities simultaneously.

Income and expense will not be offset in the statement

of profit or loss and other comprehensive income unless

required or permitted by any accounting standard or

interpretation, as specifically disclosed in the accounting

policies of the Group.

3.3.11 Fair Value of Financial Instruments

The fair value of financial instruments that are traded

in active markets at each reporting date is determined

by reference to quoted market prices or dealer price

quotations (bid price for long positions and ask

price for short positions), without any deduction for

transaction costs.

For financial instruments not traded in an active market,

the fair value is determined using appropriate valuation

techniques. Such techniques may include:

• Using recent arm’s length market transactions;

• Reference to the current fair value of another

instrument that is substantially the same;

• A discounted cash flow analysis or other valuation

models.

An analysis of fair values of financial instruments and

further details as to how they are measured are provided

in Note 38.

3.4 Provision, Contingent Liabilities, Contingent Assets

Provisions are recognized when the Group has a present

obligation (legal or constructive) as a result of a past

event, where it is probable that an outflow of resources

embodying economic benefits will be required to settle

the obligation and a reliable estimate can be made of the

amount of the obligation.

All contingent liabilities are disclosed as a note

to the financial statements unless the outflow of

resources is remote.

Contingent assets are disclosed, where inflow of economic

benefit is probable.

3.5 Employment Benefits

3.5.1 Defined Benefit Plans

The liability recognized in the Statement of Financial

Position in respect of defined benefit plan is the present

value of defined benefit obligation at the reporting date.

The defined benefit obligation is calculated annually

by independent actuary using Project Unit Credit (PUC)

method as recommended by LKAS 19 - ‘Employee Benefits.


Actuarial gains and losses for the defined benefit plans

are recognized in full in the period in which they occur in

Other Comprehensive Income.

However, according to the Payment of Gratuity Act

No. 12 of 1983, the liability for gratuity payment to an

employee arises only after the completion of 5 years of

continued service.

3.5.2 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 a fixed contribution into

a separate entity and will have no legal or constructive

obligation to pay further amounts.

All employees who are eligible for Employees’ Provident

Fund Contributions and Employees’ Trust Fund

Contributions are covered by relevant contributions funds

in line with the relevant statutes. Employer’s contributions

to the defined contribution plans are recognized as an

expense in profit or loss when incurred.

4 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

4.1 Revenue

Revenue represents the amounts derived from the

provision of services, which fall within the Group’s ordinary

activities net of trade discounts and turnover related taxes.

4.2 Revenue Recognition

Revenue is recognized to the extent that it is probable

that the economic benefits will flow to the Group 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, and after eliminating sales

within the Group. The following specific criteria are used for

the purpose of recognition of revenue.

4.2.1 Rental Income

Rental income from investment property is recognized

in profit or loss on a straight-line basis over the term

of the lease.

4.2.2 Goods Sold

Revenue from the sale of goods in the course of ordinary

activities is measured at the fair value of the consideration

received or receivable, net of returns, trade discounts and

volume rebates. Revenue is recognized 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.

4.2.3 Services Rendered

Revenue for services rendered is recognized in the

Statement of Profit or Loss and other Comprehensive

Income once all significant performance obligations have

been provided.

4.2.4 Agency Commissions and Hire Income

Agency Commissions are recognized in the Statement

of Profit or Loss and other Comprehensive Income on an

accrual basis.

4.2.5 Interest Income

For all financial instruments measured at amortized cost

and interest bearing financial assets classified as available

for sale, interest income or expense is recorded using the

effective interest rate (EIR), which is the rate that exactly

discounts the estimated future cash payments or receipts

through the expected life of the financial instrument or

a shorter period, where appropriate, to the net carrying

amount of the financial asset or liability. Interest income is

included in finance income in the profit or loss.

4.2.6 Dividend Income

Dividend income is accounted when the shareholders’

right to receive payment is established.

4.2.7 Other Income

Profits or losses from disposal of property, plant and

equipments recognized having deducted from proceeds

on disposal, the carrying value of the assets and the related

expenses.


57

Foreign currency gains and losses are reported on a

net basis.

4.3 Expenditure Recognition

Other Expenses

All expenditure incurred in the running of the business and

in maintaining the Property, Plant and Equipment in a state

of efficiency has been charged to revenue in arriving at the

profit for the year.

For the purpose of presentation of Statement of Profit or

Loss and other Comprehensive Income the directors are

of the opinion that function of expenses method presents

fairly the elements of the enterprises performance, hence

such presentation method is adopted.

Borrowing Costs

Borrowing costs are recognized as an expense in the

period in which they are incurred except those that are

directly attributable to the construction or development of

Property, Plant & Equipments which are capitalized as part

of the cost of those assets during the period of construction

or development.

4.4 Income Tax Expense

4.4.1 Current Taxes

Current Income tax liabilities for the current and prior

periods are measured at the amount expected to be

recovered from or paid to the Commissioner General of

Inland Revenue. The tax rates and tax laws used to compute

the amount are those that are enacted or substantively

enacted by the reporting date.

The provision for income tax is based on the elements

of income and expenditures reported in the Financial

Statements and computed with in accordance with the

provisions of the Inland Revenue Act.

The relevant details are disclosed in the respective notes to

the Financial Statements.

4.4.2 Deferred Taxation

Deferred tax is provided, using liability method, providing

for tax effect 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 measured at the tax rates that are expected

to apply in the year when the asset is realized or the liability

is settled, based on tax rates (and tax laws) that have been

enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset

if a legally enforceable right exists to set off current tax

assets against current income tax liabilities and the

deferred taxes relate to the same taxable entity and the

same taxation authority.

Sales Tax

Revenues, expenses and assets are recognized net of the

amount of sales tax, except, where the sales tax incurred

on a purchase of assets or service is not recoverable from

the taxation authorities, in which case, the sales tax is

recognized as a part of the cost of the asset or part of the

expense items, as applicable and receivable and payable

that are stated with the amount of sales tax included. The

net amount of sales tax recoverable from or payable to the

taxation authorities is included as a part of receivables or

payables in the Statement of Financial Position.

5 SEGMENTAL REPORTING

The Segment is a distinguishable component of the Group

that is engaged either in providing related products or

services (business segment), or in providing Products

or Services within a particular Economic Environment

(Geographical Segment), which is subject to risks and

returns that are different from those of the Segments.

Spare parts

New Vehicles

Repairs & Services

6 RECOGNITION OF ASSETS RELATED GRANTS

Government Grants are recognized initially as deferred

income at fair value when there is a reasonable assurance

that they will be received and the Group will comply with

the conditions associated with the Grant, and are then

recognized in the Statement of Comprehensive income

as other income on a systematic basis over the useful

life of the asset. Grants that compensate the Group for


expenses incurred are recognized in the Statement of

Comprehensive income as other income on a systematic

basis in the periods in which the expenses are recognized.

7 OTHER GENERAL ACCOUNTING POLICIES

7.1 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 a

price is being charged.

The relevant details are disclosed in the Note 34 to the

Financial Statements.

7.2 Earnings per Share

Basic EPS is calculated by dividing the profit or loss

attributable to ordinary share holders of the Company

by the weighted average number of ordinary shares

outstanding during the period.

7.3 Events Occurring after the Reporting Period

Events after the reporting period are those events

favourable and unfavourable that occur between the end

of the reporting period and the date when the Financial

Statements are authorized for issue.

The materiality of the events occurring after the reporting

period is considered and appropriate adjustments to or

disclosures are made in the Financial Statements, where

necessary. (Note 33)

7.4 Comparative Information

The comparative information is re-classified wherever

necessary to conform with the current year’s presentation

in order to provide a better presentation.

7.5 Statement of Directors’ Responsibility

The Board of Directors of the Company is responsible for the

preparation and presentation of these financial statements.

7.6 Statement of Cash Flow

The statement of cash flows has been prepared using the

‘indirect method’ in accordance with Sri Lanka Accounting

Standard - LKAS7 on ‘Statement of Cash Flows’. Cash and

cash equivalent comprise of cash in hand, cash at bank

and short term investments that are readily convertible to

known amount of cash and subject to an insignificant risk

of change in value.

Interest received and dividends received are classified as

investing cash flows, while dividend paid is classified as

financing cash flow and interest paid is classified under the

operating cash flows for the purpose of presentation of

Statement of Cash Flows.

Bank overdrafts and short term borrowings that are re

payable on demand and forming an integral part of the

Group’s cash management are included as a component of

cash and cash equivalent for the purpose of the Statement

of Cash Flow.

8 SRI LANKA ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

The institute of Chartered Accountants of Sri Lanka has

issued the following standards which become effective

for annual periods beginning on or after 1st January 2016.

Accordingly these standards have not been applied in

preparing these financial statements.

The extent of the impact of the above standards to the

financial statements has not been determined as at 31st

March 2015.

SLFRS 9 - Financial Instruments:

Classification and Measurement

SLFRS 9, as issued, reflects the first phase of work on

replacement of LKAS 39 and applies to classification and

measurement of financial assets and liabilities as defined

in LKAS 39.

SLFRS 9 was issued in 2012 and effective date of this

standard has been deferred until 1st January 2018 until

further notice.


59

SLFRS 14 - Regulatory Deferral Accounts

The scope of this standard is to specify the financial

reporting requirements for regulatory deferral account

balances that arise when an entity provides goods or

services to customers at a price or rate that is subject to

rate regulation.

SLFRS 14 will become effective on 1st January 2016.

SLFRS 15 - Revenue from contracts with customers

The objective of this standard is to establish the principles

that an entity shall apply to report useful information to

users of financial statements about the nature, amount,

timing and uncertainty of revenue and cash flows arising

from a contract with a customer.

SLFRS 15 will become effective on 1st January 2018.


Group Company


Rs. Rs. Rs. Rs.

Restated

9 REVENUE

Spare Parts 505,041,092 432,796,213 174,910,967 155,984,547

New Vehicles 2,560,935,285 2,160,105,291 2,367,465,952 2,141,125,291

WorkShopRepairs 235,676,552 218,384,964 160,396,871 153,445,718

Machinery 45,039,262 - 45,039,262 -

Vehicles Local Charges 176,338,679 255,359,105 - -

Agency Commission 4,209,022 8,934,389 4,209,022 8,934,389

3,527,239,892 3,075,579,962 2,752,022,074 2,459,489,945

NBT (24,726,266) (34,728,367) (14,439,717) (25,174,683)

Net Revenue 3,502,513,626 3,040,851,595 2,737,582,357 2,434,315,262

10 OTHER INCOME

Interest Income on Reverse Repurchase Agreements and Fixed

Deposits

17,653,234 3,808,571 17,653,234 2,259,403

Interest on Loans to Employees 181,430 213,981 181,430 213,981

Valuation and Fitness Certificates 148,354 136,607 148,354 136,607

Profit on Disposal of Property, Plant and Equipment 10,032,544 4,550,939 10,032,544 4,550,939

Fines and Surcharges 9,404 7,000 9,404 7,000

Sundry Income 4,925,436 5,887,329 1,255,109 669,989

Rent Income 2,400,000 2,200,000 2,400,000 2,200,000

Amortisation of Asset Related Grants 219,389 219,389 219,389 219,389

Non Refundable Tender Deposits 53,500 63,500 53,500 63,500

WritebackofUnclaimedDividend 295,137 - 295,137 -

WritebackofOverProvisionsofExpenses 1,000,000 6,000,000 1,000,000 6,000,000

WritebackofWarrantyClaimandOther 5,749,138 2,653,449 5,749,138 2,653,449

42,667,566 25,740,765 38,997,239 18,974,257

Exchange gain / (loss) pertaining to import of vehicles has been included in the cost of sales.

11 OTHER OPERATING EXPENSES

Pre Operational Expenses - 17,783,772 - -

InventoryWriteoff - 2,449,187 - -

Research Expenses 403,493 - - -

Unrecoverable Taxes - 1,209,918 - -

403,493 21,442,877 - -

12 FINANCE COST

Import Loan and Overdraft Interest 18,710,118 9,213,012 16,367 7,337,648

18,710,118 9,213,012 16,367 7,337,648


61

Group Company


Rs. Rs. Rs. Rs.

Restated

13 PROFIT BEFORE TAX

Is stated after charging all expenses including the following,

Directors’ Emoluments and Fees 13,992,800 8,692,800 7,992,800 8,692,800

Auditor’s remuneration - Statutory Audit 1,620,000 2,477,000 775,000 737,000

- Non Audit services 2,491,520 2,285,015 203,990 85,015

Legal Expenses 924,276 92,066 924,276 92,066

Depreciation on Property, Plant & Equipment 31,179,800 24,007,245 14,797,872 13,321,196

Amortisation 1,317,474 545,364 76,267 76,267

Personnel Costs ( Note 13.1) 164,170,836 131,116,568 78,722,957 70,845,105

Bad debt written off 141,433 500,000 141,433 -

Impairment of Trade Receivable - 1,622,969 - -

13.1 Personnel Cost

Salaries,WagesandOtherrelatedcosts 143,221,042 113,998,795 67,735,359 60,830,388

Defined Benefit Plan Cost - Retirement Gratuity 5,683,847 4,810,154 3,722,854 3,582,443

Defined Contribution Plan - EPF & ETF 15,265,947 12,307,619 7,264,744 6,432,274

164,170,836 131,116,568 78,722,957 70,845,105

14 INCOME TAX EXPENSE

14.1 Current Tax

In accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and amendments there to, the Company and its Subsidiary

is liable for Income Tax at 28% on its taxable profit.

14.2 Current Income Tax

Taxation on current year profits (Note 14.4) 109,786,096 124,270,181 95,147,912 89,727,776

Under provision of previous year - 49,297 - 49,297

Origination of deferred tax assets / liabilities (14.7) 2,581,080 2,514,505 1,536,345 778,972

Income Tax Expenses charged to Profit or Loss 112,367,176 126,833,983 96,684,257 90,556,045

Tax on Other Comprehensive Income (177,359) (206,829) (121,768) (206,829)

Net Tax Expenses Charged to Statement of Profit or Loss and Other

Comprehensive Income 112,189,817 126,627,154 96,562,489 90,349,216

14.2.1 Net Tax Expense charged to Statement of Profit or Loss and other Comprehensive Income

Income Tax Expense 112,367,176 126,833,983 96,684,257 90,556,045

Tax on Other Comprehensive Income (177,359) (206,829) (121,768) (206,829)

112,189,817 126,627,154 96,562,489 90,349,216


Group Company


Rs. Rs. Rs. Rs.

Restated

14.3 Deferred Tax charged to

Profit and Loss 2,581,080 2,514,505 1,536,345 778,972

Other Comprehensive Income (177,359) (206,829) (121,768) (206,829)

2,403,721 2,307,676 1,414,577 572,143

14.4 Reconciliation between Accounting Profit and Taxable Profit

Accounting Profit Before Income Tax Expense 382,171,983 415,066,940 349,652,287 322,327,188

Aggregated Disallowable Items 71,633,885 81,088,641 37,548,002 38,166,198

Aggregated Allowable Items (55,892,410) (50,965,524) (41,566,060) (38,669,062)

Aggregated Disallowable Income (17,834,664) (2,473,384) (17,834,664) (2,473,384)

Income from Other Sources 12,014,410 1,105,403 12,014,410 1,105,403

Total statutory Income 392,093,204 443,822,076 339,813,975 320,456,343

Statutory Tax Rate 28% 28% 28% 28%

- - - -

Current Tax Expense 109,786,096 124,270,181 95,147,912 89,727,776


6314

.5Re

conc

iliat

ion

of e

ffec

tive

tax

rate

Gro

up

Com

pany

For t

he y

ear e

nded

31

Mar

ch,

2015

2014

2015

2014

Rs.

Rs.

Rs.

Rs.

Res

tate

d

Prof

it fo

r the

yea

r 2

69,8

04,8

07

288

,232

,957

2

52,9

68,0

30

231

,771

,143

Tota

l tax

exp

ense

s 1

12,3

67,1

76

126

,833

,983

9

6,68

4,25

7 9

0,55

6,04

5

Prof

it ex

clud

ing

tax

382

,171

,983

4

15,0

66,9

40

349

,652

,287

3

22,3

27,1

88

Tax

usin

g co

mpa

ny's

dom

estic

tax

rate

28.0

0% 1

07,0

08,1

55

28.0

0% 1

16,2

18,7

43

28.0

0% 9

7,90

2,64

0 28

.00%

90,

251,

613

Non

ded

uctib

le e

xpen

ses

5.25

% 2

0,05

7,48

7 5.

47%

22,

704,

819

3.01

% 1

0,51

3,44

1 3.

32%

10,

686,

535

Ded

uctib

le e

xpen

ses

-4.0

9% (1

5,64

9,87

5)-3

.44%

(14,

270,

347)

-3.3

3% (1

1,63

8,49

7)-3

.36%

(10,

827,

337)

Tax

exem

pt in

com

e-1

.31%

(4,9

93,7

06)

-0.1

7% (6

92,5

48)

-1.4

3% (4

,993

,707

)-0

.21%

(692

,548

)

Inco

me

from

oth

er s

ourc

es0.

88%

3,3

64,0

35

0.07

% 3

09,5

13

0.96

% 3

,364

,035

0.

10%

309

,513

Cha

nge

in re

cogn

ized

ded

uctib

le te

mpo

rary

diff

eren

ces

0.68

% 2

,581

,080

0.

61%

2,5

14,5

05

0.44

% 1

,536

,345

0.

24%

778

,972

Ove

r pro

visi

on in

resp

ect o

f pre

viou

s ye

ar0.

00%

-

0.01

% 4

9,29

7 0.

00%

-

0.02

% 4

9,29

7

29.4

1% 1

12,3

67,1

76

30.5

5% 1

26,8

33,9

83

27.6

5% 9

6,68

4,25

7 28

.11%

90,

556,

045

G

roup

Com

pany

For t

he y

ear e

nded

31

Mar

ch,

2015

2014

2015

2014

Rs.

Rs.

Rs.

Rs.

Res

tate

d

14.6

Def

erre

d Ta

x Li

abili

ties

Bala

nce

at th

e be

ginn

ing

of th

e ye

ar 3

,615

,883

1

,308

,207

1

,880

,350

1

,308

,207

Cha

rge

/ (R

ever

sal)f

or th

e ye

ar 2

,403

,721

2

,307

,676

1

,414

,577

5

72,1

43

Bala

nce

at th

e en

d of

the

year

6,0

19,6

04

3,6

15,8

83

3,2

94,9

27

1,8

80,3

50

Def

erre

d Ta

x (a

sset

)/lia

bilit

y as

at t

he y

ear e

nd is

mad

e up

of t

he fo

llow

ing

Prop

erty

,Pla

nt a

nd E

quip

men

t 1

3,30

6,94

6 9

,559

,482

9

,633

,840

7

,480

,190

Retir

emen

t Ben

efit

Obl

igat

ions

(7,2

87,3

42)

(5,9

43,5

99)

(6,3

38,9

13)

(5,5

99,8

40)

Prov

isio

n fo

r Bad

Deb

tors

-

-

-

-

6,0

19,6

04

3,6

15,8

83

3,2

94,9

27

1,8

80,3

50


.7M

ovem

ent o

n D

efer

red

tax

(Ass

et)/

Lia

bilit

ies

Rest

ated

GRO

UP

Bala

nce

as a

t 01

.04.

20 1

4Re

cogn

ized

in

Prof

it or

Loss

Reco

gniz

ed

in O

ther

co

mpr

ehen

sive

inco

me

Bala

nce

as a

t 31

.03.

2014

Reco

gniz

ed in

Pr

ofit

or Lo

ss

Reco

gniz

ed

in O

ther

co

mpr

ehen

sive

inco

me

Bala

nce

as a

t 31

.03.

2015

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Prop

erty

Pla

nt a

nd e

quip

men

t/ In

vest

men

t pro

pert

y 6

,738

,305

2,8

21,1

77 -

9,5

59,4

82 3

,747

,463

- 1

3,30

6,94

6

Retir

emen

t Ben

efit

Obl

igat

ions

(5,4

30,0

98)

(306

,672

) (2

06,8

29)

(5,9

43,5

99)

(1,1

66,3

83)

(177

,359

) (7

,287

,342

)

1,3

08,2

07 2

,514

,505

(206

,829

) 3

,615

,883

2,5

81,0

80 (1

77,3

59)

6,0

19,6

04

COM

PAN

YBa

lanc

e as

at

31.0

3.20

14Re

cogn

ized

in

Prof

it or

Loss

Reco

gniz

ed

in O

ther

co

mpr

ehen

sive

inco

me

Bala

nce

as a

t 31

.03.

2014

Reco

gniz

ed in

Pr

ofit

or Lo

ss

Reco

gniz

ed

in O

ther

co

mpr

ehen

sive

inco

me

Bala

nce

as a

t 31

.03.

2015

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Prop

erty

Pla

nt a

nd e

quip

men

t/ In

vest

men

t pro

pert

y 6

,738

,305

741

,885

- 7

,480

,190

2,1

53,6

50 -

9,6

33,8

40

Retir

emen

t Ben

efit

Obl

igat

ions

(5,4

30,0

98)

37,

087

(206

,829

) (5

,599

,840

) (6

17,3

05)

(121

,768

) (6

,338

,913

)

1,3

08,2

07 7

78,9

72 (2

06,8

29)

1,8

80,3

50 1

,536

,345

(121

,768

) 3

,294

,927

15EA

RNIN

GS

PER

SHA

RE A

ND

DIV

IDEN

D P

ER S

HA

RE

Basi

c Ea

rnin

gs p

er S

hare

Basi

c Ea

rnin

gs p

er S

hare

has

bee

n ca

lcul

ated

by

divi

ding

pro

fit a

ttrib

utab

le t

o eq

uity

hol

ders

of

Sath

osa

Mot

ors

PLC

, by

wei

ghte

d av

erag

e nu

mbe

r of

ord

inar

y sh

ares

outs

tand

ing

durin

g th

e ye

ar.

Dilu

ted

Earn

ings

per

Sha

re

Dilu

ted

Earn

ings

per

Sha

re is

det

erm

ined

by

adju

stin

g th

e pr

ofit

or lo

ss a

ttrib

utab

le t

o or

dina

ry s

hare

hol

ders

and

the

wei

ghte

d av

erag

e nu

mbe

r of

ord

inar

y sh

ares

outs

tand

ing

for t

he e

ffect

s of

all

dilu

tive

pote

ntia

l ord

inar

y sh

ares

.

As

ther

e w

ere

no p

oten

tial D

ilutiv

e O

rdin

ary

Shar

es o

utst

andi

ng a

s at

the

year

end

, Dilu

ted

Earn

ings

per

Sha

re is

equ

al to

Bas

ic E

arni

ngs

per S

hare

.


65

Group Company


Restated

15.1 Earnings per Share

Amount used as the Number

Profits Attributable to Ordinary Shareholders (Rs.) 261,386,419 260,002,050 252,968,030 231,771,143

Amounts used as the Denominator

WeightedAverageNumberofOrdinarySharesasattheend 6,033,622 6,033,622 6,033,622 6,033,622

Basic Earnings Per Share (Rs.) 43.32 43.09 41.93 38.41

15.2 Dividend per Share

Dividend paid during the year

Final Dividend (Rs.) 30,168,110 30,168,110 30,168,110 30,168,110

Interim Dividend (Rs.) - - - -

30,168,110 30,168,110 30,168,110 30,168,110

WeightedAveragenumberofOrdinarySharesasattheyearend 6,033,622 6,033,622 6,033,622 6,033,622

Dividend Per Share (Rs.) 5 5 5 5

Previous year’s ( 2013/14) final dividend paid during the current (2014/15) year is Rs. 5 /- per share.

15.2.1 Dividend per share - Proposed / Declared

Group / Company

Final Dividend proposed for the year ended 31st March 2015 (Rs.) 42,235,354

WeightedAveragenumberofOrdinarySharesasattheyearend 6,033,622

Dividend Per Share - proposed (Rs.) 7.00

A final dividend of Rs. 7/- per share is proposed for the year ended 31st March 2015. The final dividend proposed on 15th July 2015, has

not been recognized as a distribution to owners during the period and has been disclosed under Note 33 in compliance with LKAS

10 - 'Events after Reporting Period'.


PRO

PERT

Y PL

AN

T &

EQ

UIP

MEN

TS

16.1

GRO

UP

Rest

ated

Cost

Build

ing

onM

achi

nery

Wor

ksho

pM

otor

Furn

iture

Off

ice

Com

pute

rCa

pita

l Wor

kTo

tal

Leas

ehol

dan

dH

and

Vehi

cles

and

Equi

pmen

tsIn

Pro

gres

s

Land

Oth

ers

Tool

sFi

ttin

gs

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Free

hold

Ass

ets

Bala

nce

as a

t 01

Apr

il 20

14 5

5,44

8,41

4 3

5,90

7,43

2 6

,998

,593

119

,635

,828

22,

476,

142

10,

645,

860

23,

583,

992

25,

775,

000

300

,471

,261

Add

ition

s du

ring

the

year

- 2

,990

,878

190

,148

31,

122,

000

1,6

86,3

18 2

,842

,555

1,4

30,1

60 1

50,1

42,5

76 1

90,4

04,6

35

Dis

posa

ls d

urin

g th

e ye

ar -

- -

(22,

501,

270)

- -

- -

(22,

501,

270)

Bala

nce

as a

t 31

Mar

ch 2

015

55,

448,

414

38,

898,

310

7,1

88,7

41 1

28,2

56,5

58 2

4,16

2,46

0 1

3,48

8,41

5 2

5,01

4,15

2 1

75,9

17,5

76 4

68,3

74,6

26

Free

hold

Ass

ets

Acc

umul

ated

Dep

reci

atio

n

Bala

nce

as a

t 01

Apr

il 20

14 3

5,28

6,76

6 1

2,20

3,74

6 3

,633

,668

40,

216,

731

8,0

22,8

87 8

,899

,259

18,

943,

770

- 1

27,2

06,8

27

Cha

rge

for t

he y

ear

595

,003

4,0

99,9

96 1

46,2

10 2

0,62

0,94

9 3

,456

,194

777

,413

1,4

84,0

35 -

31,

179,

800

Dis

posa

ls d

urin

g th

e ye

ar -

- -

(22,

501,

270)

- -

- -

(22,

501,

270)

Bala

nce

as a

t 31

Mar

ch 2

015

35,

881,

769

16,

303,

742

3,7

79,8

78 3

8,33

6,41

0 1

1,47

9,08

1 9

,676

,672

20,

427,

805

- 1

35,8

85,3

57

Carr

ying

Val

ue

Bala

nce

as a

t 31

Mar

ch 2

015

19,

566,

645

22,

594,

568

3,4

08,8

63 8

9,92

0,14

8 1

2,68

3,37

9 3

,811

,743

4,5

86,3

47 1

75,9

17,5

76 3

32,4

89,2

69

Bala

nce

as a

t 31

Mar

ch 2

014

20,

161,

648

23,

703,

686

3,3

64,9

25 7

9,41

9,09

7 1

4,45

3,25

5 1

,746

,601

4,6

40,2

22 2

5,77

5,00

0 1

73,2

64,4

34


6716

.2CO

MPA

NY

Cost

Build

ing

onM

achi

nery

Wor

ksho

pM

otor

Furn

iture

Off

ice

Com

pute

rCa

pita

l Wor

kTo

tal

Leas

ehol

dan

dH

and

Vehi

cles

and

Equi

pmen

tsIn

Pro

gres

s

Land

Oth

ers

Tool

sFi

ttin

gs

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Free

hold

Ass

ets

Bala

nce

as a

t 01

Apr

il 20

14 5

5,44

8,41

4 8

,997

,089

3,9

18,9

32 7

5,63

5,82

8 9

,291

,867

9,9

06,9

32 2

2,27

2,05

7 -

185

,471

,119

Add

ition

s du

ring

the

year

- 1

18,3

46 1

90,1

47 3

1,12

2,00

0 1

69,0

39 1

,425

,650

243

,684

25,

218,

895

58,

487,

761

Dis

posa

ls d

urin

g th

e ye

ar -

- -

(22,

501,

270)

- -

- -

(22,

501,

270)

Bala

nce

as a

t 31

Mar

ch 2

015

55,

448,

414

9,1

15,4

35 4

,109

,079

84,

256,

558

9,4

60,9

06 1

1,33

2,58

2 2

2,51

5,74

1 2

5,21

8,89

5 2

21,4

57,6

10

Acc

umul

ated

Dep

reci

atio

nBa

lanc

e as

at 0

1 A

pril

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Group

As at 31 March, 2015 2014

Rs. Rs.

Restated

17 INTANGIBLE ASSETSCostAs at 1st April 6,206,040 -Addition during the year - 6,206,040As at 31st March 6,206,040 6,206,040

Accumulated AmortizationAs at 1st April 469,098 -Amortization during the year 1,241,208 469,098As at 31st March 1,710,306 469,098Carrying Value as at 31st March 4,495,734 5,736,942

18 PREPAID LEASE PAYMENTS

Group Company

2015 2014 2015 2014

Rs. Rs. Rs. Rs.

CostAs at 1st April 7,550,366 7,550,366 7,550,366 7,550,366Closing Balance as at 31st March 7,550,366 7,550,366 7,550,366 7,550,366

Accumulated AmortizationAs at 1st April 2,035,290 1,959,023 2,035,290 1,959,023Charge for the year 76,267 76,267 76,267 76,267As at 31st March 2,111,557 2,035,290 2,111,557 2,035,290Carrying Value 5,438,809 5,515,076 5,438,809 5,515,076

Prepaid Lease Payments disclosed above relate to the land at Peliyagoda acquired on a 99 years operating lease commencing from

1987. Remaining lease period as at 31st March 2015 is 71 years.

Group Company

2015 2014 2015 2014

Rs. Rs. Rs. Rs.

19 INVESTMENT PROPERTYBalance at 1st April 24,191,513 21,683,401 24,191,513 21,683,401Acquisitions - 2,508,112 - 2,508,112Depreciation - - - -Balance at 31st March 24,191,513 24,191,513 24,191,513 24,191,513

Investment Property comprises building leased to Avonsmart Engineering (Pvt) Ltd, with effect from 1st May 2013. During the year

Directors' valuation was carried out for the Investment Property and the Directors are of the view that no significant change has

occurred on the value of the property as at the reporting date.The total land extent is 343.93 perches. There are 2 buildings for which the description is stated below.1. SML workshop - 1 building - owner/user2. Rented out - 1 building - Investment property


69

Company

2015 2014

% Holding No.of shares Cost (Rs.) No.of shares Cost (Rs.)

20 INVESTMENT IN SUBSIDIARY COMPANY

SML Frontier Automotive (Pvt) Ltd. 50% 6,500,002 65,000,020 6,500,002 65,000,000

6,500,002 65,000,020 6,500,002 65,000,000

21 INVENTORIES

Group Company

As at 31 March, 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Restated

New Vehicles 679,614,547 337,459,681 658,114,547 326,459,681

Spare Parts 182,897,693 156,520,745 81,476,513 95,534,881

WorkinProgress 18,966,553 23,841,074 3,496,600 3,955,073

Goods in Transit 120,332,661 154,126,573 105,605,438 140,835,263

General Stores 28,672,543 19,839,365 3,001,851 580,671

Machinery - 56,216,449 - 56,216,449

1,030,483,997 748,003,887 851,694,949 623,582,018

Provision for Inventories (3,071,848) (1,182,086) (3,071,848) (1,182,086)

1,027,412,149 746,821,801 848,623,101 622,399,932

22 TRADE AND OTHER RECEIVABLES

Trade Receivables - New Vehicles 652,434,096 655,319,646 542,619,469 655,319,646

- Spare Parts 29,265,367 114,649,646 29,265,367 22,697,901

-WorkShop 21,839,959 23,097,665 21,839,959 23,097,665

703,539,422 793,066,957 593,724,795 701,115,212

Provision for Bad and Doubtful Debts (2,463,882) (2,463,882) (840,913) (840,913)

701,075,540 790,603,075 592,883,882 700,274,299

Loans to Employees (Note 22.1) 1,575,535 1,718,208 1,406,034 1,361,208

Other Debtors 71,457,473 77,840,762 19,150,432 20,086,266

Deposits and Prepayments 2,715,946 6,232,946 2,715,946 6,219,946

WithholdingTaxRecoverable 2,591,958 1,594,675 2,591,958 1,456,121

VAT Receivable 8,901,127 12,940,402 8,901,127 12,940,402

Advances 48,079,248 56,531,772 - -

Advances to suppliers 10,998,660 16,837,239 - -

ESC Receivable - 1,372,244 - -

Bank Guarantee - 2,805,274 - -

847,395,487 968,476,597 627,649,379 742,338,242


22.1 Loans to Employees

Group Company

As at 31 March, 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Restated

Balance at the beginning of the year 1,718,208 1,815,744 1,361,208 1,815,744

Loans Granted during the year 651,500 657,000 651,500 300,000

2,369,708 2,472,744 2,012,708 2,115,744

Repayments during the year (794,174) (754,536) (606,674) (754,536)

Balance at the end of the year 1,575,534 1,718,208 1,406,034 1,361,208

23 AMOUNT DUE FROM RELATED PARTIES

Group

As at 31 March, 2015 2014

Rs. Rs.

Restated

Frontier Automotive (Pvt) Ltd. 72,860,056 26,320,201

Mr. Sheran Fernando 65,902 109,620

72,925,958 26,429,821

24 CASH AND CASH EQUIVALENTS

Group Company

As at 31 March, 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Restated

24.1 Favourable Balance

Overnight Repos and Short Term Fixed Deposits 57,682,634 1,559,819 57,682,634 1,559,819

Cash in hand 1,395,416 1,389,807 - -

Cash at Bank 27,814,379 21,922,860 25,692,067 21,881,377

86,892,429 24,872,486 83,374,701 23,441,196

24.2 Unfavourable Balance

Bank Overdraft (41,833,247) (18,648,334) - -

Cash and Cash Equivalents for the purpose of Cash Flow Statement 45,059,182 6,224,152 83,374,701 23,441,196

25 STATED CAPITAL

6,033,622 Ordinary Shares 115,924,290 115,924,290 115,924,290 115,924,290


71

The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at

meetings of the Company. All shares rank equally with regard to the Company's residual assets.

26 INTEREST-BEARING BORROWINGS

Group

2015 2014

Rs. Rs.

Restated

Payable within One Year

Term Loan 11,900,000 -

Import Loan 63,900,000 -

Import Demand Loan 63,221,939 58,876,643

139,021,939 58,876,643

Payable after One Year

Term Loan 74,300,000 -

Details of all loans and facilities outstanding together with the related securities offered as at the reporting date are set out below;

Institution and Facility Principal Amount (Rs.) Repayment terms & Interest Rate

Security offered

NDB

Bank Overdraft 25,000,000 Interest rate of 13.5%Corporate Guarantee from

Sathosa Motors PLC for

Rs. 200,000,000/-

Bank Loan 63,900,000 Interest rate 12.5%

Import Loan 150,000,000 Interest rate 13%

Guarantee 50,000,000 Interest rate 1.5%

HNB

Bank Loan 100,000,000 AWPLR+2%(Renewmonthly) Corporate Guarantee from

Sathosa Motors PLC

Rs. 100,000,000/-

27 ASSETS RELATED GRANTS

Group Company

2015 2014 2015 2014

Rs. Rs. Rs. Rs.


Amortisation for the year (219,389) (219,389) (219,389) (219,389)


The above represents the grants received for the construction of workshop at Peliyagoda and are amortised over a period of fifty (50)

years.


28 EMPLOYEE BENEFITS

Group Company

As at 31 March, 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Restated

28.1 Net Liability Recognised in the Statement of Financial Position


Charge for the year 6,317,271 5,548,830 4,157,739 4,321,119

Payments during the year (1,518,191) (3,714,900) (1,518,191) (3,714,900)


28.2 The amount Recognised in the Profit or Loss

Service Cost 3,568,640 2,676,901 1,722,911 1,449,190

Net interest on the net defined benefit liability 2,115,207 2,133,253 1,999,943 2,133,253

5,683,847 4,810,154 3,722,854 3,582,443

28.3 The amount Recognised in Other Comprehensive Income

Actuarial Losses 633,424 738,676 434,885 738,676

28.4 Employee Benefits Obligation Reconciliation


Current service cost 3,568,640 2,676,901 1,722,911 1,449,190

Interest cost 2,115,207 2,133,253 1,999,943 2,133,253

Actuarial Losses 633,424 738,676 434,885 738,676

Benefits paid during the year (1,518,191) (3,714,900) (1,518,191) (3,714,900)


An actuarial valuation of the provision for employee benefits was carried out as at 31st March 2015 by Mr. Munisamy

Poopalannathan, Messrs Actuarial & Management Consultants (Pvt) Limited - a firm of professional actuaries. The valuation

method used by the actuaries to value the employee benefits obligation is the ''Projected Unit Credit (PUC) method'', the

method recommended by the Sri Lanka Accounting Standard (LKAS 19) '' Employee Benefits''.

28.5 Principal assumptions used

a) Discount Rate 10% 10% 10% 10%

b) Salary Increase 10% 10% 10% 10%

c) Retirement Age 55 Years 55 Years 55 Years 55 Years


73

Sensitivity Analysis

Sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the Employee

Benefit Liability measurement.

Group Company

As at 31 March, 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Discount Rate Present Value of Defined Benefit Obligation

Rs.

Present Value of Defined Benefit Obligation

Rs.

1% less 27,211,221 20,994,974 23,557,349 20,994,9741% More 22,582,015 19,092,828 21,796,208 19,092,828

Salary Escalation Rate1% less 22,415,382 19,023,612 21,740,484 19,023,6121% More 27,258,068 21,053,784 23,604,196 21,053,784

Group Company

As at 31 March, 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Restated

29 DEFERRED TAX LIABILITYBalance at the beginning of the year 3,615,883 1,308,207 1,880,350 1,308,207Charge/(Reversal) for the year 2,403,721 2,307,676 1,414,577 572,143Balance at the end of the year 6,019,604 3,615,883 3,294,927 1,880,350

29.1 (Reversal) / Origination during the year(Reversal) / origination to income tax expenses 2,581,080 2,514,505 1,536,345 778,972(Reversal) / origination to other comprehensive income (177,359) (206,829) (121,768) (206,829)

2,403,721 2,307,676 1,414,577 572,143

30 TRADE AND OTHER PAYABLESAccrued Expenses 22,036,309 27,047,196 18,130,088 17,811,658Trade and Sundry Creditors 34,101,071 5,869,163 10,190,661 5,869,163Trade Payable - ITOCHU Corporation 550,613,162 542,429,300 550,613,162 520,013,369Advances and Retentions 14,833,681 15,035,075 14,833,681 15,035,075VAT Payable 6,795,971 6,640,846 - -Advance Received for Vehicles 97,421,877 87,443,407 - -Advance Received for Parts 10,093,919 8,460,244 - -NBT Payable 4,971,110 3,265,106 - -ESC Payable - 1,372,244 - -Provision for warranty 12,672,989 15,634,000 - -Payable to Guava International 38,730,393 33,753,024 - -Other Payable - 3,634,255 - -

792,270,482 750,583,860 593,767,592 558,729,265


31 AMOUNT DUE TO RELATED PARTIES

Group

As at 31 March, 2015 2014

Rs. Rs.

Restated

Reprographics (Pvt) Ltd. 17,760 128,800

Mr. Sheran Fernando - 163,251

Mrs. Roshini Fernando - 139,462

Access Engineering PLC 977,620 -

AccessNaturalWater(Pvt)Ltd. 38,963 -

1,034,343 431,513

32 CONTINGENT LIABILITIES

Outcome of the current / pending litigation cases are as follows;

32.1 Labour Tribunal cases against the Company

W.A.SiriwardanevsSathosaMotorsPLC(Ref-Ct.78(25))

TheaboveapplicationwasfiledintheLabourTribunalbyanex-employeeMr.WASiriwardenawhowasadriveroftheCompanyfor

terminating his services. He seeks reinstatement in service, monthly salary inclusive of the relevant allowances pending reinstatement

in service. The Company filed answer on 25th June 2009. The Company is vehemently resisting the claim. The further trial is fixed for

29th May 2012. The trial is now concluded. The Tribunal has granted 6th May 2013 for filing of written submissions of both parties.

As the new judge was sitting the tribunal on the 6th May 2013 the Court reserved the date of delivering the Order. The Order was

deliveredon25thAugust2013andtheapplicationofMr.WA.Siriwardanewasdismissed.Thelawyershavenotbeennotifiedofany

appeal. As regards any gratuity dues, these would be payable according to law.

Mr.W.A.SiriwardenaappealedtotheHighCourtofColomboandtheargumentoftheappealisfixedfor27.07.2015.


75

32.2 Other Litigation cases against the Company

Consumer Affairs Authority Vs. Sathosa Motors PLC (Ref - Cg.78(36))

The above application was filed by Ms. C N Thilakarathne , Directress of the consumer Affairs and information complaining that the

company had published an advertisement in Lankadeepa Newspaper dated 02nd October 2013 in violation of Gazette Extraordinary

No. 1687/45 of 07th January 2011 by omitting to mention the retail prices of the vehicles when advertising. The Court issued summons

to appear in Court on 29th April 2014. On 29th April 2014 the Company pleaded not guilty and the trial has now been fixed.

However subsequent to the reporting date this case was dismissed.

32.3 Corporate Guarantee

Sathosa Motors PLC has issued Corporate Guarantees on behalf of its Subsidiary amounting to Rs. 300,000,000/- as at the reporting date.

Name of the Company Relationship Performance Rs.

RefundRs.

Miscellaneous Rs.

TotalRs.

SML Frontier Automotive (Private) Limited Subsidiary - - 300,000,000 300,000,000

- - 300,000,000 300,000,000

33 EVENTS OCCURRING AFTER THE REPORTING DATE

Pursuant to a resolution adopted on 15th July 2015, the Board of Directors of the Company approved the payment of a final dividend

of Rs. 7/- per share for the year ended 31st March 2015 (2014 Rs. 5/- per share).

As required by Section 56 (2) of the Companies Act No. 07 of 2007, the Board of Directors has confirmed that the Company satisfies the

solvency test in accordance with Section 57 of the Companies Act No. 07 of 2007, and has obtained concurrence from auditors, prior

to declaration of dividends.

In accordance with LKAS 10 “Events occurring after the Reporting Date”, this proposed dividend has not been recognised as a liability

as at the date of Statement of Financial Position.

Except for the above there were no material events occurring after the reporting date that require adjustments to or disclosure in the

Financial Statements.


34 RELATED PARTY TRANSACTIONS

The Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in LKAS 24

"Related Party Disclosures". The details of related party transactions are reported below.

34.1 Transactions between Related Companies

Name of the company Description

Amount 2014/2015

Rs.

Amount 2013/2014

Rs.

AccessNaturalWater(Pvt)Ltd. Purchase of Mineral water 144,022 119,167

SupplyofWorkshoprepairservices - 101,523

Access International (Pvt) Ltd. SupplyofWorkshoprepairsandsaleofnewvehicles 4,491,781 8,613,526

Access Engineering PLC SupplyofWorkshoprepairsandsaleofMachinery(SANNY),

repair charges of mobile crane 45,010,247 11,996

Reprographics (Pvt) Ltd. Purchase of Photocopy machine & Toners for the Printers 120,855 -

ATSL International (Pvt) Ltd. Construction of the workshop at No.25, Vauxhall Street 23,965,000 -

SML Frontier Automotive (Pvt) Ltd. Vehicle service Charge 32,403 111,532

34.2 Transactions with Key Management Personnel

According to LKAS 24 “Related Party Disclosures”, Key Management Personnel are those having authority and responsibility for planning,

directing and controlling the activities of the entity. Accordingly Board of Directors (including executive and non - executive Directors)

have been classified as Key Management Personnel of the Group.

Fees, emoluments and other benefits paid to Key Management Personnel amounted to Rs. 7.99 Mn (2013/14 Rs.8.69 Mn) for Company

and Rs. 13.99 Mn (2013/2014 Rs. 8.69 Mn) for Group.

There were no material related party transactions other than those disclosed above and in Notes 23 and 31 to the Financial Statements.


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Fin

anci

ng C

ost

(16)

(7,3

37)

Prof

it fr

om O

pera

tions

349

,652

322

,327

Inco

me

Tax

Expe

nses

(96,

684)

(90,

556)

Prof

it fr

om O

rdin

ary

Activ

ities

252

,968

231

,771

Capi

tal E

xpen

ditu

re 5

8,48

8 4

2,96

5

Dep

reci

atio

n an

d A

mor

tizat

ion

14,

874

13,

397


79

36 NON-CONTROLLING INTEREST (NCI)

Ownership interest held by NCI

Principal place of business

Operating segment 2014/2015 2013/2014

SML Frontier Automotive (Pvt) Ltd Sri Lanka Trading agent 50% 50%

The following is summarised financial information of SML Frontier Automotive (Private) Limited. The information is before inter-

company eliminations.

As at 31st March, 2015 2014

Rs. Rs.

Statement of Profit or Loss and Other Comprehensive Income

Revenue 764,931,269 606,536,333

Profit for the year 16,836,776 56,461,814

Profit attributable to NCI 8,418,388 28,230,907

Other Comprehensive Income (142,948) -

Total Comprehensive Income 16,693,828 56,461,814

Total Comprehensive Income attributable to NCI 8,346,914 28,230,907

Statement of Financial Position

Current assets 474,978,842 378,421,335

Non-current assets 224,344,773 110,051,035

Current liability 415,756,013 299,047,272

Non-current liability 80,411,920 2,963,244

Net asset 203,155,682 186,461,854

Net asset attributable to NCI 101,577,841 93,230,927

Statement of Cash Flows

Cash flow used in operating activities (43,626,899) (84,887,545)

Cash flow used in investing activities (131,916,873) (121,206,182)

Cash flow from financing activities 154,445,297 188,876,683

Net decrease in cash and cash equivalents (21,098,475) (17,217,044)


37 PRIOR YEAR ADJUSTMENTS

The consolidated financial statements for the year ended 31st March 2014 were prepared by amalgamating the Financial statements

of the Company and its Subsidiary, SML Frontier Automotive (Pvt) Ltd (SMLF). However the Financial Statements of SMLF which were

taken for the consolidation purpose was unaudited for the year ended 31st March 2014. The prior year adjustments represent the

effects of the adjustments made to the audited financial statements of SMLF.

Statement of Financial Position Group

As at 31.03.2014

As previously reported Adjustments As Re-stated

Rs. Rs. Rs.

Property, Plant and Equipment 132,796,154 40,468,280 173,264,434

Intangible Assets - 5,736,942 5,736,942

Investment in Debentures 37,290,000 1,195,323 38,485,323

Overall impact on Total Non-current Assets 170,086,154 47,400,545 217,486,699

Inventories 759,443,354 (12,621,553) 746,821,801

Trade and Other Receivables 1,005,369,672 (36,893,074) 968,476,599

Amounts due from Related Parties - 26,429,821 26,429,821

Cash and Cash Equivalents 25,292,092 (419,606) 24,872,486

Overall impact on Total Current Assets 1,790,105,118 (23,504,412) 1,766,600,707

Overall impact on Total Assets 1,989,897,860 23,896,133 2,013,793,993

Retained Earnings 883,008,235 1,199,664 884,207,899

Non-Controlling Interest 92,031,263 1,199,664 93,230,927

Overall impact on Total Equity 975,039,498 2,399,328 977,438,826

Employee Benefits 19,999,428 1,227,711 21,227,139

Deferred Tax Liabilities 1,880,350 1,735,533 3,615,883

Overall impact on Total Non-current Liabilities 21,879,778 2,963,244 24,843,022

Trade and Other Payables 778,524,392 (27,940,532) 750,583,860

Interest Bearing Borrowings - 58,876,643 58,876,643

Amount due to Related Company - 431,513 431,513

Income Tax Payable 74,103,817 (15,194,082) 58,909,735

Bank Overdraft 16,288,335 2,359,999 18,648,334

Overall impact on Total Current Liabilities 868,916,545 18,533,540 887,450,085

Overall impact on Total Equity and Liabilities 1,989,897,860 23,896,133 2,013,793,993


81

Statement of Profit or Loss other Comprehensive Income Group

For the year ended 31.03.2014

As previously reported Adjustments As Re-stated

Rs. Rs. Rs.

Revenue 3,054,001,703 (13,150,108) 3,040,851,595

Cost of Sales (2,209,729,384) 15,383,121 (2,194,346,263)

Overall impact on Gross Profits 844,272,319 2,233,013 846,505,332

Other Income 20,384,871 5,355,894 25,740,765

Expenses (431,142,880) (16,823,265) (447,966,145)

Overall impact on Operating Profits 433,514,310 (9,234,358) 424,279,952

Net Finance Cost (7,388,150) (1,824,862) (9,213,012)

Overall impact on Profit before Tax 426,126,161 (11,059,221) 415,066,940

Income Tax Expense (140,292,531) 13,458,548 (126,833,983)

Overall impact on Profit for the year 285,833,629 2,399,328 288,232,957

Other Comprehensive income, net of tax (531,847) - (531,847)

Total Comprehensive Income for the year, net of tax 285,301,782 2,399,328 287,701,110

38 FINANCIAL INSTRUMENTS

38.1 Financial Assets and Liabilities by categories

Financial Assets and Liabilities in the tables below are split into categories in accordance with LKAS 39

Group

Financial assets by categories Loans & Receivables (L&R) Held to Maturity (HTM)Available for Sale

Financial Assets (AFS)

As at 31st March, 2015 2014 2015 2014 2015 2014

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

Financial Instruments in Non current assets

Investment in Debentures 84,113,507 38,485,323

Financial Instruments in current assets

Trade and other receivables 847,395,487 968,476,597

Amounts due from Related Parties 72,925,958 26,429,821

Cash and cash equivalents 29,209,795 23,312,667 57,682,634 1,559,819

Total 949,531,240 1,018,219,085 84,113,507 38,485,323 57,682,634 1,559,819


Group

Financial liabilities by categoriesFinancial Liabilities measured

at Amortised Cost

2015 2014

As at 31st March, Rs. Rs.

Financial Instruments in Non - current liabilitiesInterest Bearing Borrowings 74,300,000 -

Financial Instruments in current liabilitiesTrade and other payables 792,270,482 750,583,860Interest Bearing Borrowings 139,021,939 58,876,643

Amounts due from Related Parties 1,034,343 431,513

Bank Overdraft 41,833,247 18,648,334Total 1,047,425,668 828,540,350

Company

Financial assets by categories Loans & Receivables (L&R) Held to Maturity (HTM)Available for Sale

Financial Assets (AFS)

As at 31st March, 2015 2014 2015 2014 2015 2014

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

Financial Instruments in Non current assetsInvestment in Debentures - - 84,113,507 38,485,323 - -

Financial Instruments in current assetsTrade and other receivables 627,649,379 742,338,241 - - - -Cash and cash equivalents 25,692,067 21,881,377 - - 57,682,634 1,559,819Total 653,341,446 764,219,618 84,113,507 38,485,323 57,682,634 1,559,819

Company

Financial liabilities by categoriesFinancial Liabilities

measured at Amortised Cost

2015 2014

As at 31st March, Rs. Rs.

Financial Instruments in Non- current liabilities

Interest Bearing Borrowings - -

Financial Instruments in current liabilities

Trade and other payables 593,767,592 558,729,265

Total 593,767,592 558,729,265


83

The Group has not disclosed the fair value for financial Instruments such as short-term trade receivables and payables, because their

carrying amounts are a reasonable approximation of the fair values.

The Company invested Rs. 84.11 Mn in quoted debentures at fixed interest rate , for which the details are stated below.

Investee TenorInterest Rate PA

Number of stocks Value Maturity in

Years % Rs.

NDB 5 13 372900 38,485,323 2018People's Leasing Co 4 9.625 25600 2,620,757 2018HNB 3 7 422900 43,007,427 2017

84,113,507

Currently the Company has no reason to dispose them in the foreseeable future and the Company's intention is to hold them until

maturity.

38.2 Fair Value Hierarchy

The table below analyses financial instruments carried at fair value, by valuation method.

The different levels have been defined as follows:

Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 : 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 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)

Group Level 1 Level 2 Level 3 Total

Rs. Rs. Rs. Rs.

As at 31/3/2015Financial investments available for sale Government of Sri

Lanka Treasury Bills - 57,682,634 - 57,682,634



Company Level 1 Level 2 Level 3 Total

Rs. Rs. Rs. Rs.






39 Financial Risk ManagementOverviewThe Group has exposure to the following risks arising from financial instruments:- Credit risk- Liquidity risk- Market risk

This note represents information about the Group’s exposure to each of the above risks, the Group’s objectives policies and processes

for measuring and managing risk.

39.1 Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counter-party to a financial instrument fails to meet its obligations,and

arises principally from the Group’s receivables from customers and investment securities.

Exposure to Credit Risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting

date was as follows;

Group Group Company Company

2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Investment in Debentures 84,113,507 38,485,323 84,113,507 38,485,323Trade receivables 703,539,422 793,066,957 593,724,795 701,115,212Other receivables 146,319,947 177,873,522 34,765,497 42,063,943Amounts due from Related Parties 72,925,958 26,429,821 - -Cash and cash equivalents 86,892,429 24,872,486 83,374,701 23,441,196

Age analysis of trade debts as at 31/3/2015 is as follows;

Group Less than 60 daysRs.

61 - 90 daysRs.

91- 180 daysRs.

181- 365 daysRs.

Over 365 daysRs.

TotalRs.

New vehicles 418,463,469 54,700,000 87,968,634 - 1,000,000 562,132,103Spareparts&Workshop 53,737,366 13,920,886 29,269,870 23,265,027 21,214,170 141,407,319Total 472,200,835 68,620,886 117,238,504 23,265,027 22,214,170 703,539,422

Company Less than 60 daysRs.

61 - 90 daysRs.

91- 180 daysRs.

181- 365 daysRs.

Over 365 daysRs.

TotalRs.

New vehicles 418,463,469 54,700,000 69,456,000 - - 542,619,469Spare parts 24,446,697 3,097,478 993,053 601,647 126,491 29,265,367Workshop 15,681,330 2,398,173 1,940,604 1,799,902 19,949 21,839,959Total 458,591,497 60,195,651 72,389,657 2,401,550 146,439 593,724,795

The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on historic payment

pattern and extensive analysis and follow up procedures implemented on the customer credit risk.


85

39.2 Liquidity risk

The risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by

delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure , as far as possible, that it will always

have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable

losses or risking damage to the Group’s reputation. The maximum exposure to liquidity risk as at reporting date was as follows;

Group Within Within Within Within Within More than Total

1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years

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

Non- Derivative Financial Liabilities

Interest bearing borrowings 139,021,939 14,280,000 14,280,000 14,280,000 31,460,000 - 213,321,939

Trade and other payables 792,270,482 - - - - - 792,270,482

Amounts due to related Parties 1,034,343 - - - - - 1,034,343

Bank Overdraft 41,833,247 - - - - - 41,833,247

974,160,011 14,280,000 14,280,000 14,280,000 31,460,000 - 1,048,460,011

Company Within Within Within Within Within More than Total

1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years

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

Non- Derivative Financial Liabilities

Trade and other payables 593,767,592 - - - - - 593,767,592

593,767,592 - - - - - 593,767,592

Trade and other payables are settled during the availability of the credit terms.

Dividend payable is settled at the time they are claimed as the Company deposits the funds required for the purpose of the dividend

distribution in advance in a separate account.

39.3 Market risk

This has an impact on the market prices , such as forex rates, interest rates and equity prices that will affect the Group's income or the

value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while

optimising the Return.

(a.) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument fluctuate because of changes in the market

interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long term debt

obligation. The Group utilises various financial instruments to manage exposures to interest rate risks.


At the reporting date, the Group's interest - bearing financial instruments were as follows:

Group Company

Carrying Amount Carrying Amount

As at 31 March 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Fixed Rate Instruments

Financial Assets

Debentures 84,113,507 38,485,323 84,113,507 38,485,323

Overnight Repos and short term fixed deposits 57,682,634 1,559,819 57,682,634 1,559,819

141,796,141 40,045,142 141,796,141 40,045,142

Variable Rate Instruments

Financial Liabilities

Term Loan (86,200,000) - -

Import demand loans (127,121,939) (58,876,643) - -

Bank Overdraft (41,833,247) (18,648,334) - -

(255,155,186) (77,524,977) - -

(b) Currency Risk

Exposure to Currency Risk Company Company Company Company Company Company

As at 31st March 2015 2015 2015 2014 2014 2014

USD THB JPY USD THB JPY

Trade Payables - Foreign

Creditors 715,280 - 394,395,035 474,000 2,045,861 325,086,023

Gross Statement of Financial

Position Exposure 715,280 - 394,395,035 474,000 2,045,861 325,086,023

Group Group Group Group Group Group

2015 2015 2015 2014 2014 2014

USD THB JPY USD THB JPY

Trade Payables - Foreign

Creditors 715,280 - 394,395,035 474,000 2,045,861 325,086,023

Gross Statement of Financial

Position Exposure 715,280 - 394,395,035 474,000 2,045,861 325,086,023


87

The following significant exchange rates were applicable during the year

Group Average Rate Reporting Date Spot Rate

As at 31st March 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

USD 130.91 130.09 132.90 130.09THB 4.03 4.15 4.11 4.02JPY 1.20 1.30 1.11 1.29

Company Average Rate Reporting Date Spot Rate

As at 31st March 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

USD 130.91 130.08 132.90 130.09THB 4.027 4.15 4.10 4.01JPY 1.19 1.30 1.10 1.29

Sensitivity Analysis

A strengthening of the Rupee as indicated below, against the USD,THB, JPY at 31st March 2015 would have increased/ (decreased)

the equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that

the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in

particular interest rates, remain constant.

Strengthening Weakening Strengthening Weakening

Profit or LossRs.

Profit or LossRs.

Profit or LossRs.

Profit or LossRs.

Company Company Group Group

31st March 2015USD (10% movement) (9,506,071) 9,506,071 (9,506,071) - THB (10% movement) - - - - JPY (10% movement) (43,730,521) 43,730,521 (43,730,521) 43,730,521

31st March 2014USD (10% movement) 6,166,357 - - (6,166,357)THB (10% movement) (821,597) 821,597 (821,597) 821,597 JPY (10% movement) (41,942,599) 41,942,599 (4,194,260) 41,942,599

(b) Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument fluctuate because of changes in market

interest rates. The groups exposure to the risk of changes in market interest rates relates primarily to the Group's long term debt

obligation .The Group utilises various financial instruments to manage exposures to interest rate risks .


39.5 Capital management

The Board’s policy is to maintain a strong capital base so as to maintain share holder, creditor and market confidence and to

sustain future development of the business. The Board of Directors monitors the return on capital and level of dividends to

ordinary shareholders.

The Group’s Net Debt to adjusted Equity ratio at the end of the reporting period was as follows:

Carrying amount

Group Company

As at 31st March 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Total Liabilities 1,147,278,439 898,934,092 656,643,175 618,420,341

Less: Cash and Cash Equivalents (86,892,429) (25,292,091) (83,374,701) (23,441,196)

Net Debt 1,060,386,010 873,642,001 573,268,474 594,979,145

Total Equity 1,893,711,697 1,090,963,768 1,194,388,082 971,901,283

Net Debt to Equity Ratio 56% 80% 48% 61%

There were no changes in the Group’s approach to capital management during the year and the Group is not subject to externally

imposed capital requirements.

40 Operating leases

Non cancellate operating lease rentals are payable as follows:

2015 2014 2015 2014

Group Group Company Company

Rs. Rs. Rs. Rs.

Withinoneyear 528,000 528,000 528,000 528,800

1-5 years 792,000 792,000 792,000 1,320,000

Total 1,320,000 1,320,000 1,320,000 1,848,800

The above rentals are payable with respect to Panchikawatte operating lease.

Lease rental per month amounts to Rs. 44,000/- net of taxes. This payment is considered as an expense in the Profit or Loss. This is a five

year lease. Commencement October 2012.

( Rent per month - 40,000 recoverable from the advance whilst Rs. 44,000 is paid in cash terms)


89Report of the Audit Committee

CompositionThe Board appointed Audit Committee of Sathosa Motors PLC

comprised three members till 1st Sept. 2014 and out of which two

were independent. Mr. A.I Lovell who was an independent director

resigned from the Board on 1st Sept. 2014. Accordingly, since 1st

Sept. 2014 to 31st March 2015, members of the committee remained

as two with one independent director.

Mr. Chiran Wijesinghe was appointed as an independent Non-

Executive Director to the Board and Audit Committee on 15th July

2015.

Role of the CommitteeThe committee operates within the “Terms of Reference”

formally approved by the Board, which defines its objectives and

responsibilities and it is further regulated by the Listing Rules

of the Colombo Stock Exchange. In addition to such objectives,

the Committee is entrusted with ensuring that the regulatory

compliance and reporting requirements are met. The Committee has

the responsibility in evaluating and monitoring risk management

function of the Company and adherence to accounting policies. The

Committee is also to assist the Board of Directors in discharging its

responsibilities towards all stakeholders and to ensure that sound

Corporate Governance practices are upheld within the Company.

The Committee is empowered among other things to examine any

matters relating to the financial affairs of the Company and review any

activity within the Company. The objectivity and the independence

of external and internal auditors are also reviewed.

Meetings and AttendanceThe Committee meets at least once a quarter and conduct its

meeting according to a formal agenda. It had four sittings during

the year. The attendance of the members at these meetings is given

below. The Executive Director / Managing Director, Head of Finance

and Internal Auditors attend audit committee meetings by invitation.

As and when required other senior officers of the Company are

invited to attend the meetings.

Financial ReportingManagement has the primary responsibility for the preparation

of Financial Statements and the reporting process. The Audit

Committee reviews the Monthly Management Accounts, Interim

Financial Statements, Annual Report and formal announcements

made to the Colombo Stock Exchange.

Statutory and Regulatory ComplianceA procedure has been laid down for reporting on quarterly basis by

Internal Auditors with regard to statutory and regulatory compliance

and internal control procedures. Instances of non compliances if any,

are reported thru Internal Audit Report on quarterly basis and review

of such report is taken up at the Audit Committee meetings together

with appropriate corrective actions.

Due to the consolidation of unaudited financial statements of

Subsidiary, the AGM held on 26th Sep. 2014 was adjourned without

adopting Financial Statements. Subsequently, an Extra Ordinary

General meeting was held on 16th Feb. 2015 after publishing audited

consolidated financial statements of the subsidiary and the accounts

were duly adopted.

Internal AuditThe Audit Committee monitors the internal auditors’ functions by

approving annual internal audit program and reviewing quarterly

Internal Auditor Reports and recommendations made for system and

procedural improvements in the Company. The implementations of

such recommendations were made after obtaining responses from

the divisional heads.

Internal Auditors have not been appointed for the subsidiary, but

advisory services have been obtained from independent parties.

The reports made available by such parties have been reviewed by a

Committee headed by the Chairman of Audit Committee, Managing

Director and Head of Finance of the subsidiary.

Good GovernanceThe Committee also reviews the level of compliance with Corporate

Governance rules as per Sec. 7.10 of the Listing Rules of the Colombo

Stock Exchange. The Committee is satisfied that the Company has

complied with all mandatory requirements of this code.

The Company’s whistle blowing policy is intended to serve as a

channel of managing corporate fraud risk and staff is encouraged to

raise their concerns on existing or potential wrong doings by other

employees.

External AuditIn regard to the external audit functions of the Company the role

played by the Committee is as follows:

• Assisting the Board of Directors to implement the process of

engaging External Auditors for audit services in compliance

with the provisions and the directions and agree on their

remuneration.


• Monitor and assess the independence of the External Auditors.

• Reviewing non-audit services provided by the Auditors with

a view to safeguard and to support the independence and

objectivity of the external auditors.

• Discussing with the Auditors their audit plan, scope and the

methodology proposed to be adopted in conducting the audit

prior to commencement of the Annual Audit.

• Approve the financial statements.

• Reviewing the External Auditors Management Letter and the

management responds thereto.

The audit Committee has recommended to the Board that KPMG

be re-appointed as statutory auditors for the financial year ending

31st March 2016 subject to the approval by the Shareholders at the

forthcoming Annual General Meeting.

ConclusionThe Committee is satisfied that the internal controls and procedures

in operation are adequate and operating effectively to provide

reasonable assurance that the Company’s assets are safeguarded

and steps are being taken continuously to improve the systems

and controls as per the reports made available by the External

and Internal Auditors and the review processed adopted by the

Committee. The Company has adopted appropriate accounting

policies in preparation and presentation of Financial Statements.

Mr. M.M. Nelson De SilvaChairman – Audit Committee

15th July 2015

Attendance at the Committee Meetings

Meeting Held on Director Attendance

10-07-2014

Mr. M.M.N. De Silva Present

Mr. J.C. Joshua Present

Mr. A. I. Lovell Excused

03-09-2014

Mr. M.M.N. De Silva Present


Mr. A. I. Lovell Excused

04-11-2014Mr. M.M.N. De Silva Present

Mr. J.C. Joshua Excused

10-03-2015Mr. M.M.N. De Silva Present


Report of the Audit Committee

91Information to Investor

(I) TOP 20 SHAREHOLDER LIST AS AT 31ST MARCH 2015NAME OF SHAREHOLDER NO OF SHARES %

1 ACCESS ENGINEERING PLC 5,093,745 84.423

2 LAKSHMANS HOUSING AND CONSTRUCTION CO (PVT) LTD 610,850 10.124

3 BANK OF CEYLON NO. 1 ACCOUNT 16,000 0.265

4 MR B P OBEYSEKERE 10,000 0.166

5 MR M MAHIBALAN 6,927 0.115

6 MR S G N HERATH, MRS A N HERATH AND MS N E HERATH 5,442 0.090

7 MR U I SURIYABANDARA 5,338 0.088

8 MR R N HETTIARACHCHI 5,043 0.084

9 DESHAMANYA TILAK DIAS GUNASEKERA 4,648 0.077

10 MR N A N D D GUNASEKARA 4,500 0.075

11 MR G C GOONETILLEKE 4,050 0.067

12 MR R D LEELARTNA 4,028 0.067

13 MR R D U A RANAMUKA 4,000 0.066

14 MR A H MUNASINGHE 3,598 0.060

15 MR K C VIGNARAJAH 3,370 0.056

16 MRSGOWRISANGAR 3,300 0.055

17 TEA CEYLON INVESTMENTS (PVT) LTD 2,850 0.047

18 MRS S A KALEEL 2,400 0.040

19 MR N L DIAS 2,400 0.040

20 MRS N G A P RATNASEKERA 2,300 0.038

5,794,789 96.043

OTHERS 238,833 3.957

6,033,622 100.00

(ii) DIRECTORS’ HOLDING AS AT 31-03-2015Name of Shareholder No of Shares %

Deshamanya Tilak Dias Gunasekera 4,648 0.077

Mr. M M N De Silva 1,100 0.018

(iii) The percentage of shares held by the public as at 31st March 2015 is 15.482%

(iv) Total no of shareholders who hold the public holding is 1196


Stock Market Information - Company

Year 2014/2015 2013/2014

Market value per share

Market price ( as at 31st March) Rs. 275.10 240.00

Highest market price during the year Rs. 299.00 279.40

Lowest market price during the year Rs. 235.00 202.00

Net asset value per share Rs. 197.96 161.08

Earning per share Rs. 41.93 38.41

Dividend per share ( gross) Rs. 7.00 5.00

Public holding % 15.48 15.54

Dividend pay out ratio % 16.69 13.02

Dividend cover (Times) Times 5.99 7.68

Debt/ Equity ratio & interest cover

This is not applicable as there are no borrowings by the Company as at the reporting date.

Information to Investor

93Statement of Value Added

Group Company

For the year ended 31st March 2015 2014 2015 2014

Rs.000 % Rs.000 % Rs.000 % Rs.000 %

Value added

Revenue 3,502,514 3,040,852 2,737,582 2,434,315

Other Income 42,668 25,741 38,997 18,974

3,545,182 3,066,593 2,776,579 2,453,290

Cost of material & Services (3,002,753) (2,491,622) (2,325,397) (2,030,765)

542,429 574,971 451,182 422,525

Distribution of value added

To employees

as salaries, Incentive & other benefits 118,786 21.90 154,915 26.94 86,716 19.22 79,538 18.82

To government Revenue

as taxes 112,367 20.72 126,834 22.06 96,684 21.43 90,556 21.43

To providers of Capital

as dividend 42,235 7.79 30,168 5.25 42,235 9.36 30,168 7.14

To maintain operations

Depreciation 31,179 5.75 24,007 4.18 14,798 3.28 13,321 3.15

Financing Expenses 18,710 3.45 9,213 1.60 16 0.00 7,338 1.74

To Expansion & Growth

Reserves 219,151 40.70 229,834 39.97 210,733 46.71 201,603 47.71

542,429 100.00 574,971 100.00 451,182 100.00 422,525 100.00

To Employees To Government Revenue To Providers Of Capital To Maintain Operations To Expansion & Growth

17.20%

21.96%

9.59%3.37%

47.87%18.82%

47.71%

21.43%

7.14%4.89% 9.20% 7.80%

20.70%

21.90% 39.97% 26.94%

22.06%

5.25%5.78%

40.40%

GROUP2015

GROUP2014

COMPANY2015

COMPANY2014

SATHOSA MOTORS PLC | Annual Report 2014/1594Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Thirty First ( 31st) Annual General

Meeting of the Shareholders of Sathosa Motors PLC will be held at

the Institute of Chartered Accountants of Sri Lanka, 30A, Malasekera

Mawatha, Colombo 7, on 25th August 2015, at 03.00 p.m. for the

following purposes.

1. To receive and consider the Annual Report of the Board of

Directors on the affairs of the Company and the Statement of

Accounts for the year ended 31st March 2015 with the Report of

the Auditors thereon.

2. To re-elect Mr. M N M de Silva who retires by rotation in terms of

Article 88(i) of the Articles of Association of the Company.

3. ToelectMr.ChiranWijesinghewhoretiresasaDirectorinterms

of Article 95 of the Articles of Association of the Company.

4. To re-appoint M/s KPMG, Chartered Accountants as Auditors for

the year ending 31st March 2016, and to authorise the Board of

Directors to determine their remuneration.

5. To authorize the Directors to determine contributions to charities

and other donations for the year 2015/2016.

By order of the Board

SATHOSA MOTORS PLC

P W CORPORATE SECRETARIAL (PVT) LTDDirector / Secretaries

15th July 2015

Colombo

Notes

1. Any member of the Company unable to attend the meeting may

appoint another person (whether a member or not) as a proxy to

attend and vote for him/her

2. A proxy need not be a member of the Company. A proxy form

is attached for your use. The completed form of proxy should

belodgedwiththeSecretariesoftheCompanyPWCorporate

Secretarial (Pvt) Ltd, No. 3/17, Kynsey Road, Colombo 08 not less

than 36 hours before theholding of the Annual General Meeting.

3. Shareholders appointing proxies (other than Directors of the

Company) to attend the meeting are requested to indicate the

number of the National Identity Card of the Proxy holder on the

form or proxy.

4. Only registered Proxy holders will be permitted to attend the

Annual General Meeting. Shareholders/Proxy holders attending

the Annual General Meeting are kindly requested to bring with

them their National Identity Card or any other form of valid

identification.

95

I/We..………………………………………………………………………………………………………………(NICNo.……………………)

of .………………………………………………………………………………………………………………………………………………

being a member/members of SATHOSA MOTORS PLC hereby appoint;

…………………………………………………………………………………………………………………………………………….of

……………………………………………………………………………………………………………………………………(orfailinghim).

Mr. Sumal Joseph Sanjiva Perera of Colombo or failing him*Deshamanya Tilak Dias Gunasekera of Colombo or failing him*Mr. Muthu Muni Nelson de Silva of Colombo or failing him*Mr. Joseph Christopher Joshua of Colombo or failing him*Mr. Ranjan John Suriyakumar Gomez of Colombo or failing him*Mr. Saumaya Darshana Munasinghe of Colombo or failing him*Mr. Shevantha Harindra Sudharaka Mendis of Colombo or failing him*

Mr. Dalpadoruge Anton Rohana Fernando of Colombo or failing him*

Mr. Chiran wijesinghe of Colombo or failing him*

………………………………………………………………………………………………………………..………………………………of

……………………………………………………………….holderofNICNo……………….…………………………………………………

as my/our* proxy represent me/us and vote for me/us* and on my/our* behalf at the Thirty First (31st) Annual General Meeting of the Company

to be held on 25th August 2015 at 3.00 p.m. and at any adjournment thereof and every poll which may be taken in consequence thereof.

Please indicate your preference by placing a P against the following

For Against1. To receive and consider the Annual Report of the Board of Directors and the Statements of Accounts

for the year ended 31st March 2015 together with the Report of the Auditors thereon

2. To re-elect Mr. M N M de Silva who retires in terms of Article 88(i) of the Articles of Association of

the Company.

3. ToelectMr.ChiranWijesinghewhoretiresintermsofArticle95oftheArticlesofAssociationofthe

Company.

4. To re-appoint M/s KPMG Chartered Accountants as Auditors for the year ending 31st March 2016

and to authorise the Board of Directors to determine their Remuneration.

5. To authorise the Directors to determine contributions to charities and other donations for the year

2015/2016.

Aswitnessmy/our*handsthis…………….dayof…………….TwoThousandandFifteen.

*Please delete as appropriate

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NIC/REG.No. Signature of Member/s

Notes: 1. A proxy need not be a member of the Company.

2. Instructions as to completion appear overleaf.

Form of Proxy


INSTRUCTIONS FOR THE COMPLETION OF PROXY

1. Please perfect the Form of Proxy overleaf by filling in legibly your full name address and the National Identity Card number and signing in

the space provided and filling in the date of signature.

2. Please return the completed Form of Proxy after deleting one or other of the alternative words indicated by asterisk in the body of the form.

3. TobevalidthecompletedFormofProxyshouldbedepositedwiththeCom[anySecretaries,PWCorporateSecretarial(Pvt)Ltd.,No.3/17,

Kynsey Road, Colombo 08 not less than 36 hours before the time appointed for the holding of the meeting

4. If the Form of proxy has been signed by an attorney, the relative Power of Attorney should also accompany the completed form of Proxy

for registration, If such Power of Attorney has not already been registered with the Company.

5. If the shareholder is a Company or a Corporate body, the Proxy should be executed under its common seal in accordance with its Articles

of Association or Constitution.

6. A shareholder appointing a proxy (other than a Director of the Company) to attend the meeting should indicate the proxy holder’s National

Identity Card (NIC) number on the Form of Proxy and request the proxy holder to bring his/her National Identity Card with him/her.

Form of Proxy

Corporate Information

NAME OF THE COMPANYSathosa Motors PLC

LEGAL FORM

A public Limited Liability Company incorporated in Sri Lanka on

11th March 1982 under the Companies Ordinance No: 51 of 1938

and re-registered under the Companies Act No.7 of 2007. Listed on

the Colombo Stock Exchange on 07th November 1993.

REGISTRATION NUMBERPQ 105

BOARD OF DIRECTORSMr. Sumal Joseph Sanjeewa Perera Chairman

Deshamanya Tilak Dias Gunasekera Managing Director

Mr. J C Joshua Director(Alternate Director Mr. S H S Mendis)

Mr. D A R Fernando Director

Mr. S H S Mendis Director

Mr. S D Munasinghe Director

Mr. R J S Gomez Director(Alternate Director Mr. S D Munasinghe)

Mr. M M N De Silva Director

Mr. Chiran Wijesinghe Director

Senior Management TeamNeomal Fernando Assistant General Manager – New Vehicle

Nilantha Nanayakkara Assistant General Manager – Spare Parts

Deepal Dissanayake Service Manager – Workshop

Thejani Kodithuwakku Financial Controller

Lalith Jayathunga Finance Manager

Inoka Jayawickrama Accountant

Duminda Munasinghe Manager IT

Nilanga Silva Manager HR & Administration

Sujani Jayasuriya Sales Manager - Vehicle Sales

Harsha Withana Sales Manager - Services

Upul Ranasinghe Assistant Manager - Services

Eranga Dias Assistnt Manager

BANKERSHatton National Bank

NDB Bank

Commercial Bank of Ceylon PLC

Bank of Ceylon

Sampath Bank PLC

Peoples Bank

AUDITORSKPMG

Chartered Accountant,

32 A, Sir Mohomad Macan Marker Mawatha,

Colombo 03.

SECRETARIES & REGISTRARSP W Corporate Secretarial (Pvt) Ltd

No: 3/17, Kynsey Road,

Colombo 08.

LAWYERSNithi Murugesu & Associate

Attorneys – At – Law – Notaries Public

28 (level 2) W A D Ramanayake Mawatha,

Colombo 02.

ACTUARIAL CONSULTANTSActuarial & Management Consultants (Pvt) Ltd

1st Floor,

No: 434, R A de Mel Mawatha,

Colombo 03.

REGISTERED OFFICENo: 25, Vauxhall Street,

Colombo 02.

GENERAL OFFICE / BUSINESS ADDRESSNo: 25, Vauxhall Street,

Colombo 02.

Tel : 011-2432858, 011-2431568, 011- 2331621

Fax : 011-2446129

Web : www.sathosamotorsplc.com

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Photography by Studio Times

Digital plates & Printed by Printage (Pvt) Ltd

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