softlogic holdings plc · 2020. 12. 18. · softlogic holdings plc is one of sri lanka’s leading...

Annual Report 2019/20

Softlogic Holdings PLC

CONTENTS

OVERVIEWAbout This Report 1Financial Highlights 2Non-Financial Highlights 3About The Group 4Our Businesses 6Year At A Glance 8

2 563

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LEADERSHIP & GOVERNANCEChairman’s Message 10Board of Directors 14Sector Heads 18Functional Heads 20Corporate Governance Report 22

FINANCIAL STATEMENTSStatement of Directors’ Responsibilities 56Independent Auditors’ Report 57Income Statement 62Statement of Comprehensive Income 63Statement of Financial Position 64Statement of Changes In Equity 66Statement of Cash Flow 68Notes to the Financial Statements 70

OPERATIONAL & FINANCIAL REVIEWOverview of Economy 28Risk & Uncertainty 29Financial Review 32

SUPPLEMENTARY INFORMATIONShareholder Information 176Corporate Directory 178Notice of Meeting 182Form of Proxy 183Corporate Information IBC

MANAGEMENT DISCUSSION & ANALYSISRetail 36Healthcare Services 38Financial Services 40Leisure And Property 42Automobiles 44Information Technology & Others 46

Committee ReportsAnnual Report of the Board of Directors on the Affairs of the Company 48Board Audit Committee Report 51Report of The Related Party Transactions Review Committee 52HR & Remuneration Committee Report 53

Softlogic Holdings PLC | Annual Report 2019/20

1ABOUT THIS REPORT

This Annual Report covers the operations of Softlogic Holdings PLC and its Group companies for the period from 1st April 2019 to 31st March 2020. Given the unprecedented financial and operational challenges that prevailed during the year, we have sought to produce a concise report which complies with all relevant statutory requirements while fulfilling the high-level information needs of our stakeholders. The Report includes discussions on the Group’s operating landscape during the year, strategy and performance of business sectors, corporate governance, and risk management practices.

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

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To be the most preferred and trusted product and service provider, enhancing enterprise value.

To make responsible investment decisions and retain the best people so as to become the most admired corporate in Sri Lanka.

INTEGRITYNothing compromises what we do.

ACCOUNTABILITYEvery employee is responsible to do the right thing.

TRUST & LOYALTYWe build honest and rewarding relationships.

QUALITYRaise standards as we progress.

PASSIONWe passionately safeguard our reputation.

OUR VISION

OUR CREDO

RESPECTWe respect the value of the individual.

OPENNESSWe encourage unrestrained constructive feedback.

LEADERSHIPOur visionary and inspirational leadership leads by example.

INNOVATIONWe make a difference.

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


2FINANCIAL HIGHLIGHTSOVERVIEW

For the year ended 31 March 2020 2019 2018 2017 2016 2015 2014 2013 2012

Earnings Highlights

Group Revenue Rs. Mn 76,722 75,143 66,019 58,882 54,600 39,564 29,246 25,351 21,819

Gross Profit Rs. Mn 27,044 27,636 23,673 19,579 18,559 14,117 11,012 8,983 7,330

Earnings Before Interest, Tax, Depreciation & Amortisation of Intangibles Rs. Mn 9,807 11,721 11,695 8,451 7,897 6,398 5,025 4,227 4,486

Group Earnings Before Interest & Taxation Rs. Mn 6,462 8,859 9,052 6,391 6,082 4,959 3,918 3,208 3,608

Group Earnings Before Taxation Rs. Mn (2,899) 1,743 3,092 1,581 2,836 2,266 1,258 453 1,601

Group Earnings After Taxation Rs. Mn (3,181) 2,990 2,278 920 1,870 1,819 1,009 153 1,016

Total Comprehensive Income Net of Taxation Rs. Mn (2,272) 3,127 2,827 1,793 2,859 2,160 1,237 2,077 856

Group Earnings Attributable to Equity Holders Rs. Mn (4,724) 105 204 120 565 556 156 (371) 448

Group Comprehensive Income Attributable to Equity Holders Rs. Mn (4,096) 353 450 783 1,829 761 220 557 340

Gross Profit Margin % 35 37 36 33 34 36 38 35 34

Net Profit Margin % (4.15) 3.98 3.45 1.56 3.43 5.00 3.50 1.00 4.70

Earnings Per Share Rs. (3.96) 0.09 0.25 0.15 0.73 0.72 0.20 (0.44) 0.60

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

Return on Capital Employed* % 6.58 9.78 11.02 9.42 9.81 8.37 8.73 8.76 10.58

Balance Sheet Highlights

Total Assets Rs. Mn 150,044 130,670 118,823 100,915 93,152 87,324 65,863 53,836 44,688

Current Ratio No. of times 0.78 0.83 0.93 0.94 0.84 1.04 0.90 0.80 0.70

Asset Turnover No. of times 0.51 0.58 0.56 0.61 0.61 0.45 0.40 0.50 0.50

Total Interest Bearing Borrowings Rs. Mn 76,512 65,788 61,227 52,255 46,480 43,906 31,518 23,037 22,782

Shareholders' Funds Rs. Mn 9,507 14,343 11,591 8,547 8,159 7,336 6,802 7,288 7,202

Net Asset Value Per Share Rs. 8.0 12.23 14.05 11.04 10.54 9.47 8.7 9.4 9.2

Total Equity Rs. Mn 21,726 24,839 20,917 15,623 15,531 15,356 13,351 13,568 11,312

Debt : Equity ** No. of times 3.52 2.65 2.93 3.34 2.99 2.86 2.40 1.70 2.50

Debt : Total Assets No. of times 0.51 0.50 0.52 0.52 0.50 0.50 0.50 0.40 0.50

Operating Cash Flow Rs. Mn 9,009 1,556 (106) 2,331 3,432 426 1,775 1,777 157

Capital Expenditure Rs. Mn 7,637 5,743 4,524 6,311 5,252 4,438 3,604 2,271 1,138

Cash Earnings Per Share Rs. 7.55 1.33 (0.13) 3.01 4.43 0.50 2.30 2.30 0.20

Investor Information

Market Price as at 31 March Rs. 12.30 16.00 24.60 11.90 13.30 13.20 10.60 10.40 11.20

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

Market Capitalisation as at 31 March Rs. Mn 14,668 19,081 23,659 9,270 10,205 10,283 8,257 8,102 8,725

52-Week Market Share Price High Rs. 17.00 25.80 26.20 15.50 18.00 20.40 12.70 13.30 28.00

52-Week Market Share Price Low Rs. 11.00 15.90 11.70 11.70 12.30 10.30 8.10 9.40 11.10

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

Enterprise Value Rs. Mn 87,454 81,672 78,733 58,730 53,677 52,263 38,014 29,816 30,593

Enterprise Value : EBITDA No. of times 8.92 6.97 6.73 7.19 6.60 8.20 7.60 7.10 6.80

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

Dividend Payout Ratio No. of times (0.53) (0.89) 0.14 0.38 0.19 - (5.13) 0.67 0.23

* Return on Capital Employed calculated as a percentage of EBIT to Total Capital Employed (Equity plus Interest Bearing Borrowings)

** Debt to Equity calculated based on Total Equity Capital


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PRINCIPAL RELATIONSHIPS

138

SUPPLIERS AND BUSINESS PARTNERS

350+

SUPPLIERS AND BUSINESS PARTNERS

350+SUPPLIERS AND BUSINESS PARTNERS

350+

DISTRIBUTORS & OUTLETS

1850+

NO OF EMPLOYEES (AS AT 31ST MARCH 2020)

11,278STAFF RETENTION RATE

(2019/2020)

91%

INVESTMENTS ON TRAINING 2019/2020

Rs.51Mn

Softlogic Holdings continues to inspire positive change across diverse sectors - aspiring to holistically impact its people and nurture longstanding business partnerships.


4ABOUT THE GROUPOVERVIEW

ABOUT USSoftlogic Holdings PLC is one of Sri Lanka’s leading conglomerates, operating a multi-brand, multi-channel offering in key consumer-focused businesses. The Group has leading market positions in its three primary business verticals of Retail, Healthcare and Financial Services while also having a presence in the Information Technology, Automobiles and Leisure sectors. Softlogic’s competitive edge lies in its future-fit and agile business model which has enabled it to cater to the evolving needs of Sri Lanka’s increasingly affluent customer segments. Through its diverse businesses, the Group has access to one of the country’s largest consumer basis, which is supported through an extensive island-wide distribution network.

RETAILSri Lanka’s leading mobile phone distributor and retailer of consumer electronics representing an array of global brands. Represents over 100 international fashion brands in addition to ODEL and Cotton Collection. The sector also operates Burger King, Baskin Robbins and Deli France restaurants through a franchisee model and Crystal Jade, a specialty Chinese restaurant. Also operates the GLOMARK supermarket chain and is the authorised dealer for Suzuki motorcycles in Sri Lanka.

AUTOMOBILES

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

HEALTHCARE

The leader is Sri Lanka’s private healthcare industry, operating over 800 beds in 7 hospitals through the Asiri Health brand. The Sector is also the leader in medical diagnostics, operating a network of 6 Hospital laboratories, 17 Satellite laboratories and 58 collection centres across the Island.

LEISURE & PROPERTY

The leisure sector comprises of our two hotel properties: Centara Ceysands Resort and Spa in Bentota and the 5-star city hotel Movenpick as well as Sabre, an online ticketing platform, and Softlogic Destination Management for outbound travel.

FINANCIAL SERVICES

The Financial Services sector consists of Softlogic Life Insurance PLC, Sri Lanka’s 3rd largest life insurer, Softlogic Finance PLC – a licensed finance company and Softlogic Stockbrokers.

ICT

The IT Sector provides a range of services along the IT value chain including end-user computing, back end data centres, advanced infrastructure, IT security, imaging, and printing to managed services. The Sector represents an array of world-leading brands such as Dell EMC, Microsoft, Cisco, Lenovo, Huawei, HP imaging systems, Checkpoint, VMware, Whale Cloud McAfee, and Epson among others.


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Retail

Auto

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iles

Leis

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Info

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Healthcare

Financial Services

OUR BUSINESS PORTFOLIO - TURNOVER

Softlogic Holdings PLC is one of Sri Lanka’s most diversified business conglomerates with a focus on sectors with excellent opportunities in the medium to long-term while occupying leading market positions in several industries.

SOFTLOGIC IN NUMBERS

RETAIL SPACE AT ONE GALLE FACE MALL100,000 Sq FeetTOTAL PAYMENT TO EMPLOYEES 2019/2020 CUSTOMER CONTACT POINTS

140+

INTERNATIONAL BRANDS

PROPERTY PLANT AND EQUIPMENT

RS. 52 BnRS.10 Bn 1,850+

50%

20%

20%

6%

3%1%


6OUR BUSINESSESOVERVIEW

RETAIL HEALTHCARE SERVICES FINANCIAL SERVICES

100% 52% 75%

CORE VERTICALS

Softlogic Retail (Pvt) Ltd

» Suzuki Motors Lanka Ltd

» SML Holdings (Pvt) Ltd

» Dai-Nishi Securities (Pvt) Ltd

Odel PLC

» Softlogic Brands (Pvt) Ltd

» Odel Lanka (Pvt) Ltd

» Odel Apparels (Pvt) Ltd

» BSL International (Pvt) Ltd

» Odel Properties (Pvt) Ltd

» Odel Information Technology Services (Pvt) Ltd

» Odel Properties One (Pvt) Ltd

» Odel Restaurants (Pvt) Ltd

» Cotton Collection (Pvt) Ltd

Softlogic Mobile Distribution (Pvt) Ltd

» Softlogic Communications (Pvt) Ltd

Softlogic Communication Services (Pvt) Ltd

Softlogic International (Pvt) Ltd

Softlogic Restaurants (Pvt) Ltd

» Silk Route Foods (Pvt) Ltd

Softlogic Retail One (Pvt) Ltd

Softlogic Supermarkets (Pvt) Ltd

Softlogic Rewards (Pvt) Ltd

Asiri Surgical Hospital PLC

» Asiri A O I Cancer Centre (Pvt) Ltd

Central Hospital Ltd

Asiri Diagnostics Services (Pvt) Ltd

Asiri Hospital Matara (Pvt) Ltd

Digital Health (Pvt) Ltd

Asiri Hospital Galle (Pvt) Ltd

Asiri Diagnostic Services ( Asia) Pte Ltd

» Asiri Myanmar Ltd

Asiri Central Hospitals Ltd

Asiri Laboratories (Pvt) Ltd

Softlogic Life Insurance PLC

Softlogic Finance PLC

Softlogic Stockbrokers (Pvt) Ltd

Softlogic Asset Management (Pvt) Ltd

SOFTLOGIC RETAIL HOLDINGS (PVT) LTD ASIRI HOSPITAL HOLDINGS PLC SOFTLOGIC CAPITAL PLC


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LEISURE & PROPERTY AUTOMOBILES INFORMATION TECHNOLOGY & OTHERS

100% 100% 100%

NON-CORE VERTICALS

Softlogic City Hotels (Pvt) Ltd

Ceysand Resorts Ltd

Softlogic Destination Management (Pvt) Ltd

Sabre Travel Network Lanka (Pvt) Ltd (40%)

Future Automobiles (Pvt) Ltd

Softlogic Automobiles (Pvt) Ltd

Softlogic Information Technologies (Pvt) Ltd

Softlogic Computers (Pvt) Ltd

Softlogic Australia (Pty) Ltd

Softlogic BPO Services (Pvt) Ltd

Nextage (Pvt) Ltd (50%)

Softlogic Corporate Services (Pvt) Ltd

Jendo Innovations (Pvt) Ltd (21%)

Softlogic Healthcare Holdings Ltd

Softlogic Solar (Pvt) Ltd

SOFTLOGIC PROPERTIES (PVT) LTD


8YEAR AT A GLANCEOVERVIEW

2019April

2019November

2019November

2020

2019MAY

2019October

Asiri Hospital Kandy, the seventh hospital of the growing Asiri Health chain, commenced operations to serve the people in Central and Northern provinces. This 190-bed multi-specialty tertiary care hospital is backed by cutting-edge medical technology and is geared to carry out complex cardiac and neurosurgical procedures which will be a boon to the people in those provinces. This hospital complex is the first private hospital of this scale in the Central Province.

Softlogic opened 28 stores occupying over 100,000 sq.ft. at the One Galle Face. Softlogic’s leading market position in the country’s retail sector with the biggest portfolio of world’s leading brands marks it position as the anchor tenant at the mall.

ODEL department store at the One Galle Face, a total of 3 floors spanning across 52,000 sq.ft.. The three core categories of Beauty, namely Fragrances, Cosmetics and Skin Care was launched bringing in a host of fresh international beauty brands at ODEL. Global favourite kids wear brand, OVS Kids has also been launched within the Kids department at ODEL OGF.

Softlogic also launched an exclusive range of bespoke, luxury men’s formal outfits by international retail giant Sacoor Brothers at ODEL.

A hypermarket comprising ODEL departmental store, Glomark, Softlogic Max, Burger King and Baskin-Robbins was opened in Kurunegala. This four-storied building has ample parking space with the lower ground floor being occupied by Glomark, the ground floor by Baskin Robbins and Burger King, the first floor by ODEL and second floor being collectively occupied by ODEL Sports, ODEL Home and Softlogic MAX.

Softlogic Life Insurance became the only Sri Lankan company to be in Forbes Asia’s Best Under A Billion 2019 list, a business ranking which spotlights Asia’s 200 top-performing listed companies with less than USD 1 Bn in revenue with consistent top- and bottom-line growth. Softlogic Life is the only company in Sri Lanka and one of the only two insurance companies in the Asian region to achieve this momentous feat. Forbes shortlisted Softlogic Life from 1,400 finalists, which was based on a universe of 19,000 candidates, for passing their criteria for profitability, growth and modest indebtedness.

Softlogic Restaurants, the fast-food company of the Group, acquired the franchise for the Michelin star-awarded culinary brand, Crystal Jade Hong Kong Kitchen Restaurant, which is one of Asia’s most celebrated and diversified restaurant brands. The first Crystal Jade restaurant was opened at the One Galle Face. Softlogic also opened three other food and dining brands at the One Galle Face Mall, Burger King, Baskin Robbins and Delifrance.

Glomark, Softlogic’s supermarket chain, opened six outlets during the year. Glomark Essential stores were opened in Asiri Central and Asiri Hospital Kandy as well as in Orion City. Glomark was also opened in Kottawa, Kurunegala and Nawala. This expansion drive which is pursued by the supermarket business is essential to achieve the critical mass for sustainable growth.


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LEADERSHIP & GOVERNANCEChairman’s Message 10Board of Directors 14Sector Heads 18Functional Heads 20Corporate Governance Report 22

2At Softlogic Holdings, we are led by the combined power of a purposeful vision and innovative thinking to deliver creative solutions to the people.


10CHAIRMAN’S MESSAGELEADERSHIP & GOVERNANCE

2020 HIGHLIGHTS

Challenges faced during the financial year under review were unprecedented as we commenced the year with the Easter Sunday terror attacks and closed the year under lockdown as countries around the world implemented stringent measures to curtail the COVID-19 pandemic. Despite these challenges, the Softlogic Team remained optimistic and agile to deliver top line growth of 2% to Rs. 76.7 Bn as we worked with our supply chain partners at every level to drive mutually beneficial growth. This reflects our determination as our Retail and Leisure sectors relied primarily on face-to -face contact with customers at our high-end market spaces designed to enhance customer experiences and both black swan events impacted footfall to these key locations.

The earning capacity of the Group increased during the year with the opening of Asiri Hospitals Kandy which is a 190 bed multi-specialty tertiary care hospital with cutting-edge technology. Softlogic also opened 100,000 square feet of retail store space at Colombo’s latest shopping destination One Galle Face Mall at Shangri La, becoming the anchor tenant for this prime real estate location. Softlogic Life continues to gain market share and moved up two positions to become the 3rd largest insurer in the country and the only company in Sri Lanka to be featured in Forbes Asia’s Best Under a Billion 2019 list.

The impact of the two black swans in one year and policies implemented to curtail vehicle and other imports are clearly reflected in the Group’s performance. Operating profits declined by 26% to Rs. 6.1 Bn leaving little room to absorb the net finance costs which increased by 28% due to increased borrowings. Consequently the Group recorded a loss of Rs. 3.1 Bn compared to a profit of Rs. 2.9 Bn in the previous year despite the investments into growth across the Group. The onset of the pandemic in March 2020 was indeed a blow as it is typically a peak month in the run up to the festive season in April.

Despite significant odds, the Softlogic Group continues to strengthen value propositions for its customers while reining in expansion plans to optimise resource allocation and utilisation. The sharp decline in interest rates in the financial year that has commenced has been a relief as the average interest rate has nearly halved, easing the pressure on cashflow. Support from key business partners has also supported cashflow management. A Group-wide effort to streamline costs and generate cashflow

also enabled easing cashflow constraints. Consequently, we were able to maintain our considerable retail footprint with streamlining and importantly, maintain our permanent cadre. We continue to monitor developments and performance closely as the twin health and economic crises continue to require careful recalibration of strategy and responsiveness to stakeholders.

A SECTOR VIEW

Financial Services, Healthcare Services and Information Technology sectors remained profitable while external events took its inevitable toll on the Retail sector which recorded a loss in the year under review compared to a profit in the previous year. The Leisure and Property sector was also impacted by the black swans in line with the industry both locally and globally. Economic policies implemented to manage the trade deficit had a significant impact on both Retail and Automobiles sectors and these continue to be a concern moving forward as well.

Financial Services

Softlogic Capital PLC, the parent company of our financial services businesses, recorded its highest ever consolidated revenue of Rs. 17.8 Bn during 2019/2020 reflecting growth of 18%over the previous year. Pre-tax profit from the Financial Services sector was Rs. 1.4 Bn reflecting profit growth in a challenging year supported strongly by our insurance business. Softlogic Life recorded a commendable performance delivering profit before tax of Rs. 1.9 Bn and continues to maintain growth rates well above industry growth rates. Digitisation of customer interfaces through rollout of LifeUp Mobile Application, E-Advisor and

Healthcare

» Opening of Asiri Hospitals Kandy

» Australian Council on Healthcare Standards International (ACHSI) for Asiri Group of hospitals

Retail

» Opening of 100,000 sq. ft retail space at One Galle Face Mall with an expanded portfolio of international retail brands

» Expansion of Glomark supermarket chain with 6 new stores

Financial Services

» Softlogic Life becomes the 3rd largest life insurer moving up two positions in the insurance league table

» Softlogic Life is the only company in Sri Lanka to be featured in Forbes Asia’s ‘Best Under A Billion 2019’ list

» Launch of Softlogic Invest operating 2-unit trusts


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IME has supported growth as we focused on delivering customer convenience and empowered customers.

We are charting a new course for Softlogic Finance which has performed below expectations and now have one of the most experienced teams in the industry to drive our future vision. Softlogic Invest was launched during the year and operates two Unit Trusts. Stockbrokers were adversely impacted by the uncertain business landscape which featured two black swans, a presidential election and the uncertainty of a pending general election in one single year.

Healthcare Services

Asiri Group of Hospitals is the leading private healthcare operator in the country and recorded 15% revenue growth to

Rs. 15.5 Bn despite declining patient volumes in the wake of the April terror attacks and the pandemic. Profit before tax declined by 41% to Rs. 1.4 Bn reflecting a near doubling of finance costs stemming from expansion and narrower operating margins.

The opening of Asiri Hospitals Kandy added 190 beds to the Group while offering people in the hill capital access to cutting-edge medical technology at an internationally accredited tertiary care facility. Opening of the Asiri AOI Cancer Care Centre at Asiri Surgical Hospital harnesses the expertise of the American Oncology Institute to provide precision-driven cancer treatment regime based on collaborative protocols with University of Pittsburgh Medical Centre. Treatment planning is done in the USA for the patients in consultation with the oncologists in Sri

Lanka with progress reviewed via online platforms at regular intervals. Other than Asiri Kandy all our hospitals obtained accreditation by the Australian Council on Healthcare Standards International (ACHSI), while Asiri Central obtained the prestigious JCI accreditation during the year affirming high standards of care.

Information Technology

Information Technology delivered top line growth of 13% with revenue of Rs. 4.6 Bn as the demand for IT products and services increased during the year as disruptions highlighted the need for investments in future ready systems, particularly in the last two weeks of the year. We also on boarded key global partnerships with Lenovo for personal computers and Huawei for enterprise solutioning which strengthened our portfolio. Enterprise

The opening of Asiri Hospitals Kandy added 190 beds to the Group while offering people in the hill Capital access to cutting edge medical technology at an internationally accredited tertiary care facility.


12CHAIRMAN’S MESSAGELEADERSHIP & GOVERNANCE

and Security businesses recorded strong performance as more corporates explored avenues for digitally engaging their own customers. Despite exchange rate impacts in the financial year under review, the outlook for the Information Technology is positive as enterprises embrace digital technologies as they adapt to social distancing requirements. Enhancing online offerings to customers, supporting employees to work from home and a growing BPO industry provide avenues for further growth as we support the countries digitisation.

Leisure & Property

The Leisure & Property Sector recorded as pre-tax loss of Rs. 1.7 Bn as Sri Lanka recorded a sharp decline in tourist arrivals in 2019 after the terror attacks and again in December and the first quarter as travel safety was impacted by COVID-19. Industry woes were compounded by hedging costs for dollar-denominated loans as the Sri Lankan rupee depreciated during the year from Rs. 174.45 to Rs. 191.16. The outlook for the sector remains uncertain even at present as travel restrictions remain in force for the greater part of the world and disrupted industry ecosystems struggle to maintain equilibrium.

Retail

The Retail sector recorded Rs. 37.9 Bn turnover accounting for nearly half the Group’s turnover with a wide ranging portfolio of branded clothing, footwear and accessories, beauty,white goods, supermarkets and mobiles. Operating profits more than halved to Rs. 1.4 Bn due to the challenges faced during the year and our reluctance to reduce our footprint and the need to save as many jobs as we could. Coupled with increased finance costs, this resulted in a pre-tax loss of Rs. 2.5 Bn for the year

under review compared to a pre-tax profit Rs. 476 Mn reflecting the woes of the sector.

Glomark, our supermarket chain, plans to add over 100,000 sq, ft., opening 7+ stores in 2021 in the bustling suburbs around Colombo and a flagship store in Colombo 07. Offering a wider choice with products from across the globe which include a growing range of speciality items, Glomark is carving a niche to delight gourmets. Integrated spaces with coffee shops and electronics make it a fun experience for everyone, inspiring and elevating the everyday shopping experience. Our early investment in creating the widest online offering served us well in the financial year that has commenced as customers looked for a wide range of items online. Adding PickMe to supplement our online offering was also a success and it is now matching our own. Consequently, our online sales grew by 250% from the start of this year as consumers sought a combination of safety and online availability of products. Plans to launch our own private label range, adding another 60-100 lines makes Glomark a strong challenger for growth in the competitive modern trade segment in the coming year.

Positioned as the country’s dominant player in luxury goods, our international brands gained high levels of visibility as Softlogic became the anchor tenant at Colombo’s premier shopping destination, One Galle Face Mall at Shangri La, giving Sri Lankans a significantly enhanced retail experience on par with international standards. Import controls introduced to manage the twin budget and trade deficits together with the lockdown and significantly reduced footfall in malls proved to be impediments but we continue to maintain the vibrancy of our offerings to boost waning consumer confidence. We have strengthened our online presence and redoubled our efforts on targeted marketing to ensure that Softlogic maintains its leadership position in the Retail space.

Encouragingly, Telecommunications recorded strong growth as social distancing requirements unleashed an unprecedented demand for mobile communication devices. As over 95% of mobile dealers work with us, we were able to support the demand and capture

market share supported by our reputation for excellent after sales service. After sales services were extended to Male as well during the year and is performing satisfactorily despite the challenging times. We continue to inspire and motivate our dealers with attractive incentives, sharing our success with these key stakeholders.

Automobiles

The Automobiles sector faced challenges due to import restrictions on vehicles, hampering operations of Ford. King Long buses also suffered setbacks due to the drop in tourist arrivals and the pause in issuance of route permits for buses. Consequently, turnover declined to a mere third of the previous year while pre-tax losses increased from Rs. 35 Mn in the previous year to Rs. 195 Mn for FY 2019/20.

PURSUING OUR VISION

As we adjust to new societal norms with social distancing, our spirit remains unquenched and the determination to succeed against the odds grows. Our immediate focus is on extending the cash runway as cash is king amidst prolonged uncertainty and our strategy is to manage EBITDA in the short term. Consequently, we have converted inventory to cash where possible with exciting promotions that were enthusiastically received by worry-weary customers. We have undertaken a Group-wide initiative to streamline costs which continues to be monitored and reinforced to support cashflow management. We have also renegotiated our interest rates with banks to reflect market rates which have declined sharply, supporting the bottom line and cashflow.

As a dynamic group, our plans for growth continue to be visionary and many of these plans are well advanced with funding in place. We have signed contracts with third parties to expand and build our retail operations. Work has commenced on many projects and we need to complete these projects. Our largest project on hand is the Odel Mall and the completion of this landmark has been deferred for 2023 in view of the delays experienced during the year.

Our landmark hypermarket in Mount Lavinia opened in November 2020,

Rs.9.8 Bn

EBITDA

Rs.76.7 Bn

GROUP REVENUE


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realising part of our long-term retail strategy to build destinations offering unique retail experiences to consumers on par with developed markets. This retail utopia brings together three of our brands Softlogic Glomark, Odel and Softlogic Max in a sprawling 25,000 sq ft purpose built retail space offering a heady combination of chic, glamour, technology, choice and convenience for the entire family. This is expected to stimulate revenue growth as it appeals to a wider consumer segment, driving synergies and cost efficiencies in our exciting new retail model.

Softlogic Capital PLC, the holding company of the financial services arm of the Softlogic Group, has agreed to acquire a 49.67% stake in Abans Finance PLC subject to receipt of all regulatory approvals which will also trigger a mandatory offer to minority shareholders of Abans Finance PLC. We are awaiting the necessary approvals on this transaction at present. which is described in note 53 to the Financial Statements.

Both Softlogic Capital PLC and Softlogic Finance PLC have announced rights issues. Funds raised by Softlogic Capital PLC will be utilised to invest in Softlogic Finance PLC while the funds raised by Softlogic Finance PLC will augment its Core Capital requirements.

Softlogic Invest plans to add on Fund Management with a vision of strengthening retail investor participation in capital markets by introducing investments that start at just Rs. 5,000.

After a continuous period of investments, in Asiri Hospitals it is proposed to consolidate operations and enhance asset utilisation in the year that has commenced as there is sufficient capacity within the Group, supported by a growing number of centres of excellence.

The outlook for the Information Technology sector remains positive driven by demand for secure systems that facilitate working from home, increased digitisation of business processes and on boarding of customers to digital platforms.

We are closely monitoring the Automobiles and Leisure & Property sectors due to the high levels of uncertainties with regard to these two sectors and will keep weighing our

options. Meanwhile, the loans with regard to the Leisure sector have been renegotiated for more favourable terms in view of the global and industry-wide impact on the same.

ACKNOWLEDGEMENTS

In uncertain times, the indefinable magic that makes the impossible possible is the spirit of the people. I have been fortunate to lead a team of people who can infect others with this spirit and seek every opportunity to thrive in the challenging times we are living through. I wish to thank every member of the Softlogic Team for their efforts to ensure that our customers remained engaged and upholding high standards of service which has been our key differentiator.

I thank the Board for their counsel and strengthened vigilance during this period and count on their foresight and guidance as we move forward. The Board joins me in expressing our appreciation of the moratoria and other accommodations granted by our bankers and business partners which supported our cashflow management in a difficult year. We thank our shareholders for the continued confidence and look to crafting an improved performance for the Softlogic Group in the future.

Ashok PathirageChairman/Managing Director

15 December 2020Colombo

» Odel Mall in 2023

» Hypermarket in Mount Lavinia

» Expansion of Glomark modern trade chain including launch of private label

» Acquisition of Abans Finance PLC

» Softlogic Capital PLC rights issues

» Softlogic Finance PLC rights issue

» Retail fund management product roll out

BEYOND 2020


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ASHOK PATHIRAGEChairman/Managing Director

HEMANTHA GUNAWARDENAExecutive Director

HARESH KAIMALExecutive Director

RANJAN PERERAExecutive Director

ROSHAN RASSOOLExecutive Director

HARRIS PREMARATNENon-Executive Director

BOARD OF DIRECTORSLEADERSHIP & GOVERNANCE


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PRASANTHA LAL DE ALWIS, PCNon-Executive Independent Director

DR. SIVA SELLIAHNon-Executive Independent Director

NIHAL KEKULAWELANon-Executive – Independent Director

AARON RUSSELL - DAVISONNon-Executive Director

SHIRISH SARAFNon-Executive Director

PROF. AJANTHA DHARMASIRINon Executive Independent Director


16BOARD OF DIRECTORSLEADERSHIP & GOVERNANCE

ASHOK PATHIRAGEChairman/Managing Director

Mr. Ashok Pathirage, recognised as a visionary leader of Sri Lanka’s corporate world, is the founding member of Softlogic Group, one of Sri Lanka’s leading conglomerates. He manages over 50 companies with a pragmatic vision providing employment to more than 11,000 employees. Mr. Pathirage gives strategic direction to the Group which has a leading market presence in three core verticals – Retail, Healthcare and Financial Services and three non-core verticals - IT, Leisure and Automotives. The Asiri Hospital chain is the country’s leading private healthcare provider which has achieved technological milestones in medical innovation in Sri Lanka’s private healthcare. He is the Chairman/Managing Director of Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC, and ODEL PLC. He also serves as the Chairman of Softlogic Capital PLC and Softlogic Life Insurance PLC in addition to the other companies of the Group. He is also the Chairman of NDB Capital Holdings Limited, Sri Lankan Airlines Limited and Sri Lankan Catering Limited.

HEMANTHA GUNAWARDENAExecutive Director

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

HARESH KAIMALExecutive Director

Mr. Haresh Kaimal is a co-founder of the Softlogic Group and a Director since its inception. With over 3 decades of experience in IT and Operations, he heads the Group IT division which oversees the entire group requirements in information technology covering all sectors. He is also an Executive Director of Softlogic

BPO Services (Pvt) Ltd, Director of Odel PLC, Softlogic Finance PLC, Softlogic Life Insurance PLC and many other Group Companies.

RANJAN PERERAExecutive Director

Mr. Ranjan Perera is a co-founder of Softlogic and is an Executive Director since its inception and also holds many Board Directorships in subsidiaries of the Softlogic Group. He is the Sector Head of the Group’s Mobile Phone Operations and Managing Director of Softlogic International (Pvt) Ltd. With the extensive knowledge in Senior Managerial positions and having over two decades of experience in the telecommunication field, he handles world renowned brands in the mobile industry.

He also contributes to the Retail Sector of the Softlogic Group and is heading the Softlogic Consumer Electronics Dealer Business and also the FMCG Channel, Higher Purchase Division and the Service Centre Operations. He is the Managing Director of Lifeline Pharmaceuticals (Pvt) Ltd and having vast experience in the area of Supply Chain Management & Logistics, he Heads the Group’s Logistics and Warehouse Operations.

ROSHAN RASSOOLExecutive Director

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

of the Cyprus Institute of Marketing. He has over 30 years of experience behind him in the ICT industry having worked in senior managerial positions in reputed companies.

HARRIS PREMARATNENon-Executive – Independent Director

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

DR. SIVAKUMAR SELLIAHNon-Executive Independent Director

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

PRASANTHA LAL DE ALWIS, PCNon-Executive Independent Director

Mr. Prasantha Lal De Alwis joined the Softlogic Board as a Non-Executive Director in 2011. He obtained his LL.B (Bachelor of Law) and LL.M (Masters


17

in Law) from the University of Colombo and was enrolled as an Attorney at-Law in 1983. He started his career as a State Counsel of the Attorney General’s Department of Sri Lanka in 1983 and served in that capacity until 1990. He subsequently joined the private bar and since then has practiced in both Appellate and Trial courts. He was appointed a President’s Counsel in 2012. He is a visiting lecturer at the Law faculty, University of Colombo, Kotelawala Defence University (KDU) and APIIT Law School. He is a member of the Council of University of Moratuwa, Board of Management of the Centre for Studies of Human Rights, Faculty Board of Law of University of Colombo and Incorporated Council of Legal Education. Mr. De Alwis was a Director of Sampath Bank PLC from 2002 to 2011 and Chairman of its Human Resources, Remuneration and Risk Management Committees and was a Director of Siyapatha Finance PLC (2011-2020). He presently serves as a Director of SC Securities (Pvt) Ltd., Asset Line Leasing (Pvt) Ltd., Coral Sands Hotel Ltd., and Alethea International School, Honorary Legal Advisor of CIM Sri Lanka and the Ayurveda Doctors (Gampaha Wickremarachchi) Association of Sri Lanka. He was a founder member of the Consumer Affairs Authority of Sri Lanka in 2002. He was appointed as Honorary Consul for Seychelles in Sri Lanka by the President of the Republic of Seychelles in October 2013. He is the Commander of St. John’s Ambulance Bridge and a member of the Press Council Sri Lanka.

PROF. AJANTHA DHARMASIRINon Executive Independent Director

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

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

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

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

AARON RUSSELL-DAVISONNon-Executive – Non Independent Director

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

SHIRISH SARAFNon-Executive Director

Mr. Shirish Saraf joined the Board of Softlogic in April 2018 as the nominee Director of Samena Ceylon Holdings Ltd. He is the Founder and Executive Vice Chairman of Samena Capital. He has been a Director of various companies in different jurisdictions across Samena’s portfolio, including RAK Ceramics PSC, RAK Logistics LLC, Dynamatic Technologies Ltd and Tejas Networks Ltd. Mr. Saraf previously held Directorships in Aramex Holdings, Commercial Bank of Oman SADG, Abraaj Capital, EFG Hermes and Amwal Capital (Qatar). In September 2013, Asian Investor listed him as one of Asia’s 25 most influential people in Private Equity. Mr. Saraf has obtained a Bachelor of Science degree in Economics from the London School of Economics and Political Science.

NIHAL KEKULAWELANon-Executive – Independent Director

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

CHETAN GUPTAAlternate to Mr. Shirish Saraf

Mr. Chetan Gupta is the Managing Director of Samena Capital Investments Ltd in Dubai, focusing on investments within the Special Situations Funds. Mr. Gupta is a member of the Board of Directors of U-Gro Capital Ltd (India), Imperial Hotels (Pvt) Ltd (India) and RAK Logistics (Singapore). He is also a member of the Investment Committee of the Special Situations Funds. Prior to joining Samena Capital, Mr. Gupta was an equity research analyst at Tricolour India Funds and previously was a part of the General Atlantic Financial Management Leadership Program. Mr. Gupta is a Chartered Financial Analyst (AIMR), Chartered Alternative Investment Analyst and holds a Masters in Management (Finance) from the University of Mumbai.


18SECTOR HEADSLEADERSHIP & GOVERNANCE

DR. MANJULA KARUNARATNEHealthcare Services

IFTIKAR AHAMEDFinancial Services

MOHAMMED RIZVIRetail


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DR. MANJULA KARUNARATNEHealthcare Services

MBBS, M.Sc (Trinity, Dublin),Dip. MS Med (Eng) MSOrth Med. (UK)

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

He possesses over 30 years of experience in the field of healthcare, and is responsible for the overall medical policy of the Group. Under his guidance the Group has introduced large number of new medical procedures and technologies to Sri Lanka amongst which are the country’s first Bone Marrow Transplant Unit, first Minimally Invasive cardiac Surgery service, first fully fledged Stroke Unit with facilities for ‘clot retrieval’, a high end Interventional Radiology Facility, a fully-fledged Nuclear Medicine Service and the country’s first True Beam Linear Accelerator for Radiotherapy. In addition A Stem Cell Laboratory another first ,is currently nearing competition.

IFTIKAR AHAMEDFinancial Services

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

MOHAMMED RIZVIRetail

Mr Mohammed Rizvi joined as the Chief Executive Officer of Softlogic Retail (Pvt) Limited, who is a key stakeholder of the Consumer Electronic Industry in Sri Lanka. He also heads the Softlogic Office Automation Division.

He is an accomplished executive with domestic and international experience with proven success in the IT, Infrastructure and Telecommunication Industry in a wide range of fortes within the service and other various sectors.

Mr Mohammed Rizvi is responsible for transforming Softlogic Retail (Pvt) Limited by introducing smart portfolios, streamlining the operations and instrumental in making strategic decisions for the Company. Prior to his assignment with Softlogic Retail, He served as a Vice President of Siemens LLC – UAE.

During his career span, he has had wide exposure in general management and demonstrated track record of delivering results.


20FUNCTIONAL HEADSLEADERSHIP & GOVERNANCE

HIRAN PERERADirector Group Treasury

INDRESH PUVIMANASINGHE FERNANDOChief Process Officer

DAMITH VITHARANAGEGroup Head of Risk and Internal Audit

AASHIQ LAFIRGroup Finance Director

DESIREE KARUNARATNEGroup Director – Marketing

NATASHA FONSEKAGroup Director – Human Capital and Taxation

CHINTHAKA RANASINGHEHead of Strategy and Business Development

NILOO JAYATILAKEHead of Investments


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HIRAN PERERADirector Group Treasury

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

INDRESH PUVIMANASINGHE FERNANDOChief Process Officer ( CPO)

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

DAMITH VITHARANAGEGroup Head of Risk and Internal Audit

Mr. Damith Vitharanage joined Softlogic to head the Group Risk and Internal Audit Divisions in 2013. He is responsible for Internal Audit, Risk and Compliance activities of the Group. Damith counts over 20 years of senior managerial experience in Audit, Investigations, Financial Management, Human Resource Management and Administration, Information Security, Risk Management and General Management in both the state and private sectors in Sri Lanka and the Middle East. Prior to joining Softlogic Holdings PLC, He worked as Deputy General Manager - Head of Audit and Investigations at Seylan Bank PLC. He is a Management Graduate from the University of Colombo (BBA), holds a Postgraduate Diploma in HR, Post Graduate Diploma in Integrated Waste & Energy Management and possesses a Management MBA specialised in Transformational Leadership. He has Associate Memberships from the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), the Chartered Institute of

Management Accountants (CIMA), UK, and the Chartered Institute of Marketing (CIM), UK, and is a Certified Information System Auditor (CISA), USA and a Certified Project Manager (PMP) USA.

DESIREE KARUNARATNEGroup Director – Marketing

Ms. Desiree Karunaratne joined Softlogic in 2003 and serves as Group Director Marketing. She is responsible for Group marketing activities and crafting the long-term marketing strategy of the Group. She has over 17 years of senior management experience across a diverse range of businesses in Retail, Fashion, Information Technology, Travel and Media. She holds an MBA from the University of Wales, UK. She serves on the Boards of Softlogic Restaurants (Pvt) Ltd., Softlogic Supermarkets Pvt Ltd., Softlogic Destinations Management (Pvt) Ltd., Silk Route Foods (Pvt) Ltd., Nextage (Pvt) Ltd., Softlogic Rewards Pvt Ltd., and Sabre Travel Network Lanka (Pvt) Ltd.

AASHIQ LAFIRGroup Finance Director

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

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

NATASHA FONSEKAGroup Director – Human Capital & Taxation

Ms. Natasha Fonseka joined the Group in 2010 and is presently the Group Director, Human Capital and Taxation. She is responsible for Corporate Taxation and Human Capital activities of the Softlogic

Group. She counts over 25 years of experience in senior managerial positions in Human Resources Management, Taxation, Financial Advisory Services and Finance in reputed international professional firms and the private sector. She is a Fellow of the Chartered Institute of Management Accountants, UK-FCMA and a Chartered Global Management Accountant (CGMA), USA. She served in the capacity of Director Tax at EY prior to joining Softlogic.

CHINTHAKA RANASINGHEHead of Strategy and Business Development

Mr. Chinthaka Ranasinghe joined Softlogic in 2014 as the Head of Strategy and Business Development. He has over 20 years of senior managerial experience in equity research and investment banking in one of Sri Lanka’s leading conglomerates. He is a Management Graduate from the University of Colombo (BBA) and a Passed Finalist of the Chartered Institute of Management Accountants (CIMA), UK.

NILOO JAYATILAKEHead of Investments

Ms. Niloo Jayatilake holds the position of CEO / Director of Softlogic Invest, the asset management arm of the Softlogic Group. She is also the Head of Investments of the Softlogic Group PLC. With more than 25 years in the investments and portfolio management field, previously she held the position of Head of Portfolio Management/Director of Guardian Fund Management Ltd for a period of 10 years. Niloo has represented Sri Lanka and holds national colours in golf. Currently, serves as Council Member of the Sri Lanka Golf Union (SLGU) and serves as Chairperson of its Junior Sub Committee overlooking the national golf development program. Also Heads the Women’s Committee of the National Olympic Committee of Sri Lanka. She is a Fellow Member of the Chartered Institute of Management Accountants, UK and Associate Member of the Institute of Chartered Secretaries and Administrators, UK.


22CORPORATE GOVERNANCE REPORTLEADERSHIP & GOVERNANCE

THE GROUP GOVERNANCE STRUCTURE

Composition of the Board Skills of the Board

Executive Chairman

Non Independent, Non-Executive

Directors

Independent Directors

Executive Directors

Alternate Director

1 2

5 4

1

Entrepreneurship

Skills

Marketing

Medical

Legal & HR

Banking

Accounting& Finance

Corporate Governance (CG) is a framework of rules and practices by which an organisation is directed, controlled and managed. The above CG framework provides an overview of the Corporate Governance structures, principles, policies and practices of the Board of Directors of Softlogic Holdings PLC (SHL). At Softlogic, the approach to CG is guided by ethical culture, stewardship, accountability, independence, continuous improvement, oversight of strategy and risk. The fundamental relationship among the Board, Management, Shareholders and other Stakeholders is established by our governance structure, through which the ethical values and corporate objectives are set and plans for achieving those objectives and monitoring performances are determined. To serve the interests of shareholders and other stakeholders, SHL’s Corporate Governance system is subject to ongoing review, assessment and improvement. The Board of Directors proactively adopts good governance policies and practices designed to align the interests of the Board and Management with those of shareholders and other stakeholders and to promote the highest standards of ethical behaviour and risk management at every level of the organisation.

BOARD OF DIRECTORS

The Board of Directors is responsible for setting the strategic direction of the Group, safeguarding assets, managing risks and setting the tone at the top. They have set in place governance frameworks to facilitate achievement of strategic goals and compliance with regulatory frameworks while balancing stakeholder interests. Composition of the Board is set out graphically on the previous page while profiles of the Directors are given on pages 16 to 17 Directors provide annual declarations of independence in accordance with the stipulations of the Listing Rules of the CSE and the guidelines of the Code of Best Practice. Board balance is facilitated with seven Non-Executive Directors who are reputed leaders in their fields of whom four are Independent. A sufficiency of financial acumen within the Board is assured with the presence of four Directors who are experienced accounting and finance professionals. The skills, experience and standing of the individual Board members ensures sufficient deliberation on matters set before the Board and exercise of independent judgement. Directors can also seek independent professional advice when deemed necessary, for which the expenses are borne by the Group.

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

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

» Establishing an effective management team

» Establishing appropriate systems of corporate governance in the Group;

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


23

Administration of the Board is done by Softlogic Corporate

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

COMMITTEES OF THE BOARD

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

CODE OF CORPORATE GOVERNANCE

Sub-Committee Composition Mandate

Audit Committee » Mr. J.D.N. Kekulawala - Chairman

» Dr. S. Selliah

» Prof. A.S. Dharmasiri

» Mr. W.M.P.L. De Alwis, PC

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

Remuneration Committee » Prof. A.S. Dharmasiri - Chairman


» Mr. G.L.H. Premaratne

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

Related Party Transactions Committee

» Dr. S. Selliah - Chairman


» Mr. H.K. Kaimal

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


Governance Framework

Administration of the Board

Shareholders

Board of Directors Group Managing Director

Sector Heads

Group Support Functions

Audit Committee

Board of Directors CEO Management

Team

HR & Remuneration Committee

Related Party Transactions

Review Committee

Sector

Subsidiary Companies

External

y Companies Act No. 07 of 2007

y Listing Rules of the Colombo Stock Exchange

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

Internal

y Articles of Association

y Code of Business Conduct

y Terms of References for Board sub-committees

y Comprehensive framework of policies, systems and procedures

Governance Systems

y Stakeholder engagement and management

y Strategic planning

y Risk management

y Regulatory compliance

y People management

y Internal controls

y Internal and external audit



MEETINGS

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

Director Board Statutory Committees

Audit Committee

HR & Remuneration Committee

Related Party Transactions Review Committee

Mr. A.K. Pathirage 5/5

Mr. G.W.D.H.U. Gunawardene 5/5

Mr. R.J. Perera 5/5

Mr. H.K. Kaimal 5/5 3/4

Dr. S. Selliah 5/5 13/13 4/4

Mr. W.M.P.L. De Alwis 4/5 12/13 1/1 4/4

Mr. G.L.H. Premaratne 5/5 1/1

Prof. A.S. Dharmasiri 2/5 8/13 1/1

Mr. A Russell-Davison 4/5

Mr. J.D.N. Kekulawela 4/5 11/13Mr. S. Saraf 0/5

COMPANY SECRETARY

Messrs. Softlogic Corporate Services (Private) Limited function as Company Secretaries to the Group. The Company Secretary provides guidance to the Board as a whole and to individual Directors with regard to how their responsibilities should be discharged. The Company Secretary is also responsible for ensuring that the Board is compliant with the applicable rules and regulations and that all activities of the Board are in line with the appropriate procedures.

APPOINTMENT, RE-ELECTION TO THE BOARD

» Directors are appointed by the Board in a structured and transparent manner.

» Appointments are made with due consideration given to the diversity of skills and experience within the Board.

» As per the Company’s Articles of Association, three of the Directors shall retire from office at each Annual General Meeting and offer themselves for re-election.

» All Directors appointed during the year seek re-election at the subsequent AGM.

» The Managing Director is not subject to retirement by rotation.

» The following Directors thus retire and offer themselves for re-election:

Mr. R.J. Perera

Mr. A. Russell-Davison

Mr. S. Saraf

CHAIRMAN & CEO

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

INVESTMENT APPRAISAL

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

» Board Composition & Appointment

» Risk Management

» Funding Structure of Group

» Business Expansion

» Financial Reporting

» Performance Management

DIRECTORS’ REMUNERATION

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

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

The Report of Board Remuneration Committee is on page 53 provides further


25

information. The aggregate remuneration paid to the Directors is disclosed in the Notes to the Financial Statements on page 105 of this Report.

SHAREHOLDER RELATIONS

Shareholder relations are managed through a structured process with multiple platforms facilitating shareholder engagement and timely dissemination of information. The Annual General Meeting is the key platform for engagement and notice of the AGM and all relevant documents are circulated among shareholders at least 15 working days prior to the AGM. The Chairmen of the Board Committees and External Auditors attend the Annual General Meetings to respond to queries that may be raised by the shareholders. In addition to the AGM, shareholder engagement is also facilitated by the Group’s investor relations department which maintains a continuous dialogue with shareholders through dissemination of announcements on material developments and quarterly performance. They are also a point of clarification for shareholders.

ACCOUNTABILITY AND AUDIT

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

» Audited Financial Statements – pages 62 to 174

» Statement of Director’s Responsibilities - page 56

» Annual Report of the Board of Directors on the Affairs of the Company – pages 48 to 50

» Management Discussion & Analysis – pages 36 to 47

The Audit Committee has oversight responsibility for monitoring and supervising financial processes to ensure integrity, accurate and timely financial reporting. It is also responsible for ensuring adequacy and effectiveness of the Internal Control and Risk Management processes and receives reports from Group Internal Audit and Group Risk Management

in this regard. The Audit Committee comprises 4 Non-Executive Directors all of whom are Independent. The Chairman of the Audit Committee is a Finance professional with extensive experience in the relevant areas whose profile is given on page 16. The Terms of Reference of the Audit Committee complies with the recommendations of the Code of Best Practice on Board Audit Committees issued by ICASL and guidelines stipulated by the SEC.

The Audit Committee is responsible for approving the terms of engagement of the external auditors including audit fees. The principal auditor has not provided any services which are stipulated as restricted by the SEC and the audit fees and non-audit fees paid by the Company to its auditors are separately disclosed on page 105 of the Notes to the Financial Statements.

The Board holds overall responsibility for determining the Group’s risk appetite and implementing sound risk management and internal control systems to ensure that risk exposures are maintained within defined parameters. The Group’s internal control systems are aimed at safeguarding shareholders investments and effectively managing risks that may impact the achievement of its strategic objectives. A discussion on the Company’s key risk exposures and mitigation mechanisms are given in the Risk Management Report on page 29 of this Report. The Audit Committee annually reviews the effectiveness of the Group’s risk and internal control systems.

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

The Board Related Party Transactions Review Committee has been set up in compliance with guidelines stipulated by the CSE. Directors individually declare their relevant transactions with the Company and its subsidiaries on a quarterly basis. A formalised process is in place for identifying related party transactions

and avoiding conflicts of interest. All Related Party Transactions as defined by the applicable accounting standards are disclosed on Note 48 of the Financial Statements on page 153 of this Report.

SHAREHOLDERS

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

SUSTAINABILITY REPORTING

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



COMPLIANCE WITH CORPORATE GOVERNANCE RULES OF THE CSE

The following disclosures are made in conformity with Section 7 of the Listing Rules of the Colombo Stock Exchange:

Section Criteria Status of Compliance

Disclosure Details

7.10.1 (a) Non-Executive Directors Compliant Out of 12 Directors 7 are Non-Executive Directors.

7.10.2 (a) Independent Directors Compliant There are 4 Independent Directors on the Board.

All Non-Executive Directors have submitted the declaration with regard to their independence/non-independence.

7.10.3 Disclosures relating to Directors Compliant The names of Independent Directors are disclosed in the Board profile presented on pages 16 and 17

7.10.3.(c) Disclosures relating to Directors. A brief resume of each Director should be included in the Annual Report including his/her area of expertise

Compliant A brief profile of each Director is available in the Board profile presented on pages 16 and 17

7.10.3.(d) Appointment of new Directors. A brief resume of any new Director appointed to the Board

Not applicable. This requirement is not applicable as there were no appointments to the Board during the year

7.10.5 Remuneration Committee Compliant Comprises 3 Independent Non-Executive Directors.

The names of the members of the Committee are stated on page 23 of the Annual Report.

7.10.6 Audit Committee Compliant Comprises 4 Independent Non-Executive Directors.

The names of the members of the Committee are stated on page 23 of the Annual Report. The report of the Committee is stated on page 51. The Chief Financial Officer attends all meetings.

STATUS OF TRANSFERRING TO THE DIRI SAVI BOARD OF CSE

The Company having noted that, it was not in compliance with the Minimum Public Holding (MPH) criteria applicable to companies listed on the Main Board, as prescribed under the Listing Rules of CSE took steps to obtain an extension from the CSE and continues to comply with the requirement of providing the CSE with a quarterly statement regarding such non-compliance, since 14th October, 2019.

The Company was informed by a letter dated 15th October, 2020 from the CSE, that the company’s securities would be transferred to the “Second Board” w.e.f. 9th November, 2020, by application of Rule 7.13.2 (b) of the Listing Rules of the CSE on the grounds of the said non-compliance, and accordingly the securities of the Company remain on the “Second Board” of the CSE.

As required under the Listing Rules of the CSE, the Company will duly notify

its’ Shareholders at the Annual General Meeting to be held on 19th January, 2021 (being the next General Meeting which is to be held immediately subsequent to the securities of the Company being transferred to the Second Board ), that its securities have been transferred to the Second Board, as a consequence of being non-compliant with the MPH criteria set out under the provisions of Rule 7.13 of the Listing Rules of CSE.

In view of the above, the Company made an application to CSE and has been transferred accordingly to the Diri Savi Board.


27

OPERATIONAL & FINANCIAL REVIEWOverview of Economy 28Risk & Uncertainty 29Financial Review 32

3Ours is a philosophy of continued growth and progress, through adaptive strategies designed to navigate the changing dynamics of today.


28OVERVIEW OF ECONOMYOPERATIONAL & FINANCIAL REVIEW

ECONOMIC GROWTHThe economic fallout of the COVID-19 pandemic in Sri Lanka is yet to be accurately ascertained or quantified; the Department of Census and Statistics has announced a delay in the publication of the National Accounts for the 2nd quarter of 2020. However, the impacts are expected to be devastating with all sub-sectors of the economy likely to see sharp contractions, stemming from increased unemployment, impacts on disposable incomes, drastic drops in consumer spending and import restrictions. Meanwhile the recent resurgence of infections has renewed the need for further lockdowns, which is likely to delay recovery.

INTEREST RATESMultiple reductions in policy rates over the last 18 months have led to a consistent decline in market interest rates.

RELEVANT REGULATORY DEVELOPMENTS

» Import restrictions on non-essential items including motor vehicles

» Debt moratoriums granted to the tourism sector » Multiple downward revisions of the policy rate and the

Statutory Reserve Ratio (SRR) » Implementation of stringent safety and hygiene

practices across all operations and facilities

OUTLOOK: Looming government debt, together with ongoing fiscal challenges, the drastic drop in tourism earnings and massive impact on the SME sector, is anticipated to present unprecedented challenges for the Sri Lankan economy. Accordingly, the International Monetary Fund projects Sri Lanka’s GDP to contract by 4.6% in 2020. That said, numerous measures adopted by the Government to support business activity, including debt moratoria, monetary easing and manageable inflation levels, are likely to support economic revival over the medium-term, although the upside potential is tempered by the recent surge in COVID-19 infections.

CONSUMER SPENDINGThe Easter Attacks in April 2019 followed by heightened security concerns led to a sharp decline in consumer spending by mid-2019. While sentiments gradually improved towards the latter part of the year, the outbreak of the pandemic in March 2020 and the resultant lockdown had a massive impact on disposable incomes and consumer spending.

HOUSEHOLD CONSUMPTION EXPENDITURE 2019

EXCHANGE RATESThe Sri Lankan Rupee was relatively stable in 2019, appreciating by 0.6% during the year. Following the outbreak of the pandemic, the Rupee recorded sharp depreciation towards the end of 1Q2020, falling by 6% to Rs. 192.85 by end-April 2020. However, the external sector has somewhat improved in ensuing months supported by restrictions on non-essential imports, decline in global petroleum prices and a rebound in remittances.

AWPR

%

1-year T-bill rate

0.0

2.5

5.0

7.5

10.0

12.5

15.0

APR-

19

MAY

-19

JUN-

19

JUL-

19

AUG-

19

SEP-

19

OCT-

19

NOV-

19

DEC-

19

JAN-

20

FEB-

20

MAR

-20

APR-

20

MAY

-20

JUN-

20

JUL-

20

AUG-

20

ECONOMIC GROWTH

2017 3.40%

2018 3.20%

2019 2.60%

1Q2020 -1.9%

Source: Dept. of Census and Statistics

+3.6% Y-O-Y

SLR vs USD

100

120

140

160

180

200

APR-

19

MAY

-19

JUN-

19

JUL-

19

AUG-

19

SEP-

19

OCT-

19

NOV-

19

DEC-

19

JAN-

20

FEB-

20

MAR

-20

APR-

20

MAY

-20

JUN-

20

JUL-

20

AUG-

20

Rs/U

SD


29

The Group’s risk landscape changed dramatically during the year, given the unprecedented challenges stemming from the outbreak of COVID-19. As a diverse business conglomerate, Softlogic is exposed to an array of internal and external risk factors and given the industry-specific nature of most risks, identification and management of risks occurs primarily at sector level. Sectors also operate under the regulatory frameworks of their relevant regulators including the Central Bank of Sri Lanka, Insurance Regulatory Commission of Sri Lanka, and the Private Medical Regulatory Council which in turn inform their risk management practices.

Principals Risks of 2019/20

Risk Exposure Risk MitigantsNet Risk Assessment

19/20 18/19

Risks of increasing COVID-19 infections

The outbreak of the COVID-19 pandemic has led to unprecedented challenges including:

» Adverse impact on disposable incomes and consumer spending

» Border closures and its impact on the tourism sector

» Disruptions to the supply chain and logistics during lockdown

» Ensuring the health and safety of all employees and customers

» Adverse impacts on profitability and liquidity

» Stringent hygiene and safety standards implemented across all facilities and operations

» Proactive cost rationalisation measures

» Deferment of capital expenditure

» Increasing focus on the e-commerce platform

High

Based on the resurgence of infections in October ’20 and the resultant lockdown

-

Consumer spending

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

Exposure to various market segments through diverse business profile

» Strong market position in relatively defensive industries such as healthcare

» Ongoing monitoring of macro-economic trends

High

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

High

Government Policy

All our verticals are directed impacted by the Government’s monetary and fiscal policy measures as well as regulations, particularly in the financial services and healthcare sectors.

» Negotiations with suppliers to obtain extended credit periods

» Proactive monitoring of market trends and policy implications

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

High

Given import restrictions on non-essential items which will have a significant impact on our Retail businesses such as branded apparel, QSR and Modern Trade.

Moderate

RISK & UNCERTAINTY


30RISK & UNCERTAINTYOPERATIONAL & FINANCIAL REVIEW


19/20 18/19

Exchange rate risk

The Group is exposed to exchange rate risk through Retail, ICT and Automobiles sectors which rely on imports.

» Close monitoring of foreign currency exposures

» Risk limiting thresholds in place for exposures

» Hedging through forward contracts by Group Treasury to limit exposures within specified thresholds

Moderate

Given measures by the Government to curtail imports, the exchange rate is expected to be relatively stable over the short-to-medium term.

High

Interest rate risk

The Group is exposed to interest rate risk due to its exposure to borrowings as well as repricing of the financial sector’s advances and deposit portfolios.

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

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

Moderate

The declining interest rates have had a favourable impact on the Group.

High

Customer experience and satisfaction

Satisfying and retaining customers is key to business growth, particularly given the increasing competitive intensity in the operating landscape.

» High levels of customer engagement facilitated through numerous platforms

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

» High levels of product responsibility maintained throughout the entire Group

» Monitoring customer rankings

Moderate

Moderate

Credit risk

Credit risk exposure stems primarily from the financial services sector engages in the provision of leasing, working capital and other loans.

» Customer credit due diligence

» Increased focus on secured lending products

» Diversified credit portfolio (concentration and tail risks)

» Credit approval is reviewed by respective authority levels depending on the value involved

» Internal client ratings

High

The moderating economic conditions have led to pressure on repayment capabilities.

Moderate

People related risks

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

» Strong employee engagement mechanisms

» Attractive remuneration schemes

» Opportunities for training and skill development

» Culture of mentoring

Low Low


31


19/20 18/19

Technological obsolescence

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

» Strong partnerships facilitate introduction of new technology to the market

» Proactive monitoring of consumer preferences and emerging technological trends

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

Moderate Moderate

Relationships with principals

Our relationships with globally-reputed principals is a key source of competitive edge.

» High levels of engagement with principals at senior levels

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

» Consistent delivery of value to principals

Low Low


32FINANCIAL REVIEWOPERATIONAL & FINANCIAL REVIEW

REVENUE

The Softlogic Group recorded a top line growth of 2% to Rs. 76.7 Bn during the year, demonstrating strategic agility and adaptability in the wake of unprecedented challenges. Growth was supported by the resilient performance of Healthcare Services (+15%), Financial Services (+14%), Information Technology (+13%) and Retail (+1%) sectors as the Group sought to increase availability of its products through strengthening partnerships with suppliers and leverages on its leading market positions. Revenue growth was however hampered by the contraction in the Automobiles and Leisure sectors which reflected the adverse industry conditions for most part of the year.The Retail Sector maintained its position as the largest contributor to consolidated revenue with a share of 50% during the year.

SectorRevenue

DriversChange (%) Contribution

Information Technology +13% 6% » Strong performance of IT Security and Enterprise sub-segment

» New partnerships

» Deeper relationships with existing clients

Leisure & Property -30% 3% » Sharp fall in tourist arrivals after the Easter Sunday attacks

» Closure of country borders following the outbreak of COVID-19

Retail +1% 50% » Growth in the telecommunication and modern trade sub-segments

» Fashion and branded apparel impacted by the decline in customer footfall and spending power

Automobiles -73% 1% » Sharply impacted by restrictions on vehicle imports

Financial Services +14% 20% » Consistent growth in Softlogic Life

» Weak credit growth in Softlogic Finance

Healthcare +15% 20% » Increased contributions from Asiri Hospitals Kandy

GROSS PROFIT

Despite the top line growth, the Group’s gross profit declined by 2% to Rs. 27.0 Bn during the year, reflecting exchange rate volatility which adversely impacted costs of imported products and lower business volumes in several sectors such as Leisure and Automobiles. Resultantly, the consolidated gross profit margin narrowed to 35.2% from 36.8% the previous year. A further decline was stemmed by proactive efforts aimed cost rationalisation and process efficiencies.

OPERATING PROFITABILITY

Disciplined cost management and optimization of resources enabled the Group to contain the increase in overhead costs to 7% during the year. Distribution expenses declined by 9% reflecting consolidation across the distribution network and temporary closure of outlets during the lockdown period. Meanwhile administrative expenses increased by 10% mainly due to the addition of around 100,000 sq.ft of new retail space at One Gall Face mall. Meanwhile Other operating income decreased by 21% due to a fall in fee and commission income.

2016 2017 2018 2019 2020

Rs.Mn %

Revenue Y-o-Y Growth(%)

0

20,000

40,000

60,000

80,000

100,000

0

5

10

15

20

25

30

35

40

CONSOLIDATED REVENUE GROWTH


33

Overall, the Group’s Operating profitability weakened during the year, with Earnings before interest and tax (EBIT) declining by 27% to Rs. 6.5 Bn. Despite the extremely challenging operating environment that prevailed during the year, all sectors except the Leisure & Property sector generated operating profits during the year. The Financial Services sector delivered a 11% increase in operating profit, upheld by the strong performance of Softlogic Life while other sectors recorded declines in profitability. The Healthcare Sector retained its position as the largest contributor to consolidated operating profit, with a share of 47% during the year under review.

NET FINANCE COSTS

The Group’s net finance costs increased by 28% to Rs.7.3 Bn, reflecting an increase in borrowings to fund expansion and working capital requirements. The increase in finance costs stemmed primarily from the Retail and Healthcare sectors which pursued debt-funded capacity expansions as well as the Leisure & Property sector which relied on borrowings to fund working capital needs. Meanwhile, the Group’s finance income increased by 46% to Rs. 2.0 Bn during the year, supported by fair value gains of investments and interest income.

PROFITABILITY

The decline in operating profitability coupled with the increase in net finance costs and change in insurance contract liabilities resulted in the Group incurring a pre-tax loss of Rs. 2.9 Bn during the year, compared to a profit of Rs. 1.7 Bn the previous year. Tax expenses for the year amounted to Rs. 282.7 Mn, which in turn resulted in a loss-after-tax of Rs. 3.2 Bn. The Healthcare, Financial services and Information Technology sectors delivered profits during the year, although this was countered by the weak performance of the Retail, Leisure and Automobile sectors which were directly impacted by the Easter Sunday attack, pandemic and the resultant lockdowns.

FINANCIAL POSITION

Asset Growth

Despite the challenges that prevailed, the Group took a long-term view to value creation by continuing to invest in enhancing its earnings capacity. Total assets expanded by 15% to Rs. 150.0 Bn during the year, supported by a near 22% increase in non-current assets. Property, plant, and equipment (PPE) increased by 12% reflecting capital investments relating to Asiri Hospital Kandy as well as the expansion of the Group’s retail footprint at the One Galle Face mall. Growth in non-current assets were also supported by the recognition of Rs. 6.6 Bn of right-of-use assets in line with the adoption of SLFRS-16. Meanwhile, current assets increased by 4% mainly due to an increase in short-term investments. The recent acquisitions and capital expansions have enhanced the Group’s long-term earnings capacity, positioning it for strong growth upon revival of the economic activity.

2016 2017 2018 2019 2020

Rs.Mn %

EBIT EBIT margin (%)

0

2,000

4,000

6,000

8,000

10,000

0

2

4

6

8

10

12

14

CONSOLIDATED EBIT TRENDS

Rs.Mn

2018/19 2019/20

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Info

rmat

ion

Tech

nolo

gy

Leis

ure

Reta

il

Auto

mob

ile

Fina

ncia

l Se

rvic

es

Hea

lthca

re

SECTOR-WISE EBIT TRENDS

2016 2017 2018 2019 2020

Rs.Mn Rs.Mn

Total assets CAPEX

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

ASSET GROWTH


34

Capital Structure

The Group’s total equity base decreased by 13% to Rs. 21.7 Bn as a result of losses generated during the year and accounted for 31% of total funding. Meanwhile total borrowings increased by 16.3% to Rs. 76.5 Bn by end-March 2020, as the Group pursued debt-funded capital expansions. Given the prevalent low-interest rate scenario, the Group sought to increase exposure to long-term borrowings which accounted for 41% of total borrowings during the year. While gearing levels increased to 0.77X from 0.72X the previous year, the sustained decline in interest rates during the year is expected to result in a decrease in finance costs over the short-term.

WAY FORWARD

The performance of the year reflects the inevitable toll of the Easter Sunday attacks and the COVID-19 pandemic on the Group’s operations. While the diversity of its earnings profile and strong market positions in several defensive sectors enabled the Group to withstand to these pressures to a certain degree, the short-term outlook is anticipated to remain challenging, particularly given the recent surge in infections across the country. Against this backdrop, strategic focus has been placed on optimising resources, preserving liquidity and rationalizing costs. Despite these short-to-medium term pressures, the Group remains optimistic regarding the long-term growth potential of its businesses and is confident that the investments it has made in strengthening earnings capacity will position it in good stead to capture emerging opportunities.

FINANCIAL REVIEWOPERATIONAL & FINANCIAL REVIEW

MANAGEMENT DISCUSSION & ANALYSISRetail 36Healthcare Services 38Financial Services 40Leisure and Property 42Automobiles 44Information Technology & Others 46

Committee ReportsAnnual Report of the Board of Directors on the Affairs of the Company 48Board Audit Committee Report 51Report of The Related Party Transactions Review Committee 52HR & Remuneration Committee Report 53

4Softlogic Holdings is driven by the trust our stakeholders have placed in us, promising a host of resilient, people-centric business solutions.


36BUSINESS LINE REVIEWSMANAGEMENT DISCUSSION & ANALYSIS

Retail STRATEGY & PERFORMANCE

» The deceleration in consumer spending directly impacted the country’s retail sector in 2019/20, following the Easter Sunday terror attacks and the lockdown which was implemented to curtail the spread of the COVID-19 pandemic. Accordingly, growth in household consumption expenditure moderated to 2.9% in 2019, before falling further to 0.9% in the first quarter of 2020.

» Challenges in the operating landscape had its inevitable toll on the Group’s retail sector: while revenue increased marginally to Rs. 38.0 Bn, operating profit halved to Rs. 1.5 Bn reflecting prevalent challenges. Despite industry conditions, the Sector took a long-term view to enhancing its earnings capacity by becoming the anchor tenant at One Galle Face Mall at Shangri La, Colombo’s latest premier shopping destination. These debt-funded expansions led to the Segment’s finance costs increasing by 40% during the year, resulting in a loss of Rs. 2.1 Bn.

» Telecommunications recorded strong growth as migration to online schooling and remote working arrangements fueled demand for mobile communication devices. Timely and proactive efforts to clear stocks enabled us to cater to pent up demand, thereby capturing market share and improving our cash cycle. Samsung also awarded us the exclusive after sales service for Male during the year.

» Consumer electronics experienced a difficult year, reflecting fluctuations in the exchange rate, import restrictions, increased price competition and weaker demand. We sought to consolidate the existing network of showrooms while further widening our product portfolio to include high-end automated solutions such as robotic vacuum cleaners, IOT enabled air conditioners and other SMART products. That said, performance improved considerably in the first 2 quarters of 2020/21, supported by increased digital adoption.

» Branded apparel and fashion expanded its footprint with the addition of retail space at One Galle Face. We offer customers an array of choice at various price points, ranging from local to international brands. Performance, was however, impacted by the sharp decline in tourists as well as exchange rate fluctuations, decrease in consumer spending and recent import restrictions.

» Quick service restaurants: We continued our strategy of driving penetration across market segments through differentiated offerings. During the year, we added 2 new Burger King outlets, 2 Baskin Robbins outlets, as well as one Deli France outlet to the network. The Chinese Restaurant- Crystal Jade opened to rave reviews at the One Galle Face Mall, and has emerged as one of Colombo’s most popular destinations for Chinese food. In line with the standards set by our international partners, we implemented stringent safety and hygiene practices in all our QSR outlets, thereby ensuring the safety of both our customers and employees. The segment also intends to widen its QSR offering with the launch of Popeyes, an international fried chicken brand in January 2021, with plans to expand to major cities over the short-to-medium term.

50%Revenue

24%Total Assets

24%EBIT

28%Liabilities

30%of Employees

RELEVANCE TO GROUP


37

» Modern trade: Softlogic GLOMARK performed relatively well during the year with most outlets recording strong trading patterns and generating profits at operating level. The Group opened 3 new outlets during the year and plans to add over 100,000 sq,ft to the network through the addition of 7+ stores in 2021, in the bustling suburbs around Colombo and a flagship store at a central location in Colombo 7.

» Suzuki and Houjue: Softlogic holds the exclusive distributorship of Suzuki Motorcycles, spare parts, and accessories in Sri Lanka. The Sector marked delivered good growth in FY 2019/20, nearly doubling volumes and capturing market share. Growth was supported by an expansion in the distribution network coupled with the addition of 2 new models to the portfolio. During the year, the Group also partnered with the Chinese motorcycle brand Houjue, introducing several models to the Sri Lankan market. The short-to-medium term outlook of this segment is challenging, given the import restrictions implemented by the government and our focus will be on generating revenue through the spare parts and service business.

» In the immediate aftermath of the lockdown outlets faced numerous challenges including the loss of staff and disruptions to operations. However, proactive measures taken to scale up the existing online platform served as well, enabling customer retention and continuous cash flow generation. We also leveraged our data analytical capabilities to drive targeted marketing and regain lost customers and increased penetration of loyalty customers.

» As social distancing measures and concerns on health and safety have limited customers’ mobility, we have sought to widen our online presence through strengthening our e-commerce platform. The service is currently offered for the Group’s fashion retail, modern trade and consumer electronics portfolios and has seen consistent growth in traffic in recent months.

We expect the operating landscape to remain challenging over the short-

term and will focus on extending cash runways and manage operating

profitability. Concerted efforts to streamline costs and improve efficiencies across the Group are

ongoing and is expected to support liquidity management. Despite these

challenges, we remain optimistic about the long-term potential of

our businesses; plans to expand our retail operations remain unchanged and we are committed to completing these projects, although delays are

likely given the disruptions faced. The Softlogic complex in Mount Lavinia was also opened in November 2020

and houses the Group’s retail offerings providing an integrated retail solution

to the area..

Implications of COVID-19and Way forward

RISKS

» Uncertainty regarding further spread of the virus

» Decline in consumer spending and affordability

» Import restrictions

» Increased price competition in key business segments

OPPORTUNITIES

» Growth in the e-commerce platform

» Consistent demand growth for telecommunication products

» Increased propensity towards modern trade

PERFORMANCE

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2017/18 2018/19 2019/20

RevenuePre-tax profit

Rs.Mn

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000



Healthcare ServicesSTRATEGY & PERFORMANCE

» Demand for private healthcare in Sri Lanka has continued to increase supported by higher disposable incomes, an ageing population and increasing urbanisation. While the public sector still dominates healthcare, fiscal constraints have led to limited availability of resources, resulting in overcrowding and long waiting times at government hospitals.

» The Asiri Group of Hospitals maintained its position as the leading private healthcare operator in the country. The segment recorded a 15% growth in revenue in 2019/20, despite a drop in patient volumes following the April terror attacks and outbreak of the pandemic. Profitability, however, was impacted by narrower operating margins and a near doubling of finance costs, given recent debt-funded capacity expansions. Overall, the segment generated a pre-tax profit of Rs. 1.4 Bn (41%) and was the largest contributor to Group pre-tax earnings during the year.

» Recent investments in capacity expansion have shown promising results, particularly Asiri Hospital Kandy which has seen consistent growth in patient volumes. The first of its kind in the Central Province, the tertiary hospital offers advanced diagnostic and laboratory services and is equipped to carry out a range of high-end surgeries. During the year, the Sector also acquired a land in Galle, adjacent to its hospital, with the aim of expanding capacity and the range of services offered.

» Our state-of-the-art oncology centre, ‘Asiri-AOI Cancer Centre,’ a joint venture with the American Oncology Institute, has gained traction and shows significant potential for growth. Through this centre, patients have access to world-class, precision driven personalised cancer treatment including support from a pool of global oncologists, which is facilitated through a collaboration with the University of Pittsburg Medical Centre.

» Despite the prevalent challenges we continued to invest in technology upgrades, employee training and quality assurance. Other than Asiri Kandy all our hospitals obtained the Australian Council on Healthcare Standards International (ACHSI) certification, while Asiri Central obtained the prestigious JCI accreditation during the year.

» The segment sought to consolidate its laboratory network during the year, retaining its market leadership position. Expansion was limited, with just 5 collection centres being added to the network.

20%Revenue

18%Total Assets

34%EBIT

13%Liabilities

46%of Employees

RELEVANCE TO GROUP


39

40

30

Following the outbreak of COVID-19, extremely stringent hygiene

protocols were adopted across all our hospitals, providing assurance

to both patients and doctors on the safety levels offered at our hospitals. We were also the first private sector operator to obtain the accreditation

to carry out PCR testing. While patient volumes declined in the

months immediately following the lockdown, the segment has now

seen definite signs of recovery and is confident that the remaining quarters of 2020/21 would see continued growth. We have also

partnered India’s leading IVF provider and hope to launch a dedicated IVF

centre in the short-to-medium term.


RISKS

» Heightened safety concerns following the outbreak of COVID-19

» Exchange rate fluctuations

» Shortage of skilled healthcare personnel

» Intense competitive pressures

OPPORTUNITIES

» Increasing demand for private healthcare

» Demographic trends including an aging population and rising prevalence of NCDs

» Regional opportunities for growth

» Partnerships with leading global operators

ASIRI HOSPITAL HOLDINGS PLC115 - bed hospital in Colombo190 - bed hospital in KandyAsiri Laboratories network

ASIRI SURGICAL HOSPITAL PLC155-bed hospital offering specialised surgical care inclusive of a state-of-the-art heart centre, modern operating theatres and urology treatment facilities

ASIRI CENTRAL HOSPITALS LTDNon-operational

CENTRAL HOSPITAL LTD260-bed state-of-the-art technologically advanced, modern one stop medical cen-tre that offers diagnostic, therapeutic and intensive care facilities.

ASIRI HOSPITAL MATARA (PVT) LTD60-bed hospital in Matara, offering a range of general and surgical care facilities

ASIRI DIAGNOSTICS SERVICES (PVT) LTD Laboratory services in the Central Province

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

ASIRI LABORATORIES (PVT) LTDNon-operational

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

ASIRI DIAGNOSTIC SERVICES (ASIA) PTE LTDNon-operational

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

ASIRI MYANMAR LTDNon-operational

SOFTLOGIC HOLDINGS PLC

PERFORMANCE

0

5,000

10,000

15,000

20,000

2017/18 2018/19 2019/20


Rs.Mn

1,000

1,500

2,000

2,500

3,000



STRATEGY & PERFORMANCE

» Sri Lanka’s life insurance industry recorded good growth in 2019, with GWP increasing by 11%. However, an increase in claims and operating expenses led to a 26% decline in profitability with Return on Equity falling to 17% (2018: 26%). Meanwhile, the NBFI Sector experienced a challenging year, with Sector PAT declining 38% due to the slowdown in credit expansion and increase in non-performing-loans. The Colombo Stock Exchange recorded volatility for most part of 2019 reflecting weaker investor sentiments; the ASPI gained marginally by end-December 2019, before falling sharply in the ensuing months following the outbreak of pandemic.

» The Group’s Financial Services segment delivered a commendable performance given prevalent challenges, with top line and operating profit increasing by 11%. Profit after tax declined by 62% to Rs. 1.3 Bn, reflecting a deferred tax adjustment in 2018/19; excluding this the segment’s PAT is estimated to have increased by 33%.

» Insurance: The Segment’s profitability continues to be upheld by Softlogic Life, which recorded consistent growth supported by its multi-channel distribution strategy, focus on customer convenience and innovative product mix. With its GWP growth consistently surpassing the industry average, the Company has rapidly gained market share in recent years, notching up a further position to emerge as the 3rd largest player in the industry in 2019. The Company gained recognition as the only Sri Lankan corporate to be featured in the Forbes Asia’s ‘Best Under A Billion’ in 2019 and won the coveted ‘Brand of the year-2019’ at the EFFIE awards.

» Finance: Performance of Softlogic Finance weakened during the year, reflecting a slowdown in credit growth and weak portfolio quality which in turn led to a loss of Rs. 334 Mn. That said, recent measures taken to strengthen leadership capabilities through new appointments to several key positions are expected to revive the Company over the medium term. Focus will be placed on increasing contributions from the secured lending portfolio, particularly leasing, gold loans and factoring. Other priorities include preserving quality of the new lending book and leveraging technology to drive improved customer convenience. Capital will also be enhanced with a rights issue of approximately of Rs. 1.9 Bn in the near term.

» Stockbrokers: The fortunes of the Group’s stockbroking arm mirrored that of the broader market; performance improved in line with the upturn in the CSE following the Presidential election and has maintained its momentum in recent weeks. Softlogic Stockbrokers’ best-in-class research capabilities and access to foreign clientele has enabled it to consistently rank among the country’s top 3 stockbrokers (based on volumes traded).

20%Revenue

26%Total Assets

19%EBIT

26%Liabilities

13%of Employees

RELEVANCE TO GROUP

Financial Services


41

» We launched Softlogic Invest during the year, With the aim of venturing into asset management through leveraging the Sector’s existing capabilities and network. The Company currently operates two unit trusts and will pursue penetration in the retail market, offering investment opportunities from just Rs. 5000.

Softlogic Life continued to serve its customers during the lockdown

period, with minimal disruptions to processes, premium collection

and claims settlement. Recent investments in technology served the Company well during this time,

as it seamlessly transitioned to remote working arrangements, attesting to both the agility of its infrastructure and people.

The outlook for the life insurance sector remains positive given the relatively low penetration levels in the country and the higher priority placed on insurance following the outbreak of COVID-19. Meanwhile

Softlogic Finance will look to refine its operating model and reposition itself as a customer-driven, agile,

technologically advanced company over the medium term. We are also

excited about the opportunities presented by our recent foray into asset management, and hope to

consolidate our position both in the institutional and retail market.


RISKS

» Slowdown in the leasing market following restrictions on vehicle imports

» Preserving portfolio quality

OPPORTUNITIES

» Low penetration in life insurance in Sri Lanka

» Increased demand for health and life insurance products given the outbreak of the pandemic

» Leveraging technology to offer better solutions for customers


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

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

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

SOFTLOGIC STOCKBROKERS (PVT) LTDStockbroker regulated by the SEC

SOFTLOGIC ASSET MANAGEMENT (Pvt) Ltd

30

10

30

PERFORMANCE

0

5,000

10,000

15,000

20,000

2017/18 2018/19 2019/20


Rs.Mn

0

500

1,000

1,500

2,000




» The year under review was a devastating one for Sri Lanka’s tourism industry, which experienced unprecedented challenges following the terror attacks in April 2019 and the outbreak of the COVID-19 pandemic in March 2020. Tourist arrivals, which declined sharply following the April attacks showed gradual signs of recovery towards the latter part of 2019, before coming to a virtual standstill following the outbreak of the pandemic and the resultant closure of Sri Lanka’s borders for foreign arrivals.

» Since April 2019, tourist arrivals recorded m-o-m declines every month of the year with total arrivals decreasing by 29% in the 12 months ending March 2020. Since then, there have been no tourist arrivals into the country as border controls have remained in place.

» Hotel operators have sought to attract the domestic market through attractive discounts and promotions; although driving occupancies and generating revenue, the lower pricing has had a considerable impact on yields and ARRs.

» The performance of the Group’s Leisure and Property segment reflected industry woes, with revenue declining by 30% while operating losses amounted to Rs. 487 Mn. Finance costs for the year increased by 35% to Rs. 1.2 Bn mainly due to the impact of the Rupee depreciation on Mövenpick’s dollar-denominated borrowings. Resultantly, the sector’s post-tax losses increased to Rs. 1.7 Bn from Rs. 849 Mn the previous year.

» The Segment has sought to address immediate liquidity pressures through consolidating operations and pooling resources wherever possible. All capital investments have been deferred and operating costs rationalised in a bid to extend the cash runway. The segment has also availed itself of the debt moratoriums which have been granted to the leisure sector.

» Despite the extremely challenging operating conditions, the segment has to date retained all its employees, attesting to the Group’s commitment towards its people and ensuring job security in these difficult times.

3%Revenue

10%Total Assets

11%Liabilities

5%of Employees

RELEVANCE TO GROUP

Leisure and Property


43

The country’s leisure sector is unlikely to recover in the short-to-

medium term, as global restrictions on air travel as well as Sri Lanka’s

border closure is expected to prevail until at least early 2021.

As infections continue to increase globally, the United Nations World

Travel Organisation (UNWTO) estimates tourist arrivals to fall by around 60% to 80%in 2020, with

the Asia and Pacific regions showing the highest impact. Against this

backdrop, our immediate priority is to rationalise costs and effectively

manage liquidity levels, as we prepare for extremely challenging

quarters ahead.


RISKS

» Continued global travel restrictions and border closure as COVID-19 infections rise

OPPORTUNITIES

» Opportunities in the domestic market

» Emergence of travel corridors among regional destinations

» Decline in market interest rates


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

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

SOFTLOGIC DESTINATION MANAGEMENT (PVT) LTDTotal outbound travel solutions provider

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

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

30

10

30

PERFORMANCE

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2017/18 2018/19 2019/20


Rs.Mn

-2,000

-1,500

-1,000

-500




» It was yet another challenging year for Sri Lanka’s Automobiles sector which was impacted by import restrictions on vehicles, exchange rate volatility and an overall slowdown in demand given moderating economic conditions. Following the outbreak of the pandemic, the Government sought to further tighten import restrictions in a bid to preserve the exchange rate. Accordingly, expenditure on vehicle imports recorded a decline of 16% y-o-y in the first 6 months of 2020, falling further in ensuing months.

» The performance of the Group’s Automobiles Segment understandably reflected industry challenges; revenue fell sharply by 73% while operating profit reduced to Rs. 5 Mn. Finance costs recorded a marginal decline reflecting the decline in interest rates. Overall, the Segment’s losses for the year increased to Rs. 210 Mn from Rs. 35 Mn the previous year.

» The Government tender market which we previously focused on to drive sales of buses, ambulances, and double cabs recorded a slowdown during the year as fiscal constraints impacted government demand. This was compounded by the pause in issuance of route permits during the year. Demand for King Long buses also dwindled following the April terror attacks and the outbreak of COVID-19 which had a catastrophic impact on the tourism industry.

» Future Automobiles which is the authorised dealer for Ford vehicles in Sri Lanka also experienced a challenging year, given weak consumer sentiments following the terror attacks in April. Subsequent import restrictions in the aftermath of the pandemic further weakened its performance.

1%Revenue

1%Total Assets

1%Liabilities

1%of Employees

RELEVANCE TO GROUP

Automobiles


45

The pandemic and the subsequent import restrictions have brought

the brand new vehicle market to a standstill; as restrictions are likely to

remain over the short-term, we do not foresee an immediate recovery

of this segment in the near term. The collision repair centre is expected to generate earnings following its

relocation to a larger and more accessible facility in Kaduwela.


RISKS

» Import restrictions on vehicles

» Reduced disposable incomes

» Exchange rate volatility

» Decline in government demand due to fiscal constraints

OPPORTUNITIES

» Income generation from collision repair centre


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

FUTURE AUTOMOBILES (PVT) LTDAuthorised Dealer for Ford

30

10

30

PERFORMANCE

0

500

1000

1500

2000

2500

3000

3500

2017/18 2018/19 2019/20


Rs.Mn

-200

-150

-100

-50

0




» Sri Lanka’s ICT Sector is poised for strong growth, fuelled by the government and private sector’s efforts to promote the country as a technology hub and drive IT as enabler in developing sectors such as healthcare, agriculture, and education. As the telecommunications and BPO industries reach a degree of maturity, there is increased focus on developing high-end, innovative solutions.

» The Group’s IT segment delivered a commendable performance with revenue increasing by 13% to Rs. 4.6 Bn during the year. Performance was upheld by the IT Security and Enterprise sub-segments while the performance of the BPO and distribution operations moderated during the year. Operating profit recorded a decline of 21% mainly due to the sharp depreciation of the exchange rate in the latter part of FY 2020; this was however partly offset by a near halving of finance costs as interest rates declined during the year. Overall, the Segment’s profit-after-tax amounted to Rs. 102 Mn, a decrease of 11% compared to the previous year.

» We leveraged the capabilities of our team and partnerships with world leading brands to deepen relationships with existing customers and effectively capitalise on growing demand.

» The segment also sought to widen its service offering, entering new partnerships with Lenovo and Huawei during the year. With this addition, the segment now offers the entire gamut of end-to-end solutions to its clientele.

» The significant increase in digital adoption across organisations and households, following the outbreak of the pandemic offered opportunities for growth, particularly in the months immediately following the financial year-end, as we facilitated the necessary technology infrastructure to enable work-from-home and online learning solutions.

» As organisations seek to transform their business models in adapting to the new norm, the Group is aptly positioned to support such transitions through its wide array of services, advanced infrastructure, and unique base of organisational knowledge.

6%Revenue

2%Total Assets

5%EBIT

2%Liabilities

3%of Employees

RELEVANCE TO GROUP

Information Technology & Others


47

30

10

Demand for the IT segment’s services remained resilient during the pandemic given our presence

in essential industries such as healthcare, banking, and the military.

The outlook is promising given the Government’s thrust towards leveraging technology to enhance

several key areas of public service as well as increased digital adoption by private sector organisations. On the other hand, key downside risks such as import restrictions and exchange rate volatility is likely to temper the Segment’s earnings outlook in the

next financial year.


RISKS

» Exchange rate volatility

OPPORTUNITIES

» Government thrust towards ICT

» Increasing digital adoption in organisations

» Opportunities in BPO, healthcare and education sectors


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

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

SOFTLOGIC SOLAR (PVT) LTDNon-operational

SOFTLOGIC CORPORATE SERVICES (PVT) LTDGroup Company Secretarial function

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

NEXTAGE (PVT) LTD

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


Others

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

SOFTLOGIC HEALTHCARE HOLDING LTDNon-operational

30

PERFORMANCE

0

1,000

2,000

3,000

4,000

5,000

2017/18 2018/19 2019/20


Rs.Mn

0

50

100

150

200

250

300


48ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

COMMITTEE REPORTS

The Directors of Softlogic Holdings PLC have pleasure in presenting to the members their report together with the Audited Financial Statements of the Company and the Audited Consolidated Financial Statements of the Group for the year ended 31 March 2020.

GENERAL

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

PRINCIPAL ACTIVITIES AND NATURE

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

FUTURE DEVELOPMENTS

An indication of likely future developments is set out in the Chairman’s Review on pages 10 to 13 In the ordinary course of business the Group develops new products and services in each of its business segments.

PERFORMANCE REVIEW

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

FINANCIAL STATEMENTS

Section 168 (b) of the Companies Act require that the Annual Report of the Directors include Financial Statements of the Company, in accordance with Section 151 of the Act and Group Financial

Statements for the accounting period, in accordance with section 152 of the Act. The requisite Financial Statements of the Company are given on pages 62 to 174 of the Annual Report.

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

The Directors are responsible for the preparation of the Financial Statements of the Company to reflect a true and fair view of the state of affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Companies Act No. 07 of 2007 and the Sri Lanka Accounting Standards. A statement in this regard is given on page 56.

AUDITOR’S REPORT

The Auditor’s Report on the Financial Statements is given on pages 57 to 61 of the Annual Report.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of the Financial Statements are given on pages 70 to 174 of the Annual Report. There was no change in the accounting policies adopted from the previous year except for the adoption of SLFRS 16: leses.

PROPERTY, PLANT & EQUIPMENT

The details and movement of property, plant and equipment during the year under review is set out in Note 22 to the Financial Statements on pages 111 to 117.

CAPITAL EXPENDITURE

The total capital expenditure incurred on the acquisition of property plant and equipment for the Company and the Group amounted to Rs 3 Mn (2019 – Rs 2 Mn) and Rs 7,637 Mn ( 2019 – Rs 5,743 Mn)respectively. Details of capital expenditure and their movements are given in Note 22 to the Financial Statements on pages 113 and 114 of the Annual Report.

In addition to the above, a sum of Rs. 1,756 Mn (2019 - Rs. 2,022 Mn) has been incurred by the Group in respect of the Odel Mall project.

RESERVES

The reserves of the Company and the Group amounted to Rs. 2,120 Mn (2019 – Rs. 3,871 Mn) and (Rs. 2,612 Mn) (2019 – Rs. 2,223 Mn) respectively. The movement and composition of the Capital and Revenue reserves is disclosed in the Statement of Changes in Equity.

DONATIONS

During the year, donations made by the Company and the Group amounted to Rs. 397,789 (2019 - Rs. 30,000 and Rs. 4.2 Mn (2019– Rs. 8.2 Mn) respectively.

STATED CAPITAL

The stated capital of the Company as at 31 March 2020 was Rs. 12,119,234,553 represented by 1,192,543,209 shares.

EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

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

TAXATION

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

STATUTORY PAYMENTS

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

RELATED PARTY TRANSACTIONS

The Company’s transactions with Related Parties, given in Note 48 to the Financial


49

Statements have complied with the Listing Rules of the Colombo Stock Exchange.

DIRECTORATE

The following Directors held office during the year under review. The biographical details of the Board members are set out on pages 16 to 17.

Mr. A.K. Pathirage (Chairman/ Managing Director)

Mr. G.W.D.H.U. Gunawardena

Mr. R.J. Perera

Mr. H.K. Kaimal

Mr. M.P.R. Rassool

Dr. S. Selliah

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

Mr. G.L.H. Premaratne

Prof. A.S. Dharmasiri

Mr. A. Russell Davison

Mr. S. Saraf

Mr. J.D.N. Kekulawala

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

Mr. A.K. Pathirage (Alternate Director to Mr. H.K. Kaimal)

RETIREMENT AND RE-ELECTION OF DIRECTORS

In terms of Article 87 of the Articles of Association of the Company Mr. R.J. Perera, Mr. A Russell- Davison and Mr. S. Saraf retire by rotation and being eligible to offer themselves for re-election.

The Directors have recommended the re-appointment of Mr. G.L.H. Premaratne who is 72 years of age, as a Director of the Company; and accordingly a resolution will be placed before the shareholders in terms of Section 211 of the Companies Act in regard to the re-appointment of Mr. G.L.H Premaratne.

DIRECTORS’ SHAREHOLDING

Directors’ interest in the shares of the Company as at 31 March 2020 were as follows.

Name of Director As at 31 March 2019 No. of Shares

As at 31 March 2020No. of Shares

Mr. A.K. Pathirage 477,843,941 486,244,633

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

Mr. R.J. Perera 75,437,508 75,437,508

Mr. H.K. Kaimal 80,439,792 80,439,792

Mr. M.P.R. Rassool - -

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

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

Mr. G.L.H. Premaratne - -

Prof. A.S. Dharmasiri - -

Mr. A. Russell-Davison - -

Mr. J.D.N. Kekulawala - -

Mr. S. Saraf - -

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

- -

DIRECTORS’ REMUNERATION

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

DIRECTORS’ INTERESTS IN CONTRACTS AND PROPOSED CONTRACTS WITH THE COMPANY

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

in any other contract or proposed contract with the Company.

INTERESTS REGISTER

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

SHAREHOLDERS’ INFORMATION

The distribution of shareholders is indicated on page 176 of the Annual Report. There were 10,729 registered shareholders as at 31 March 2020 (31 March 2019 – 10,676).

SHARE INFORMATION

Information on share trading is given on page 177 of the Annual Report.

INTERNAL CONTROL

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

RISK MANAGEMENT

The Group’s risk management objectives and policies and the exposure to risks, are set out in pages 29 to 31 of the Annual Report.

CORPORATE GOVERNANCE

The Report on Corporate Governance is given on pages 22 to 26 of the Annual Report.

THE AUDITORS

The Board Audit Committee reviews the appointment of the external auditors, as well as their relationship with the Group, including monitoring the Group’s use of


50ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

COMMITTEE REPORTS

the auditors for non-audit services and the balance of audit and non-audit fees paid to the auditors.

The Auditors of the Company, Messrs Ernst & Young, Chartered Accountants were paid Rs. 2.4 Mn as audit fees for the financial year ended 31 March 2020 (2019 – Rs. 2.8 Mn) by the Company. Details of which are given in Note 18 to the Financial Statements.

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

Having reviewed the independence and effectiveness of the external auditors, the Audit Committee has recommended to the Board that the existing auditors, Messrs. Ernst & Young, Chartered Accountants be re-appointed. Ernst & Young have expressed their willingness to continue

in office and an ordinary resolution re-appointing them as auditors and authorising the Directors to determine their remuneration will be proposed at the forthcoming AGM.

GOING CONCERN

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

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held as a hybrid meeting at the Auditorium of Central Hospital Limited (4th Floor), No. 114, Noris Canal Road, Colombo 10 on Tuesday the 19th January 2021 at 10.00 a.m. The Notice of the Annual General Meeting is on page 182 of the Annual Report.

For and on behalf of the Board

A.K. Pathirage H.K. Kaimal

Chairman/Managing Director Director


Secretaries

15 December 2020

Colombo


51BOARD AUDIT COMMITTEE REPORT

SCOPE OF THE COMMITTEE

The Board Audit Committee supports the Board of Directors in fulfilling in discharging its oversight responsibilities in relation to financial reporting, Internal Audit function, compliance with laws & regulations, internal controls and risk management and External Auditors’ performance and their independence. The scope, functions and responsibilities are adequately set out in the terms of reference of the Committee which has been approved by the Board and is reviewed annually. The Committee places reliance on other Audit Committees in the Group without prejudicing the independence of those Committees. However, the Committee reviews the minutes of those committees’ meetings and receives appropriate briefings on matters arising from those. The effectiveness of the Committee is evaluated annually by each member

of the Committee and the results are communicated to the Board.

COMPOSITION

The Audit Committee is appointed by the Board of Directors and comprises four independent Non-Executive Directors. Their profiles appear in the Board of Directors section of this Annual Report

Mr. J.D.N. Kekulawala (Chairman)

Dr. S. Selliah

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

Prof. A. Dharmasiri

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

The composition of the Committee enables a blend of financial and audit expertise and wide business and regulatory experience to fulfil its responsibilities.

MEETINGS

The Audit Committee met on thirteen (13) occasions during the year under review including quarterly meetings to review and make recommendations on the quarterly and annual financial statements before they were considered and approved by the Board of Directors.

The attendance at Audit Committee meetings was as follows:

Name of Director Attendance

Mr J.D.N. Kekulawala 11/13

Dr. S. Selliah 13/13

Prof. A.S. Dharmasiri 9/13

Mr. W.M.P.L. De Alwis, PC 12/13

The Group Finance Director attended the Committee’s meetings by invitation and other members of the Senior Management attend meetings by invitation when necessary. The External Auditors attended meetings when their presence was required; they attended three meetings held during the year. The Committee meets with the External Auditors, with no members of Management present, to cover matters they wish to discuss confidentially.

ACTIVITY & FOCUS, AND REPORTING

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

1. The integrity of the Company’s and Group’s Financial Statements, including the reasonableness of assertions made, the appropriateness of accounting policies used,

the adequacy of presentation and disclosures made and the effectiveness of internal control over financial reporting. This has continued to be a major thrust of the Committee;

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

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

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

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

3. The work and performance of the Internal Auditors.

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

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

6. Review of steps focused on IT Security.

7. Greater formalisation of processes enabling whistle-blowing.

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

REAPPOINTMENT OF EXTERNAL AUDITORS

The Audit Committee has proposed to the Board of Directors, having considered their independence and performance, that the incumbent auditors M/S Ernst & Young, Chartered Accountants be re-appointed for the year ending 31 March 2021 at the Annual General Meeting.

J.D.N. Kekulawala

Chairman – Board Audit Committee

15 December 2020

Colombo


52REPORT OF THE RELATED PARTY TRANSACTIONS REVIEW COMMITTEE

COMMITTEE REPORTS

PURPOSE

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

COMPOSITION

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

Dr. S. Selliah - Non-Executive – Independent Director – Chairman

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

Mr H.K. Kaimal – Executive Director - Member

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

ATTENDANCE AT MEETINGS

Name of Director Attended/ Eligible to attend

Dr. S. Selliah 4/4

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

Mr. H.K. Kaimal 3/4

ROLES AND RESPONSIBILITIES

» Reviewing all proposed related party transactions of the Company and its listed companies in the Group in compliance with the Code.

» Adopting policies and procedures to review related party transactions of the Company and reviewing and overseeing existing policies and procedures.

» Determining whether related party transactions that are to be entered into by the Company require the approval of the Board or Shareholders of the respective companies.

» If related party transactions are ongoing (recurrent related party transactions) the Committee establishes guidelines for Senior Management to follow in its ongoing dealings with the relevant related party.

» Ensuring that no Director of the Company shall participate in any discussion of a proposed related party transactions for which he or she is a related party, unless such Director is requested to do so by the Committee for the express purpose of providing information concerning the related party transactions to the Committee.

» If there is any potential conflict in any related party transactions, the Committee may recommend the creation of a special committee to review and approve the proposed related party transactions.

» Ensuring that immediate market disclosures and disclosures in the Annual Report as required by the applicable rules/regulations are made in a timely and detailed manner.

REVIEW OF THE RELATED PARTY TRANSACTIONS DURING THE YEAR

The Committee reviewed all proposed Related Party Transactions of Softlogic Holdings PLC and scrutinised such transactions to ensure that they are no less favourable to the Group than those generally available to an unaffiliated third party in a similar circumstance. The activities of the Committee have been communicated to the Board quarterly through tabling minutes of the meeting of the Committee at Board Meetings. Relevant disclosures have been made to the Colombo Stock Exchange in compliance with regulations. Details of Related Party Transactions entered by the Group during the above period are disclosed in Note 48 to the Financial Statements.

Dr. S. Selliah

Chairman – Related Party Transactions Review Committee

15 December 2020

Colombo


53HR & REMUNERATION COMMITTEE REPORT

PURPOSE

The principal purpose of the Committee is to consider, agree and recommend to the Board a remuneration policy that is aligned with its long term business strategy, objectives, risk appetite, values and the long term interests of the Group whilst also recognising the interests of stakeholders. The responsibilities of the Committee are laid out in its written Terms of Reference (TOR)

COMMITTEE COMPOSITION AND MEETING

The Human Resources and Remuneration Committee consists of Non-Executive Independent Directors. During the year under review, there were no changes in the membership of the Human Resources and Remuneration Committee. The members of the Human Resources and Remuneration Committee as at 31 March 2020 and the attendance at the meeting held is as below:

ATTENDANCE AT MEETINGS

Name of Director Category Attended/ Eligible to attend

Prof. A.S. Dharmasiri Non-Executive Independent Director

Chairman 01 /01

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

Member 01 /01

Mr. G.L.H. Premaratne Non-Executive- Independent Director

Member 01 /01

The Chairman of the Group who is also the Managing Director and Ms. Natasha Fonseka - Group Director -Human Capital attends Committee Meetings by invitation.

ACTIVITIES OF THE YEAR

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

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

OUR REWARD FRAMEWORK

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

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

SUMMARY

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

Prof. A.S. Dharmasiri

Chairman – Remuneration Committee

15 December 2020

Colombo


55

FINANCIAL STATEMENTSStatement of Directors’ Responsibilities 56Independent Auditors’ Report 57Income Statement 62Statement of Comprehensive Income 63Statement of Financial Position 64Statement of Changes In Equity 66Statement of Cash Flow 68Notes to the Financial Statements 70

5We are strengthened by a broad spectrum of brands designed to deliver excellence and value across every stakeholder category.

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STATEMENT OF DIRECTORS’ RESPONSIBILITIESFINANCIAL STATEMENTS

The responsibilities of the Directors, in relation to the Financial Statements of the Company differ from the responsibilities of the Auditors, which are set out in the Report of the Auditors on pages 57 to 61

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

The Directors consider that, in preparing Financial Statements set out on pages 62 to 174 of the Annual Report, appropriate accounting policies have been selected and applied in a consistent manner and supported by reasonable and prudent judgements and estimates, and that all applicable accounting standards have been followed. The Directors confirm that they have justified in adopting the going concern basis in preparing the Financial Statements since adequate resources are available to continue operations in the foreseeable future.

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

They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. In this regard the Directors have instituted an effective and comprehensive system of internal control. The Directors are required to prepare Financial Statements and to provide the External Auditor with every opportunity to take whatever steps and undertake whatever inspections they may consider to be appropriate to enable them to give their independent audit opinion.

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

COMPLIANCE REPORT

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

For and on behalf of the Board of


Softlogic Corporate Services (Pvt) Ltd.

Secretaries

15 December 2020

Colombo

57


INDEPENDENT AUDITORS’ REPORTFINANCIAL STATEMENTS

TO THE SHAREHOLDERS OF SOFTLOGIC HOLDINGS PLC

Report on the audit of the Financial Statements

Opinion

We have audited the Financial Statements of Softlogic Holdings PLC (“the Company”), and the consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31 March 2020, income statement and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the Financial Statements, including a summary of significant accounting policies.

In our opinion, the accompanying Financial Statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 March 2020, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for opinion

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

Key audit matters

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

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

58


INDEPENDENT AUDITOR’S REPORTFINANCIAL STATEMENTS

Key audit matter How our audit addressed the key audit matter

Valuation of land and buildings

The Group carries freehold land and buildings under Property, Plant and Equipment and Investment Property at fair value. As of reporting date, such land and buildings within Property, Plant and Equipment and Investment Property amounted to Rs. 36.7 Bn & Rs. 2.0 Bn respectively which represents 26% of total assets. The fair values of land and buildings were determined by the external valuers engaged by the Group.

The valuation of freehold land and buildings was considered a key audit matter due to the use of significant estimates and assumptions, including the Management’s judgments relating to possible effects of the COVID-19 outbreak on those significant assumptions and estimates disclosed in notes 22.3 and 24.2 to the financial statements.

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

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

» Read the external valuers’ reports and identified the key assumptions, used and the approach taken by the valuers in determining the valuation of each property.

» We engaged specialised resources to assist us in assessing the appropriateness of the valuation techniques and reasonableness of the key assumptions used by the external valuers.

» We have also evaluated the overall appropriateness of the related Financial Statement disclosures in notes 22.3 and 24.2.

Impairment allowance for lease, loan and factoring receivables of Finance Activities.

As at 31 March 2020, lease, loan and factoring receivables in a subsidiary amounted to Rs. 16.3 Bn. This contributed 11% to the Group’s total assets.

Significant assumptions and judgements were used by the management to determine the impairment allowance and complex calculations were involved in its estimation. Probable impacts of COVID -19 outbreak on the economically impacted customers and related government relief measures on the key assumptions, the higher level of estimation uncertainty involved, and materiality of the amounts reported in the Group’s financial statements, underpinned our basis for considering this impairment assessment as a Key Audit Matter.

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

» We evaluated the design, implementation and operating effectiveness of key internal controls over estimation of impairment for Lease receivables, Factoring receivables and Loan receivables, which included assessing the level of oversight, review and approval of impairment policies by the Board Audit Committee and management.

» We test-checked the underlying calculations and data used in such calculations

» In addition to the above, following focused procedures were performed:

For those individually assessed for impairment:

– we assessed the main criteria used by the management for determining whether an impairment event had occurred.

– where impairment indicators existed, we assessed the reasonableness of management’s estimated future recoveries including the expected future cash flows, discount rates and the valuation of collateral held. We also compared the actual recoveries against previously estimated amounts of future recoveries.

59



For those collectively assessed for impairment:

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

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

» We assessed the adequacy of the related financial statement disclosures as set out in notes 9.1.8, 9.1.14. 29 and 33.

Interest bearing loans and borrowings of the Group.

As disclosed in note 40 the Group’s total non-current interest-bearing borrowings amounted to Rs. 31.0 Bn which represents 24% of its total liabilities.

Given the magnitude of the borrowings, assessing continuous compliance with all the covenants are important for us to ensure appropriateness of disclosures relating to liquidity risk management, maturity profile and current vs non-current classification of such borrowings in the financial statements.

Considering above facts together with volume of borrowing contracts and complexity involved in monitoring of compliance with covenants, we considered non-current interest bearing borrowing as a focus area.

Our audit procedures included amongst others, the following:

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

» We understood the Group’s processes and assessed the design and operating effectiveness of controls for recording and reporting the terms and conditions of interest-bearing liabilities.

» We evaluated the Management's statements of compliance with loan covenants of the Group as of 31 March 2020, by;

– Corroborating those with direct confirmations obtained from selected lending institutions regarding entity's compliance with respective loan covenants as of the reporting date; and

– validating on a sample basis, the key information reported in those statements.

» We assessed the accuracy and adequacy of the disclosures made in notes 9.3.3 and 40 to the Financial Statements relating to the interest-bearing borrowings.

60


INDEPENDENT AUDITOR’S REPORTFINANCIAL STATEMENTS


Insurance contract liabilities in a subsidiary

The Group has insurance contract liabilities amounting to of Rs. 13.1 Bn which represents 10% of the Group’s total liabilities.

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

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

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

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

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

Other information included in the 2019/20 Annual Report

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

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

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

Responsibilities of the management and those charged with governance

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

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

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

Auditor’s responsibilities for the audit of the Financial Statements

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

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

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

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

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

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

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

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

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

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

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

Report on other legal and regulatory requirements

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

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

15 December 2020

Colombo

62


INCOME STATEMENTFINANCIAL STATEMENTS

In Rs. ‘000 Note Group CompanyFor the year ended 31 March 2020 2019 2020 2019

Continuing operationsRevenue from contract with customers 61,271,399 61,635,079 748,895 645,766 Revenue from insurance contracts 11,919,961 9,833,075 - - Interest income 3,530,417 3,674,450 - - Total revenue 13 76,721,777 75,142,604 748,895 645,766

Cost of sales (49,677,851) (47,506,880) (288,729) (240,599)Gross profit 27,043,926 27,635,724 460,166 405,167

Dividend income 14 - - - 514,513 Other operating income 15 755,480 954,483 40,779 28,618 Distribution expenses (3,204,592) (3,521,670) - - Administrative expenses (18,420,621) (16,708,267) (448,441) (442,305)Results from operating activities 6,174,193 8,360,270 52,504 505,993

Finance income 16 2,042,275 1,398,974 2,180,339 1,502,906 Finance costs 17 (9,360,252) (7,116,287) (3,441,668) (2,626,433)Net finance cost (7,317,977) (5,717,313) (1,261,329) (1,123,527)

Change in insurance contract liabilities 39.2 (2,089,317) (1,152,037) - - Change in fair value of investment property 24 332,924 245,000 50,500 40,000 Share of profit of equity accounted investees 27.2 1,611 7,080 - - Profit/ (loss) before tax 18 (2,898,566) 1,743,000 (1,158,325) (577,534)

Tax expense 19.1.1 (282,736) 1,247,284 24,599 (90,593)Profit/ (loss) for the year (3,181,302) 2,990,284 (1,133,726) (668,127)

Attributable to:Equity holders of the parent (4,724,233) 104,669 Non-controlling interests 1,542,931 2,885,615

(3,181,302) 2,990,284

Earnings per shareBasic 20 (3.96) 0.09

Dividend per share 21 0.50 0.50

Figures in brackets indicate deductions.

The accounting policies and notes as set out in pages 70 to 174 form an integral part of these financial statements.

63


STATEMENT OF COMPREHENSIVE INCOME


Profit/ (loss) for the year (3,181,302) 2,990,284 (1,133,726) (668,127)

Other comprehensive incomeContinuing operationsOther comprehensive income to be reclassified to income statement in subsequent periodsCurrency translation of foreign operations 8,119 (5,447) - - Net change in fair value on derivative financial instruments 40.2 (37,900) (481,700) - - Net gain/ (loss) on financial instruments at fair value through other comprehensive income 202,103 (110,386) - - Net other comprehensive income/ (loss) to be reclassified to income statement in subsequent periods 172,322 (597,533) - -

Other comprehensive income not to be reclassified to income statement in subsequent periodsRevaluation of land and buildings 22.1 1,374,302 1,541,245 - - Re-measurement gain/ (loss) on employee benefit liabilities 42 (149,814) 65,512 (7,743) (3,474)Share of other comprehensive income of equity accounted investments (net of tax) 27.2 (505) 34 - - Net loss on equity instruments at fair value through other comprehensive income (154,517) (519,221) (15,100) - Tax on other comprehensive income not to be reclassified to income statement in subsequent periods 19.2.1 (332,776) (353,223) 2,168 973 Net other comprehensive income/ (loss) not to be reclassified to income statement in subsequent periods 736,690 734,347 (20,675) (2,501)

Other comprehensive income/ (loss) for the year, net of tax 909,012 136,814 (20,675) (2,501)

Total comprehensive income/ (loss) for the year, net of tax (2,272,290) 3,127,098 (1,154,401) (670,628)

Attributable to:Equity holders of the parent (4,096,115) 352,881 Non-controlling interests 1,823,825 2,774,217

(2,272,290) 3,127,098



64


STATEMENT OF FINANCIAL POSITIONFINANCIAL STATEMENTS

In Rs. ‘000 Note Group CompanyAs at 31 March 2020 2019 2020 2019

Assets

Non-current assets

Property, plant and equipment 22 52,133,148 46,594,012 84,644 170,963

Right of use assets 23.1 6,600,136 - 63,363 -

Lease rentals paid in advance 23.1 - 789,095 - -

Investment property 24 2,030,380 1,695,261 794,500 744,000

Intangible assets 25 8,805,006 8,764,534 1,468 686

Investments in subsidiaries 26 - - 20,056,623 20,028,700

Investments in equity accounted investees 27 109,355 78,249 41,000 11,000

Non-current financial assets 28 16,554,159 13,007,216 1,549,170 1,465,042

Rental receivable on lease assets and hire purchase 29.1 1,156,023 1,135,517 - -

Other non-current assets 30 4,939,884 3,215,787 - -

Deferred tax assets 19.2.2 3,449,138 3,247,950 - -

95,777,229 78,527,621 22,590,768 22,420,391

Current assets

Inventories 31 12,434,764 10,689,021 - -

Trade and other receivables 32 12,391,226 14,042,394 680,360 912,093

Loans and advances 33 11,526,423 11,962,990 - -

Rental receivable on lease assets and hire purchase 29.2 1,004,262 830,478 - -

Amounts due from related parties 48.1 4,670 13,692 18,506,617 14,176,360

Other current assets 34 3,822,063 5,358,386 76,290 28,273

Short term investments 35 9,357,231 6,049,396 115,040 130,625

Cash in hand and at bank 36 3,726,096 3,196,350 800,330 18,294

54,266,735 52,142,707 20,178,637 15,265,645

Total assets 150,043,964 130,670,328 42,769,405 37,686,036

Equity and Liabilities

Equity attributable to equity holders of the parent

Stated capital 37 12,119,235 12,119,235 12,119,235 12,119,235

Revenue reserves (7,395,133) (1,797,474) 2,135,310 3,870,883

Other components of equity 38 4,782,940 4,020,858 (15,100) -

9,507,042 14,342,619 14,239,445 15,990,118

Non-controlling interests 12,218,723 10,496,838 - -

Total equity 21,725,765 24,839,457 14,239,445 15,990,118

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Non-current liabilities

Insurance contract liabilities 39 13,133,911 8,309,628 - -

Interest bearing borrowings 40 31,041,430 25,115,045 6,027,598 7,003,919

Lease liability 23.2 4,322,333 - 3,235 -

Public deposits 41 4,858,728 4,601,829 - -

Deferred tax liabilities 19.2.2 3,346,327 3,306,076 184,282 173,435

Employee benefit liabilities 42 1,369,586 1,081,320 103,716 81,109

Other deferred liabilities 43 47,390 148,841 39,640 75,676

Other non-current financial liabilities 44 848,092 115,205 - -

58,967,797 42,677,944 6,358,471 7,334,139

Current liabilities

Trade and other payables 45 8,645,807 8,428,255 236,343 108,894

Amounts due to related parties 48.2 32,405 2,731 95,208 16,671

Income tax liabilities 19.14 189,389 351,689 - 16,910

Other current financial liabilities 46 27,690,199 23,128,625 16,367,571 10,003,875

Current portion of interest bearing borrowings 40 10,517,214 9,782,952 5,207,906 3,958,498

Current portion of lease liability 23.2 1,348,221 - 10,621 -

Other current liabilities 47 1,506,617 1,312,392 93,597 82,229

Public deposits 41 12,157,713 12,385,059 - -

Bank overdrafts 36 7,262,837 7,761,224 160,243 174,702

69,350,402 63,152,927 22,171,489 14,361,779

Total liabilities 128,318,199 105,830,871 28,529,960 21,695,918

Total equity and liabilities 150,043,964 130,670,328 42,769,405 37,686,036

I certify that the Financial Statements comply with the requirements of the Companies Act No. 7 of 2007.

A C M Lafir

Group Finance Director

The Board of Directors is responsible for these financial statements.

Signed for and on behalf of the Board.

A K Pathirage H K Kaimal

Chairman Director

15 December 2020

Colombo



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STATEMENT OF CHANGES IN EQUITYFINANCIAL STATEMENTS

Group

In Rs. ‘000 Attributable to equity holders of parent Attributable to equity holders of parent Total Non- controlling

interests

Total equity Stated

capital Restricted regulatory

reserve

Revaluation reserve

Foreign currency translation

reserves

Fair value reserve of financial

assets at FVOCI

Statutory reserve fund

Other reserves

Cash flow hedge reserve

Revenue reserve

As at 01 April 2018 8,195,383 309,613 4,774,665 (46,325) (530,887) 215,063 (569,884) (178,966) (577,403) 11,591,259 9,325,667 20,916,926 Impact of adopting SLFRS 9 - - - - - - - - (637,466) (637,466) (273,427) (910,893)Restated balance under SLFRS 9 as at 01 April 2018 8,195,383 309,613 4,774,665 (46,325) (530,887) 215,063 (569,884) (178,966) (1,214,869) 10,953,793 9,052,240 20,006,033

Error correction on impairment (Note 33.2) - - - - - - - - (80,529) (80,529) (69,924) (150,453)Adjusted balance as at 01 April 2018 8,195,383 309,613 4,774,665 (46,325) (530,887) 215,063 (569,884) (178,966) (1,295,398) 10,873,264 8,982,316 19,855,580

Profit for the year - - - - - - - - 104,669 104,669 2,885,615 2,990,284 Other comprehensive income/ (loss) - - 949,433 (5,447) (252,386) - - (481,288) 37,900 248,212 (111,398) 136,814 Total comprehensive income/ (loss) - - 949,433 (5,447) (252,386) - - (481,288) 142,569 352,881 2,774,217 3,127,098

Issue of shares 3,923,852 - - - - - - - - 3,923,852 - 3,923,852 Transfer to reserve fund - - - - - 48,373 - - (48,373) - - - Acquisition of subsidiary - - - - - - - - - - (37,538) (37,538)Changes in ownership interest in subsidiaries - - - - - - (211,106) - - (211,106) (393,724) (604,830)Dividend paid - - - - - - - - (596,272) (596,272) - (596,272)Subsidiary dividend to non-controlling interest - - - - - - - - - - (828,433) (828,433)

As at 31 March 2019 12,119,235 309,613 5,724,098 (51,772) (783,273) 263,436 (780,990) (660,254) (1,797,474) 14,342,619 10,496,838 24,839,457 Adjustment due to initial application of SLFRS 16 (Note 6) - - - - - - - - (23,188) (23,188) (34,023) (57,211)

Adjusted balance as at 01 April 2019 12,119,235 309,613 5,724,098 (51,772) (783,273) 263,436 (780,990) (660,254) (1,820,662) 14,319,431 10,462,815 24,782,246

Profit/ (loss) for the year - - - - - - - - (4,724,233) (4,724,233) 1,542,931 (3,181,302)Other comprehensive income/ (loss) - - 740,676 8,119 5,725 - - (37,870) (88,532) 628,118 280,894 909,012 Equity investments at FVOCI reclassified to retained earnings - - - - 39,217 - - - (39,217) - - - Total comprehensive income/ (loss) - - 740,676 8,119 44,942 - - (37,870) (4,851,982) (4,096,115) 1,823,825 (2,272,290)

Recognition of put option liability - - - - - - - - (126,217) (126,217) (42,127) (168,344)Changes in ownership interest in subsidiaries - - - - - - 6,215 - - 6,215 (6,190) 25 Dividend paid - - - - - - - - (596,272) (596,272) - (596,272)Subsidiary dividend to non-controlling interest - - - - - - - - - - (19,600) (19,600)As at 31 March 2020 12,119,235 309,613 6,464,774 (43,653) (738,331) 263,436 (774,775) (698,124) (7,395,133) 9,507,042 12,218,723 21,725,765

Company

In Rs. ‘000 Stated capital


assets at FVOCI

Revenue reserve

Total equity

As at 01 April 2018 8,195,383 - 5,193,136 13,388,519 Impact of adopting SLFRS 9 - - (55,353) (55,353)Restated balance under SLFRS 9 as at 01 April 2018 8,195,383 - 5,137,783 13,333,166

Loss for the year - - (668,127) (668,127)Other comprehensive loss - - (2,501) (2,501)Total comprehensive loss - - (670,628) (670,628)

Issue of shares 3,923,852 - - 3,923,852 Dividend paid - - (596,272) (596,272)As at 31 March 2019 12,119,235 - 3,870,883 15,990,118

Loss for the year - - (1,133,726) (1,133,726)Other comprehensive loss - (15,100) (5,575) (20,675)Total comprehensive loss - (15,100) (1,139,301) (1,154,401)

Dividend paid - - (596,272) (596,272)As at 31 March 2020 12,119,235 (15,100) 2,135,310 14,239,445



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Group

In Rs. ‘000 Attributable to equity holders of parent Attributable to equity holders of parent Total Non- controlling

interests

Total equity Stated

capital Restricted regulatory

reserve

Revaluation reserve

Foreign currency translation

reserves


assets at FVOCI

Statutory reserve fund

Other reserves

Cash flow hedge reserve

Revenue reserve

As at 01 April 2018 8,195,383 309,613 4,774,665 (46,325) (530,887) 215,063 (569,884) (178,966) (577,403) 11,591,259 9,325,667 20,916,926 Impact of adopting SLFRS 9 - - - - - - - - (637,466) (637,466) (273,427) (910,893)Restated balance under SLFRS 9 as at 01 April 2018 8,195,383 309,613 4,774,665 (46,325) (530,887) 215,063 (569,884) (178,966) (1,214,869) 10,953,793 9,052,240 20,006,033

Error correction on impairment (Note 33.2) - - - - - - - - (80,529) (80,529) (69,924) (150,453)Adjusted balance as at 01 April 2018 8,195,383 309,613 4,774,665 (46,325) (530,887) 215,063 (569,884) (178,966) (1,295,398) 10,873,264 8,982,316 19,855,580

Profit for the year - - - - - - - - 104,669 104,669 2,885,615 2,990,284 Other comprehensive income/ (loss) - - 949,433 (5,447) (252,386) - - (481,288) 37,900 248,212 (111,398) 136,814 Total comprehensive income/ (loss) - - 949,433 (5,447) (252,386) - - (481,288) 142,569 352,881 2,774,217 3,127,098

Issue of shares 3,923,852 - - - - - - - - 3,923,852 - 3,923,852 Transfer to reserve fund - - - - - 48,373 - - (48,373) - - - Acquisition of subsidiary - - - - - - - - - - (37,538) (37,538)Changes in ownership interest in subsidiaries - - - - - - (211,106) - - (211,106) (393,724) (604,830)Dividend paid - - - - - - - - (596,272) (596,272) - (596,272)Subsidiary dividend to non-controlling interest - - - - - - - - - - (828,433) (828,433)

As at 31 March 2019 12,119,235 309,613 5,724,098 (51,772) (783,273) 263,436 (780,990) (660,254) (1,797,474) 14,342,619 10,496,838 24,839,457 Adjustment due to initial application of SLFRS 16 (Note 6) - - - - - - - - (23,188) (23,188) (34,023) (57,211)

Adjusted balance as at 01 April 2019 12,119,235 309,613 5,724,098 (51,772) (783,273) 263,436 (780,990) (660,254) (1,820,662) 14,319,431 10,462,815 24,782,246

Profit/ (loss) for the year - - - - - - - - (4,724,233) (4,724,233) 1,542,931 (3,181,302)Other comprehensive income/ (loss) - - 740,676 8,119 5,725 - - (37,870) (88,532) 628,118 280,894 909,012 Equity investments at FVOCI reclassified to retained earnings - - - - 39,217 - - - (39,217) - - - Total comprehensive income/ (loss) - - 740,676 8,119 44,942 - - (37,870) (4,851,982) (4,096,115) 1,823,825 (2,272,290)

Recognition of put option liability - - - - - - - - (126,217) (126,217) (42,127) (168,344)Changes in ownership interest in subsidiaries - - - - - - 6,215 - - 6,215 (6,190) 25 Dividend paid - - - - - - - - (596,272) (596,272) - (596,272)Subsidiary dividend to non-controlling interest - - - - - - - - - - (19,600) (19,600)As at 31 March 2020 12,119,235 309,613 6,464,774 (43,653) (738,331) 263,436 (774,775) (698,124) (7,395,133) 9,507,042 12,218,723 21,725,765

Company

In Rs. ‘000 Stated capital


assets at FVOCI

Revenue reserve

Total equity

As at 01 April 2018 8,195,383 - 5,193,136 13,388,519 Impact of adopting SLFRS 9 - - (55,353) (55,353)Restated balance under SLFRS 9 as at 01 April 2018 8,195,383 - 5,137,783 13,333,166

Loss for the year - - (668,127) (668,127)Other comprehensive loss - - (2,501) (2,501)Total comprehensive loss - - (670,628) (670,628)

Issue of shares 3,923,852 - - 3,923,852 Dividend paid - - (596,272) (596,272)As at 31 March 2019 12,119,235 - 3,870,883 15,990,118

Loss for the year - - (1,133,726) (1,133,726)Other comprehensive loss - (15,100) (5,575) (20,675)Total comprehensive loss - (15,100) (1,139,301) (1,154,401)

Dividend paid - - (596,272) (596,272)As at 31 March 2020 12,119,235 (15,100) 2,135,310 14,239,445



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Cash flows from/ (used in) operating activitiesProfit/ (loss) before tax from continuing operations (2,898,566) 1,743,000 (1,158,325) (577,534)

Adjustments for:Finance income 16 (2,042,275) (1,398,974) (2,180,339) (1,502,906)Dividend income 14 - - - (514,513)Finance cost 17 9,360,252 7,116,286 3,441,668 2,626,434 Change in fair value of investment property 24 (332,924) (245,000) (50,500) (40,000)Share of results of equity accounted investees 27.2 (1,611) (7,080) - - Gratuity provision and related cost 42 276,998 221,936 17,380 13,759 Provisions for / write-off of impaired receivables 32.2.1 345,746 353,623 - 3,415 Provisions for / write-off of inventories 31.1 139,950 75,137 - - Provisions for / write-off of loans and advances 9.1.8.2 343,334 110,758 - - Provisions for / write-off of investments in lease and hire purchase 9.1.14.2 40,762 61,501 - - Depreciation of property, plant and equipment 22 3,078,435 2,520,118 23,489 36,051 (Profit)/ loss on sale of property, plant and equipment 15 2,423 (7,589) (4,549) (2,140)(Profit)/ loss on sale of investments 15 (11,057) 377 - 10,575 Unrealised (gain) / loss on foreign exchange (13,132) 23,873 - - Maturity of put option liability (9,357) - - - Amortisation / impairment of intangible assets 25 267,246 341,578 2,162 2,542 Amortisation of right of use assets/ prepaid lease rentals 23.1 1,531,183 16,506 35,851 - Impairment and derecognition of property, plant & equipment 19,429 21,318 - - Profit before working capital changes 10,096,836 10,947,368 126,837 55,683

(Increase) / decrease in inventories (1,885,694) 661,206 - - (Increase) / decrease in trade and other receivables 1,254,570 (3,573,802) 231,732 (145,325)(Increase) / decrease in loans and advances 618,587 (224,169) - - Increase in investments in lease and hire purchase (232,031) (465,530) - - (Increase) / decrease in other current assets 1,338,884 (2,068,629) (23,741) (21,074)(Increase) / decrease in amounts due from related parties 9,022 (12,885) (2,453,327) (5,587,037)Increase in trade and other payables 412,677 861,518 127,449 64,481 Increase / (decrease) in amounts due to related parties (327) (4,835) 78,538 (1,207)Increase / (decrease) in other current liabilities 204,088 (70,370) 11,368 (3,992)Decrease in deferred income (111,311) (63,360) (36,036) (36,036)Increase in public deposits 29,554 685,416 - - Increase in insurance contract liabilities 39.1 4,824,283 1,117,037 - - Cash generated from/ (used in) operations 16,559,138 7,788,965 (1,937,180) (5,674,507)

Finance income received 1,442,153 1,261,411 303,893 1,531,157 Finance expenses paid (8,027,722) (6,500,079) (3,296,840) (2,495,236)Dividend received - 35,045 - 50,965 Tax paid (825,766) (921,614) (3,571) (80,989)Gratuity paid 42 (138,546) (108,089) (2,517) (4,375)Net cash flow from/ (used in) operating activities 9,009,257 1,555,639 (4,936,215) (6,672,985)

STATEMENT OF CASH FLOWFINANCIAL STATEMENTS

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Cash flows from / (used in) investing activitiesPurchase and construction of property, plant and equipment (7,583,055) (5,728,410) (2,525) (1,870)Addition to investment property 24 (2,195) (18,237) - - Addition to intangible assets 25 (308,660) (141,234) (2,944) (2,635)Increase in other non-current assets (2,292,965) (2,245,759) - - (Purchase) / disposal of short term investments (net) 2,060,023 115,631 - 1,550,225 Dividends received 135,922 124,551 - - (Purchase) / disposal of non-current financial assets (4,106,907) (1,825,343) (84,129) (636,686)Acqusition of business, net of cash acquired 8.1 - (952,452) - - Proceeds from sale of property, plant and equipment 167,158 54,075 5,457 5,455 Net cash flow used in investing activities (11,930,679) (10,617,178) (84,141) 914,489

Cash flows from / (used in) financing activitiesProceeds from issue of shares 37 - 3,923,852 - 3,923,852 Proceeds from shareholders with non-controlling interest on issue of shares in subsidiaries 177,087 - - - Dividend paid to non-controlling interest (19,600) (828,433) - - Increase in interest in subsidiaries (57,445) (561,897) (57,923) (172,000)Proceeds from long term borrowings 40 15,119,488 7,585,232 3,679,984 2,500,000 Repayment of long term borrowings (9,022,435) (6,874,434) (3,527,327) (2,307,649)Repayment of lease liabilities (1,882,746) - (45,307) - (Increase) / decrease in other non-current financial liabilities 564,542 (7,297) - - Proceeds from / (repayment of) other current financial liabilities (net) 4,570,931 (478,880) 6,363,696 (508,255)Dividend paid to equity holders of parent (596,272) (596,272) (596,272) (596,272)Net cash flow from financing activities 8,853,550 2,161,871 5,816,851 2,839,676

Net increase / (decrease) in cash and cash equivalents 5,932,128 (6,899,668) 796,495 (2,918,820)Cash and cash equivalents at the beginning (1,010,674) 5,888,960 (156,408) 2,762,412 Effect of exchange rate changes (1,571) 34 - - Cash and cash equivalents at the end 4,919,883 (1,010,674) 640,087 (156,408)

Analysis of cash and cash equivalentsFavourable balances

Cash in hand and at Bank 3,726,096 2,596,037 800,330 18,294 Restricted cash at bank - 600,313 - - Short term investments 8,456,624 3,554,200 - -

Unfavourable balancesBank overdrafts (7,262,837) (7,761,224) (160,243) (174,702)

Cash and cash equivalents 4,919,883 (1,010,674) 640,087 (156,408)



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NOTES TO THE FINANCIAL STATEMENTSFINANCIAL STATEMENTS

1 CORPORATE AND GROUP INFORMATION

Reporting entity

Softlogic Holdings PLC is a public limited liability company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The registered office and principal place of business of the company is located at No. 14, De Fonseka Place, Colombo 5.

Softlogic Holdings PLC became the holding company of the Group during the financial year ended 31 March 2003.

Consolidated financial statements

The Financial Statements for the year ended 31 March 2020, comprise “the Company” referring to Softlogic Holdings PLC as the holding company and “the Group” referring to the companies that have been consolidated therein.

Approval of financial statements

The financial statements for the year ended 31 March 2020 were authorised for issue by the Board of Directors on 15 December 2020.

Responsibility for financial statements

The responsibility of the Board of Directors in relation to the Financial Statements is set out in the “Statement of Directors’ Responsibilities” report in the Annual Report.

Statement of compliance

The Financial Statements which comprise the income statement, statement of comprehensive income, statement of financial position, statement of changes in equity and the statement of cash flows, together with the accounting policies and notes (the “Financial Statements”) have been prepared in accordance with Sri Lanka Accounting Standards (herein referred to as SLFRS/LKAS) issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the requirements of the Companies Act No. 7 of 2007

Principal activities and nature of operations

Holding Company

Softlogic Holdings PLC, the Group’s holding company, provides management services and warehouse management facilities to Group companies, facilitates funding requirements of these companies and provides other value added services.

Subsidiaries and associates

The business activities of other companies within the Group are information & communication technology, automobile sales and after sales, consumer electronic retailing, garment manufacturing & fashion retailing, hoteliering, quick service restaurant operations, development of apartments, provision of financial services, life insurance services, stock brokering services, management of Unit Trust, healthcare services, management consultancy and financial advisory services.

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

2 BASIS OF PREPARATION AND OTHER SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The consolidated Financial Statements have been prepared on an accrual basis and under the historical cost convention except for investment properties, land and buildings, fair valued through profit or loss financial assets, derivative financial instruments and fair valued through other comprehensive income financial assets, which have been measured at fair value.

Each material class of similar items is presented cumulatively in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard - LKAS 1 ‘Presentation of Financial Statements’.

Presentation and functional currency

The consolidated Financial Statements are presented in Sri Lankan Rupees (Rs.) the Group’s functional and presentation currency, which is the currency of the primary economic environment in which the holding company operates. Each entity in the Group uses this currency of the primary economic environment in which they operate as their functional currency except for entities incorporated outside Sri Lanka.

All values are rounded to the nearest Sri Lankan Rupees thousand (Rs. ’000) except when otherwise indicated.

The following subsidiary is uses a functional currency other than the Sri Lankan Rupee (Rs.).

Name of the subsidiary Country of incorporation

Functional currency

Softlogic Australia (Pty) Ltd Australia Australian Dollar (AUD)

Comparative information

The presentation and classification of the Financial Statements of the previous years have been amended, where relevant for better presentation and to be comparable with the statements of the current year other than the note 33.2.

The Group applied SLFRS 16 with effect from 1 April 2019. Due to the transition method chosen in applying these standards, comparative information throughout these financial statements have not been restated to reflect the requirements of the new standard.

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3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies has been disclosed along with relevant individual notes in the subsequent pages.

The accounting policies presented with each note, have been applied consistently by the Group.

Other significant accounting policies not covered with individual notes

The following accounting policies, which have been applied consistently by the Group, are considered significant and are not covered in any other sections.

Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on a current/ non-current classification.

An asset is current when it is:

» expected to be realised or intended to be sold or consumed in the normal operating cycle,

» held primarily for the purpose of trading,

» expected to be realised within twelve months from the reporting date, or

» a cash or cash equivalent unless restricted from exchange or use to settle a liability for at least twelve months after the reporting date.

All other assets are classified as non-current

A liability is current when it is:

» expected to be settled in the normal operating cycle,

» incurred primarily for the purpose of trading,

» due to be settled within twelve months after the reporting date, and

» not affected by any unconditional right to defer settlement for at least twelve months after the reporting date.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

4 FOREIGN CURRENCY TRANSLATION, FOREIGN CURRENCY TRANSACTIONS AND BALANCES

The consolidated financial statements are presented in Sri Lanka Rupees (Rs.), which is the holding company’s functional and presentation currency. This functional currency is the currency of the primary economic environment in which virtually all the entities of the Group operate. All foreign exchange transactions are converted to the functional currency, at the rates of exchange prevailing at the time the transactions are effected. Monetary assets and liabilities denominated in foreign currency are retranslated to functional currency equivalents at the spot exchange rate prevailing at the reporting date.

Non-monetary items measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the

dates of the initial transactions. The gain or loss arising on non- monetary items subsequently valued at fair value is in keeping with the recognition of gains or losses on other fair valued items.

Foreign operations

The statement of financial position and income statement of overseas subsidiaries and associates are deemed to be foreign operations are translated to Sri Lanka Rupees (Rs.) at the rate of exchange prevailing as at the reporting date and at the average annual rate of exchange for the period respectively.

The exchange differences arising on the translation are taken directly to the statement of other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in the statement of other comprehensive income relating to that particular foreign operation is recognised in the income statement.

The Group treated goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition as assets and liabilities of the parent. Therefore, those assets and liabilities are non-monetary items already expressed in the functional currency of the parent and no further translation differences occur.

The exchange rates applicable during the period were as follows:

Statement of financial position

31-03-2020

Income statement 31-03-2020

Australian Dollar 116.46 122.52

5 SUMMARY OF SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In preparing these Financial Statements of the Group/ Company, the management has made judgements, estimates and assumptions that affect the application of Group’s accounting policies and the reported amounts of assets, liabilities, income, expenses and its disclosure of contingent liabilities. Judgements and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. Hence, actual results may differ from these judgements and estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised prospectively.

The management considered the following items, where significant judgements, estimates and assumptions have been used in preparing these Financial Statements.

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Going concern

Going concern in determining the basis of preparing the financial statements for the year ended 31 March 2020, based on available information, the management has assessed the existing and anticipated effects of COVID-19 on the Group Companies and the appropriateness of the use of the going concern basis. In March 2020, each business segment evaluated the resilience of its businesses considering a wide range of factors under multiple scenarios, relating to expected revenue streams, cost management, profitability, the ability to defer non-essential capital expenditure, debt repayment capabilities, salary cuts were implemented at the senior levels in the Group and in businesses with very low revenues. Cash reserves and potential sources of financing facilities were also considered where required, and the ability to continue providing goods and services to ensure businesses continue at acceptable level.

Having presented the outlook for each business segment in the Group and after due consideration of the range and likelihood of outcomes, the Directors are satisfied that the Company, its subsidiaries, associates and joint ventures have adequate resources to continue in operational existence for the foreseeable future and continue to adopt the going concern basis in preparing and presenting these financial statements.

In determining the above significant management judgements, estimates and assumptions the impact of the COVID-19 pandemic has been considered as of reporting date and specific considerations have been disclosed under the relevant notes.

Significant accounting judgements, assumptions and estimation

Significant areas of critical judgements, assumptions and estimation uncertainties, in applying accounting policies that have significant effects on the amounts recognised in the Financial Statements of the Group are detailed in the following notes.

» Valuation of property, plant & equipment

» Recognition of right of use assets

» Valuation of investment property

» Valuation of intangible assets

» Deferred taxation and taxes

» Employee benefit liability

» Valuation of insurance contract liabilities

» Provisions and contingent liabilities

» Valuation of financial liabilities at fair value through profit or loss

» Valuation of derivative financial instruments

» Provision for Expected Credit Loss of trade receivables and contract asset

» Provision for Expected Credit Loss of loans & advances and lease and higher purchase receivables


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6 CHANGES IN ACCOUNTING STANDARDS

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 March 2019, except for the adoption of new standards effective as of 1 April 2019.

SLFRS 16 Leases

SLFRS 16: Leasing, sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘Lessee’] and the supplier (‘Lessor’]. SLFRS 16 replaced Sri Lanka Accounting Standard LKAS 17 Leases and related interpretations. The Group has adopted SLFRS 16 using modified retrospective method from 1 April 2019, without restating comparative information.

Lessor accounting under SLFRS 16 is substantially unchanged from LKAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in LKAS 17. Therefore, SLFRS 16 does not have an impact for leases where the Group is the lessor.

The effect of adoption SLFRS 16 as at 1 April 2019 is as follows:

In Rs. ‘000 Group Company

Assets Property, plant and equipment (263,384) (75,533)Lease rentals paid in advance (789,094) - Right of use assets 6,946,533 110,300 Other non-current assets (535,563) - Other current assets (5,170) -

5,353,322 34,767

Equity and Liabilities Revenue reserves (23,188) - Non-controlling interests (34,023) - Interest bearing borrowings (126,263) (20,335)Lease liabilities 5,618,338 55,102 Deferred tax liabilities 1,501 - Trade and other payables (83,043) -

5,353,322 34,767

The lease liabilities as at 1 April 2019 can be reconciled to the operating lease commitments as of 31 March 2019 as follows:

In Rs. ‘000 Group Company

Operating lease commitments as at 31 March 2019 9,165,143 37,208

Discounted operating lease commitments at 1 April 2019 5,697,495 34,704 Less : Commitments relating to short-term leases (183,363) - Add: Commitments relating to leases previously classified as finance leases 104,206 20,336 Lease liabilities as at 1 April 2019 5,618,338 55,040

Estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). The Group’s IBR span within the range of 13.00% - 17.00%.

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7 BASIS OF CONSOLIDATION AND MATERIAL PARTLY OWNED SUBSIDIARIES

ACCOUNTING POLICY

Basis of consolidation

The consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries as at 31 March 2020. The Financial Statements of the subsidiaries are prepared in compliance with the Group’s accounting policies unless otherwise stated. Control over an investee is achieved when the Group is exposed or has rights to variable returns from its involvement with the investee and when it has the ability to affect those returns through its power over the investee.

Control over an investee

Specifically, the Group controls an investee if, and only if, the Group has:

» power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

» exposure, or rights, to variable returns from its involvement with the investee

» the ability to use its power over the investee to affect its returns

Subsidiaries that are consolidated have been listed in note 26.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed during the year are included in the consolidated Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. The Financial Statements of the subsidiaries are prepared for the same reporting period as the parent Company, which is 12 months ending 31 March, using consistent accounting policies unless otherwise stated.

Transactions eliminated on consolidation

All intra-group assets, liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

Loss of control

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in the income statement. Any investment retained is recognised at fair value.

The total profits and losses for the year of the Company and of its subsidiaries included in consolidation are shown in the consolidated income statement and consolidated statement of comprehensive income and all assets and liabilities of the Company and of its subsidiaries included in consolidation are shown in the consolidated statement of financial position.

Non-controlling interest (NCI)

Non-controlling interests, which represents the portion of profit or loss and net assets not held by the Group, are shown as a component of profit for the year in the consolidated income statement and statement of comprehensive income and as a component of equity in the consolidated statement of financial position separately from equity attributable to the shareholders of the parent.


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7.1 Names and financial information of material partly-owned subsidiaries

Financial information of subsidiaries that have material non-controlling interests (NCI) are provided below:

In Rs. ‘000 Healthcare Service Asiri Hospital Holdings PLC

Asiri Surgical Hospital PLC

Central Hospitals Ltd

2020 2019 2020 2019 2020 2019

Summarised income statement for the year ended 31 MarchRevenue 5,706,706 4,194,654 3,654,663 3,475,047 4,990,327 5,026,990 Other income 105,804 1,115,086 83,990 68,524 48,751 33,806 Operating expenses (4,364,240) (2,878,557) (3,195,450) (2,985,620) (4,214,995) (4,055,251)Finance income 92,362 106,264 216,398 (54,952) (442,824) (219,846)Finance expenses (1,731,635) (1,090,977) (151,700) 107,223 306,628 99,993 Profit/ (loss) before tax (191,003) 1,446,470 607,901 610,222 687,887 885,692 Tax expense (110,457) (7,322) (174,790) (243,707) (78,542) (27,133)Profit/ (loss) for the year (301,460) 1,439,148 433,111 366,515 609,345 858,559 Other comprehensive income/ (loss) 337,500 243,232 84,704 (69,431) 20,606 216,789 Total comprehensive income 36,040 1,682,380 517,815 297,084 629,951 1,075,348

Profit/ (loss) attributable to material NCI (147,488) 203,751 257,015 208,106 295,731 410,873

Dividend paid to NCI - 441,519 - 157,597 - 366,369

Summarised statement of financial position as at 31 MarchCurrent assets 1,607,728 4,654,034 2,296,362 888,635 2,025,939 1,690,483 Non-current assets 25,025,513 16,719,970 5,571,614 4,975,946 9,454,484 7,871,672 Total assets 26,633,241 21,374,004 7,867,976 5,864,581 11,480,423 9,562,155

Current liabilities 6,350,936 7,736,150 1,737,038 1,353,300 3,393,663 2,674,688 Non-current liabilities 12,347,434 5,336,552 2,074,333 914,845 1,894,620 1,326,494 Total liabilities 18,698,370 13,072,702 3,811,371 2,268,145 5,288,283 4,001,182

Effective holding % owned by NCI 48.39 48.52 59.46 59.64 48.53 48.66

Accumulated balance of material NCI 3,839,651 4,027,555 2,412,248 2,145,057 3,012,966 2,705,854

Summarised cash flow information for the year ended 31 MarchCash flows from/ (used in) operating activities 3,621,574 (2,696,390) 294,298 917,206 1,153,884 1,213,277 Cash flows from/ (used in) investing activities (3,984,143) 358,234 (1,702,059) (1,252,845) (1,109,945) (295,034)Cash flows from/ (used in) financing activities 909,833 957,608 1,666,802 (332,236) 590,241 (1,837,576)Net increase/ (decrease) in cash and cash equivalents 547,264 (1,380,548) 259,041 (667,875) 634,180 (919,333)

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In Rs. ‘000 Financial Services Softlogic

Finance PLC Softlogic Life Insurance PLC

2020 2019 2020 2019

Summarised income statement for the year ended 31 MarchRevenue 3,607,234 3,674,450 11,919,961 9,833,075 Other income 209,742 344,443 16,426 3,370 Operating expenses (4,298,877) (3,933,744) (9,323,019) (8,005,077)Change in insurance contract liabilities - - (2,089,317) (1,152,037)Finance income - - 1,808,187 1,174,986 Finance expenses (56,712) (22,033) (88,500) (301,293)Profit/ (loss) before tax (538,613) 63,116 2,243,738 1,553,024 Tax expense 204,654 140,854 (325,838) 1,888,878 Profit/ (loss) for the year (333,959) 203,970 1,917,900 3,441,902 Other comprehensive income/ (loss) 15,756 (30,749) 51,942 (611,481)Total comprehensive income/ (loss) (318,203) 173,221 1,969,842 2,830,421

Profit/ (loss) attributable to material NCI (137,382) 94,250 1,173,785 1,921,454

Dividend paid to NCI - - - 238,418

Summarised statement of financial position as at 31 MarchCurrent assets 16,373,630 16,612,747 9,699,604 6,101,173 Non-current assets 5,372,962 5,791,853 15,249,468 11,115,576 Total assets 21,746,592 22,404,600 24,949,072 17,216,749

Current liabilities 14,042,523 15,921,888 2,631,176 1,559,680 Non-current liabilities 5,663,080 4,726,016 13,592,259 8,901,274 Total liabilities 19,705,603 20,647,904 16,223,435 10,460,954

Effective holding % owned by NCI 41.90 46.48 61.20 61.20

Accumulated balance of material NCI 855,097 816,432 5,340,229 4,134,654

Summarised cash flow information for the year ended 31 MarchCash flows from/ (used in) operating activities 459,347 (623,408) 5,984,999 2,788,708 Cash flows from/ (used in) investing activities 133,177 (37,601) (6,398,117) (2,202,948)Cash flows from/ (used in) financing activities (159,208) 49,720 (131,095) (546,398)Net increase/ (decrease) in cash and cash equivalents 433,316 (611,289) (544,213) 39,362

The above information is based on amounts before intercompany eliminations


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8 BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTEREST

ACCOUNTING POLICY

Business combination & goodwill

Business combinations are accounted for using the acquisition method of accounting. The Group measures goodwill at the acquisition date as the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

When the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree is lower than the fair value of net assets acquired, a gain is recognised immediately in the income statement.

The Group elects on a transaction by transaction basis whether to measure non-controlling interests at fair value, or at their proportionate share of the recognised amount of the identifiable net assets, at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is re measured to fair value at the acquisition date through the income statement.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of SLFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with SLFRS 9. Other contingent consideration that is not within the scope of SLFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if the events or changes in the circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the

carrying amount, an impairment loss is recognised. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets pro- rata to the carrying amount of each asset in the unit.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Impairment of goodwill

Goodwill is tested for impairment annually (as at 31 March) and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

8.1 Obtaining control of subsidiaries

FY 2019/20

No changes to the Group Structure other than the increase in controlling stake in direct and indirect subsidiaries.

FY 2018/19

In August 2018, Odel PLC, a subsidiary of Softlogic Holdings PLC acquired 100.00% ordinary shares of Cotton Collection (Pvt) Ltd and it became a subsidiary of the Group.

Further in November 2018, Asiri Hospital Holdings PLC, a subsidiary of Softlogic Holdings PLC acquired 100.00% ordinary shares of Asiri Hospital Galle (Pvt) Ltd (previously known as Hemas Southern Hospitals (Pvt) Ltd) and it became a subsidiary of the Group.

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The acquisition had the following effect on the Group’s assets and liabilities.

In Rs. ‘000 NoteAs at 31 March 2019

Property, plant & equipment 22.1 734,556 Intangible assets 25 1,971 Other non current assets 41,525 Inventories 180,992 Trade and other receivables 178,614 Income tax refund 7,589 Cash in hand and at bank 38,524

Retirement benefit liability 42 (20,490)Deferred tax liabilities 19.2.2 (59,689)Interest bearing borrowings 40 (240,164)Trade and other payables (256,025)Amounts Due to Related Parties (18,259)Bank overdrafts (240,532)Net identifiable assets 348,612 Non controlling interest holding 226,421 Intangible recognised on acquisition 25 364,294

939,327 Investment by Non controlling interest (188,883)

750,444

Total purchase price paid Cash consideration 750,444 Cash at bank and in hand acquired 202,008

952,452

8.2 Share restructure transaction - Softlogic Holdings PLC

In comparative period, relating to restructure Softlogic Holdings PLC transferred its stake in Odel PLC to Softlogic Retail Holdings (Pvt) Ltd, which is a fully owned subsidiary of Softlogic Holdings PLC.

The loss resulting from these transactions have been accounted for as ‘Other Operating Income’ of the company.

In Rs. ‘000 2019Shares disposed Transaction

value Loss

Odel PLC 1,550,225 10,575 10,575


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9 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial liabilities consist of public deposits, borrowings, trade & other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance Group’s operations. The Group financial assets comprise of loans and advances, rental receivable on lease assets & hire purchase, trade & other receivables, cash and short-term deposits that flow directly from its operations. The Group also holds other financial instruments such as investments in equity instruments.

The Group is exposed to market risk including currency risk, interest rate risk & price risk, credit risk and liquidity risk. Risk management is carried out under policies approved by the Board of Directors of the Group. The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s financial and non- financial performance.

Risk management framework

The Board of Directors of Softlogic Holdings PLC and its Group companies have overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify, assess and take action of the risks faced by the Group falling within their risk appetite. Risk management policies and systems are reviewed regularly along with the risk register to reflect changes in market conditions and the Group’s activities. The Group through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees clearly understand their roles and obligations.

The Group’s Integrated Risk Management Committee (IRMC) is being designated to oversee how management monitors compliance with the Group’s risk management policies and procedures, and to review the adequacy of the risk management framework in relation to the risks faced by the Group. The committee will be assisted in its oversight by Group’s Risk Management Department and cluster risk units. Internal Audit undertakes regular reviews of risk management practices. The results of this are reported to the Audit Committee, which supports the Risk Management process through their findings and other deliberations.

9.1 Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables and customer lending) and from its investing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all clients who wish to trade on credit terms are subject to credit evaluation procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debt is not significant.

The hire purchase and lease portfolio is broad based, accounting for 153,594 (2019 - 149,551 customers) contracts, and the risk of non- payment is mitigated by credit approval processes. There is no concentration risk on any single region, customer or sector in particular; collection of dues from customers are robust with the delinquency rate being better than the financial industry average.

With respect to credit risk arising from other financial assets of the Group, such as cash and cash equivalents, available-for-sale financial investments and short term investments, the Group’s exposure to credit risks arises from default of the counterparty. The Group manages its operations to avoid any excessive concentration of counterparty risk.

9.1.1 Credit Risk - Default risk

Default risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur financial loss. It arises from lending, trade finance, treasury and other activities undertaken by the Group. The Group has in place standards, policies and procedures for the control and monitoring of all such risks.

9.1.2 Credit Risk - Concentration risk

The Group seeks to manage its credit concentration risk exposure through diversification of its lending, investing and financing activities to avoid undue concentrations of risks with individuals or groups of customers in specific businesses. It also obtains security when appropriate. The types of collateral obtained include cash margins, mortgages over properties and pledges over equity instruments.

The prospect of an impairment is analysed at each reporting date on an individual basis for major clients. Less significant receivables are grouped into homogeneous groups and assessed for impairment collectively. The calculation is based on actual historical data.

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9.1.3 Risk exposure

The tables below show the maximum exposure to credit risk for the various components, shown gross before the effect of mitigation through the use of collateral arrangements.

Risk Exposure - Group

In Rs. ‘000

As at 31 March 2020

Note Non-current investments

Loans and advances

Rental receivable on

leased assets & hire purchases

Cash in hand and at bank

Trade and other receivables

Short term investments

Amounts due from related

parties

Total % of allocation

Government securities 9.1.4 5,375,282 - - - - 2,598,307 - 7,973,589 15.04 Corporate debt securities 9.1.5 4,183,297 - - - - 1,093,730 - 5,277,027 9.95 Deposits with banks and Unit Trusts 9.1.6 29,341 - - - - 5,546,051 - 5,575,392 10.52 Loans to executives 9.1.7 6,107 - - - 14,868 - - 20,975 0.04 Loans and advances 9.1.8 - 14,179,349 - - - - - 14,179,349 26.74 Policyholders loans 9.1.9 - 236,700 - - - - - 236,700 0.45 Trade receivables 9.1.10 1,487,164 - - - 8,740,669 - - 10,227,833 19.29 Other receivables 9.1.11 - - - - 3,301,682 - - 3,301,682 6.23 Reinsurance receivables 9.1.12 - - - - 334,007 - - 334,007 0.63 Amounts due from related parties 9.1.13 - - - - - - 4,670 4,670 0.01 Rental receivable on leased assets & hire purchase 9.1.14 - - 2,160,285 - - - - 2,160,285 4.07 Cash in hand and at bank 9.1.15 - - - 3,726,096 - - - 3,726,096 7.03 Total credit risk exposure 11,081,191 14,416,049 2,160,285 3,726,096 12,391,226 9,238,088 4,670 53,017,605 100.00

Financial assets at fair value through profit or loss 9.2.3.1 - - - - - 9,243 - 9,243 0.34 Financial assets at fair value through OCI 9.2.3.1 2,583,342 - - - - 109,900 - 2,693,242 99.66 Total equity risk exposure 2,583,342 - - - - 119,143 - 2,702,485 100.00 Total 13,664,533 14,416,049 2,160,285 3,726,096 12,391,226 9,357,231 4,670 55,720,090


In Rs. ‘000

As at 31 March 2019


Loans and advances







parties


Government securities 9.1.4 3,316,389 - - - - 1,969,419 - 5,285,808 11.12 Corporate debt securities 9.1.5 2,683,462 - - - - 1,030,166 - 3,713,628 7.81 Deposits with banks and Unit Trusts 9.1.6 25,419 - - - - 2,356,296 - 2,381,715 5.01 Loans to executives 9.1.7 550 - - - 43,272 - - 43,822 0.09 Loans and advances 9.1.8 - 15,502,233 - - - - - 15,502,233 32.62 Policyholders loans 9.1.9 - 173,312 - - - - - 173,312 0.36 Trade and other receivables 9.1.10 1,252,299 - - - 10,868,292 - - 12,120,591 25.50 Other receivables 9.1.11 - - - - 2,836,536 - - 2,836,536 5.97 Reinsurance receivables 9.1.12 - - - - 294,294 - - 294,294 0.62 Amounts due from related parties 9.1.13 - - - - - - 13,692 13,692 0.03 Rental receivable on leased assets & hire purchase 9.1.14 - - 1,965,995 - - - - 1,965,995 4.14 Cash in hand and at bank 9.1.15 - - - 3,196,350 - - - 3,196,350 6.73 Total credit risk exposure 7,278,119 15,675,545 1,965,995 3,196,350 14,042,394 5,355,881 13,692 47,527,976 100.00



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9.1.3 Risk exposure

The tables below show the maximum exposure to credit risk for the various components, shown gross before the effect of mitigation through the use of collateral arrangements.


In Rs. ‘000

As at 31 March 2020


Loans and advances







parties


Government securities 9.1.4 5,375,282 - - - - 2,598,307 - 7,973,589 15.04 Corporate debt securities 9.1.5 4,183,297 - - - - 1,093,730 - 5,277,027 9.95 Deposits with banks and Unit Trusts 9.1.6 29,341 - - - - 5,546,051 - 5,575,392 10.52 Loans to executives 9.1.7 6,107 - - - 14,868 - - 20,975 0.04 Loans and advances 9.1.8 - 14,179,349 - - - - - 14,179,349 26.74 Policyholders loans 9.1.9 - 236,700 - - - - - 236,700 0.45 Trade receivables 9.1.10 1,487,164 - - - 8,740,669 - - 10,227,833 19.29 Other receivables 9.1.11 - - - - 3,301,682 - - 3,301,682 6.23 Reinsurance receivables 9.1.12 - - - - 334,007 - - 334,007 0.63 Amounts due from related parties 9.1.13 - - - - - - 4,670 4,670 0.01 Rental receivable on leased assets & hire purchase 9.1.14 - - 2,160,285 - - - - 2,160,285 4.07 Cash in hand and at bank 9.1.15 - - - 3,726,096 - - - 3,726,096 7.03 Total credit risk exposure 11,081,191 14,416,049 2,160,285 3,726,096 12,391,226 9,238,088 4,670 53,017,605 100.00



In Rs. ‘000

As at 31 March 2019


Loans and advances







parties


Government securities 9.1.4 3,316,389 - - - - 1,969,419 - 5,285,808 11.12 Corporate debt securities 9.1.5 2,683,462 - - - - 1,030,166 - 3,713,628 7.81 Deposits with banks and Unit Trusts 9.1.6 25,419 - - - - 2,356,296 - 2,381,715 5.01 Loans to executives 9.1.7 550 - - - 43,272 - - 43,822 0.09 Loans and advances 9.1.8 - 15,502,233 - - - - - 15,502,233 32.62 Policyholders loans 9.1.9 - 173,312 - - - - - 173,312 0.36 Trade and other receivables 9.1.10 1,252,299 - - - 10,868,292 - - 12,120,591 25.50 Other receivables 9.1.11 - - - - 2,836,536 - - 2,836,536 5.97 Reinsurance receivables 9.1.12 - - - - 294,294 - - 294,294 0.62 Amounts due from related parties 9.1.13 - - - - - - 13,692 13,692 0.03 Rental receivable on leased assets & hire purchase 9.1.14 - - 1,965,995 - - - - 1,965,995 4.14 Cash in hand and at bank 9.1.15 - - - 3,196,350 - - - 3,196,350 6.73 Total credit risk exposure 7,278,119 15,675,545 1,965,995 3,196,350 14,042,394 5,355,881 13,692 47,527,976 100.00


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Risk Exposure - Company

In Rs. ‘000

As at 31 March 2020

Note Non-current

investments

Cash in hand and at

banks

Trade and other receivable

Short term

investments

Amounts due from

related parties


Loans to executives 9.1.7 - - 4,198 - - 4,198 0.02 Trade receivables 9.1.10 - - 655,300 - - 655,300 3.04 Other receivables 9.1.11 - - 20,862 - - 20,862 0.10 Amounts due from related parties 9.1.13 1,549,170 - - - 18,506,617 20,055,787 93.12 Cash in hand and at bank 9.1.15 - 800,330 - - - 800,330 3.72 Total credit risk exposure 1,549,170 800,330 680,360 - 18,506,617 21,536,477 100.00

Financial assets at fair value through profit or loss 9.2.3.1 - - - 5,140 - 5,140 4.47Financial assets at fair value through OCI 9.2.3.1 - - - 109,900 - 109,900 95.53Total equity risk exposure - - - 115,040 - 115,040 100.00Total 1,549,170 800,330 680,360 115,040 18,506,617 21,651,517

Risk Exposure - Company

In Rs. ‘000

As at 31 March 2019

Note Non-current

investments

Cash in hand and at

banks

Trade and other receivable

Short term

investments

Amounts due from

related parties


Loans to executives 9.1.7 - - 4,218 - - 4,218 0.03Trade receivables 9.1.10 - - 398,263 - - 398,263 2.40Other receivables 9.1.11 - - 509,612 - - 509,612 3.08Amounts due from related parties 9.1.13 1,465,042 - - - 14,176,360 15,641,402 94.39Cash in hand and at bank 9.1.15 - 18,294 - - - 18,294 0.10Total credit risk exposure 1,465,042 18,294 912,093 - 14,176,360 16,571,789 100.00

Financial assets at fair value through profit or loss 9.2.3.1 - - - 5,625 - 5,625 4.31Financial assets at fair value through OCI 9.2.3.1 - - - 125,000 - 125,000 95.69Total equity risk exposure - - - 130,625 - 130,625 100.00Total 1,465,042 18,294 912,093 130,625 14,176,360 16,702,414


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9.1.4 Government securities

As at 31 March 2020 as shown in the table above, 15.04% (2019 - 11.12%) of Group debt securities comprise investments in government securities which consist of treasury bonds, bills and reverse repo investments. Government securities are usually considered to as risk free due to the sovereign nature of the instrument.

9.1.5 Corporate debt securities

As at 31 March 2020, corporate debt securities comprise 97.22% (2019 - 88.24%) of the total investments for the Group were rated “A-” or better.

As at 31 March Group2020 2019

Rs. '000 Rating % of total


Fitch/ ICRA ratingAA+ 857,148 16.24 421,578 11.35 AA- 639,258 12.11 819,801 22.08 A+ 1,342,500 25.44 378,732 10.20 A 2,291,926 43.43 1,087,842 29.29 A- - - 568,936 15.32 BBB+ 25,837 0.50 125,406 3.38 BBB 31,737 0.60 63,006 1.70 BBB- - - 102,985 2.77 CC - - 145,342 3.91 Not rated 88,621 1.68 - - Total 5,277,027 100.00 3,713,628 100.00

9.1.6 Deposits with banks and Unit Trusts

Deposits with banks consist mainly of fixed and call deposits.

As at 31 March 2020, 98.03% (2019 - 99.99%) of the fixed and call deposits and investments in Unit Trusts were rated “A-” or better for the Group.

As at 31 March Group2020 2019



Fitch ratingAAA 108,640 1.95 - - AA+ 29,086 0.52 161,439 6.78 AA - - 25,179 1.06 AA- 275,637 4.94 344,517 14.47 A+ - - 444,395 18.66 A 1,469,374 26.35 144,676 6.07 A- 54,318 0.97 659,973 27.71 BBB- 4,727 0.08 - - BBB 105,579 1.89 - - BB+ - - 182 0.01 Unit trust 3,527,819 63.30 601,323 25.24 Not rated 212 - 31 - Total 5,575,392 100.00 2,381,715 100.00

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9.1.7 Loans to executives

The Loans to Executives portfolio consists largely of short term distress loans granted to executive staff. The respective business units have taken necessary powers of attorney/ promissory notes as collateral for the loans granted.

9.1.8 Loans and advances

As a part of the overall risk management strategy, the Boards of Directors of the respective companies in the Financial Services cluster, have delegated responsibility for the oversight of credit risk to their ‘Credit Committee’ and ‘Integrated Risk Management Committee’. Their ‘Credit Risk Monitoring Unit’ reports to the ‘Risk Committee’ through the ‘Chief Risk Officer’ who is responsible for managing the company’s credit risk. Steps taken to manage credit risk include:

» introduction of a comprehensive credit policy as the guideline in lending, which has strengthened the credit evaluation process

» regular evaluation of the concentration risk of credit, with the credit policy amended appropriately to ensure the credit granting process responds

» implementation of delegated authority levels, to strengthen credit screening and evaluation

» implementation of a customer rating system as a way of building a data base within the company for efficient and effective credit evaluation

» regular discussions by both ‘Credit Committee’ and ‘Integrated Risk Management Committee’ in relation to credit risk and actions to be implemented.

The table below shows the maximum exposure to credit risk for components of the Statement of Financial Position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.

Loans and advances excluding loans to life policyholder

In Rs. ‘000 NoteAs at 31 March

Consumer loans

Factoring loans

Gold loans

Other loans

Personal loans

Revolving loans

SME loans

Total2020

Total2019

Assets at amortised costIndividually impaired- gross amount - - - 2,491,549 5,063 1,232,923 140,322 3,869,857 2,834,096- unearned income - - - (407,599) (235) (5,264) (3,920) (417,018) (235,525)Gross carrying amount - - - 2,083,950 4,828 1,227,659 136,402 3,452,839 2,598,571- allowance for impairment 9.1.8.2 - - - (148,905) (1,927) (65,783) (8,044) (224,659) (192,944)Net carrying amount - - - 1,935,045 2,901 1,161,876 128,358 3,228,180 2,405,627

For the rest of portfolio where collective impairment is applicable- gross amount 72,907 642,747 2,953,867 5,845,921 702,939 223,408 2,674,359 13,116,148 15,810,437- unearned income (7,019) - - (810,215) (25,302) (230) (145,427) (988,193) (1,750,172)Gross carrying amount 9.1.8.1 65,888 642,747 2,953,867 5,035,706 677,637 223,178 2,528,932 12,127,955 14,060,265- allowance for impairment 9.1.8.2 (21,594) (42,659) (12,998) (484,968) (205,479) (12,074) (397,014) (1,176,786) (963,659)Net carrying amount 44,294 600,088 2,940,869 4,550,738 472,158 211,104 2,131,918 10,951,169 13,096,606Total net carrying amount 44,294 600,088 2,940,869 6,485,783 475,059 1,372,980 2,260,276 14,179,349 15,502,233


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9.1.8.1 Age analysis of facilities considered for collective impairment

In Rs. ‘000As at 31 March

Consumer loans

Factoring loans

Gold loans

Other loans

Personal loans

Revolving loans

SME loans

Total2020

Total2019

CategoryNot due/ current 32,144 515,612 1,086,189 1,223,193 44,332 168,233 586,784 3,656,487 6,360,846 Less than 30 days 10,810 31,627 546,938 757,285 10,455 21,752 257,244 1,636,111 2,692,939 31 - 60 days 1,324 59,135 402,747 320,311 4,755 20,102 99,976 908,350 1,330,573 61 - 90 days 1,127 9,534 340,206 1,168,238 2,891 1,142 44,874 1,568,012 733,794 91 - 120 days 716 26,839 498,914 132,954 7,656 - 64,705 731,784 434,737 121 - 150 days 759 - 67,309 102,694 4,024 5,646 78,585 259,017 257,174 151 - 180 days 141 - 255 105,456 8,406 1,999 68,866 185,123 322,800 above 180 days 18,867 - 11,309 1,225,575 595,118 4,304 1,327,898 3,183,071 1,927,402 Total 65,888 642,747 2,953,867 5,035,706 677,637 223,178 2,528,932 12,127,955 14,060,265

9.1.8.2 Movement in impairment allowance for loans advances

In Rs. ‘000 Movement in specific impairment allowance

Movement in collective impairment allowance

Movement in impairment allowance

As at 31 March 2020 2019 2020 2019 2020 2019

At the beginning of the year 192,944 338,953 963,659 575,231 1,156,603 914,184 Impact of adopting SLFRS 9 - - - 592,062 - 592,062 Net impairment charge for the year 31,715 (95,009) 311,619 205,767 343,334 110,758 Set-offs during the year - (1,605) - (70,000) - (71,605)Write-offs during the year - (49,395) (98,492) (339,401) (98,492) (388,796)At the end of the year 224,659 192,944 1,176,786 963,659 1,401,445 1,156,603

9.1.8.3 Maximum exposure to credit risk

The table below shows the maximum exposure to credit risk for the components of statement of financial position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.

As at 31 March 2020 2019 In Rs. ‘000 Maximum

exposure to credit risk

Net exposure

Maximum exposure to

credit risk

Net exposure

Loans and receivables 15,953,544 11,911,084 17,208,835 11,306,176

9.1.9 Loans to life policyholders

Softlogic Life Insurance PLC issued loans to life policyholders of the company considering the surrender value of their life policies as collateral. As at the reporting date, the value of policy loans granted amounted to Rs. 236.70 Mn (2019 – Rs. 173.31 Mn) and their related surrender value is more than carrying value.

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9.1.10 Trade receivables

Customer credit risk is managed by each business unit according to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on a credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and outstanding of major customers are, where feasible, covered by bank guarantees or other forms of credit insurance.

In Rs. ‘000 Group CompanyAs at 31 March 2020 2019 2020 2019

Non hire purchase

debtors

Hire purchase

debtors

Total Non hire purchase

debtors

Hire purchase

debtors

Total Total Total

Trade receivable settlement profileCurrent/ 0 - 30 days 2,003,023 2,768,409 4,771,432 4,186,131 3,042,415 7,228,546 121,663 99,39831 - 60 days 1,993,071 37,519 2,030,590 2,969,021 59,446 3,028,467 66,125 51,92061 - 90 days 982,116 4,121 986,237 658,556 61,233 719,789 47,216 72,25191 - 120 days 902,781 1,985 904,766 150,223 30,137 180,360 84,112 25,455> 121 days 1,491,279 168,327 1,659,606 1,062,883 29,779 1,092,662 336,184 149,239Impaired 538,382 962,494 1,500,876 590,983 758,666 1,349,649 136,621 136,621Gross amount 7,910,652 3,942,855 11,853,507 9,617,797 3,981,676 13,599,473 791,921 534,884Less : Unearned income - (124,798) (124,798) - (155,722) (155,722) - -Gross carrying value 7,910,652 3,818,057 11,728,709 9,617,797 3,825,954 13,443,751 791,921 534,884Less : Impairment provisionIndividually assessed impairment provision (220,139) - (220,139) (313,268) - (313,268) (77,853) (77,853)Collectively assessed impairment provision (318,243) (962,494) (1,280,737) (277,715) (732,177) (1,009,892) (58,768) (58,768)Total 7,372,270 2,855,563 10,227,833 9,026,814 3,093,777 12,120,591 655,300 398,263

The requirement for impairment is analysed at each reporting date on an individual basis for major clients. Less significant receivables are grouped into homogeneous groups and assessed for impairment collectively. The calculation is based on actual historical data.

9.1.11 Other receivables

The Group’s other receivables consist mainly of dues receivables from foreign suppliers. At each reporting period end management assess the recoverability of these receivable balances and make necessary provisioning for the dough full balances.

9.1.12 Reinsurance receivable

As a part of overall risk management strategy, the Group cedes insurance risk through proportional, non-proportional and specific risk reinsurance treaties. While these mitigate insurance risk, the recoverables from reinsurers and receivables arising from ceded reinsurance expose the company to credit risk. Following are the steps taken to manage reinsurance risk:

» Policy guidelines are approved by the Board of Directors annually, in line with the guidelines issued by the Insurance Board of Sri Lanka

» Counterparties’ limits are set each year and are subjected to regular reviews with management assessing the creditworthiness of reinsurers to update the reinsurance strategy and ascertain the allowance for impairment of reinsurance assets

» Outstanding reinsurance receivables are reviewed monthly to ensure that all dues are collected or set off against payables

» Close professional relationship are maintained with reinsurers

» No cover is issued without confirmation of reinsurance, except for non-reinsurance business.

As at the reporting date reinsurance receivables amounted to Rs. 334.00 Mn at 31 March 2020 (2019 - Rs. 294.29 Mn). This consists mainly of reinsurance receivables on paid claims amounting to Rs. 277.70 Mn (2019 - Rs. 225.57 Mn) and the reinsurance share of claim reserve (receivables on outstanding claims) of Rs. 56.30 Mn as at 31 March 2020 (2019 - Rs. 68.72 Mn).

9.1.13 Amounts due from related parties

The Group’s dues from related parties consists mainly of dues from associate companies and receivables from KMPs.

The Company balance consists mainly of balances due from affiliate companies.


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9.1.14 Rental receivable on lease assets & hire purchase

As a part of overall risk management strategy, the Board of Directors of the company concerned has delegated responsibility for the oversight of credit risk to its ‘Board Credit Committee’. Its ‘Independent Credit Risk Monitoring Unit’ reports to the ‘Risk Committee’ through the ‘Head of Credit Risk’ who is responsible for managing the company’s credit risk. Following are the steps taken to manage credit risk:

» introduction of a comprehensive credit policy as the guideline in lending, which has strengthened the credit evaluation process

» formulation of that policy considering current market conditions and evaluating it quarterly to keep it in line with the market conditions

» determining the levels of service and quality of the evaluators involved in the credit evaluation process

» regular discussion in both the Credit Committee and Integrated Risk Management Committee on credit risk, with necessary actions being implemented

The table below shows the maximum exposure to credit risk for the components of the statement of financial position. This is shown gross, before the effect of mitigation through the use of collateral agreements.

In Rs. ‘000 Note Rental receivable on lease assets

Rental receivable on hire purchase

Total Rental receivable on lease assets


Total

As at 31 March 2020 2019

Assets at amortised costIndividually impaired- gross amount 119,276 28,226 147,502 49,620 25,491 75,111 - unearned income (9,507) (1,256) (10,763) (4,488) (4,535) (9,023)Gross carrying amount 109,769 26,970 136,739 45,132 20,956 66,088 - allowance for impairment 9.1.14.2 (20,760) (685) (21,445) (13,275) (761) (14,036)Net carrying amount 89,009 26,285 115,294 31,857 20,195 52,052

For the rest of portfolio, where collective impairment applies- gross amount 2,784,514 86,057 2,870,571 2,652,410 96,060 2,748,470 - unearned income (696,699) - (696,699) (738,994) (5) (738,999)Gross carrying amount 9.1.14.1 2,087,815 86,057 2,173,872 1,913,416 96,055 2,009,471 - allowance for impairment 9.1.14.2 (111,945) (16,936) (128,881) (75,333) (20,195) (95,528)Net carrying amount 1,975,870 69,121 2,044,991 1,838,083 75,860 1,913,943 Total Net carrying amount 2,064,879 95,406 2,160,285 1,869,940 96,055 1,965,995

9.1.14.1 Age analysis of facilities considered for collective impairment

In Rs. ‘000 Rental receivable on lease assets


Total Rental receivable on lease assets


Total

As at 31 March 2020 2019

CategoryNot due/ current 959,612 1,111 960,723 752,598 239 752,837 Overdue: Less than 30 days 385,291 - 385,291 380,256 - 380,256 31 - 60 days 203,669 - 203,669 266,712 236 266,948 61 - 90 days 134,335 - 134,335 158,261 - 158,261 91 - 120 days 75,451 - 75,451 98,815 603 99,418 121 - 150 days 47,478 - 47,478 48,373 90 48,463 151 - 180 days 45,025 - 45,025 31,946 - 31,946 above 180 days 236,954 84,946 321,900 176,455 94,887 271,342 Total 2,087,815 86,057 2,173,872 1,913,416 96,055 2,009,471

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9.1.14.2 Movement in impairment allowance

In Rs. ‘000 Movement in specific impairment allowance

Movement in collective impairment allowance

Movement in impairment allowance

As at 31 March 2020 2019 2020 2019 2020 2019

At the beginning of the year 14,036 10,090 95,528 121,882 109,564 131,972 Impact of adopting SLFRS 9 - - - (1,864) - (1,864)Net impairment charge for the year 7,409 3,946 33,353 57,555 40,762 61,501 Write offs during the year - - - (82,045) - (82,045)At the end of the year 21,445 14,036 128,881 95,528 150,326 109,564

9.1.14.3 Maximum exposure to credit risk

The table below shows the maximum exposure to credit risk for the components of statement of financial position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.

As at 31 March 2020 2019 In Rs. ‘000 Maximum

exposure to credit risk

Net exposure

Maximum exposure to

credit risk

Net exposure

Lease and hire purchase receivables 2,310,611 - 2,075,558 -

9.1.15 Cash in hand and at bank

Deposits with banks consist mainly of fixed and call deposits. Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed annually, and may be updated during the year subject to appropriate approval. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through the counterparty’s failure to make payments. The Group’s maximum exposure to credit risk for the components of the statement of financial position are the carrying amounts as shown.

9.2 Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will adversely deviate because of changes in market movements.

Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include: borrowings, trade payables, short term investments and available-for-sale investments.

9.2.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to changes in market interest rates relates significantly to the Group’s long-term debt obligations.

9.2.1.1 Exposure to interest rate risk

The interest rate profile of the Group’s interest bearing financial instruments as reported to Group management is as follows:

In Rs. ‘000 Group CompanyNominal amount Nominal amount

As at 31 March 2020 2019 2020 2019

Fixed rate instrumentFinancial assets 38,755,174 31,280,131 - - Financial liabilities (51,439,645) (42,368,861) (17,194,951) (3,273,536)

(12,684,471) (11,088,730) (17,194,951) (3,273,536)

Variable rate instrumentsFinancial assets 3,726,096 2,596,037 18,828,562 14,013,567 Financial liabilities (42,338,687) (40,396,514) (10,568,366) (17,867,456)

(38,612,591) (37,800,477) 8,260,196 (3,853,889)


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9.2.1.2 Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings that may be affected. Provided all other variables are held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:

In Rs. ‘000 Increase in basis points Effect on profit before tax Rupee

borrowings Other

currencies Group Company

2020 + 300 b.p + 200 b.p (999,152) 247,806 - 300 b.p - 200 b.p 999,152 (247,806)

2019 + 100 b.p + 30 b.p (339,446) 38,539 - 100 b.p - 30 b.p 339,446 (38,539)

The spread of basis points used for the interest rate sensitivity analysis is based on the currently observable market environment.

9.2.2 Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of adverse fluctuations in foreign exchange rates. The Group’s exposure to the risk of fluctuations in foreign exchange rates relates primarily to the Group’s operating activities and foreign currency borrowings.

Management has set up a policy that requires the company and its subsidiaries to manage their foreign exchange risk with limits on maximum exposure.

9.2.2.1 Foreign currency sensitivity

The following table demonstrates the sensitivity to possible changes in the USD/RS exchange rate, provided that all other variables are held constant.

The Group’s exposure to foreign currencies other than USD is not material.

In Rs. ‘000 Increase in exchange rate USD

Effect on profit

before tax

Effect on equity

2020 + 5% 67,808 (305,925)- 5% (67,808) 305,925

2019 + 10% (367,062) (444,325)- 10% 367,062 444,325

The Group manages its foreign currency risk using a balanced approach involving forward contracts on exposures expected to occur within a maximum 24 month period.

Where the nature of the hedging is not economic, it is the Group’s policy to negotiate with counterparties or banks to obtain most advantage position for the Group.

9.2.2.2 Foreign exchange risk in operating activities

The exposure is mainly from foreign currency obligations arising out of operating activities where fluctuation of foreign exchange rate may occur during a credit period of 3 - 6 months.

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9.2.3 Equity price risk

9.2.3.1 Listed equity investments

The Group holds listed and unlisted equity securities which are susceptible to market-price risk arising from uncertainties about future values of these securities.

The Group manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Periodic reports on equity investment portfolios are submitted to the senior management of individual business segments. The respective Boards of Directors review and approve all equity investment decisions

Group

Financial assets at fair value through profit or loss Financial assets at fair value through OCIAs at 31 March 2020 2019 2020 2019

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

Bank, finance and insurance 7,988 86.41 357,445 62.88 1,940,670 87.83 1,547,305 100.00 Beverage, food and tobacco - - - - 40,113 1.82 - - Construction and engineering - - - - 37,129 1.68 - - Diversified holdings 51 0.55 147,882 26.01 95,947 4.34 - - Footwear and textile - - - - 56,078 2.54 - - Hotels and travels 12 0.13 13 - - - - - Manufacturing 119 1.29 17,172 3.02 29,459 1.33 20 - Power and energy 1,074 11.62 13,436 2.36 10,286 0.46 - - Telecommunications - - 32,567 5.73 - - - -

9,244 100.00 568,515 100.00 2,209,682 100.00 1,547,325 100.00

Company

Financial assets at fair value through profit or lossAs at 31 March 2020 2019

Rs. '000 % Rs. '000 %

Bank, finance and insurance 4,066 79.11 4,525 80.44 Power and energy 1,074 20.89 1,100 19.56

5,140 100.00 5,625 100.00

9.2.3.2 Unquoted equity investments

Investments in unquoted investments are made with the board approval.

9.2.3.3 Sensitivity analysis

The following table demonstrate the sensitivity of cumulative changes in fair value to reasonably possible changes in equity prices provided all other variables are held constant. The effect of a decrease in equity prices is expected to be equal and opposite to the effect of the increase shown.

This table consider only quoted equity shares classified as short term and long term financial assets.

In Rs. ‘000 Group CompanyChange in

equity price Effect

on profit before tax

Effect on equity

Effect on profit

before tax

Effect on equity

2020Quoted equity investments listed on the Colombo Stock Exchange + 15% 1,387 331,452 771 Nil

- 15% (1,387) (331,452) (771) Nil2019Quoted equity investments listed on the Colombo Stock Exchange + 15% 85,277 232,099 844 Nil

- 15% (85,277) (232,099) (844) Nil


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9.3 Liquidity risk

Liquidity risk is 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 have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, finance leases and hire purchase contracts that will always have sufficient liquidity to meet its liabilities when due under normal and stressed conditions. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficient and debt maturing within 12 months can be rolled over with existing lenders.

9.3.1 Net debt / (cash)


Short term investments 9,357,231 6,049,396 115,040 130,625 Cash in hand and at bank 3,726,096 3,196,350 800,330 18,294 Total liquid assets 13,083,327 9,245,746 915,370 148,919

Other current financial liabilities 27,690,199 23,128,625 16,367,571 10,003,875 Current portion of interest bearing borrowings 10,517,214 9,782,952 5,207,906 3,958,498 Bank overdrafts 7,262,837 7,761,224 160,243 174,702 Total liabilities 45,470,250 40,672,801 21,735,720 14,137,075

Net debt 32,386,923 31,427,055 20,820,350 13,988,156 Adjustments for;Short term investments with maturity less than 3 months 8,456,624 3,554,200 - - Unutilised approved banking facilities 2,270,774 757,908 281,200 6,521

21,659,525 27,114,947 20,539,150 13,981,635

Further the Group will utilise excess liquidity through operating cycle, restructuring of short term financial commitments, funds available through commercial papers and revolving loan facilities as positive cash flows to the manage the liquidity position of the Group.

9.3.2 Liquidity risk management

An optional combination of positive and negative cash flows along with investment returns and contractual obligation maturing is collated through an intra-day cash reporting system for all business segments. High value contractual outflows are processed through various control filters. The Group is in the process of building a “Liquidity Dashboard” with the implementation of its ERP program. This would help further accelerate the review and identification of debt maturities relating to net liquidity position on a daily basis and thus enable proactive funding mobilisation and reinvestment of cash surpluses, and re-scheduling maturity profiles to de-stress cash flows and align them with actual investment tenors. This would engender optimal liquidity positioning, reduce borrowing cost and enhance reinvestment income.

9.3.3 Maturity analysis

The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2020 based on contractual undiscounted payments.

In Rs. ‘000 Within 1 year

Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total

Interest bearing loans and borrowings 13,751,238 12,805,522 7,749,298 5,968,832 5,612,558 8,430,111 54,317,559 Lease liability 1,704,061 1,625,862 1,359,755 1,003,394 640,933 2,318,162 8,652,167 Other non-current financial liabilities - 28,500 516,247 135,000 168,345 - 848,092 Trade and other payables 8,645,807 - - - - - 8,645,807 Amounts due to related parties 32,405 - - - - - 32,405 Other current financial liabilities 27,690,199 - - - - - 27,690,199 Public deposits 13,278,368 2,822,505 1,553,956 861,130 1,849,548 - 20,365,507 Bank overdrafts 7,262,837 - - - - - 7,262,837

72,364,915 17,282,389 11,179,256 7,968,356 8,271,384 10,748,273 127,814,573

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The table below summarises the maturity profile of the company’s financial liabilities at 31 March 2020 based on contractual undiscounted payments.


Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total

Interest bearing loans and borrowings 5,994,543 4,790,144 1,115,332 788,055 328,350 227,814 13,244,238 Lease liability 11,684 2,285 1,350 - - - 15,319 Trade and other payables 236,343 - - - - - 236,343Amounts due to related parties 95,208 - - - - - 95,208 Other current financial liabilities 16,367,571 - - - - - 16,367,571 Bank overdrafts 160,243 - - - - - 160,243

22,865,592 4,792,429 1,116,682 788,055 328,350 227,814 30,118,922

The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2019 based on contractual undiscounted payments.


Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total

Interest bearing loans and borrowings 12,907,941 9,581,274 9,421,147 4,522,075 3,476,983 4,166,077 44,075,497Other non-current financial liabilities - 4,426 110,779 - - - 115,205Trade and other payables 8,428,255 - - - - - 8,428,255Amounts due to related parties 2,731 - - - - - 2,731Other current financial liabilities 23,128,625 - - - - - 23,128,625Public deposits 13,252,446 2,394,223 1,438,383 565,690 665,482 - 18,316,224Bank overdrafts 7,761,224 - - - - - 7,761,224

65,481,222 11,979,923 10,970,309 5,087,765 4,142,465 4,166,077 101,827,761

Contingent gross commitment on put option 1,812,828 - - - - - 1,812,828

The table below summarises the maturity profile of the company’s financial liabilities at 31 March 2019 based on contractual undiscounted payments.


Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

More than 5 years

Total

Interest bearing loans and borrowings 5,089,886 3,813,199 2,009,971 773,162 433,193 158,361 12,277,772 Trade and other payables 108,894 - - - - - 108,894 Amounts due to related parties 16,671 - - - - - 16,671 Other current financial liabilities 10,003,875 - - - - - 10,003,875 Bank overdrafts 174,702 - - - - - 174,702

15,394,028 3,813,199 2,009,971 773,162 433,193 158,361 22,581,914

9.3.4 Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

No changes were made in the objectives, policies or processes for managing capital during the year ended 31 March 2020.

The Group monitors capital using a gearing ratio for the company and subsidiaries, net debt divided by total capital plus net debt, which is monitored closely by senior management. Net debt of the Group includes, interest bearing loans and borrowings, trade and other payables less cash and cash equivalents.


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Net debt 72,785,584 62,591,496 26,962,988 21,122,700 Equity 21,725,765 24,839,457 14,239,445 15,990,118 Capital and total net debt 94,511,349 87,430,953 41,202,433 37,112,818 Gearing ratio - (X) 0.77 0.72 0.65 0.57

10 FAIR VALUE MEASUREMENT AND RELATED FAIR VALUE DISCLOSURE

Fair value measurement

Fair value related disclosures for financial instruments and non- financial assets that are measured at fair value are disclosed in this note. Apart from this note, additional fair value related disclosures, including the valuation methods, significant estimates and assumptions are also provided in:

Note

Property, plant and equipment under revaluation model 22.3Investment properties 24.2Investment in unquoted equity shares 26.3Financial instruments 12

ACCOUNTING POLICY

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

» in the principal market for the asset or liability, or

» in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the Financial Statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the Financial Statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group determines the policies and procedures for both recurring fair value measurement, such as investment properties and unquoted AFS financial assets, and for non-recurring measurement, such as assets held-for-sale in discontinued operations.

External valuers are involved for valuation of significant assets, such as land and building and investment properties, and significant liabilities, such as insurance contracts. Selection criteria for external valuers include market knowledge, reputation, independence and whether professional standards are maintained. The Group decides, after discussions with the external valuers, which valuation techniques and inputs to use for each case.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

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10.1 Financial assets and liabilities by fair value hierarchy - Group

The Group held the following financial instruments carried at fair value in the statement of financial position:

Financial assets

In Rs. ‘000 Level 1 Level 2 Level 3 As at 31 March 2020 2019 2020 2019 2020 2019

Financial assetsFinancial assets at fair value through OCIQuoted equity instruments - 1,547,325 2,209,682 - - - Unquoted equity instruments - - - - 483,560 594,217 Quoted debt instruments 1,364,029 2,780,090 - - - - Financial assets at fair value through P&LQuoted equity instruments - 568,515 9,243 - - - Quoted debt instruments 2,105,955 293,477 - - - - Unit Trust - - 3,270,729 601,323 - - Total 3,469,984 5,189,407 5,489,654 601,323 483,560 594,217

Liabilities measured at fair valueFinancial liabilities at fair value through P&LOther current financial liabilities - - - - 168,345 9,357 Total - - - - 168,345 9,357

Due to the COVID-19 outbreak and the closure of the Colombo Stock Exchange, the Management has assessed and determined the fair value of equity portfolio as of 31 March 2020, based on the closing traded prices that existed as of 31 December 2019 and 28 February 2020.

All the listed equity instruments amounting to Rs. 2,218.93 Mn were transferred from level 1 to level 2 as at 31 March 2020 as it shows factors which are indicative of an inactive market due to COVID-19 pandemic. There was a significant decline in the world equity market and the share prices did not reflect the accurate fair value of the instrument. Hence management decided to recognise all its listed equity instruments in level 2.

Non financial assets


Non financial assets measured at fair valueLand and buildings - - - - 27,217,331 25,954,359 Buildings on leasehold land - - - - 9,556,307 4,736,385 Investment property - - - - 2,030,380 1,695,261 Total - - - - 38,804,018 32,386,005

In determining the fair value of non financial assets measured at fair value, highest and best use of the property has been considered including the current condition of the properties, future usability and associated redevelopment requirements. Also, the valuers have made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are rounded within the range of values.


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10.2 Financial assets and liabilities by fair value hierarchy - Company

The Company held the following financial instruments carried at fair value in the statement of financial pos

Financial assets


Financial assetsFinancial assets at fair value through P&LQuoted equity instruments - 5,625 5,140 - - - Financial assets at fair value through OCIUnquoted equity instruments - - - - 109,900 125,000 Total - 5,625 5,140 - 109,900 125,000

All the listed equity instruments amounting to Rs. 5.14 Mn were transferred from level 1 to level 2 as at 31 March 2020 as it shows factors which are indicative of an inactive market due to COVID-19 pandemic. There was a significant decline in the world equity market and the share prices did not reflect the accurate fair value of the instrument. Hence management decided to recognise all its listed equity instruments in level 2.

Non financial assets


Non financial assets measured at fair valueInvestment property - - - - 794,500 744,000 Total - - - - 794,500 744,000

In determining the fair value of non financial assets measured at fair value, highest and best use of the property has been considered including the current condition of the properties, future usability and associated redevelopment requirements. Also, the valuers have made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are rounded within the range of values.

Reconciliation of fair value measurements of level 3 financial instruments

The Group and Company carries unquoted equity shares are classified as Level 3 within the fair value hierarchy. A reconciliation of the beginning and closing balances including movements is summarised below:

In Rs. ‘000 Financial assets at fair value through OCI

Group Company

As at 1 April 2019 594,217 125,000 Remeasurement recognised in OCI (110,657) (15,100)As at 31 March 2020 483,560 109,900

Valuation of level 3 : unquoted equity instruments

The fair valuation of level 3 : unquoted equity instruments is measured using internal model of adjusted net asset for illiquidity. Comparative figure stated at cost as permitted by SLFRS 9. Fair value would not significantly vary if one or more of the inputs were changed.

When deciding illiquidity premium, the Group has considered following factors.

- the recent acquisition of Finance Companies had taken place at more than the net asset value of target investee

- the Bank is in the possession of regular license

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This table consider only unquoted equity shares classified level 3 financial assets.

In Rs. ‘000 Variable Change Effect on equity Group Company

2020Unquoted equity investments classified as level 3 within the fair value hierarchy Illiquidity

premium+ 1% (4,840) (1,100)- 1% 5,280 1,200

2019Unquoted equity investments classified as level 3 within the fair value hierarchy Equity

price+ 1% 6,278 2,350 - 1% (6,278) (350)

11 FINANCIAL INSTRUMENTS

11.1 Financial assets

ACCOUNTING POLICY

Initial recognition and subsequent measurement

Initial recognition and measurement

Financial assets within the scope of SLFRS 9 are classified as amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. This assessment is referred to as the SPPI test and is performed at an instrument level. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price.

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

The Group’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments and derivative financial instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification. For the purpose of subsequent measurement financial assets are classified in four categories.

» Financial assets at amortised cost

» Financial assets at fair value through OCI with recycling of cumulative gains and losses

» Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition

» Financial assets at fair value through profit or loss

Debt instruments

Financial assets at amortised cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. The Group measures financial assets at amortised cost if both of the following conditions are met:

» The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows: and

» The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial

The Group’s financial assets at amortised cost includes trade receivables and short term investments.

Financial assets at fair value through OCI

Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. The Group measures debt instruments at fair value through OCI if both of the following conditions are met:

» The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling: and

» The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/ (losses) and impairment expenses are presented as separate line item in the income statement.


97


Equity instruments

Financial assets designated at fair value through OCI

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under LKAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognised as other income in the statement of profit or loss when the right of payment has been established.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Impairment of financial assets

From 01 April 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by SLFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group has

established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

11.2 Financial liabilities


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

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

The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments.


The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by SLFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.

Loans and borrowings

This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

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

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of

98


a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

Off-setting of financial instruments

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

Derivative financial instruments and hedge accounting - Initial recognition and subsequent measurement The Group uses derivative financial instruments, such as forward currency contracts, interest rate swaps and forward commodity contracts, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the other comprehensive income statement (OCI). The gain or loss in relation to ineffective portion is recognised immediately in the income statement.

“Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When the forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible.

Where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors that could affect the reported fair value of financial instruments, are further explained in note 11.

Derivative financial instruments

Initial recognition and subsequent measurement

Initial recognition and subsequent measurement The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and forward commodity contracts to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to the income statement.

Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives either as,

» hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge)

» hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge)

» hedges of a net investment in a foreign operation (net investment hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking various hedging transactions. The company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative instruments used for hedging purposes are disclosed in note 39.4. Movements on the hedging reserve on the other comprehensive income statement (OCI) are shown in the same note. The fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.


99


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101


The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

» Fair value of quoted equities, debentures and bonds is based on price quotations in an active market at the reporting date.

» The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

» Fair value of unquoted ordinary shares has been estimated using a Discounted Cash Flow (DCF) model. The valuation requires management to make certain assumptions about

the model inputs, including forecast cash flows, the discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

» Approximately 76% of loans and advances, rental receivable on lease assets and hire purchase have a remaining maturity of less than one year. Therefore, fair value of the lending portfolio approximates to the carrying value at the reporting date. All loans and advances are granted with fixed interest rate terms.

12 SRI LANKA ACCOUNTING STANDARDS (SLFRS) ISSUED BUT NOT YET EFFECTIVE

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.

SLFRS - 17 Insurance Contracts

SLFRS 17 is effective for annual reporting periods beginning on or after 1 January 2021, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. SLFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features.

This supersedes SLFRS 4 Insurance Contracts that was issued in 2005. Earlier application is permitted providing that for entities that apply SLFRS 9 Financial Instruments and SLFRS 15 Revenue from Contracts with customers.

A few scope exceptions will apply. The overall objective of SLFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in SLFRS 4, which are largely based on grandfathering previous local accounting policies, SLFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of SLFRS 17 is the general model, supplemented by:

» A specific adaptation for contracts with direct participation features (the variable fee approach)

» A simplified approach (the premium allocation approach) mainly for short duration contracts

Amendments to SLFRS 3 : Definition of a “Business”

In October 2018, the Institute of Chartered Accountants of Sri lanka issued amendments to the definition of a business in SLFRS 3 - Business Combinations are made to help the entities determine whether an acquired set of activities and assets is a business or not. They clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing any missing elements, add guidance to help entities to assess whether an acquired process is substantive, narrow the definition of a business and of outputs, and introduce an optional fair value concentration test.

The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after the first annual reporting period beginning on or after 01 January 2020, with early application permitted.

Amendments to LKAS 1 and LKAS 8 : Definition of “Material”

In October 2018, the Institute of Chartered Accountants of Sri Lanka issued amendments to LKAS 1 - Presentation of Financial Statements and LKAS 8 - Accounting policies, Changes in Accounting Estimates and Errors are made to align the definition of “material” across the standard and to clarify certain aspects of the definition. The new definition states that, “information is material if omitting or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.

The amendments are applied prospectively for the annual periods beginning on or after 01 January 2020 with early application permitted.

102


13 REVENUE

ACCOUNTING POLICY

Continuing operations

Revenue recognition

Revenue from contracts with customers

Under SLFRS 15 - Revenue from contracts with customers, revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

Sale of goods

Under SLFRS 15 - Revenue from contracts with customers, revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of goods.

Rendering of services

Under SLFRS 15 - Revenue from contracts with customers, revenue from service performance obligation over time or at a point in time. For each performance obligation satisfied over time, the Group recognises the revenue over time by measuring the progress towards complete satisfaction of that performance obligation because the customer simultaneously receives and consumes the benefits provided by the Group.

The Group has several operating segments which are described in Note 49 to these Financial Statements.

Performance obligations

The Group’s uses following specific criteria in recognising the revenue.

Financial Services

Life insurance business - Gross Written Premiums (GWP)

Gross written premiums comprise the total premiums received/ receivable for the whole period of cover provided by contracts entered into during the accounting period. Gross written premium is generally recognised in full at the inception of the policy.

Gross recurring premiums on life insurance contracts are recognised as revenue when payable by the policyholder (policies within the 30 day grace period are considered as due). Premiums received in advance are not recorded as revenue and recorded as a liability until the premium is due unless the relevant policy conditions require such premiums to be recognised as income. Benefits and expenses are provided against such revenue to recognise profits over the estimated life of the policies. For single premium business, revenue is recognised on the date on which the policy is effective.

Income from leases, hire purchases, loans and advances

Under both SLFRS 9 and LKAS 39, interest income and interest expense is recorded using the effective interest rate (EIR) method for all financial instruments measured at amortised cost. Interest income on interest bearing financial assets measured at FVOCI under SLFRS 9, similarly to interest bearing financial assets classified as available for sale or held to maturity under LKAS 39 is also recorded by using the EIR method. The EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability.

When a financial asset becomes credit-impaired and is, therefore, regarded as ‘Stage 3’, the Group calculates interest income by applying the effective interest rate to the net amortised cost of the financial asset. If the financial assets cures and is no longer credit-impaired, the Group reverts to calculating interest income on a gross basis.

Interest income on overdue rentals

Overdue charges of leasing, loans and hire purchases have been accounted when the receipt in established.

Healthcare Services

Healthcare sector revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured, regardless of when the payment is being made after considering discounts, offers given to the customers, consultations, and services provided under packages.

Retail Sector

Retail sector revenue is recognised upon satisfaction of a performance obligation. The revenue recognition occurs at a point in time when control of the asset is transferred to the customer, which is generally upon delivery of the goods. The output method will provide a faithful depiction in recognising revenue.


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Contract Balances

Contract assets

Contract assets are the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer, with rights that are conditional on some criteria other than the passage of time. Upon satisfaction of the conditions, the amounts recognised as contract assets are reclassified to trade receivables.

Contract liabilities

Contract liabilities are the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or the amount is due) from the customer. Contract liabilities include long-term advances received to deliver goods and services, short-term advances received to render certain services.

In Rs. ‘000 Group CompanyFor the year ended 31 March 2020 2019 2020 2019

Goods transferred at a point in time 41,873,109 44,547,507 - - Services transferred at a point in time 19,398,290 17,087,572 748,895 645,766 Total revenue from contracts with customers 61,271,399 61,635,079 748,895 645,766 Revenue from insurance contracts 11,919,961 9,833,075 - - Interest income on lease and hire purchase receivables 493,350 402,528 - -Interest income 3,037,067 3,271,922 - -

76,721,777 75,142,604 748,895 645,766

13.1 Business segment analysis

In Rs. ‘000 GroupFor the year ended 31 March 2020 2019

Automobiles 835,741 3,136,176 Financial Services 15,596,174 13,628,719 Healthcare Services 15,510,422 13,474,682 Information Technology 4,578,477 4,039,509 Leisure 2,196,048 3,128,298 Other 13,969 12,667 Retail 37,990,946 37,722,553

76,721,777 75,142,604

14 DIVIDEND INCOME

ACCOUNTING POLICY

Dividend income is recognised when the Company’s right to receive the payment is established.

In Rs. ‘000 Company For the year ended 31 March 2020 2019

Dividend income from investments in subsidiaries and equity accounted investees - 514,513 - 514,513

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15 OTHER OPERATING INCOME

ACCOUNTING POLICY

Gains and losses

Net gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non-current assets, including investments, are accounted for in the income statement, after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses.

Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a group of similar transactions which are not material are aggregated, reported and presented on a net basis.

Fee and commission income

Fee and commission income from services includes mainly documentation and processing fees for the service provided in processing loan facilities for customers.

Other income

Other income is recognised on an accrual basis.

Profit on disposal of investments

On derecognition of an investment classified as financial assets at fair value through P&L and OCI, the cumulative gain or loss previously recognised in other comprehensive income statement is transferred to the income statement.


Commission income 69,330 115,048 36,036 36,036 Fees received 218,190 306,541 - - Maturity of put option liability 9,357 - - - Net exchange gain 99,322 55,520 - - Other laboratory income 75,264 79,003 - - Proceeds from ESOP - 49,049 - - Profit/ (loss) on disposal of investments 11,057 (377) - (10,575)Profit/ (loss) on sale of property, plant & equipment (2,423) 7,589 4,549 2,140 Sundry income 275,383 342,110 194 1,017

755,480 954,483 40,779 28,618

16 FINANCE INCOME

ACCOUNTING POLICY

Finance income comprises interest income on funds invested, dividend income, fair value gains on financial assets at fair value through profit or loss and gains on the re-measurement to fair value of any pre-existing interest in an acquiree recognised in the income statement.

Interest income is recorded as it accrues using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income on the income statement.


Interest income 290,904 211,163 1,988,945 1,364,767 Dividend income on- financial assets at fair value through OCI 131,707 105,612 - - - financial assets at fair value through P&L 4,215 18,939 - - Net change in fair value of financial instruments at fair value through P&L 464,201 13,013 (485) (28,251)Finance income on other financial instruments 1,151,248 1,050,247 191,879 166,390

2,042,275 1,398,974 2,180,339 1,502,906


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17 FINANCE COSTS

ACCOUNTING POLICY

Finance costs comprise interest expenses on borrowings, unwinding of the discount on provisions, fair value losses on financial assets at fair value through profit or loss and impairment losses recognised on financial assets (other than trade receivables).

Interest expense is recorded as it accrues using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments through the expected life of the financial instrument or a shorter period where appropriate, to the net carrying amount of the financial liability.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds.


Interest expense on borrowings 6,461,104 5,857,772 1,724,587 1,902,029 Finance cost on other financial instruments 1,373,797 568,178 1,643,671 649,862 Fair value loss on financial assets at fair value through P&L 266 140,075 - - Exchange loss on foreign currency loan conversion 577,945 287,026 - - Finance cost on right of use assets 739,509 - 4,123 - Other finance expenses 207,631 263,236 69,287 74,542

9,360,252 7,116,287 3,441,668 2,626,433

18 PROFIT/ (LOSS) BEFORE TAX

ACCOUNTING POLICY

Expenditure recognition

Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. 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 the income statement.

For the purpose of presentation of the income statement, the “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the Company and Group’s performance.

Profit/ (loss) before tax is stated after charging all expenses including the following:


Remuneration to Executive and Non-Executive Directors 405,904 402,470 54,603 54,010 Auditors' remuneration- Audit 24,311 27,817 2,426 2,800 - Non audit 36,202 24,100 539 605 Cost of defined employee benefit- Defined benefit plan cost 276,998 221,936 17,381 13,852 - Defined contribution plan cost - EPF/ETF 1,002,774 878,022 44,240 42,046 Staff expenses 9,529,306 8,662,886 358,679 348,040 Depreciation of property, plant and equipment 3,078,435 2,520,118 23,489 36,051 Amortisation of intangible assets 267,246 262,143 2,162 2,542 Amortisation of rights of use assets/ lease rentals paid in advance 1,531,183 1,156 35,851 - Donations 4,244 8,194 398 30 Provisions for/ write off of impaired receivables 345,746 353,623 - 2,472 Provision for impairment of inventories 139,950 75,137 - - (Profit)/ loss on sale of property, plant and equipment 2,423 (7,589) (4,549) (2,140)Impairment and derecognition of property, plant and equipment 19,428 21,318 - - Impairment/ derecognition of intangible assets - 79,435 - -

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19 TAXATION

19.1 Income tax

ACCOUNTING POLICY

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and for items recognised in other comprehensive income is recognised in other comprehensive

income and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Management has used its judgment on the application of tax laws including transfer pricing regulations involving identification of associated undertakings, estimation of the respective arm’s length prices and selection of appropriate pricing mechanisms.

19.1.1 Tax expense


Current income taxCurrent tax charge 778,202 788,440 - 37,614 Under provision of income tax of previous years 56,762 (11,224) (37,614) 36,487 Written-off / (back) of tax receivables (71,243) 151,923 - - 14% withholding tax on dividends 6,099 185,181 - - Total income tax expense 19.1.3 769,820 1,114,320 (37,614) 74,101

Deferred income taxRelating to origination and reversal of temporary differences 19.2.1 (487,084) (2,361,604) 13,015 16,492

282,736 (1,247,284) (24,599) 90,593

19.1.2 Reconciliation between current tax charge and the accounting profit


Profit/ (loss) before tax (2,898,566) 1,743,000 (1,158,325) (577,534)Dividend income from Group companies 17,544 1,884,085 - - Share of results of equity accounted investees (1,611) (7,080) - - Other consolidation adjustments 56,643 227,792 - - Profit/ (loss) after adjustment (2,825,990) 3,847,797 (1,158,325) (577,534)Exempt profits (343,152) (868,858) - - Profits not liable for income tax (345,674) (255,826) - - Resident dividend (153,466) (2,007,736) - (554,605)Adjusted accounting profit/ (loss) chargeable to income taxes (3,668,282) 715,377 (1,158,325) (1,132,139)Deductible expenses (8,346,865) (4,345,261) (139,572) (104,906)Non deductible expenses 8,955,056 5,700,523 771,714 1,371,381 Other source of income 24,460 352,312 - - Set off against tax losses 8,782,950 2,718,741 526,183 - Other reductions (2,391,776) (2,301,203) - - Taxable income 3,355,543 2,840,489 - 134,336


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19.1.3 Reconciliation between tax expense and the product of accounting profit


Tax effect on chargeable profits 474,162 736,766 - (316,999)Tax effect on deductible expenses (278,046) (469,874) - (29,374)Tax effect on non deductible expenses 582,086 521,548 - 383,987 Under/ (over) provision for previous years 56,762 (11,224) (37,614) 36,487 Other income based taxes14% withholding on dividends 6,099 185,181 - - Total income tax expense 841,063 962,397 (37,614) 74,101

Income tax charged atStandard rate 778,202 788,440 - 37,614 Under/ (over) provision for previous year 56,762 (11,224) (37,614) 36,487 Charge for the year 834,964 777,216 (37,614) 74,101

Other tax expensesWritten-off / (back) of tax receivables (71,243) 151,923 - -

Other income based taxes14% withholding on dividends 6,099 185,181 - - Total income tax expense 769,820 1,114,320 (37,614) 74,101

Group tax expense is based on the taxable profit of individual companies within the Group. At present the tax laws of Sri Lanka do not provide for Group taxation.

19.1.4 Income tax liabilities


At the beginning of the year 351,689 348,372 16,910 33,309 Charge for the year 841,063 962,397 - 74,101 Payments and set off against refunds (1,003,363) (959,080) (16,910) (90,500)At the end of the year 189,389 351,689 - 16,910

19.2 Deferred tax

ACCOUNTING POLICY

Deferred tax is provided, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences except:

» where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

» in respect of taxable temporary differences associated with investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences can be

controlled, and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised except:

» where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss; and

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» in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as at the reporting date.

Deferred tax relating to items recognised outside the income statement is recognised outside the income statement, either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.

No deferred tax asset or liability has been recognised in the companies enjoying Board of Investment (BOI) Tax Holidays’ if no qualifying assets or liabilities continue beyond the BOI period.

19.2.1 Deferred tax charge / (release)


Income statementDeferred tax expense arising from;Accelerated depreciation for tax purposes 243,059 105,624 (1,158) 3,637 Revaluation of investment property to fair value 33,071 24,500 18,424 15,483 Employee benefit liabilities (25,814) (26,915) (4,251) (2,628)Benefit arising from tax losses (445,083) (1,990,017) - - Others (292,317) (474,796) - -

(487,084) (2,361,604) 13,015 16,492

Other comprehensive incomeDeferred tax expense arising from;Revaluation of land and building to fair value 366,600 338,027 - - Actuarial gains/ (loss) on employee benefit liabilities (33,824) 15,196 (2,168) (973)

332,776 353,223 (2,168) (973)

Deferred tax has been computed at 28% for all standard rate companies (including listed companies), at 14% for leisure sector companies and at 15% for Central Hospitals Ltd.

19.2.2 Deferred tax - Group

In Rs. ‘000 Asset Liability As at 31 March 2020 2019 2020 2019

At the beginning of the year 3,247,950 749,406 3,306,076 2,829,959 Day 01 Impact of Deferred tax - 73,833 2,137 - Charge and release 201,188 2,424,711 38,114 416,428 Acquisition of subsidiary - - - 59,689 At the end of the year 3,449,138 3,247,950 3,346,327 3,306,076


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The closing deferred tax asset balance relates to the following:

In Rs. ‘000 Asset Liability As at 31 March 2020 2019 2020 2019

Revaluation of building to fair value (89,409) (78,349) 3,275,568 2,920,028 Revaluation of investment property to fair value (5,300) (1,550) 61,721 32,400 Accelerated depreciation for tax purposes (264,821) (259,045) 1,179,968 935,706 Employee benefit liabilities 75,169 56,456 (221,356) (180,570)Losses available for offset against future taxable income 2,763,078 2,833,704 (910,147) (394,437)Provision for bad debts 353,364 303,341 - - Lease capital balance (53,811) (50,134) - - Unclaimed impairment provisions 153,025 153,026 - - Others 517,843 290,501 (39,427) (7,051)

3,449,138 3,247,950 3,346,327 3,306,076

19.2.2 Deferred tax - Company

In Rs. ‘000 Liability As at 31 March 2020 2019

At the beginning of the year 173,435 157,916 Charge and release 10,847 15,519 At the end of the year 184,282 173,435

The closing deferred tax liability balance of the company relates to the following:

In Rs. ‘000 Liability As at 31 March 2020 2019

Revaluation of investment property to fair value 183,430 165,006 Accelerated depreciation for tax purposes 29,982 31,140 Employee benefit liabilities (29,130) (22,711)

184,282 173,435

19.3 Sales tax

Revenues, expenses, assets and liabilities are recognised net of the amount of sales tax except:

» where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

» where receivables and payables are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

19.4 Tax on dividend income

Tax on dividend income from subsidiaries is recognised as an expense in the consolidated income statement.

19.5 VAT on Financial Services

VAT on Financial Services is calculated in accordance with the amended VAT Act No. 07 of 2013. The base for the computation of Value Added Tax on Financial Services is the accounting profit before tax adjusted for the economic depreciation and emolument of employees computed on prescribed rate.

19.6 Debt Repayment Levy

As per the Finance Act No. 35 of 2018, with effect from 01 October 2018, Debt Repayment Levy (DRL) of 7% was introduced on the value addition attributable to the supply of financial services by each institution. DRL is chargeable on the same base used for calculation of VAT on Financial Services as explained above. This tax was abolished by the Government with effect from 01 January 2020.

19.7 Crop Insurance Levy

In terms of the Finance Act No. 12 of 2013, all institutions under the purview of Banking Act No.30 of 1988, Finance Business Act No.42 of 2011 and Regulation of Insurance Industry Act No. 43 of 2000 are required to pay 1% of the profit after tax as Crop Insurance Levy to the National Insurance Trust Fund effective from 01 April 2013.

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Accounting judgements, estimates and assumptions

The Group is subject to income tax and other taxes including VAT. Significant judgment was required to determine the total provision for current, deferred and other taxes due to the uncertainties that exist with respect to the interpretation of applicability of tax laws at the time of the preparation of these Financial Statements.

Uncertainties also exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and

assumptions made or future changes to such assumptions may require future adjustments to tax income and expense already recorded. Where the final tax outcome of such matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax amounts in the period in which the determination is made.

The Group has tax losses in subsidiaries that have a history of losses that do not expire and may not be used to offset other tax liabilities, where the subsidiaries have no avenues available that could partly support the recognition of these losses as deferred tax assets

19.8 Applicable rates of income tax

The tax liability of resident companies are computed at the standard rate of 24% except for the following companies which enjoy full or partial exemptions and concessions.

19.8.1 Exemptions/ concessions granted under the Board of Investment Law/ Inland Revenue Act

Company Basis Exemption or concessions

Period concessions

Central Hospitals Ltd Providing healthcare services

Exempt 8 years from 1st year of profit or 2 years from commencement of operation whichever is earlier (from FY 2012/13 onwards)

Softlogic City Hotels (Pvt) Ltd Construction of tourist hotel

Exempt 7 Years from 1st year of profit or 2 years from commencement of operation whichever is earlier (from FY 2018/19 onwards)

Ceysand Resorts Ltd Promotion of tourism 14% Open ended Softlogic B P O Services (Pvt) Ltd BPO service Exempt 6 years commencing from year in which the company make

profits or any year of assessment not less than 2 years reckoned from the date of commencement of commercial operations whichever is earlier (from FY 2015/16 onwards)

19.8.2 Income tax rates of off-shore subsidiaries

Company Country of incorporation Rate

Softlogic Australia (Pty) Ltd Australia 33.3%

19.9 Tax losses carried forward


Tax losses brought forward 20,235,534 19,452,631 - -Adjustments on finalisation of liability 1,587,225 356,036 505,060 -Acquisition of subsidiary - 9,329 - -Impact due to amalgamation (105,161) - - -Tax losses arising during the year 8,782,950 2,718,741 526,182 -Utilisation of tax losses (2,391,776) (2,301,203) (2,296) -

28,108,772 20,235,534 1,028,946 -

The group has tax losses amounting to Rs. 11,896.00 Mn (2019 - Rs. 8,706.00 Mn) available to offset against future taxable profits but not utilised for recognition of theses losses as deferred tax assets.

With the introduction of the Inland Revenue Act no. 24 of 2017, which is effective from 1 April 2018, significant changes have been introduced to the income tax law of Sri Lanka. Further the Department of Inland Revenue has issued a Gazette notification no. 2064/53 on the transitional provisions that would be applicable in implementing the above Act.

As per the gazette notification issued in relation to the transitional provisions, any unclaimed loss as at 31 March 2018 is deemed to be a loss incurred for the year of assessment commencing on or after 01 April 2018 and shall be carried forward up to 6 years.


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20 EARNINGS PER SHARE

ACCOUNTING POLICY

Basic EPS is calculated by dividing the profit/ (loss) for the year attributable to ordinary equity holders of the parent by the weighted number of ordinary shares outstanding during the year.

20.1 Basic earnings per share

Note GroupFor the year ended 31 March 2020 2019

Profit/ (loss) attributable to equity holders of the parent - continuing operations (4,724,233) 104,669 Weighted average number of ordinary shares in issue 20.2 1,192,543,209 1,172,482,493 Basic earnings per share - continuing operations (Rs.) (3.96) 0.09

20.2 Amount used as denominator

GroupFor the year ended 31 March 2020 2019

Ordinary shares at the beginning of the year 1,192,543,209 961,728,395 Effect of issue of rights issue shares - 210,754,098 Adjusted weighted average number of ordinary shares 1,192,543,209 1,172,482,493

21 Dividend per share

Equity dividend on ordinary shares declared and paid during the year

GroupFor the year ended 31 March 2020 2019

Rs. Rs.’000 Rs. Rs.’000

Interim dividend 0.50 596,272 0.50 596,272

22 PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICY

Basis of recognition

Property, plant and equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be reliably measured.

Basis of measurement

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss. Such cost includes the cost of replacing component parts of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Group derecognises the replaced part, and recognises the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statement as incurred.

Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment charged subsequent to the date of the revaluation.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Any revaluation surplus is recognised in the statement of other comprehensive income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

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Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Where land and buildings are subsequently revalued, the entire class of such assets is revalued at fair value on the date of revaluation. The Group has adopted a policy of revaluing land and buildings by professional valuers at least every 3 years except for properties held for rental and occupied mainly by group companies.

De-recognition

An item of property, plant and equipment is derecognised upon replacement, disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.

Depreciation

Depreciation is calculated by using a straight-line method on the cost or valuation of all property, plant and equipment, other than freehold land, in order to write off such amounts over the estimated useful economic life of such assets.

The estimated useful life of assets is as follows:

Assets Years

Buildings 40 - 75Buildings on leasehold land 40 - 60 or over the

period of leasePlant & machinery 4 - 10Computer equipment, furniture & fittings 2 - 10Motor vehicles 4 - 8

The useful life and residual values of assets are reviewed, and adjusted if required, at the end of each financial year.

Capital work-in-progress

Capital work in progress consists of the cost of assets, labour and other direct costs associated with property, plant and equipment being constructed by the Group. Once the assets become

operational, the related costs are transferred from construction in progress to the appropriate asset category and are depreciated together with the related asset.

Impairment of property plant and equipment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash 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. Impairment losses are recognised in the income statement, except that impairment losses in respect of property, plant and equipment previously revalued are recognised against the revaluation reserve through the statement of other comprehensive income to the extent that they reverse a previous revaluation surplus.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.


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22.1 Group


Land and buildings

Buildings on

leasehold land

Plant and machinery

Computer, Equipment,

furniture and fittings

Motor vehicles

Capital work-in- progress

Total

2020

Total

2019

Freehold assets Cost or ValuationAt the beginning of the year 25,975,616 7,161,385 7,363,200 11,180,272 641,899 4,714,471 57,036,843 49,719,425Additions 317,848 1,383,245 2,183,760 1,718,760 40,465 1,992,576 7,636,654 5,728,410Acquisition of subsidiary - - - - - - - 971,984Disposals - - (141,923) (135,332) (15,101) (128,490) (420,846) (360,047)Transfers* (236,923) 4,727,612 (88,103) 997,842 70,077 (5,964,473) (493,968) (526,494)Impairment/ derecognition (9,486) (253) - (99) - (9,680) (19,518) (37,857)Revaluations 1,255,513 118,789 - - - - 1,374,302 1,541,245Effect of movements in exchange rates - (49) - (318) - - (367) 177At the end of the year 27,302,568 13,390,729 9,316,934 13,761,125 737,340 604,404 65,113,100 57,036,843

Leasehold assets CostAt the beginning of the year - - 179,594 4,297 291,665 - 475,556 488,929Additions - - - - - - - 14,795Acquisition of subsidiary - - - - - - - 2,574Transfers - - (179,594) (4,297) (291,665) - (475,556) (31,206)Effect of movements in exchange rates - - - - - - - 464At the end of the year - - - - - - - 475,556Total value of assets 27,302,568 13,390,729 9,316,934 13,761,125 737,340 604,404 65,113,100 57,512,399

Freehold assets Accumulated depreciation At the beginning of the year 26,145 868,706 3,749,463 5,752,904 315,287 - 10,712,505 8,697,024Charge for the year 282,166 566,602 768,013 1,394,289 67,365 - 3,078,435 2,463,552Acquisition of subsidiary - - - - - - - 238,122Disposals - - (141,916) (97,751) (11,598) - (251,265) (314,820)Transfers* (284,150) (104,080) (239,024) 23,669 44,127 - (559,458) (354,898)Impairment/ derecognition - - - (90) - - (90) (16,539)Effect of movements in exchange rates - (30) - (145) - - (175) 64At the end of the year 24,161 1,331,198 4,136,536 7,072,876 415,181 - 12,979,952 10,712,505

Leasehold assets Accumulated depreciation At the beginning of the year - - 83,754 4,297 117,831 - 205,882 173,407Charge for the year - - - - - - - 56,566Acquisition of subsidiary - - - - - - - 1,880Transfers - - (83,754) (4,297) (117,831) - (205,882) (26,076)Effect of movements in exchange rates - - - - - - - 105At the end of the year - - - - - - - 205,882Total accumulated depreciation 24,161 1,331,198 4,136,536 7,072,876 415,181 - 12,979,952 10,918,387

Carrying valueAs at 31 March 2020 27,278,407 12,059,531 5,180,398 6,688,249 322,159 604,404 52,133,148As at 31 March 2019 25,949,471 6,292,679 3,709,577 5,427,368 500,446 4,714,471 46,594,012

* Transfers include the accumulated depreciation amounting to Rs. 496.91 Mn (2019 - Rs. 375.02 Mn) as at revaluation date that was eliminated against the gross carrying amount of the revalued assets.

114


22.2 Company


Furniture and fittings

Computer and office

Equipment,

Motor vehicles

Total

2020

Total

2019

Freehold assetsCostAt the beginning of the year 37,232 45,436 140,962 223,630 205,678 Additions 216 2,318 - 2,534 1,870 Disposals (15) - (3,839) (3,854) (9,811)Transfers - (9) 20,766 20,757 25,893 At the end of the year 37,433 47,745 157,889 243,067 223,630

Leasehold assetsAt the beginning of the year - - 109,943 109,943 135,836 Transfers - - (109,943) (109,943) (25,893)At the end of the year - - - - 109,943 Total value of assets 37,433 47,745 157,889 243,067 333,573

Freehold assetsAccumulated depreciationAt the beginning of the year 19,570 25,656 82,974 128,200 88,959 Charge for the year 4,600 6,031 12,858 23,489 25,023 Disposals (9) - (2,937) (2,946) (6,496)Transfers - - 9,680 9,680 20,714 At the end of the year 24,161 31,687 102,575 158,423 128,200

Leasehold assetsAccumulated depreciationAt the beginning of the year - - 34,410 34,410 44,096 Charge for the year - - - - 11,028 Transfers - - (34,410) (34,410) (20,714)At the end of the year - - - - 34,410 Total accumulated depreciation 24,161 31,687 102,575 158,423 162,610

Carrying valueAs at 31 March 2020 13,272 16,058 55,314 84,644 As at 31 March 2019 17,662 19,780 133,521 170,963

22.3 Revaluation of land and buildings


The Group uses the revaluation model of measurement of land and buildings. The Group engaged independent expert valuers, to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence of transaction prices for similar properties.

Valuations are based on open market prices, adjusted for any difference in the nature, location or condition of the specific property. The valuation techniques used are appropriate in the circumstances, for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The date of the most recent revaluation was on 31 March 2020 except revaluation of land and building of Softlogic Life Insurance PLC.

The changes in fair value are recognised in other comprehensive income and in the statement of equity. As a result of the valuations of land and buildings the surplus arising from the change in fair value was Rs. 1,374.30 Mn (2019 - Rs. 1,541.25 Mn) which has been credited to the revaluation reserve. Further during the reporting period, deficit arising from the change in fair value of revalued land and buildings were Rs. 0.25 Mn (2019 - Nil).

As a result of the COVID-19 outbreak in Sri Lanka during the last part of the quarter ended 31 March 2020, a reassessment of the valuations were obtained by the same independent professional valuers who determined there was no significant change to the revalued carrying amount provided prior to 31 March 2020.


115


The following items were indicated in the reassessment reports to the Group;

The outbreak of COVID 19, declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020, has impacted both local and global markets.

Consequently, as at the reporting date, the value reflected represents the best estimate based on the market conditions that prevailed, which in valuers’ considered opinion, meets the requirements in SLFRS-13 Fair Value Measurement.

Details of group’s land and buildings stated at valuations are indicated below:

Group

Company Property Method of valuation

Extent No of buildings

Range of estimates for significant unobservable inputs

Correlation to fair value

Per perch value - Rs. Mn. Per square foot value - Rs.2020 2019 2020 2019

Property valuations by Mr. G W G Abeygunawardene (Chartered Valuation Surveyor)Land ofSoftlogic Holdings PLC 14, De Fonseka

Place, Colombo 05

OMV

20.49 P - 16.50 -

17.50 15.50 -

16.50 - - PositiveSoftlogic Properties (Pvt) Ltd

24, Dharmapala Mw., Kollupitiya, Colombo 03

OMV

2 R 11.68 P - 21.00 19.00 - - PositiveSuzuki Motors Lanka Ltd

371, New Nuge Road, Peliyagoda

OMV 28.39 P - 2.03 1.85 - - Positive

Building of Softlogic Information Technologies (Pvt) Ltd

14, De Fonseka Place, Colombo 05

DCC/ IM

- 1 building - - 6,175 -

7,475 6,250 -

7,550 PositiveSuzuki Motors Lanka Ltd

371, New Nuge Road, Peliyagoda

DCC - 1 building - -

4,250 - 5,600

4,400 - 5,650 Positive


24, Dharmapala Mw., Kollupitiya, Colombo 03

DCC

- 1 building - - 18,870 18,880 PositiveFuture Automobiles (Pvt) Ltd

1124/5, Parliament Rd., Battaramulla

DCC/ IM

- 2 buildings - - 2,850 -

8,250 3,000 -

8,500 PositiveAsiri Surgical Hospital PLC

21, Kirimandala Mw., Colombo 05

DCC - 3 buildings - -

3,250 - 10,000

3,000 - 8,400* Positive

Asiri Hospital Holdings PLC

907, Peradeniya Road, Kandy

DCC - 1 building - -

7,000 - 18,750 - Positive

Ceysand Resorts Ltd Centara Ceysands Resort & Spa, Bentota

DCC

- 18 buildings - - 3,000 - 13,250

3,000 - 12,500* Positive

Land and building ofSoftlogic Holdings PLC 262, Gagarama

Road, PiliyandalaOMV/ DCC

1 A 2 R 21 P 14 buildings 0.88 0.75 580 - 5,850

600 - 6,000 Positive

Asiri Hospital Holdings PLC

181,Kirula Road, Colombo 05

OMV/ DCC 1 A 2 R 13.98 P 2 buildings 12.00 11.00

3,250 - 9,500

2,500 - 16,000* Positive

Softlogic Retail (Pvt) Ltd

402, Galle Road, Colombo 03

OMV/ DCC/ IM 17.3 P 1 building 19.00 18.00

4,450 - 6,200

4,500 - 6,250 Positive

Odel PLC Dr. C W W. Kannangara Mw., Colombo 07

OMV/ DCC 1 A 3 R 27.58 P 1 building

17.00 - 18.00

16.00 - 17.00

3,500 - 3,700

4,000 - 4,250 Positive

29 A, Jayatilake Mw., Panadura

OMV/ DCC/ IM 1 R 2.16 P 1 building 2.80 2.60

2,350 - 4,750

2,450 - 4,850 Positive

18 & 20, Sama Mw., Boralesgomuwa

OMV/ DCC

20.0 P 2 buildings 1.98 1.80 4,125 -

4,650 4,250 -

4,750 Positive

116




Range of estimates for significant unobservable inputs


Per perch value - Rs. Mn. Per square foot value - Rs.2020 2019 2020 2019

Odel Properties (Pvt) Ltd

475/32, Kotte Road, Rajagiriya

OMV/ DCC/ IM 1 R 7.42 P 1 building 8.00 7.00

2,750 - 5,950

5,350 - 6,100 Positive

Softlogic Finance PLC 13, De Fonseka Place, Colombo 04

OMV/ DCC/ IM

12.62 P 1 building 17.50 16.50 6,450 -

8,200 6,500 -

8,250 Positive

Property valuations by Mr. P B Kalugalgedara (Chartered Valuation Surveyor)Land and building ofCentral Hospitals Ltd 114, Norris Canal

Road, Colombo 10

OMV/ DCC

1 A 21.03 P 1 building 12.00 11.50 2,000 - 10,000

2,000 - 10,000 Positive

Asiri Hospital Matara (Pvt) Ltd

26, Esplande Road, Uyanwatta, Matara

OMV/ DCC 1 A 2 R 1.3 P 2 buildings

0.90 - 1.25

0.75 - 1.10

2,000 - 8,500

2,000 - 8,000 Positive

Asiri Hospital Galle (Pvt) Ltd

59, Wackwella Road, Galle

OMV/ DCC 3 R 33.20 P 4 buildings

4.00 - 5.19 3.00 8,500 8,000 Positive

Softlogic Life Insurance PLC

283, R A De Mel Mw., Kollupitiya, Colombo 03

OMV/ IM

8.0 P 1 building 20.00 15.00 9,000 9,750 Positive

* Previous year property valuation carried out by Mr. P B Kalugalgedara (Chartered Valuation Surveyor)

Summary description of valuation methodologies:

The valuer has used valuation techniques such as market values and discounted cash flow methods where there was lack of comparable market data available based on the nature of the property.

Open Market Value method (OMV)

Open market value method uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets and liabilities, such as a business.

Direct Capital Comparison method (DCC)

This method may be adopted when the rental value is not available from the property concerned, but there are evidence of sale price of properties as a whole. In such cases, the capitalised value of the property is fixed by direct comparison with the capitalised value of similar property in the locality.

Investment method (IM)

The investment method is used to value properties which are let to produce an income for the investor. Conventionally, investment value is a product of rent and yield. Each of these elements is derived using comparison techniques.

Residual method (RM)

The residual method is based on the concept that the value of a property with development potential is derived from the value of the property after development minus the cost of undertaking that development, including a profit for the developer.

22.4 Land and buildings

In Rs. ‘000 GroupAs at 31 March 2020 2019

At cost 2,564,300 1,551,406 At valuation 36,773,638 30,690,744

39,337,938 32,242,150


117


22.5 Carrying value


At cost 15,359,510 15,633,594 84,644 95,430 At valuation 36,773,638 30,690,744 - - On finance lease - 269,674 - 75,533

52,133,148 46,594,012 84,644 170,963

22.6 The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows:

In Rs. ‘000 Land and buildings

Buildings on leasehold

land

Group

As at 31 March 2020 2019

Cost 16,402,202 8,204,414 24,606,616 19,481,015 Accumulated depreciation (1,530,961) (685,158) (2,216,119) (1,788,819)Carrying value 14,871,241 7,519,256 22,390,497 17,692,196

22.7 Property, plant and equipment pledged as securities

Group land and buildings with a carrying value of Rs. 17,009.85 Mn (2019 - Rs. 12,853.56 Mn) have been pledged as security for term loans obtained, details of which are disclosed in note 54.

22.8 Fully depreciated but still in use

Group property, plant and equipment with a cost of Rs. 4,573.16 Mn (2019 - Rs. 3,791.65 Mn) have been fully depreciated and continue to be in use by the Group. The cost of fully depreciated assets in the Company amounts to Rs. 76.36 Mn (2019 - Rs. 43.34 Mn).

22.9 Permanent fall in value of property, plant and equipment

There is no permanent fall in the value of property, plant and equipment which requires a provision for impairment other than the details disclosed under note 18 and note 22.1 to the financial statements.

22.10 Title restriction on property, plant and equipment

There were no restrictions that existed on the title to the property, plant and equipment of the Group/ Company as at the reporting date.

23 RIGHT OF USE ASSETS/ LEASE RENTALS PAID IN ADVANCE

ACCOUNTING POLICY

Set out below are the new accounting policies of the Group upon adoption of SLFRS 16, which have been applied from the date of initial application:

Right of use assets

The Group recognises right of use assets when the underlying asset is available for use. Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life or the lease term. Right of use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

118


Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the commencement date. It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Expenses relating to short term leases and leases of low value assets amounting to Rs. 183.36 Mn has recognised in profit or loss.

Leases - policy applicable before 01 April 2019

Leases previously classified as Finance Leases

For leases previously classified as finance leases, the Group recognised initially at the fair value of the asset or, if lower, the present value of the minimum lease payments. Finance charges payable are recognised in ‘Interest Expenses’ over the period of the lease based on the interest rate implicit in the lease so as to give a constant rate of interest on the remaining balance of the liability.

Leases previously classified as Operating Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

23.1 Right of use assets

In Rs. ‘000 Group CompanyAs at 31 March Lease

rentals paid in advance

Leasehold properties

Plant and machinery

Motor Vehicles

Total2020

Leasehold properties

Motor Vehicles

Total2020

CostAs at 31 March 2019 789,095 - - - 789,095 - - - Initial recognition - SLFRS 16 - 5,953,769 - - 5,953,769 34,767 - 34,767 Transfers - SLFRS 16 (789,095) 789,095 179,593 276,584 456,177 - 109,943 109,943 Effect of initial application of SLFRS 16 - (59,714) - - (59,714) - - - As at 1 April 2019 - 6,683,150 179,593 276,584 7,139,327 34,767 109,943 144,710 Additions - 913,106 246,866 48,666 1,208,638 - - - Transfers - - - (54,996) (54,996) - (20,766) (20,766)Derecognition - (13,851) - - (13,851) - - - Exchange difference - - - (889) (889) - - - At the end of the year - 7,582,405 426,459 269,365 8,278,229 34,767 89,177 123,944

Accumulated amortisationTransfers - SLFRS 16 - - 84,385 108,408 192,793 - 34,410 34,410 As at 1 April 2019 - - 84,385 108,408 192,793 - 34,410 34,410 Amortisation expense - 1,459,447 41,887 29,849 1,531,183 24,856 10,995 35,851 Transfers - - - (34,704) (34,704) - (9,680) (9,680)Derecognition - (11,428) - - (11,428) - - - Exchange difference - - - 249 249 - - -At the end of the year - 1,448,019 126,272 103,802 1,678,093 24,856 35,725 60,581

Carrying valueAs at 31 March 2020 6,134,386 300,187 165,563 6,600,136 9,911 53,452 63,363


119


23.2 Lease liability

Set out below are the carrying amounts of lease liabilities and the movements for the period ended 31 March 2020.


Group2020

Company2020

Initial recognition - SLFRS 16 5,514,132 34,704 Transfers - SLFRS 16 104,206 20,336 As at 1 April 2019 5,618,338 55,040 Additions 1,130,832 - Derecognition (12,511) - Interest expense 739,509 4,123 Payments (1,804,940) (45,307)Exchange difference (674) - At the end of the year 5,670,554 13,856

Repayable within one year 1,348,221 10,621 Repayable after one year 4,322,333 3,235

5,670,554 13,856

23.3 Amounts recognised in income statement relating to right of use assets

Following are the amounts recognised in the income statement for the year ended 31 March 2020.

In Rs. ‘000 2020As at 31 March Group Company

Amounts recognised in income statementAmortisation of right of use assets 1,531,183 35,851 Interest expense on lease liabilities 739,509 4,123

23.4 Impairment of right of use assets

The Group does not foresee any impairment of right of use assets due to the COVID-19 pandemic since as each business unit is operating under the business continuity plans as per the Group risk management strategy, to the extent possible, whilst strictly adhering to and supporting government directives. The Group does not anticipate discontinuation of any right of use assets as at the reporting date.

24 INVESTMENT PROPERTIES

ACCOUNTING POLICY

Properties held to earn rental income and properties held for capital appreciation have been classified as investment property.

Investment properties are measured initially at cost, including transaction costs. The carrying value of an investment property includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day-to-day servicing of the investment property. Subsequent to initial recognition, the investment properties are stated at fair values, which reflect market conditions at the reporting date.

Gains or losses arising from changes in fair value are included in the income statement in the year in which they arise. Fair values are evaluated at frequent intervals by an accredited external, independent valuer.

Investment properties are derecognised when disposed, or permanently withdrawn from use because no future economic benefits are expected. Any gains or losses on de-recognition or disposal are recognised in the income statement in the year of derecognition or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property or inventory (WIP), the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property or inventory (WIP), the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. Where Group companies occupy a 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 the Group accounting policy for property, plant and equipment.

120



At the beginning of the year 1,695,261 1,238,300 744,000 704,000 Additions during the year 2,195 18,237 - - Change in fair value during the year 332,924 245,000 50,500 40,000 Transfer from property, plant and equipment - 193,724 - - At the end of the year 2,030,380 1,695,261 794,500 744,000

24.1 Amounts recognised in income statement relating to investment property

Following are the amounts recognised in the income statement.


Amounts recognised in income statementRevenue 28,800 - 80,672 77,189 Direct operating expenses - 15 24,812 23,741

24.2 Accounting judgements, estimates and assumptions

The fair value of investment property is ascertained by independent valuations carried out by Chartered Valuation Surveyors, who have recent experience in valuing properties of similar category. in similar location. Investment property is appraised by the independent valuers in accordance with LKAS 40, SLFRS 13 and the 8th edition of International Valuation Standards published by the International Valuation Standards Committee (IVSC). In determining the fair value, the current condition of the properties, future usability and associated re-development requirements have been considered. Also, the valuers have made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are rounded within a range of values.

As a result of the COVID-19 outbreak in Sri Lanka during the last part of the quarter ended 31 March 2020, a reassessment of the valuations were obtained by the same independent professional valuers who determined there was no significant change to the revalued carrying amount provided prior to 31 March 2020.

The following items were indicated in the reassessment reports to the Group;

The outbreak of COVID 19, declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020, has impacted both local and global markets.

Consequently, as at the reporting date, the value reflected represents the best estimate based on the market conditions that prevailed, which in valuers’ considered opinion, meets the requirements in SLFRS-13 Fair Value Measurement.

Changes in fair value of lands and buildings which are recognised as investment property are recognised in the income statement. The valuer has used the open market approach in determining the fair value of the land. Further details on fair value of investment property are disclosed in the below note.


121


Valuation details of investment property - Group


Extent Range of estimates for significant unobservable

inputs


Per perch value - Rs. Mn 2020 2019

Property valuations by Mr. G W G Abeygunawardene (Chartered Valuation Surveyor)Land ofSoftlogic Retail (Pvt) Ltd Dekatana, Gampaha OMV/ RM 20 A 2 R 27 P 0.04 0.03 PositiveOdel Lanka (Pvt) Ltd 271 & 271F, Kaduwela Road, Thalangama & 197/C,

Kalapaluwawa Road, Thalangama OMV/ RM 1 A 2 R 25.7 P 6.50 5.80 PositiveSoftlogic Communications (Pvt) Ltd Kahandamodara Road, Kahaduwa, Ranna OMV 44.7 P 0.08 0.07 Positive

Matara - Hambanthota Road, Ranna, Thangalla OMV 27.7 P 0.09 0.08 PositiveJayabima Road, Panagoda OMV 15.6 P 0.40 0.60 PositiveUdaya Mw., Heiyanthuduwa, Biyagama OMV 14 P 0.30 0.30 PositiveBogamuwa Village, Agunakolapalassa OMV 2 R 2.2 P 0.03 0.03 Positive


No of buildings

Range of estimates for significant unobservable

inputs


Per square foot value - Rs. 2020 2019

Property valuations by Mr. G W G Abeygunawardene (Chartered Valuation Surveyor)Building of Asiri Surgical Hospital PLC - New Cancer Care Unit

21, Kirimandala Mw., Colombo 05 DCC 1 building 32,042 28,871 Positive

Valuation details of investment property - Company



Range of estimates for significant unobservable inputs Correlation to fair value

Per perch value - Rs. Mn. Per square foot value - Rs. 2020 2019 2020 2019

Property valuations by Mr. G W G Abeygunawardene (Chartered Valuation Surveyor)Land ofSoftlogic Holdings PLC

14, De Fonseka Place, Colombo 05 OMV 20.49 P

16.50 - 17.50

15.50 - 16.50 - - Positive

Land and building ofSoftlogic Holdings PLC

262, Gagarama Road, Piliyandala

OMV/ DCC 1 A 2 R 21 P 14 buildings 0.88 0.75

580 - 5,850

600 - 6,000 Positive

Summary description of valuation methodologies are disclosed under property, plant & equipments and note no. 22.3 to the Financial Statements.

122


24.3 The table below summarise the maturity profile of Group’s undiscounted lease payments to be received as at 31 March 2020


Between 1-2 years

Between 2-3 years

Between 3-4 years

Between 4-5 years

Total

Lease payments to be received 37,893 40,362 42,551 45,354 19,070 185,230 37,893 40,362 42,551 45,354 19,070 185,230

25 INTANGIBLE ASSETS

ACCOUNTING POLICY

Basis of recognition

An intangible asset is recognised if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be reliably measured.

Basis of measurement

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Internally generated intangible assets, excluding capitalised development costs, are not capitalised, and expenditure is charged against income in the year in which the expenditure is incurred.

Useful economic lives, amortisation and impairment

The useful lives of intangible assets are assessed as either finite or infinite. Intangible assets with finite lives are amortised over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end and such changes are treated as accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement.

Intangible assets with infinite useful lives are not amortised but tested for impairment annually, or more frequently when an indication of impairment exists either individually or at the cash- generating unit level. The useful life of an intangible asset with an infinite life is reviewed annually to determine whether infinite life assessment continues to be supportable. If not, the change in the useful life assessment from infinite to finite is made on a prospective basis.

Goodwill

Goodwill is initially measured at the acquisition date as the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Lease rights

Lease rights acquired as part of a business combination, are capitalised if they meet the definition of an intangible asset and the recognition criteria are satisfied. Leased rights are amortised on a straight-line basis over their estimated useful life.

Present Value of acquired In-force Business (PVIB)

The present value of future profits on a portfolio of long term life insurance contracts as at the acquisition date is recognised as an intangible asset based on a valuation carried out by an independent actuary. Subsequent to initial recognition, the intangible asset is carried at cost less accumulated amortisation and accumulated impairment losses.

The PVIB is amortised over the average useful life of the related contracts in the portfolio. The amortisation charge and any impairment losses would be recognised in the consolidated income statement as an expense.


123


Purchased software

Purchased software is recognised as an intangible asset and is amortised on a straight line basis over its useful life.

Software licenses

Software license costs are recognised as an intangible asset and amortised over the period of the related license.

Brand name

Brands acquired as part of a business combination, are capitalised as Brands if they meet the definition of an intangible asset and are tested for impairment annually or more frequently if events or changes in the circumstances indicate that the carrying value may be impaired.

A summary of the policies applied to the group’s intangible assets is as follows:

Intangible Useful life Acquired/ internally generated

Impairment testing

Goodwill Infinite Acquired annually or when an indication of impairment existsLease rights Over the remaining lease period Acquired when an indication of impairment existsPurchased software 3 - 5 years Acquired when an indication of impairment arisesPresent Value of acquired In-force Business (PVIB) 16 years Acquired when an indication of impairment existsBrand name Infinite Acquired annually or when an indication of impairment exists

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

In Rs. ‘000 Goodwill Lease right

PVIB Brand name

Others* Group Company

Total Total Computer Software As at 31 March 2020 2019 2020 2019

Cost / carrying valueAt the beginning of the year 4,604,797 892,406 1,980,620 1,509,085 1,568,699 10,555,607 10,132,809 6,814 14,326Additions - - - - 308,660 308,660 141,234 2,944 2,635Acquisition of subsidiary - - - - - - 391,202 - -Transfers - - (12,094) - -Impairment/ derecognition - - - - (4,963) (4,963) (97,978) (4,963) (10,147)Exchange translation difference - - - - (1,366) (1,366) 434 - -At the end of the year 4,604,797 892,406 1,980,620 1,509,085 1,871,030 10,857,938 10,555,607 4,795 6,814

Accumulated amortisation and impairmentAt the beginning of the year - 178,062 938,732 - 674,279 1,791,073 1,522,445 6,128 13,733Amortisation - 22,484 123,789 - 120,973 267,246 262,143 2,162 2,542Acquisition of subsidiary - - - - - - 24,937 - -Impairment/ derecognition - - - - (4,963) (4,963) (18,543) (4,963) (10,147)Exchange translation difference - - - - (424) (424) 91 - -At the end of the year - 200,546 1,062,521 - 789,865 2,052,932 1,791,073 3,327 6,128

Carrying valueAs at 31 March 2020 4,604,797 691,860 918,099 1,509,085 1,081,165 8,805,006 1,468As at 31 March 2019 4,604,797 714,344 1,041,888 1,509,085 894,420 8,764,534 686

* Other intangible assets include purchased software and software licenses, other license fee and franchise fee paid on acquiring operational rights.

124


Goodwill & brand names

Goodwill and brand names acquired through business combinations have been allocated to six cash generating units (CGU’s) for impairment testing as follows:

In Rs. ‘000 Goodwill Brand name As at 31 March 2020 2019 2020 2019

Information and Communication Technology 14,087 14,087 - - Retail 1,200,377 1,200,377 998,180 998,180 Travel and Leisure 182,207 182,207 4,169 4,169 Financial Services 817,742 817,742 - - Healthcare Services 2,358,921 2,358,921 506,736 506,736 Others 31,463 31,463 - -

4,604,797 4,604,797 1,509,085 1,509,085

Present Value of acquired-In -force Business (PVIB)

Upon acquiring a controlling stake in Softlogic Life Insurance PLC (previously known as Asian Alliance Insurance PLC), the Group recognised in the consolidated financial statements an intangible assets representing the present value of future profits on SLI’s portfolio of long term life insurance contracts at the acquisition date, known as the present value of acquired in-force business (PVIB). PVIB recognised at the acquisition date is being amortised over the life of the business acquired and reviewed annually for any impairment in value.


Impairment of goodwill

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active market in an arm’s length transaction of similar assets, or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

The recoverable amount of all CGUs have been determined based on the higher of fair value less costs to sell and its Value in Use (VIU) calculation. VIU is determined by discounting the future cash flows generated from continuing use of the unit. The recoverability of quoted entities determined based on share price existed as at reporting date. The key assumptions used are given below:

Business growth - volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to five years immediately subsequent to the budgeted year, based on industry growth rates. Cash flows beyond a five year period are extrapolated using zero growth rate.

Inflation - budgeted cost inflation is the inflation rate, based on projected economic conditions.

Discount rate - the discounting rate used is the risk free rate increased by an appropriate risk premium.

Margin - budgeted gross margins are the gross margins achieved in the year preceding, adjusted for projected market conditions and business plans.


125


26 INVESTMENT IN SUBSIDIARIES

ACCOUNTING POLICY

Investments in subsidiaries are initially recognised at cost in the financial statements of the Company. Any transaction cost relating to acquisition of investment in subsidiaries is immediately recognised in the income statement. Following initial recognition, investments in subsidiaries are carried at cost less any accumulated impairment losses.

In Rs. ‘000 Note CompanyAs at 31 March 2020 2019

Quoted investments 26.1 8,288,319 8,260,396 Unquoted investments 26.2 11,768,304 11,768,304

20,056,623 20,028,700

26.1 Group quoted investments

In Rs. ‘000 Group CompanyAs at 31 March No of

shares Effective

holding % No of

shares Holding

% 2020 2019

Asiri Hospital Holdings PLC 596,859,039 51.61 580,434,328 51.03 5,585,003 5,563,998 Asiri Surgical Hospital PLC 415,055,398 40.54 - - - - Odel PLC 265,920,868 97.72 - - - - Softlogic Capital PLC 515,952,743 74.98 515,952,743 74.98 2,670,061 2,670,061 Softlogic Finance PLC 82,623,201 58.10 1,186,909 1.15 31,695 24,777 Softlogic Life Insurance PLC 193,996,310 38.80 175,550 0.05 1,560 1,560

8,288,319 8,260,396

Group quoted investments

In Rs. ‘000 Group CompanyAs at 31 March 2020* 2019 2020* 2019

Market ValueAsiri Hospital Holdings PLC 11,638,751 12,016,148 11,318,469 11,704,569 Asiri Surgical Hospital PLC 4,067,543 3,935,315 - - Odel PLC 5,876,851 6,940,535 - - Softlogic Capital PLC 2,528,168 2,837,740 2,528,168 2,837,740 Softlogic Finance PLC 1,255,873 1,083,163 18,041 16,847 Softlogic Life Insurance PLC 6,770,471 6,110,884 6,127 5,530

32,137,657 32,923,785 13,870,805 14,564,686

* The indicative market values of the 2020 are based on 28 February 2020 active market prices, since as at 31 March 2020 shows factors which are indicative of an inactive market due to COVID-19 pandemic.

126


26.2 Group unquoted investments

In Rs. ‘000 Group CompanyAs at 31 March Number of

shares Effective

holding % Number of

shares Holding

% 2020 2019

Asiri Central Hospitals Ltd 10,319,735 48.74 - - - -Asiri Diagnostic Services (Asia) PTE Ltd 1 51.61 - - - -Asiri Diagnostics Services (Pvt) Ltd 273,221 34.34 - - - -Asiri Hospital Galle (Pvt) Ltd 44,000,002 51.61 - - - -Asiri Hospital Matara (Pvt) Ltd 25,999,999 51.61 - - - -Asiri Laboratories (Pvt) Ltd 100,000 51.61 - - - -Asiri Myanmar Ltd 1 51.61 - - - -BSL International (Pvt) Ltd (liquidated on 18-07-2020) 298,400 97.72 - - - -Central Hospitals Ltd 214,539,804 51.47 - - - -Ceysand Resorts Ltd - Voting Shares 17,087,669 99.90 - - - - - Non Voting Shares 134,250 96.58 - - - -Cotton Collection (Pvt) Ltd 600,100 97.72 - - - -Dai-Nishi Securities (Pvt) Ltd 49,999,998 99.99 - - - -Future Automobiles (Pvt) Ltd 19,300,000 100.00 19,300,000 100.00 195,675 195,675Greenfield Trading (Pvt) Ltd (liquidated on 18-01-2020) - - - - - -Odel Apparels (Pvt) Ltd 2 97.72 - - - -Odel Information Technology Services (Pvt) Ltd 1 97.72 - - - -Odel Lanka (Pvt) Ltd 27,000,002 97.72 - - - -Odel Properties (Pvt) Ltd 1,081,002 97.72 - - - -Odel Properties One (Pvt) Ltd 76,925,383 97.72 - - - -Odel Restaurants (Pvt) Ltd 100,000 97.72 - - - -Silk Route Foods (Pvt) Ltd 5,100 51.00 - - - -SML Holdings (Pvt) Ltd 99,999 86.17 - - - -Softlogic Australia (Pty) Ltd - Ordinary Shares 1,900,002 100.00 1,900,002 100.00 162,256 162,256 - Preference Shares 256,578 100.00 256,578 100.00 31,687 31,687Softlogic Asset Management (Pvt) Ltd 3,500,002 74.98 - - - -Softlogic Automobiles (Pvt) Ltd 5,000,000 100.00 5,000,000 100.00 50,000 50,000Softlogic B P O Services (Pvt) Ltd 5,100,000 100.00 5,100,000 100.00 51,000 51,000Softlogic Brands (Pvt) Ltd 716,368 97.72 - - - -Softlogic City Hotels (Pvt) Ltd 230,569,836 99.92 - - - -Softlogic Communication Services (Pvt) Ltd 100 100.00 - - - -Softlogic Communications (Pvt) Ltd 10,442,153 100.00 - - - -Softlogic Computers (Pvt) Ltd 200,000 100.00 200,000 100.00 2,354 2,354Softlogic Corporate Services (Pvt) Ltd 2,725,002 100.00 2,725,002 100.00 10,394 10,394Softlogic Destination Management (Pvt) Ltd 100,000 100.00 100,000 100.00 1,000 1,000Softlogic Healthcare Holdings Ltd 100,000 100.00 100,000 100.00 1,000 1,000Softlogic Information Technologies (Pvt) Ltd 436,496 100.00 436,496 100.00 4,906 4,906Softlogic International (Pvt) Ltd 669,808 100.00 - - - -Softlogic Mobile Distribution (Pvt) Ltd 1,000,000 100.00 - - - -Softlogic Properties (Pvt) Ltd 483,421,208 99.92 483,421,208 99.92 4,438,214 4,438,214Softlogic Restaurants (Pvt) Ltd 59,500,000 100.00 59,500,000 100.00 595,000 595,000Softlogic Retail (Pvt) Ltd 169,345,616 99.99 - - - -Softlogic Retail Holdings (Pvt) Ltd 627,239,302 100.00 627,239,302 100.00 6,272,393 6,272,393Softlogic Retail One (Pvt) Ltd 100,000 100.00 100,000 100.00 1,000 1,000Softlogic Rewards (Pvt)Ltd 100,000 100.00 100,000 100.00 1,000 1,000Softlogic Solar (Pvt) Ltd 100 100.00 100 100.00 1 1Softlogic Stockbrokers (Pvt) Ltd 19,700,000 74.98 - - - -Softlogic Supermarkets (Pvt) Ltd 17,100,000 100.00 17,100,000 100.00 171,000 171,000Suzuki Motors Lanka Ltd 12,031,051 86.17 - - - -

11,988,880 11,988,880Less - Impairment of investments (Note 26.3) (220,576) (220,576)

11,768,304 11,768,304


127



Impairment of investments

An impairment assessment was carried out as at 31 March 2020 and it was concluded that the net realisable value of all investments included under quoted and unquoted investments exceed their carrying value except for the investments made in Future Automobiles (Pvt) Ltd, Softlogic Solar (Pvt) Ltd and Softlogic Australia (Pty) Ltd.

Movement in provision for impairment of investments in subsidiaries

In Rs. ‘000 CompanyAs at 31 March 2020 2019

At the beginning of the year 220,576 220,576 Provision for impairment - - At the end of the year 220,576 220,576

27 INVESTMENTS IN EQUITY ACCOUNTED INVESTEES

ACCOUNTING POLICY

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

Associate companies of the Group which have been accounted for under the equity method of accounting are:

Name of the company Country of incorporation

Digital Health (Pvt) Ltd Sri LankaGerry’s Softlogic (Pvt) Ltd PakistanJendo Innovations (Pvt) Ltd Sri LankaNextage (Pvt) Ltd Sri LankaSabre Travel Network Lanka (Pvt) Ltd Sri Lanka

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Joint venture company of the Group which have been accounted for under the equity method of accounting is:

Name of the company Country of incorporation

Asiri A O I Cancer Centre (Pvt) Ltd Sri Lanka

The considerations assessed in determining significant influence a similar to those in determining control over subsidiaries.

The Group’s investments in its associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment individually.

The income statement reflects the Group’s share of the results of operations of associates. OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The aggregate of the Group’s shares of profit or loss of associates is shown on the face of the income statement outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate venture and its carrying value, and then recognises the loss as ‘Share of results of equity accounted investees’ in the income statement.

Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in the income statement.

The accounting policies of associate companies conform to those of the Group.

The equity method of accounting has been applied for associates using their financial statements for the corresponding financial period or a matching 12 month period. In the case of associates whose reporting dates are different to Group reporting dates, adjustments are made for significant transactions or events up to 31 March.

128



Investments in equity accounted investees 27.1 109,355 78,249 41,000 11,000 109,355 78,249 41,000 11,000

27.1 Group investments in equity accounted investees


Investments in joint venturesUnquotedAsiri A O I Cancer Centre (Pvt) Ltd 29,480 29,368 - -

29,480 29,368 - - Investments in associatesUnquotedDigital Health (Pvt) Ltd 5,753 10,080 - - Gerry's Softlogic (Pvt) Ltd - - 2,700 2,700 Nextage (Pvt) Ltd 5,541 6,885 1,250 1,250 Jendo Innovations (Pvt) Ltd 30,000 - 30,000 - Sabre Travel Network Lanka (Pvt) Ltd 37,475 65,552 9,750 9,750

78,769 82,517 43,700 13,700 Less: impairment of investment in Gerry's Softlogic (Pvt) Ltd - - (2,700) (2,700)

78,769 82,517 41,000 11,000

Share of profit accruing to the group 27.2 1,611 7,080 - - Share of associate companies dividend - (40,750) - - Share of OCI accruing to the group 27.2 (505) 34 - -

109,355 78,249 41,000 11,000

27.2 Summarised financial information of equity accounted investees

In Rs. ‘000 Associates Joint ventures

GroupAs at 31 March 2020 2019

Group share of:Revenue 149,721 52,480 202,201 187,452 Operating expenses (148,307) (52,975) (201,282) (193,985)Other income 578 114 692 13,613 Profit/ (loss) for the year 1,992 (381) 1,611 7,080

Group share of:Share of other comprehensive income/ (loss) of equity accounted investees (473) (32) (505) 34 Net share of other comprehensive income/ (loss) for the year (473) (32) (505) 34

Group share of:Total assets 188,570 104,614 293,184 243,263 Total liability (140,168) (91,715) (231,883) (189,941)Net assets 48,402 12,899 61,301 53,322 Unrealised profits (52) - (52) (130)Deferred tax on undistributable profits (5,917) - (5,917) (5,917)Goodwill 37,856 16,167 54,023 30,974

80,289 29,066 109,355 78,249

Contingent liabilities Nil Nil Nil Nil Capital commitments Nil Nil Nil Nil


129


28 NON - CURRENT FINANCIAL ASSETS


Other quoted equity investments 28.1 2,209,682 1,547,325 - - Other unquoted equity investments 28.2 373,660 469,217 - - Other non equity investments 28.3 13,970,817 10,990,674 1,549,170 1,465,042

16,554,159 13,007,216 1,549,170 1,465,042

28.1 Other quoted equity investments

In Rs. ‘000 Number of shares

Group As at 31 March 2020 2019

Access Engineering PLC 2,028,927 37,129 - ACL Cables PLC 616 19 20 Ceylon Cold Stores PLC 52,095 40,113 - Commercial Bank of Ceylon PLC 1,305,000 111,578 - John Keells Holdings PLC 298,243 43,543 - Lanka IOC PLC 605,000 10,285 - Lanka Tiles PLC 400,000 29,440 - Melstacorp PLC 1,204,686 52,404 - National Development Bank PLC 17,216,038 1,721,604 1,546,201 People's Leasing & Finance PLC 1,000,000 14,700 - Sampath Bank PLC 574,978 91,709 - Seylan Bank PLC - Non Voting Shares 31,984 1,080 1,104 Teejay Lanka PLC 1,602,215 56,078 -

2,209,682 1,547,325

28.2 Other unquoted equity investments

In Rs. ‘000 Number of shares


Cargills Bank Ltd 34,000,000 373,660 469,000 Voyages Jean Mermoz Ltd - 10Ceylon Lexcon Services Ltd - 207

373,660 469,217

28.3 Other non equity investments


Debentures 4,183,297 2,683,462 - - Fixed deposits 29,061 25,388 - - Government securities 5,375,282 3,316,389 - - Hire purchase trade debtors 32.1 1,487,164 1,252,299 - - Investment in Unit Trust 249 - - - Loans and advances 33 2,889,626 3,712,555 - - Loans to executives 6,107 550 - - Loans to subsidiaries - - 1,549,170 1,465,042 Placement with banks and financial institutions 31 31 - -

13,970,817 10,990,674 1,549,170 1,465,042

130


28.4 Reclassification of financial assets at Fair Value Through Profit or Loss (FVTPL) to financial assets at Fair Value Through Other Comprehensive Income (FVOCI)

Guidance Notes on Accounting Considerations of the COVID-19 Outbreak issued by Institute of Chartered Accountants of Sri Lanka on 11 May 2020 granted a one off option to reclassify equity instruments after initial recognition if the entity decides to change its business model as at 1 January 2020. Accordingly, Softlogic Life Insurance PLC has reclassified equity instruments from FVTPL to FVOCI with effect from 01 January 2020. Subsequent to the reclassification, the gain or loss on disposal of equity shares are recognised in the statement of profit or loss and other comprehensive income. Already recognised fair value loss of Rs. 178.60 Mn has been reversed in the Income Statement on reclassification for the period ended 31 March 2020.

Details of reclassified amounts from FVTPL to FVOCI are as follows.

In Rs. ‘000 Fair value Impact on Income Statement

Impact on Other Comprehensive

Income

As at 31 March 2020 349,735 178,596 (178,596)

29 RENTAL RECEIVABLE ON LEASE ASSETS AND HIRE PURCHASE

ACCOUNTING POLICY


When the Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of the asset to the lessee, the arrangement is classified as a finance lease and a receivable equal to the net investment in the lease is recognised. Amounts receivable under finance leases are included

under “Rentals receivable on leased assets”. Leasing balances are stated in the statement of financial position after deduction of initial rentals received, unearned lease income and the provision for impairment losses.

29.1 Receivable from one to five years

In Rs. ‘000 Group As at 31 March 2020 2019

Rental receivable

on lease assets

Rental receivable

on hire purchase

Total Rental receivable

on lease assets

Rental receivable

on hire purchase

Total

Rental receivables 1,594,598 - 1,594,598 1,467,071 25,010 1,492,081 Unearned income (359,129) - (359,129) (352,029) (4,535) (356,564)Impairment (79,446) - (79,446) - - -

1,156,023 - 1,156,023 1,115,042 20,475 1,135,517

29.2 Receivable within one year

In Rs. ‘000 Group As at 31 March 2020 2019

Rental receivable

on lease assets

Rental receivable

on hire purchase

Total Rental receivable

on lease assets

Rental receivable

on hire purchase

Total

Rental receivables 1,309,192 114,283 1,423,475 1,234,959 96,540 1,331,499 Unearned income (347,077) (1,256) (348,333) (391,453) (5) (391,458)Impairment (53,259) (17,621) (70,880) (84,444) (25,119) (109,563)

908,856 95,406 1,004,262 759,062 71,416 830,478 2,064,879 95,406 2,160,285 1,874,104 91,891 1,965,995


131



Impairment of rental receivables

For rental receivables on lease assets and hire purchases, 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, recognised are not included in a collective assessment of impairment.

29.3.1 Analysis of rental receivable on lease assets and hire purchase on maximum exposure to credit risk

In Rs. ‘000 TotalAs at 31 March Stage 1 Stage 2 Stage 3 2020

Gross rental receivables - subject to collective impairment 1,344,904 493,287 472,420 2,310,611 Allowance for expected credit losses (ECL) (12,397) (26,562) (111,367) (150,326)

1,332,507 466,725 361,053 2,160,285


Gross rental receivables - subject to collective impairment 1,112,696 620,054 342,809 2,075,559 Allowance for expected credit losses (ECL) (9,156) (20,739) (79,669) (109,564)

1,103,540 599,315 263,140 1,965,995

29.3.2 Movement in allowance for expected credit losses (ECL)


Balance as at 01 April 2019 9,156 20,739 79,669 109,564 Charge to income statement 3,241 5,823 31,698 40,762

12,397 26,562 111,367 150,326


Balance as at 01 April 2018 871 3,606 127,495 131,972 Impact of adopting SLFRS 9 22,013 3,326 (27,203) (1,864)Charge/ (reversal) to income statement (13,728) 13,807 (20,623) (20,544)

9,156 20,739 79,669 109,564

30 OTHER NON-CURRENT ASSETS

In Rs. ‘000 Note GroupAs at 31 March 2020 2019

Rent advances 542,913 538,817 Deferred expenditure - 35,900 Work-in-progress - Odel Mall project 30.1 4,396,971 2,641,070

4,939,884 3,215,787

30.1 Work-in-progress - Odel Mall project

Odel Properties One (Pvt) Ltd, a fully own subsidiary of Odel PLC is engaged in the development and construction of an integrated complex with an approximate area of 645,000 sq. ft., comprising of retail and associate facilities, residential units, cinemas and a car park.

Work-in-progress - Odel Mall project includes advances paid to contractors, directly attributable cost incurred on the project and borrowing cost capitalised.

132


Reconciliation of work-in-progress - Odel Mall project


At the beginning of the year 2,641,070 619,407 Additions during the period 1,755,901 2,021,663 At the end of the year 4,396,971 2,641,070

31 INVENTORIES

ACCOUNTING POLICY

Inventories are valued at the lower of cost and net realisable value.

Net realisable value is the estimated selling price less estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories is:

» Finished goods - cost of direct materials and direct labour and an appropriate proportion of fixed overheads based on normal operating capacity

» Other stock - actual cost


Finished goods 10,540,414 8,815,937 Other stocks 2,409,250 2,309,686

12,949,664 11,125,623 Less - provision for write-down of inventories 31.1 (514,900) (436,602)

12,434,764 10,689,021

31.1 Movement in provision for write-down of inventories


At the beginning of the year 436,602 396,226 Acquisition of subsidiary - 6,691 Provision for write-down of inventories 139,950 75,137 Written off during the year (61,652) (41,452)At the end of the year 514,900 436,602

32 TRADE AND OTHER RECEIVABLES

ACCOUNTING POLICY


Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Other financial receivables are recognised as other receivables. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Reinsurance receivables

The Group cedes insurance risk in the normal course of business for all of its businesses. Reinsurance receivables represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract.


133



Trade and other receivables 32.1 8,740,669 10,868,292 655,300 398,263 Reinsurance receivables 334,007 294,294 - - Loans to executives 14,868 43,272 4,198 4,218 Other receivables 3,301,682 2,836,536 20,862 509,612

12,391,226 14,042,394 680,360 912,093

32.1 Trade and other receivables

In Rs. ‘000 Note Gross Unearned income

Group Company

As at 31 March 2020 2019 2020 2019

Hire purchase debtors 3,942,855 (124,798) 3,818,057 3,841,478 - - Trade receivables 7,897,499 - 7,897,499 9,602,273 791,921 534,884

11,840,354 (124,798) 11,715,556 13,443,751 791,921 534,884 Less - provision for impairment of trade and other receivables 32.2.1 (1,500,876) (1,323,160) (136,621) (136,621)

11,840,354 (124,798) 10,214,680 12,120,591 655,300 398,263

Trade and other receivablesReceivable within one year 8,740,669 10,868,292 655,300 398,263 Receivable after one year 1,487,164 1,252,299 - -

10,227,833 12,120,591 655,300 398,263


Impairment of receivables

The Group assesses the evidence of impairment of receivables at both an individual asset and at a collective level. All individually significant receivables are individually assessed for impairment by considering objective evidence i.e. significant financial difficulties or default in payments of a customer. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Receivables that are not individually significant are collectively assessed for impairment.

Collective assessment is carried out by grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical information on the probability of default, the timing of recoveries, and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested historical trends.

32.2.1 Movement in provision for trade and other receivables


At the beginning of the year 1,323,160 576,145 136,621 77,853 Impact of adopting SLFRS 9 - 406,489 - 55,353 Acquisition of subsidiary - (1,031) - - Provision for impairment of trade and other receivables 345,746 353,623 - 3,415 Written offs during the year (168,030) (12,066) - - At the end of the year 1,500,876 1,323,160 136,621 136,621

134


33 LOANS AND ADVANCES

ACCOUNTING POLICY


Loans and advances are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.

Policyholders loans are granted up to 90% of the surrender value of a life insurance policy at a rate equivalent to the market rate.


Loans and advances are initially recognised at fair value, which is the cash consideration to originate or purchase the loan including any transaction costs and measured subsequently at amortised cost using the EIR, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in ‘interest income’ in the Statement of profit or loss. The losses arising from impairment are recognised in ‘impairment charge for loans and advances’ in the Statement of profit or loss.

In Rs. ‘000

As at 31 March

Gross Unearned income

Group

2020 2019

Consumer loan receivables 72,907 (7,019) 65,888 31,093 Factoring receivables 642,747 - 642,747 309,227 Gold loan receivables 2,953,867 - 2,953,867 2,014,921 Other loan receivables 8,338,611 (1,218,955) 7,119,656 6,369,013 Personal loan receivables 708,002 (25,537) 682,465 841,563 Revolving loan receivables 1,456,331 (5,494) 1,450,837 1,028,065 SME loan receivables 2,813,540 (148,206) 2,665,334 6,064,954 Gross loan receivable 16,986,005 (1,405,211) 15,580,794 16,658,836 Less - Allowance for impairment (1,401,445) (1,156,603)

16,986,005 (1,405,211) 14,179,349 15,502,233 Policyholders loans 236,700 173,312

16,986,005 (1,405,211) 14,416,049 15,675,545

Loans and advancesReceivable within one year 11,526,423 11,962,990 Receivable after one year 2,889,626 3,712,555

14,416,049 15,675,545


Impairment of loans and advances

Analysis of loan receivables on maximum exposure to credit risk


Gross loan receivables - subject to collective impairment (excluding policyholders loans)Consumer loan receivables 42,815 2,216 20,857 65,888 Factoring receivables 547,239 68,670 26,838 642,747 Gold loan receivables 1,633,127 742,953 577,787 2,953,867 Other loan receivables 1,982,508 1,060,903 4,076,245 7,119,656 Personal loan receivables 54,786 7,646 620,033 682,465 Revolving loan receivables 18,495 21,243 1,411,099 1,450,837 SME loan receivables 841,998 346,769 1,476,567 2,665,334 Gross loan receivable 5,120,968 2,250,400 8,209,426 15,580,794

Less - Allowance for expected credit losses (ECL) (72,453) (139,642) (1,189,350) (1,401,445) 5,048,515 2,110,758 7,020,076 14,179,349


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Gross loan receivables - subject to collective impairment (excluding policyholders loans)Consumer loan receivables 10,513 1,202 19,378 31,093 Factoring receivables 244,463 58,717 6,047 309,227 Gold loan receivables 1,272,996 597,382 144,543 2,014,921 Other loan receivables 2,943,191 2,434,091 991,731 6,369,013 Personal loan receivables 87,634 32,343 721,586 841,563 Revolving loan receivables 457,347 53,033 517,685 1,028,065 SME loan receivables 4,013,407 975,309 1,076,238 6,064,954 Gross loan receivable 9,029,551 4,152,077 3,477,208 16,658,836

Less - Allowance for expected credit losses (ECL) (121,625) (142,489) (892,489) (1,156,603) 8,907,926 4,009,588 2,584,719 15,502,233

Overview of the expected credit loss (ECL) principles

Movement in allowance for expected credit losses (ECL)


Balance as at 01 April 2019 121,625 142,489 892,489 1,156,603 Charge/ (reversal) to income statement (49,172) (2,847) 296,861 244,842

72,453 139,642 1,189,350 1,401,445


Balance as at 01 April 2018 283,807 115,234 1,104,847 1,503,888 Charge/ (reversal) to income statement (162,182) 27,255 (212,358) (347,285)

121,625 142,489 892,489 1,156,603

The Group established a policy to perform as assessment, at the end of each reporting period, of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument.

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ expected credit loss (12mECL).

The 12mECL is the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date.

Both LTECLs and 12mECLs are calculated on either an individual basis or collective basis, depending on the nature of the underlying portfolio of financial instruments.

Based on the above process, the Company groups its loans into Stage 1, Stage 2, Stage 3 and POCI, as described below.

Stage 1 When loans are first recognised, the Group recognises an allowance based on 12mECLs. Stage 1 loans also include

facilities where the credit risk has improved and the loan has been reclassified from Stage 2.

Stage 2 When a loan has shown a significant increase in credit risk since origination, the Group records an allowance for the LTECLs. Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassified from Stage 3.

Stage 3 Loans considered credit-impaired. The Group records an allowance for the LTECLs.

POCI Purchased or originated credit impaired (POCI) assets are financial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognised based on a credit-adjusted EIR. ECLs are only recognised or released to the extent that there is a subsequent change in the expected credit losses.

For financial assets for which the Company has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the financial asset.

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The Calculation of Expected Credit Loss (ECL)

The Group calculates ECLs based on a four probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.

The mechanics of the ECL calculations are outlined below and the key elements are, as follows.

Probability of Default (PD)

The probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.

Exposure at Default (EAD)

The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected draw downs on committed facilities, and accrued interest from missed payments.

Loss Given Default (LGD)

The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.

The mechanism of the ECL method are summarised below.

Stage 1 The 12mECL is calculated as the portion of LTECLs that represent the ECLs that represent the ECLs that result from default events on a financial instrument that are possible with in the 12 months after the reporting date. The Group calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation of the original EIR.

Stage2 When a loan has shown a significant increase in credit risk since origination, the Group records an allowance for the LTECLs. The mechanics are similar to those explained above, including the use of multiple scenarios, but PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR.

Stage 3 For loans considered credit-impaired, the Group recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.

Loan Commitments

When estimating LTECLs for undrawn loan commitments, the Group estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down, based on a probability weighting of the four scenarios. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan.

For factoring receivables and revolving loans that include both a loan and an undrawn commitment. ECLs are calculated and presented with the loan.

Financial Guarantee contracts

The Group’s liability under each guarantee is measured at the higher of the initially recognised less cumulative amortisation recognised in the income statement, and the ECL provision. For this purpose, the Group estimates ECLs based on the present value of the expected payments to reimburse the holder for a credit loss that it incurs. The shortfalls are discounted by the risk-adjusted interest rate relevant to the exposure. The calculation is made using a probability - weighting of the four scenarios. The ECLs related to financial guarantee contracts are recognised within provisions.


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33.2 Error correction on impairment - Softlogic Finance PLC

Softlogic Finance PLC which is a subsidiary of Softlogic Holdings PLC adjusted errors mainly due to at the initial point of forecasting future cash flows for financial year ended 31 March 2018, the Company had not taken in to consideration certain information. In order to rectify this error, the company has re-forecasted the relevant future cash flows and made the necessary adjustments as follows.

In Rs. ‘000 GroupPublished for 2019

Impact of error

Impact of

reclassification

Published for 2020

AssetsNon current assetsNon-current financial assets 13,157,132 (148,901) (1,015) 13,007,216 Total non current assets 78,677,537 (148,901) (1,015) 78,527,621

Current assetsTrade and other receivables 14,351,620 - (309,226) 14,042,394 Loans and advances 11,664,401 - 298,589 11,962,990 Rental receivable on lease assets and hire purchase 835,051 (1,552) (3,021) 830,478 Other current assets 5,343,713 - 14,673 5,358,386 Total current assets 52,143,244 (1,552) 1,015 52,142,707Total assets 130,820,781 (150,453) - 130,670,328

Equity and liabilitiesEquity attributable to equity holders of the parentRevenue reserves (1,716,945) (80,529) - (1,797,474)Equity attributable to equity holders 14,423,148 (80,529) - 14,342,619 Non-controlling interests 10,566,762 (69,924) - 10,496,838 Total equity 24,989,910 (150,453) - 24,839,457 Total equity and liabilities 130,820,781 (150,453) - 130,670,328

34 OTHER CURRENT ASSETS

ACCOUNTING POLICY

The Group classifies all non-financial current assets under other current assets. Other current assets comprise mainly advances, deposits, prepayments and tax refunds and receivables.

Advances and deposits are carried at historical value less a provision for impairment. Prepayments are amortised over the period during which they are utilised and are carried at historical value less amortisation and impairments if any.


Prepayments, advances & non-cash receivables 2,113,443 2,958,382 5,824 6,134 Tax refunds & receivables 1,109,876 1,014,726 70,466 22,139 Other receivables 598,744 1,385,278 - -

3,822,063 5,358,386 76,290 28,273

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35 SHORT TERM INVESTMENTS


Quoted equities at market value 35.1 9,243 568,515 5,140 5,625 Unquoted equity investments 35.2 109,900 125,000 109,900 125,000 Other investments (more than 3 months and less than 1 year) 35.3 781,464 1,801,681 - -

900,607 2,495,196 115,040 130,625

Other investments (less than 3 months)Commercial papers 566,974 446,647 - - Fixed deposits 2,013,728 1,138,134 - - Government securities 2,348,352 1,969,419 - - Investment in Unit Trust 3,527,570 - - -

8,456,624 3,554,200 - - 9,357,231 6,049,396 115,040 130,625

35.1 Quoted equities at market value


shares 2020 2019 Number of

shares 2020 2019

ACL Cables PLC 264 8 9 - - - B P P L Holdings PLC - - 332 - - - Ceylinco Insurance PLC 89 158 189 - - - Commercial Bank of Ceylon PLC 44,391 3,684 90,397 - - - DFCC Bank PLC 296 24 21 - - - Dialog Axita PLC - - 32,566 - - - Dunamis Capital PLC - - 9 - - - Hatton National Bank PLC - - 87,449 - - - John Keells Holdings PLC 334 49 147,870 - - - Lanka IOC PLC 63,200 1,074 1,100 63,200 1,074 1,100 Lanka Tiles PLC 997 62 70 - - - LVL Energy Fund PLC - - 12,337 - - - National Development Bank PLC 955 55 92 - - - Renuka City Hotel PLC 50 12 13 - - - Richard Pieris and Company PLC 210 2 2 - - - Richard Pieris Exports PLC 200 49 42 - - - Sampath Bank PLC 18,772 2,994 88,348 18,772 2,994 3,247 Seylan Bank PLC 143 7 9 143 7 9 Seylan Bank PLC - Non Voting Shares 36,730 1,065 12,853 36,730 1,065 1,269 Teejay Lanka PLC - - 16,720 - - - Union Bank of Colombo PLC - - 66,256 - - - Vallibel One PLC - - 11,831 - - -

9,243 568,515 5,140 5,625

35.2 Unquoted equity investments


shares 2020 2019 Number of

shares 2020 2019

Cargills Bank Ltd 10,000,000 109,900 125,000 10,000,000 109,900 125,000 109,900 125,000 109,900 125,000


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35.3 Other investments


More than 3 months and less than 1 yearDebentures maturing within a year 219,171 275,145 Fixed deposits 4,753 616,839 Government securities 249,955 - Investment in Unit Trust - 601,323 Investments in commercial papers 307,585 308,374

781,464 1,801,681

36 CASH AND CASH EQUIVALENTS


Favourable balancesCash in hand and at bank 3,726,096 2,596,037 800,330 18,294 Restricted cash at bank- Cash margin receivables - 600,313 - -

3,726,096 3,196,350 800,330 18,294

Unfavourable balancesBank overdrafts 7,262,837 7,761,224 160,243 174,702

7,262,837 7,761,224 160,243 174,702

37 STATED CAPITAL

As at 31 March 2020 2019 Number of

shares Value of

shares Rs. ‘000

Number of shares

Value of shares

Rs. ‘000

Fully Paid Ordinary SharesAt the beginning of the year 1,192,543,209 12,119,235 961,728,395 8,195,383 Shares issued during the period - - 230,814,814 3,923,852

1,192,543,209 12,119,235 1,192,543,209 12,119,235

38 OTHER COMPONENTS OF EQUITY


Restricted regulatory reserve 38.1 309,613 309,613 - -Revaluation reserve 38.2 6,464,774 5,724,098 - -Foreign currency translation reserve 38.3 (43,653) (51,772) - -Fair value reserve of financial assets at FVOCI 38.4 (738,331) (783,273) (15,100) -Statutory reserve fund 38.5 263,436 263,436 - -Other reserves 38.6 (774,775) (780,990) - -Cash flow hedge reserve 38.7 (698,124) (660,254) - -

4,782,940 4,020,858 (15,100) -

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38.1 Restricted regulatory reserve reserve reflects the equity holders share of one-off surplus attributable to policyholder non-participating fund to shareholder fund. This reserve has been made as per the direction no. 16 on 20 March 2018 issued by the ‘Insurance Regulatory Commission of Sri Lanka (IRCSL) on ‘Identification and Treatment of one-off surplus’.

38.2 Revaluation reserve consists of the net surplus on the revaluation of property.

38.3 Foreign currency translation reserve comprises the net exchange movement arising on the currency translation of foreign operations and net equity investments of other currency denominated associates into Sri Lankan Rupees (Rs.).

38.4 Fair value reserve of financial assets at FVOCI includes changes on fair value of financial instruments designated as financial assets at FVOCI.

38.5 Statutory reserve fund reflects the profit transfer made by Softlogic Finance PLC in compliance with the Central Bank direction no. 01 of 2003.

38.6 Other reserve is used to recognise goodwill or gains from purchases on subsequent acquisitions of further equity interests in subsidiaries and gains or losses arising from partial and deemed acquisitions/disposals in its subsidiaries.

38.7 Cash flow hedge reserve reflects the effective portion of the gain or loss on the hedging instrument.

39 INSURANCE CONTRACT LIABILITIES

ACCOUNTING POLICY

The Directors agree to the long term insurance business provisions on the recommendation of the actuary following valuation of the life insurance business. The actuarial valuation takes into

account all liabilities including contingent liabilities and is based on assumptions recommended by the Appointed Actuary.


Provision - life 39.1 13,133,911 8,309,628 13,133,911 8,309,628

39.1 Movement in life insurance fund


At the beginning of the year 8,309,628 7,192,591 Increase in life fund 6,720,336 2,546,037 Transfer to shareholders (1,850,275) (1,394,000)Increase in insurance contract liabilities 4,870,061 1,152,037

Tax on policyholder bonus (45,778) (35,000)At the end of the year 13,133,911 8,309,628


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39.2 Change in life insurance contract liabilities

The results of Softlogic Life Insurance PLC life business segment is consolidated line by line into the Group’s consolidated income statement.

The change in life insurance contract liabilities represents the transfer to the Life Fund, the difference between all income and expenditure attributable to life policyholders during the year.

Increase in insurance contract liabilities for the period ended 31 March 2020 included Rs 2.7 Bn commission income received from financial re-insurance arrangement.

In Rs. ‘000 GroupFor the year ended 31 March 2020 2019

Revenue 11,919,961 9,833,075 Cost of sales (6,117,150) (4,752,746)Gross profit 5,802,811 5,080,329 Operating expenses including distribution and administration expenses (3,094,458) (3,153,291)Net finance income 1,231,239 618,999 Profit attributable to shareholders (1,850,275) (1,394,000)Change in insurance contract liabilities 2,089,317 1,152,037

39.3 Recommendation of surplus transfer

The valuation of the life insurance fund as at 31 March 2020 was made by Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI, Messrs. Towers Watson India (Pvt) Limited, who recommended:

» no transfer to shareholders from the participating life fund

» transfer of a sum of Rs. 1,850.28 Mn to non-participating life insurance fund / insurance contract liabilities to the shareholders’ fund (2019 - Rs. 1,394.00 Mn) : (transfer of the amount of Rs. 498.80 Mn (2019 - Rs. 928.00 Mn) declared as surplus for the quarter ended 31 March 2020, as recommended by the Appointed Actuary was permitted by the Insurance Regulatory Commission of Sri Lanka (IRCSL)

Measurement

Life insurance liabilities are recognised when contracts are entered into and premiums are charged. These liabilities are measured on a market consistent basis in accordance with the Solvency Margin (Risk Based Capital) Rules 2015 issued under Sections 105 and 26 (1) of the Regulation of Insurance Industry Act No. 43 of 2000, with effect from 01 January 2016. For periods up to 31 December 2015, the Company used the Net Premium Valuation (NPV) methodology to calculated insurance liabilities in accordance with the Solvency Margin (Long Term Insurance) Rules 2002.

The value of the life insurance liabilities are determined as follows:

Life insurance liabilities = Best Estimate Long term Liability (BEL) + Risk Margin for adverse deviation (RM)

The best estimate liability is measured sum of the present value of all future best estimate cash flows calculated using the risk free interest rate yield curve issued by the Insurance Regulatory Commission of Sri Lanka (IRCSL). Further a discounted cash flow approach equivalent to Gross Premium Valuation (GPV) methodology has been used to calculate liabilities as at 31 March 2020.

Measurement is usually based on the prospective method, by determining the difference between the present value of future benefits and future premiums. The actuarial assumptions used for the calculation include, in particular, assumptions relating to:

» Mortality rates

» Lapse ratios

» Morbidity rates

» Dividend rates

» Expense assumptions

» Participating fund yield

» Expense inflation

» Bonus rates

Assumptions are estimated on a realistic basis at the time the insurance contracts are concluded and they include adequate provision for adverse deviations to make allowance for the risks of change and random fluctuations. Further in valuing the policy liability, provisions for reinsurance have been allowed in accordance with applicable reinsurance terms as per current reinsurance arrangements.

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Details of key assumptions used and basis of arriving for same are summarised in the following table:

Assumption Basis of estimation

Risk free rate Based on Sri Lankan government bond yields issued by IRCSL for the industry as at 31 March 2020 Mortality rates Based on the Mortality investigation carried out as at 31 March 2020

» Individual life - 65% of A67/70

» Group term products - 30% of A67/70

» Single premium mortgage protection plan products - 45% of A67/70

» Per day insurance products - 20% of A67/70Morbidity rates Based on the loss ratios (loss ration is calculated as the ratio of settled and pending claims to earned premiums)Expenses Based on the expense investigation carried out as at 31 December 2019 on expenses incurred during 2019/20.

For the purpose of the expense study, a functional split of expenses between acquisition or maintenance costs have been made on the basis of inputs from various departments heads of each cost centre to determine a reasonable activity based split of expenses. These have been further identified as either being premium or policy-count driven base on the nature of expenses to determine a unit cost loading for use in the valuation.

Expense inflation The best estimate expense inflation has been assumed to be 5% p.a. The expense inflation assumption has remained unchanged since previous valuation. The assumption is also inline with the long term inflation target of Central Bank of Sri Lanka which is in the range of 4 % to 6%.

Persistency ratio Discontinuance assumption are based on the experience investigation. The discontinuance assumptions are set with reference to actual experience and vary by policy duration.

Bonus rate Bonus rate scale assumed has been arrived based on bonus declared as at 31 December 2019, based on the Company management’s views on policyholder reasonable expectations. This assumes that company is expecting to maintain the current bonus levels into the future and is unchanged from the previous valuation.

Participating fund yield Based on the weighted average of projected asset mix on expected yields for various asset types

De-recognition

The liability is de-recognised when the contract is expired, discharged or cancelled.

39.4 Valuation of life insurance fund

Long duration contract liabilities included in the life insurance fund result primarily consist of traditional participating and non-participating life insurance products. The actuarial reserves have been established by Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI, Messrs. Towers Watson India (Pvt) Limited as at 31 March 2020.

Details of the calculation of policy liabilities and net cash flows are provided in the following table for each class of products.

Details of product category Basis of determinants of policy liability

Basis of calculating net cash flows

Individual traditional non-participating products

Discounting “net cash flows” at the risk free interest rate curve

Future premium income (-) death benefit outgo (+) rider benefit outgo (+) surrender benefit outgo (+) maturity benefit outgo (+) commission expenses outgo (+) policy expenses outgo (+) reinsurance recoveries (-) reinsurance premium outgo (+) reinsurance commissions (-)

Individual traditional participating products

Max (guaranteed benefit liability, total benefit liability)

Same as above

Individual universal non- participating products

Discounting “net cash flows” at the risk free interest rate curve

Future premium income (-) death benefit outgo inclusive of dividend accumulations (+) rider benefit outgo (+) surrender benefit Outgo inclusive of dividend accumulations (+) maturity benefit outgo inclusive of dividend accumulations (+) commission expense outgo (+) policy expense outgo (+) reinsurance recoveries (-) reinsurance premium outgo (+) reinsurance commission (-)

Group traditional non-participating products - Group term (life) and per day insurance

Net cash flow Future premium income (-) death benefit outgo (+) rider benefit outgo (+) commission expenses outgo (+) policy expense outgo (+) reinsurance recoveries (-) reinsurance premium outgo (+) reinsurance commission (-)

Group traditional non-participating products - Group Hospitalisation cover

Policy liability has been set equal to Unearned Premium Reserve (UPR)

Not applicable


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39.5 Solvency Margin

In the opinion of the appointed actuary, the Company maintains a Capital Adequacy Ratio (CAR) of 203% and Total Available Capital (TAC) of Rs. 10,710.46 Mn as at 31 March 2020, which exceed the minimum requirement of 120% and Rs. 500.00 Mn respectively

as per the Solvency Margin (Risk Based Capital) Rules 2015 requirement prescribed under section 26 (1) of the Regulation of Insurance Industry Act No. 43 of 2000.

39.6 Liability Adequacy Test (LAT)

ACCOUNTING POLICY

Measurement

At each reporting date, an assessment is made of whether the recognised life insurance liabilities are adequate by using an existing liability adequate test as laid out under SLFRS 4 – Insurance Contracts. The liability value is adjusted to the extent that it is insufficient to meet future benefits and expenses.

In performing the adequacy test, current best estimates of future contractual cash flows, including related cash flows such as claim handling and policy administration expenses, policyholder options and guarantees, as well as investment income from assets backing such liabilities, are used. A number of valuation methods are applied, including discounted cash flows to the extent that the test involves discounting of cash flows, the interest rate applied based on management’s prudent expectation of current market interest rates.

Any deficiency shall be recognised in the income statement by setting up a provision for liability adequacy.

Valuation

Liability Adequacy Test for life insurance contract liability was carried out by Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI, Messrs. Towers Watson India (Pvt) Limited as at 31 December 2019. When performing the LAT, the Company discounted all contractual cash flows and compared this amount with the carrying value of the liability.

Based on the actuarial assessment assets are adequate as compared to the discounted cash flows reserves and in contrast to the reserves as at 31 March 2020.

No additional provision was required against the LAT as at 31 March 2020.

39.7 Surplus created due to change in valuation method - one off surplus zeroed at product level

ACCOUNTING POLICY

Insurance contract liabilities are measured on a market consistent basis in accordance with the Solvency Margin (Risk Based Capital) Rules 2015 with effect from 01 January 2016. However period up to 31 December 2015, the Company used the Net Premium Valuation (NPV) methodology to calculate insurance liability in accordance with Solvency Margin (Long Term Insurance) Rules 2002.

A one off unallocated surplus was created with the migration to the new regime effective 01 January 2016.

Measurement

The surplus created due to change in Valuation Method of Policy Liabilities from Net Premium Valuation (NPV) to Gross Premium Valuation (GPV) is measured based on the difference in the policy liability valuation by the independent Actuary based on NPV and GPV bases valuation as at 31 December 2015 according to the Direction 16 “Identification and Treatment of One-Off Surplus” issued by IRCSL. According to the Direction 16, the Company has determined the One-off Surplus as the difference between NPV Solvency basis liability and GPV Distribution basis liability for both Participating business and other than Participating business.

Valuation

Details of one off adjustment as at 01 January 2016 are as follows:

In Rs. ‘000Description

Participating fund

Non-Participating fund

Total

Value of Insurance contract liability based on Independent Actuary - NPV as at 31 December 2015 3,866,780 2,472,575 6,339,355 Value of Insurance contract liability based on Independent Actuary - GPV 31 December 2015 2,810,245 1,674,571 4,484,816 Surplus created due to Change in Valuation Method - One off Surplus as at 01 January 2016 1,056,535 798,004 1,854,539

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39.7.1 Transfer of one-off surplus from policy holder fund to shareholder fund

The Insurance Regulatory Commission of Sri Lanka (IRCSL) has issued a Direction No 16 on 20 March 2018 on “Guidelines/ directions for Identification and Treatment of One-off Surplus” and has instructed all life insurance companies to comply with the new direction. Based on the new guidelines life insurance companies are directed to transfer one off surplus attributable to policyholder non-participating fund to shareholder fund as at the reporting year ended 31 March 2018. The transfer has been presented as a separate line item in the Income Statement as “change in contract liability due to transfer of one off surplus” and as a separate reserve in the Statement of Financial Position as “Restricted Regulatory Reserve” under equity in accordance with above Direction. As required by the said direction, the company received the approval for this transfer on 29 March 2018.

Further distribution of one off surplus to shareholders, held as part of the “Restricted Regulatory Reserve”, is subject to meeting governance requirements stipulated by the IRCSL and can only be released as dividends upon receiving approval from the IRCSL. The one off surplus in the shareholder fund will remain invested in government debt securities and deposits as disclosed in Note 34.8.3 as per the directions of the IRCSL

One-off surplus in respect of participating business is held within the participating fund as part of the unallocated valuation surplus and may only be transferred to the Shareholder fund by means of bonuses to policyholders in line with Section 38 of the “Regulation of Insurance Industry, Act No. 43 of 2000”. Please refer Note 34.8.3 for details of assets supporting the restricted regulatory reserve as at 31 March 2020.

In Rs. ‘000Description

Participating fund

Non-Participating fund

Total

Value of Insurance Contract Liability based on Independent Actuary-NPV as at 31 December 2015 3,866,780 2,472,575 6,339,355 Value of Insurance Contract Liability based on Independent Actuary-GPV as at 31 December 2015 2,810,245 1,674,571 4,484,816 Surplus Created due to Change in Valuation method from NPV to GPV - One off Surplus as at 01 January 2016 1,056,535 798,004 1,854,539 Transfer of One-off Surplus from long term fund to Restricted Regulatory Reserve as at 31 December 2017 - (798,004) (798,004)Surplus Created due to Change in Valuation method from NPV to GPVOne off Surplus as at 31 March 2020 1,056,535 - 1,056,535

Distribution of one off surplus

The distribution of one off surplus to shareholders as dividends shall remain restricted until the company develops appropriate policies and procedures for effective management of its business, as listed below.

» expense allocation policy setting out basis of allocation of expenses between the shareholder fund and the policyholder fund as well as between different lines of business within the policyholder fund, particularly participating and non-participating

» dividend declaration policy for universal life business

» bonus policy for the participating business, which should include treatment of one off surplus for the purpose of bonus declaration

» assets and liability management policy

» policy on internal target Capital Adequacy Ratio

» Considerations for transfer of funds from policyholder fund to shareholder fund.

These policies should be approved by the Board of Directors of the Softlogic Life Insurance PLC and must also comply with any relevant guidance issued by IRCSL from time to time. Further IRCSL will reconsider the distribution of one off surplus when the Risk Based Capital rules are revised.


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39.7.2 Composition of investments supporting the Restricted Regulatory Reserve as at 31 March 2020

Face value

Market value as at 31 March 2020

Rs. '000

Government SecuritiesTreasury Bonds - LKB03044A010 100,000,000 135,709 - LKB01534I155 50,000,000 51,174 - LKB01534I155 50,000,000 51,174 - LKB01534I155 50,000,000 51,174 - LKB01534I155 50,000,000 51,174

DepositsSeylan Bank PLC 304,559 National Savings Bank 108,641 Regional Development Bank 54,318 Total market value of the assets 807,923

39.8 Direction 18 - Unclaimed benefits of Long Term Insurance Business

There was no transfer of any unclaimed benefit to shareholders and recorded in the life fund as unclaimed benefits if any.

39.9 Taxation on surplus distributed to the life insurance policyholder who shares the profits

With the introduction of the Inland Revenue Act no. 24 of 2017, which is effective from 01 April 2018, surplus distributed to the life insurance policyholders who shares the profits of a person engaged in the business of life insurance in a given year, as provided in the “Regulation of Insurance Industry Act no. 43 of 2000”, shall be deemed as gains and profits of that person from the business and subject to tax at a concessionary rate of 14% for three years of assessment after the commencement of the Act.

As recommended by the Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI of Messrs. Towers Watson India (Pvt) Ltd, Softlogic Life Insurance PLC has declared a bonus of Rs. 322.00 Mn (2019 - Rs. 250.00 Mn) to life insurance policyholders who participating in the profit of life insurance business. Accordingly, there is Rs. 45.78 (2019 - Rs. 35.00 Mn) tax amount is arising from policyholder who shares the profits of a person engaged in the business of life insurance. As at the reporting date, Softlogic Life Insurance PLC has utilised the tax credits to setoff this tax liability hence no income tax liability has recorded as at 31 March 2020.

39.10 Sensitivity to assumptions used

Change in key assumptions used in valuing the insurance contract liability would have the following effect to the Group financials:

In Rs. ‘000As at 31 March 2020 2019

Effect on the change of the insurance contract liability:Increase by 10% in mortality rate 298,222 96,797 Decrease by 10% in mortality rate (299,878) (183,463)

Effect on the change of the insurance contract liability:Increase by 10% in morbidity rate 66,478 10,554 Decrease by 10% in morbidity rate (66,478) (9,520)

Effect on the change of the insurance contract liability:Increase by 50 basis point in discount rate (220,276) (46,952)Decrease by 50 basis point in discount rate 234,834 48,691

Effect on the change of the insurance contract liability:Increase by 10% in expense ratio 450,873 346,611 Decrease by 10% in expense ratio (450,873) (346,611)

146


40 INTEREST BEARING BORROWINGS


Debentures Loans Total Finance leases

Debentures Loans Total

At the beginning of the year 1,759,090 32,750,850 34,509,940 207,844 1,324,970 31,373,435 32,906,249 Additions 1,400,000 13,719,488 15,119,488 15,406 1,000,000 6,585,232 7,600,638 Acquisition of subsidiary - - - 693 - 239,471 240,164 Repayments (759,090) (8,263,344) (9,022,434) (107,515) (565,880) (6,201,039) (6,874,434)Transfers - (22,057) (22,057) - - - - Unamortised loan processing cost (15,076) (50,426) (65,502) - (5,456) (14,120) (19,576)Finance charges 56,536 366,828 423,364 (12,658) 21,795 281,632 290,769 Exchange translation difference - 615,845 615,845 436 - 753,751 754,187 At the end of the year 2,441,460 39,117,184 41,558,644 104,206 1,775,429 33,018,362 34,897,997

Repayable within one year 56,536 10,460,678 10,517,214 63,747 780,885 8,938,320 9,782,952 Repayable after one year 2,384,924 28,656,506 31,041,430 40,459 994,544 24,080,042 25,115,045

2,441,460 39,117,184 41,558,644 104,206 1,775,429 33,018,362 34,897,997

In Rs. ‘000 CompanyAs at 31 March 2020 2019

Other Loans

Debentures Loans Total Finance leases

Debentures Loans * Total

At the beginning of the year 186,200 1,000,000 9,565,589 10,751,789 49,859 - 10,531,341 10,581,200 Additions - - 3,679,984 3,679,984 - 1,000,000 1,500,000 2,500,000 Repayments - - (3,527,327) (3,527,327) (28,096) - (2,279,552) (2,307,648)Processing fee - (3,583) (46,825) (50,408) - (5,456) (9,618) (15,074)Finance charges/ accrued interest - 14,646 366,820 381,466 (1,427) 14,226 191,140 203,939 At the end of the year 186,200 1,011,063 10,038,241 11,235,504 20,336 1,008,770 9,933,311 10,962,417

Repayable within one year - 14,646 5,193,260 5,207,906 17,087 14,226 3,927,185 3,958,498 Repayable after one year 186,200 996,417 4,844,981 6,027,598 3,249 994,544 6,006,126 7,003,919

186,200 1,011,063 10,038,241 11,235,504 20,336 1,008,770 9,933,311 10,962,417

* Loans - this includes Rs. 186.20 Mn balance which is payable to related party. Total bank borrowings as at 31 March 2019 amounted to Rs. 9,747.11 Mn.

Security pledged and interest rates pertaining to interest bearing borrowings are disclosed in note 54 to the financial statements.


147


40.1 Details regarding the debentures are as follows;

In Rs. ‘000 Annual interest rate

Interest payment

frequency

Allotment date

Maturity date

Face value

Amortised cost as at

31-03-2020


31-03-2019

GroupListed debentures Softlogic Capital PLCListed, secured, Type "A" debentures 14.75%

Semi Annually 19-12-2019 19-12-2023 250,060 258,481 -

Listed, secured, Type "B" debentures 14.50% Monthly 19-12-2019 19-12-2024 459,880 458,954 - Listed, secured, Type "C" debentures 15.00%

Semi Annually 19-12-2019 19-12-2024 690,050 712,952 -

Listed, secured, Type "D" debentures 13.50%

Semi Annually 19-12-2019 19-12-2024 10 10 -

Softlogic Finance PLCListed, secured, Type “A” debentures Quarterly 29-08-2014 28-08-2019 - - 413,038 Listed, secured, Type “B” debentures Quarterly 29-08-2014 28-08-2019 - - 353,621

1,430,397 766,659

Unlisted debentures Softlogic Holdings PLCUnlisted, unsecured debentures 16.75%

Semi Annually 08-02-2019 07-02-2022 1,000,000 1,011,063 1,008,770

1,011,063 1,008,770 2,441,460 1,775,429

In Rs. ‘000 Annual interest rate

Interest payment

frequency

Allotment date

Maturity date

Face value


31-03-2020


31-03-2019

CompanySoftlogic Holdings PLCUnlisted, unsecured debentures 16.75%

Semi Annually 08-02-2019 07-02-2022 1,000,000 1,011,063 1,008,770

1,011,063 1,008,770

40.2 Derivative financial instruments

In Rs. ‘000 Group2020 2019

As at 31 March Asset Liability Asset Liability

Foreign currency cash flow hedges 698,124 - 660,992 -

Cash flow hedge

The risk management objective of the cash flow hedge is to hedge the risk of variation in the foreign currency exchange rates associated with USD denominated forecast sales.

The risk management strategy is to use the foreign currency variability (gains /losses) arising from revaluation of the foreign currency loan attributable to change in the spot foreign exchange on LKR conversion of USD denominated forecast sales. The effective portion of the gain or loss on the hedging instrument is recognised in the Other Comprehensive Income Statement (OCI) and any ineffective portion is recognised immediately in the Income Statement.

148


The amount recognised in Other Comprehensive Income is transferred to the Income Statement when the hedge transaction occurs (when the forecasted revenue is realised). If the forecast transaction is no longer expected to occur, the cumulative gain or loss previously recognised in Other Comprehensive Income is transferred to the Income Statement.

Ceysand Resorts Ltd

Hedging instrument - Foreign currency borrowing of USD 7.50 Mn in February 2013, maturing in March 2024, and foreign currency borrowing of USD 2.50 Mn in October 2013, maturing in March 2024

Hedged item - USD denominated sales expected to occur in March and September of 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023 and 2024

The cash flow hedge has a notional amount of USD 10.00 Mn and cash flows are expected to occur as 17 equal semi-annual installments at 15 March and 15 September of 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024 in USD 588,235 capital and interest repayments at 15 March and 15 September of each year.


Hedging instrument - Foreign currency borrowing of USD 36.40 Mn in May 2015, maturing in June 2025

Hedged item - USD denominated sales expected to occur in each month of 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024 and upto 2025 from April 2017

The cash flow hedge has a notional amount of USD 35.39 Mn and cash flows are expected to occur as 101 monthly installments of 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024 and 2025 in total of USD 35.39 Mn capital and interest repayments at 25 of each month till May 2025.

In respect of the cash flow hedge instrument, the following balance has been recognised in the Other Comprehensive Income Statement (OCI) as the fair value loss on the hedging instrument.


Net change in fair value on derivative financial instruments (37,900) (481,700)

On the hedged instrument the following attributable to the hedged risk has been recognised in the Group Income Statement.


Under finance expensesRealised exchange loss on foreign currency borrowings - 47,976 Unrealised exchange loss on foreign currency borrowings 577,945 239,050

577,945 287,026

Due to the impact of the Easter Sunday Attack and COVID-19, Ceysand Resorts Ltd and Softlogic City Hotels (Pvt) Ltd obtained a loan moratorium, which resulted in a change in the previously expected cash outflows of the loan and the forecasted sales. Accordingly, the Group has reclassified the ineffective portion of Rs. Rs. 237.96 Mn of the loan to Group Income Statement during the year.

40.3 Other borrowings

In Rs. ‘000Lending institution

Annual interest rate

Repayment term Outstanding balance 31-03-2020 31-03-2019

CompanySoftlogic Information Technologies (Pvt) Ltd Fixed rate 84 monthly installments after 24 months of

grace period 186,200 186,200 186,200 186,200


149


41 PUBLIC DEPOSITS


Deposits maturing after one year 4,858,728 4,601,829 Deposits maturing within one year 12,157,713 12,385,059

17,016,441 16,986,888

42 EMPLOYEE BENEFIT LIABILITIES

ACCOUNTING POLICY

Defined benefit plan - Gratuity

The liability recognised in the statement of financial position is the present value of the defined benefit obligation at the reporting date using the projected unit credit method.

Any actuarial gains or losses arising are recognised immediately in other comprehensive income.

As per the payment of Gratuity Act No. 12 of 1983, this liability only arises upon completion of 5 years of continued service.

The gratuity liability is not externally funded.


At the beginning of the year 1,081,320 1,012,888 81,109 68,252 Current service cost 158,889 118,976 8,433 7,174 Interest cost on benefit obligation 118,109 102,960 8,948 6,584 (Gain) / loss arising from changes in assumptions 149,814 (65,512) 7,743 3,474 Acquisition of subsidiary - 20,490 - - Transfers from/ (to) related companies - (393) (1,475) - Payments (138,546) (108,089) (1,042) (4,375)At the end of the year 1,369,586 1,081,320 103,716 81,109

The employee benefit liability of the Group is based on the actuarial valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd, Messrs. Smiles Global (Pvt) Ltd and Mr. Piyal Goonatilleke, actuaries.

Defined contribution plan - Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund benefits in line with respective statutes and regulations. The companies contribute the defined percentages of gross emoluments of employees to an approved Employees’ Provident Fund and to the Employees’ Trust Fund respectively, which are externally funded.


The employee benefit liability of the Group is based on the actuarial valuation carried out by an independent actuarial specialist. The actuarial valuations involve making assumptions about discount rates and future salary increases. Given the complexity of the valuation, the underlying assumptions and the long term nature of the liability, the defined benefit obligation is highly sensitive to changes in these assumptions.

All assumptions are reviewed at each reporting date.

The principal assumptions used in determining the cost of employee benefits were as bellow:

As at 31 March 2020 2019

Discount rate (%) 8.70 - 11.00 10.00 - 11.60 Future salary increases (%) 5.00 - 10.00 5.00 - 8.10

150


42.1 Sensitivity to assumptions used

If there is a one percentage point changes in the assumptions, it would have the following effect:


Effect on the defined benefit obligation liability:Increase by one percentage point in discount rate (45,398) (36,413) (1,875) (1,199)Decrease by one percentage point in discount rate 49,075 41,017 2,652 4,784

Effect on the defined benefit obligation liability:Increase by one percentage point in salary increment rate 54,697 46,191 2,951 5,129 Decrease by one percentage point in salary increment rate (51,501) (41,639) (2,201) (1,573)

42.2 Maturity analysis of the payments

The following payments are expected on account of employees benefit liabilities in future years.


- within the next 12 months 480,730 273,872 61,828 10,219 - between 1 and 2 years 358,634 297,940 16,067 13,288 - between 3 and 5 years 306,795 324,412 13,544 51,383 - between 6 and 10 years 161,247 143,886 10,572 5,387 - beyond 10 years 62,180 41,210 1,705 832 Total expected payments 1,369,586 1,081,320 103,716 81,109

42.3 Weighted average durations of service

The Group’s and the company’s weighted average durations of service in is 4.08 years (2019 - 4.56 years) and 2.31 years (2019 - 3.95 years) respectively.

43 OTHER DEFERRED LIABILITIES

ACCOUNTING POLICY

Deferred revenue

Deferred revenue is the money received for goods or services which have not yet been delivered. According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted to revenue.

Warranty

Provisions for warranty related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on historical experience and revised annually.


Within one yearDeferred revenue 88,992 100,984 36,036 36,036 Warranty provision 43,847 41,716 - -

132,839 142,700 36,036 36,036 After one yearDeferred revenue 47,390 147,459 39,640 75,676 Warranty provision - 1,382 - -

47,390 148,841 39,640 75,676 Total other deferred liabilities 180,229 291,541 75,676 111,712


151


44 OTHER NON-CURRENT FINANCIAL LIABILITIES


Advances received 373,874 110,779 Financial liabilities at fair value through profit or loss 44.1 168,345 - Retention payable 298,500 - Security deposits 7,373 4,426

848,092 115,205

44.1 Financial liabilities at fair value through profit or loss

Softlogic Holdings PLC (“SH”), Softlogic Capital PLC (“SC”) and Softlogic Life Insurance PLC (“SLI”) entered into a “Shareholders Agreement” and “Share Purchase Agreement” dated 20 December 2012 as amended 13 February 2013 with Deutsche Investitions - Und Entwicklungsgesellschaft MBH (“DEG”) and Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (“FMO”) to sell 19% of the ordinary shares of SLI, held by SH to FMO and 19% of the SLI ordinary shares held by SC to DEG. As per the above agreements, SC has granted a “Put Option” to FMO and DEG which will be valid for a three year period with effect from 7 March 2017 to repurchase 38% of the shares held by DEG and FMO based on a “Put Option” price as specified in the amended agreements.

On 20 December 2018, FMO sold its ownership in ordinary shares (19%) in SLI to Dalvik Inclusion (Pvt) Ltd (Dalvik) and DEG sold its ownership in ordinary shares (19%) in SLI to Milford Ceylon (Pvt) Ltd (Milford) on 16 January 2020. “Put Option” attached to initial “Shareholders Agreement” and “Share Purchase Agreement” dated 20 December 2012 as amended 13 February 2013 granted by SC remained as valid till 7 March 2020 and became null and void thereafter.

On 16 January 2020, SH, SC and SLI entered into the Fourth amendment to “Shareholders Agreement” and “Share Purchase Agreement and SC granted a “Put Option” to Dalvik and Milford which will be valid for a three year period with effect from 31 July 2024 to repurchase 38% shares held by Dalvik and Milford.

Subsequent to the evaluation of ownership interests on the shares transferred to non-controlling interests (NCI) based on pricing, voting rights, decision making and dividend rights, management determines that SH and SC have transferred full ownership interests to the NCI. Therefore, the investment in SLI shares were derecognised and any liability arising from the put option is recognised based on the option valuation methodology in line with SLFRS - 9 Financial Instruments.

As at 31 March, 2020, the Group had pledged 52,368,036 shares (2019 – 52,368,036 shares) of Asiri Hospital Holdings PLC owned by Softlogic Holdings PLC and 20,000 shares (2019 – 20,000 shares) of Softlogic Life Insurance PLC owned by Softlogic Capital PLC as collateral on the said transaction. In October 2020, shares pledged against above “Put Option” attached to “DEG” and “FMO” were released in fully.

44.1.1 Valuation of obligation on the put option liability

The obligation on the put option liability of the Group is based on the binomial method of valuation carried out by the management of Softlogic Capital PLC. The principal inputs used in determining the liability were:


Continuous compounded risk free rate (%) 8.32 10.40 Annualised volatility (%) 35.84 37.00 Put option price/ appraisal value (Rs.) 47.08 39.73 Probability to move up (Pu) of the option value (%) 80.00 90.00 Probability to move down (Pd) of the option value (%) 20.00 10.00 Upward movement of the appraisal value (%) 1.43 1.30 Downward movement of the appraisal value (%) 0.70 0.77

Risk free rate - Rate of return of an investment with no risk of financial loss

Appraisal value - Appraisal value is based on a valuation performed by an independent valuer

152


44.1.2 Sensitivity of assumptions used

A one percentage point change in the assumptions would have the following effect:


Effect on the put option obligation liability:Increase by one percentage point in risk free rate (7,750) (53)Decrease by one percentage point in risk free rate 8,155 53

Effect on the put option obligation liability:Increase by one percentage point in appraisal value (3,249) (350)Decrease by one percentage point in appraisal value 3,249 350

Effect on the put option obligation liability:Increase by one percentage point in probability to move up of the option value (14,713) (1,913)Decrease by one percentage point in probability to move up of the option value 15,185 2,093

45 TRADE AND OTHER PAYABLES

ACCOUNTING POLICY

Trade payables are the aggregate amount of obligations to pay for goods or services, that have been acquired in the ordinary course of business. Trade payable are classified as current liabilities if payment is due within one year.


Trade and other payables 5,826,063 5,281,526 236,343 108,894 Contract liabilities 2,518 - - - Dividend payable 41,320 634,417 - - Reinsurance payables 519,784 444,231 - - Sundry creditors including accrued expenses 2,256,122 2,068,081 - -

8,645,807 8,428,255 236,343 108,894

46 OTHER CURRENT FINANCIAL LIABILITIES


Loans 19,774,503 20,732,979 7,884,041 7,759,444 Commercial papers 7,915,696 2,386,289 8,483,530 2,244,431 Financial liabilities at fair value through profit or loss 44.1 - 9,357 - -

27,690,199 23,128,625 16,367,571 10,003,875


153


47 OTHER CURRENT LIABILITIES

ACCOUNTING POLICY

The Group classifies all non-financial current liabilities under other current liabilities. These include non-refundable deposits and other tax payables. These liabilities are recorded at amounts expected to be set-off at the reporting date.


Advances received 537,127 405,275 - - Taxes payables 138,678 298,243 15,289 26,482 Other liabilities 697,973 466,174 42,272 19,711 Other deferred liabilities 43 132,839 142,700 36,036 36,036

1,506,617 1,312,392 93,597 82,229

48 RELATED PARTY TRANSACTIONS

The Companies within the Group disclosed under the Corporate Directory engage in trading transactions under relevant commercial terms and conditions.

Outstanding current account balances at year end are unsecured an interest free and settlement occurs in cash. Interest bearing borrowings are on pre-determined interest rates and terms.

48.1 Amounts due from related parties


Subsidiaries 48.3 - - 18,504,708 14,174,694 Equity accounted investees 48.4 4,545 13,494 1,909 1,666 Key Management Personnel 125 198 - -

4,670 13,692 18,506,617 14,176,360

48.2 Amounts due to related parties


Subsidiaries 48.3 - - 63,216 14,679 Equity accounted investees 48.5 30,413 - 30,000 - Key Management Personnel 1,992 2,731 1,992 1,992

32,405 2,731 95,208 16,671

154


48.3 Subsidiaries

In Rs. ‘000 Company Amount due to Amount due from

As at 31 March 2020 2019 2020 2019

Ceysand Resorts Ltd - 114 - - Future Automobiles (Pvt) Ltd - - 62,806 62,630 Softlogic Australia (Pty) Ltd - - 10,945 10,483 Softlogic Automobiles (Pvt) Ltd - - 6,364 7,417 Softlogic B P O Services (Pvt) Ltd - - 186,319 133,774 Softlogic Brands (Pvt) Ltd - - 30 241 Softlogic City Hotels (Pvt) Ltd - - 973,452 973,442 Softlogic Communication Services (Pvt) Ltd - - 4,897 5,789 Softlogic Communications (Pvt) Ltd 5,149 - - 645 Softlogic Computers (Pvt) Ltd 2,307 - - - Softlogic Corporate Services (Pvt) Ltd 1,579 912 - - Softlogic Destination Management (Pvt) Ltd - - 6,649 6,696 Softlogic Healthcare Holdings Ltd - - 25,022 25,022 Softlogic Information Technologies (Pvt) Ltd 35,633 12,640 - - Softlogic International (Pvt) Ltd 10,646 13 - - Softlogic Mobile Distribution (Pvt) Ltd 6,902 - - 6,501 Softlogic Properties (Pvt) Ltd - - 628,421 342,311 Softlogic Restaurants (Pvt) Ltd - - 8,872 1,179 Softlogic Retail (Pvt) Ltd - - - 169 Susuki Motors Lanka Ltd 1,000 1,000 - - Softlogic Rewards (Pvt)Ltd - - 8,983 943 Softlogic Solar (Pvt) Ltd - - 34,613 34,613 Softlogic Supermarkets (Pvt) Ltd - - 169,554 135,554

63,216 14,679 2,126,927 1,747,409 Less - Provision for impairment - - (101,281) (101,281)

63,216 14,679 2,025,646 1,646,128

48.3 Subsidiaries

In Rs. ‘000 Company Loans received Loans given

As at 31 March 2020 2019 2020 2019

Cotton Collection (Pvt) Ltd - - 5,755 4,917 Future Automobiles (Pvt) Ltd - - 1,079,704 1,059,646 Odel PLC - - 355,403 491,170 Softlogic Automobiles (Pvt) Ltd - - 150,808 134,489 Softlogic Brands (Pvt) Ltd - - 467,379 124,089 Softlogic City Hotels (Pvt) Ltd - - 298,090 174,936 Softlogic Communications (Pvt) Ltd - - - 4,730 Softlogic Destination Management (Pvt) Ltd - - 41,213 39,719 Softlogic Properties (Pvt) Ltd - - 68,639 68,639 Softlogic Restaurants (Pvt) Ltd - - 745,808 658,732 Softlogic Retail (Pvt) Ltd - - 5,372,685 3,265,632 Softlogic Retail Holdings (Pvt) Ltd - - 7,885,142 6,829,736 Softlogic Supermarkets (Pvt) Ltd - - 335,905 - Susuki Motors Lanka Ltd - - 400 -

- - 16,806,931 12,856,435 Less - Provision for impairment - - (327,869) (327,869)

- - 16,479,062 12,528,566 63,216 14,679 18,504,708 14,174,694


155


Interest rate for the lons given to subsidiaries - Company Average Borrowing Cost plus Margin .

Repayment terms of loans given to subsidiries - On demand

48.4 Amounts due from related parties


Equity accounted investeesJoint venturesAsiri A O I Cancer Centre (Pvt) Ltd - 9,683 - -

AssociatesJendo Innovations (Pvt) Ltd 1,909 1,666 1,909 1,666 Sabre Travel Network Lanka (Pvt) Ltd 2,636 2,145 - -

4,545 13,494 1,909 1,666

48.5 Amounts due to related parties


Equity accounted investeesAssociatesJendo Innovations (Pvt) Ltd 30,000 - 30,000 - Nextage (Pvt) Ltd 413 - - -

30,413 - 30,000 -

156


48.6 Transactions with related parties


Subsidiaries(Purchases)/ sales of goods - - (9,638) (19,378)(Receiving) / rendering of services - - 640,849 559,546 (Purchases) / sale of property plant & equipment - - (2,166) (1,378)Loans given/ (obtained) - - 918,989 2,580,671 Interest received / (paid) - - 1,677,462 1,148,937 Rent received / (paid) - - 59,432 55,303 Dividend received - - - 479,712 Profit on disposal of shares - - - (10,575)Guarantee charges received - - 173,542 140,393 Guarantees given/ received - - 23,855,456 23,282,722

Equity Accounted InvesteesAssociates(Purchases) / sale of property plant & equipment 4,790 3,394 - - (Receiving) / rendering of services (8,926) 1,963 12,565 12,153 Interest received / (paid) - 116 - 116 Dividend received - - - 35,045 Joint ventures(Purchases) / sale of property plant & equipment 974 13,257 - - (Receiving) / rendering of services (41,934) 20,402 - - Dividend received - - - 35,045

Key Management PersonnelLoans given/ (received) (1,867) (2,533) (1,992) (1,992)Guarantees given/ (obtained) (150,000) (410,000) - - Loans given/ (customer deposits received) (15) (47,617) - - Advances given/ (received) (263,760) (251,720) - - Interest paid on customer deposits 6,127 7,868 - -

Close family Members of KMP(Receiving)/rendering of services - - - -


157


48.7 Compensation of Key Management Personnel

Key management personnel include members of the Board of Directors of Softlogic Holdings PLC and its subsidiary companies.


Short term employee benefits 405,904 402,470 54,603 54,010 Post-employment benefits 68,921 60,457 14,137 14,187

474,825 462,927 68,740 68,197

49 OPERATING SEGMENT INFORMATION

ACCOUNTING POLICY

The Group’s internal organisation and management is structured based on individual products and services which are similar in nature and process and where the risks and returns are similar. The operating segments represent this business structure.

The Group is thus organised into business units based on their products and services and has seven operating business segments as follows:


The information Technology operating segment comprises the areas of software development, hardware and system software solutions, market specific ICT solutions and office automation solutions.

Leisure and Property

The leisure and Property operating segment comprises one five star hotel, one four star hotel, destination management and development/ sale of residential apartments.

Retail

The Retail operating segment comprises Consumer Electronics and Durables, Branded Apparels & Fashion, Telecommunication, and Quick Service Restaurants.

Automobiles

The Automobile operating segment deals in branded motor vehicles and ancillary services.

Financial Services

The Financial Services operating segment offers a complete range of financial solutions including some banking related services, insurance, stock broking, debt trading, fund management, management of Unit Trust and leasing.

Healthcare Services

The Healthcare Services operating segment comprises a leading private hospital chain providing private healthcare and laboratory services.

Others

This sector consists of Softlogic Holdings PLC, which provides ancillary services to Group companies.

Segment information has been prepared in conformity with the accounting policies adopted for preparing and presenting the consolidated financial statements of the Group.

The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions about resource allocations and performance assessments.

Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the consolidated financial statements.

Transactions between operating segments are carried out in the ordinary course of business on arm’s length basis.

158



49.1 Revenue and profit

In Rs. ‘000 Information Technology

Leisure & Property

Retail Automobiles Financial Services

Healthcare Services

Others Total Eliminations/ Consolidation adjustments

Group

For the year ended 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019


Revenue

Total revenue 5,217,350 4,730,418 2,327,507 3,298,678 39,448,882 39,839,827 909,819 3,203,701 15,677,691 13,690,752 15,863,105 13,884,945 782,722 678,287 80,227,076 79,326,608 - - 80,227,076 79,326,608

Inter group (638,873) (690,909) (131,459) (170,380) (1,457,936) (2,117,274) (74,078) (67,525) (81,517) (62,033) (352,683) (410,263) (768,753) (665,620) (3,505,299) (4,184,004) - - (3,505,299) (4,184,004)

Total external revenue 4,578,477 4,039,509 2,196,048 3,128,298 37,990,946 37,722,553 835,741 3,136,176 15,596,174 13,628,719 15,510,422 13,474,682 13,969 12,667 76,721,777 75,142,604 - - 76,721,777 75,142,604

Results from operating activities 222,112 281,892 (486,907) 73,830 1,468,583 3,055,648 5,084 169,680 2,083,358 1,874,176 2,990,756 3,148,706 62,867 4,584 6,345,853 8,608,516 (171,660) (248,246) 6,174,193 8,360,270

Finance income 71,736 41,216 30,403 4,197 285,066 279,962 163 164 1,837,647 1,194,783 190,440 95,303 2,180,329 2,017,384 4,595,784 3,633,009 (2,553,509) (2,234,035) 2,042,275 1,398,974

Finance expenses (130,943) (170,430) (1,243,477) (921,234) (4,779,595) (3,424,015) (200,521) (204,852) (428,968) (522,736) (1,790,383) (877,048) (3,439,990) (2,625,484) (12,013,877) (8,745,799) 2,653,625 1,629,512 (9,360,252) (7,116,287)

Change in insurance contract liabilities - - - - - - - - (2,089,317) (1,152,037) - - - - (2,089,317) (1,152,037) - - (2,089,317) (1,152,037)

Change in fair value of investment property (2,000) (266) - - 526,712 564,000 - - - - 19,212 - 50,500 40,000 594,424 603,734 (261,500) (358,734) 332,924 245,000

Share of profit of equity accounted investees - - - - - - - - - - (6,604) (4,213) 8,215 11,293 1,611 7,080 - - 1,611 7,080

Profit/ (loss) before taxation 160,905 152,412 (1,699,981) (843,207) (2,499,234) 475,595 (195,274) (35,008) 1,402,720 1,394,186 1,403,421 2,362,748 (1,138,079) (552,223) (2,565,522) 2,954,503 (333,044) (1,211,503) (2,898,566) 1,743,000

Taxation (58,402) (36,603) 5,208 (5,560) 352,985 (57,824) (15,089) 452 (112,650) 2,032,656 (491,423) (420,240) 21,280 (94,486) (298,091) 1,418,395 15,355 (171,111) (282,736) 1,247,284

Profit/ (loss) for the year 102,503 115,809 (1,694,773) (848,767) (2,146,249) 417,771 (210,363) (34,556) 1,290,070 3,426,842 911,998 1,942,508 (1,116,799) (646,709) (2,863,613) 4,372,898 (317,689) (1,382,614) (3,181,302) 2,990,284

Depreciation of property, plant & equipment (PPE) 52,269 62,085 587,247 606,076 1,003,153 718,793 29,530 35,940 201,155 189,755 1,210,624 876,413 23,810 36,290 3,107,788 2,525,352 (29,353) (5,234) 3,078,435 2,520,118

Amortisation of ROU assets/ LR paid in advance 4,883 - 4,543 - 1,062,076 119 14,754 - 275,369 - 151,779 16,387 17,779 - 1,531,183 16,506 - - 1,531,183 16,506

Amortisation/ impairment of intangible assets 31,542 16,748 8,095 8,361 58,402 77,231 - - 20,699 11,236 73 613 2,163 2,542 120,974 116,731 146,272 224,847 267,246 341,578

Retirement benefit obligations and related cost 22,659 18,868 10,280 8,827 61,850 41,563 2,055 1,660 51,730 43,244 110,561 93,706 17,863 14,068 276,998 221,936 - - 276,998 221,936

Purchase and construction of PPE 58,311 42,084 57,809 110,097 3,173,028 2,027,758 14,797 14,665 209,916 187,567 4,119,604 3,358,730 3,189 2,304 7,636,654 5,743,205 - - 7,636,654 5,743,205

Additions to intangible assets 60,425 100,427 427 2,962 102,103 35,209 - - 142,718 - 43 - 2,944 2,636 308,660 141,234 - - 308,660 141,234

159


49.1 Revenue and profit


Leisure & Property


Healthcare Services


Group

For the year ended 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019


Revenue

Total revenue 5,217,350 4,730,418 2,327,507 3,298,678 39,448,882 39,839,827 909,819 3,203,701 15,677,691 13,690,752 15,863,105 13,884,945 782,722 678,287 80,227,076 79,326,608 - - 80,227,076 79,326,608

Inter group (638,873) (690,909) (131,459) (170,380) (1,457,936) (2,117,274) (74,078) (67,525) (81,517) (62,033) (352,683) (410,263) (768,753) (665,620) (3,505,299) (4,184,004) - - (3,505,299) (4,184,004)

Total external revenue 4,578,477 4,039,509 2,196,048 3,128,298 37,990,946 37,722,553 835,741 3,136,176 15,596,174 13,628,719 15,510,422 13,474,682 13,969 12,667 76,721,777 75,142,604 - - 76,721,777 75,142,604

Results from operating activities 222,112 281,892 (486,907) 73,830 1,468,583 3,055,648 5,084 169,680 2,083,358 1,874,176 2,990,756 3,148,706 62,867 4,584 6,345,853 8,608,516 (171,660) (248,246) 6,174,193 8,360,270

Finance income 71,736 41,216 30,403 4,197 285,066 279,962 163 164 1,837,647 1,194,783 190,440 95,303 2,180,329 2,017,384 4,595,784 3,633,009 (2,553,509) (2,234,035) 2,042,275 1,398,974

Finance expenses (130,943) (170,430) (1,243,477) (921,234) (4,779,595) (3,424,015) (200,521) (204,852) (428,968) (522,736) (1,790,383) (877,048) (3,439,990) (2,625,484) (12,013,877) (8,745,799) 2,653,625 1,629,512 (9,360,252) (7,116,287)

Change in insurance contract liabilities - - - - - - - - (2,089,317) (1,152,037) - - - - (2,089,317) (1,152,037) - - (2,089,317) (1,152,037)

Change in fair value of investment property (2,000) (266) - - 526,712 564,000 - - - - 19,212 - 50,500 40,000 594,424 603,734 (261,500) (358,734) 332,924 245,000

Share of profit of equity accounted investees - - - - - - - - - - (6,604) (4,213) 8,215 11,293 1,611 7,080 - - 1,611 7,080

Profit/ (loss) before taxation 160,905 152,412 (1,699,981) (843,207) (2,499,234) 475,595 (195,274) (35,008) 1,402,720 1,394,186 1,403,421 2,362,748 (1,138,079) (552,223) (2,565,522) 2,954,503 (333,044) (1,211,503) (2,898,566) 1,743,000

Taxation (58,402) (36,603) 5,208 (5,560) 352,985 (57,824) (15,089) 452 (112,650) 2,032,656 (491,423) (420,240) 21,280 (94,486) (298,091) 1,418,395 15,355 (171,111) (282,736) 1,247,284

Profit/ (loss) for the year 102,503 115,809 (1,694,773) (848,767) (2,146,249) 417,771 (210,363) (34,556) 1,290,070 3,426,842 911,998 1,942,508 (1,116,799) (646,709) (2,863,613) 4,372,898 (317,689) (1,382,614) (3,181,302) 2,990,284

Depreciation of property, plant & equipment (PPE) 52,269 62,085 587,247 606,076 1,003,153 718,793 29,530 35,940 201,155 189,755 1,210,624 876,413 23,810 36,290 3,107,788 2,525,352 (29,353) (5,234) 3,078,435 2,520,118

Amortisation of ROU assets/ LR paid in advance 4,883 - 4,543 - 1,062,076 119 14,754 - 275,369 - 151,779 16,387 17,779 - 1,531,183 16,506 - - 1,531,183 16,506

Amortisation/ impairment of intangible assets 31,542 16,748 8,095 8,361 58,402 77,231 - - 20,699 11,236 73 613 2,163 2,542 120,974 116,731 146,272 224,847 267,246 341,578

Retirement benefit obligations and related cost 22,659 18,868 10,280 8,827 61,850 41,563 2,055 1,660 51,730 43,244 110,561 93,706 17,863 14,068 276,998 221,936 - - 276,998 221,936

Purchase and construction of PPE 58,311 42,084 57,809 110,097 3,173,028 2,027,758 14,797 14,665 209,916 187,567 4,119,604 3,358,730 3,189 2,304 7,636,654 5,743,205 - - 7,636,654 5,743,205

Additions to intangible assets 60,425 100,427 427 2,962 102,103 35,209 - - 142,718 - 43 - 2,944 2,636 308,660 141,234 - - 308,660 141,234

160


49.2 Segment assets and liabilities


Leisure & Property


Healthcare Services


Group

As at 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019

Property, plant and equipment 73,228 83,811 10,113,566 10,554,530 8,855,464 6,743,496 257,699 171,800 1,223,508 1,158,622 24,270,835 20,792,877 85,795 171,800 44,880,095 39,676,936 7,253,053 6,917,076 52,133,148 46,594,012Right of use assets/ Lease rental paid in advance 16,523 - 52,796 - 4,062,457 3,686 97,085 - 1,044,972 - 1,262,939 785,409 63,364 - 6,600,136 789,095 - - 6,600,136 789,095Investment property 202,000 204,000 1,945,780 1,791,640 6,204,380 5,640,537 - 744,000 - - 215,000 193,724 794,500 744,000 9,361,660 9,317,901 (7,331,280) (7,622,640) 2,030,380 1,695,261Intangible assets 438,996 411,055 16,872 24,541 418,297 374,596 - 686 205,396 83,376 135 165 1,468 686 1,081,164 895,105 - - 1,081,164 895,105Non-current financial assets 186,200 186,200 - - 1,523,994 1,279,699 - 1,465,042 14,999,358 11,866,315 360,695 323,946 1,549,170 1,465,042 18,619,417 16,586,244 (2,065,258) (3,579,028) 16,554,159 13,007,216Rental receivable on lease assets and hire purchase - - - - - - - - 1,156,023 1,135,517 - - - - 1,156,023 1,135,517 - - 1,156,023 1,135,517Other non-current assets 1,241 3,925 4,405,427 2,649,526 492,104 547,115 9,300 9,387 3,500 3,500 28,312 2,334 - - 4,939,884 3,215,787 - - 4,939,884 3,215,787Segment non-current assets 918,188 888,991 16,534,441 15,020,237 21,556,696 14,589,129 364,084 2,390,915 18,632,757 14,247,330 26,137,916 22,098,455 2,494,297 2,381,528 86,638,379 71,616,585 (2,143,485) (4,284,592) 84,494,894 67,331,993

Investments in equity accounted investees 109,355 78,249 - - 109,355 78,249Goodwill 4,604,797 4,604,797 - - 4,604,797 4,604,797Intangible assets through business combinations 3,119,045 3,264,632 - - 3,119,045 3,264,632Deferred tax assets 3,449,138 3,247,950 - - 3,449,138 3,247,950Total non-current assets 918,188 888,991 16,534,441 15,020,237 21,556,696 14,589,129 364,084 2,390,915 18,632,757 14,247,330 26,137,916 22,098,455 2,494,297 2,381,528 97,920,714 82,812,213 (2,143,485) (4,284,592) 95,777,229 78,527,621

Inventories 670,406 538,045 758,210 971,622 9,747,135 8,288,727 433,582 355,773 193,635 174,243 674,494 452,519 - - 12,477,462 10,780,929 (42,698) (91,908) 12,434,764 10,689,021Trade and other receivables 1,435,140 1,231,604 240,280 326,086 7,579,776 9,148,371 28,931 1,297,881 2,625,544 1,857,953 947,354 697,632 708,214 928,964 13,565,239 15,488,491 (1,174,013) (1,446,097) 12,391,226 14,042,394Loans and advances - - - - - - - - 11,899,173 12,214,401 - - - - 11,899,173 12,214,401 (372,750) (251,411) 11,526,423 11,962,990Rental receivable on lease assets and hire purchase - - - - - - - - 1,004,262 833,499 - - - - 1,004,262 833,499 - (3,021) 1,004,262 830,478Other current assets 90,044 52,258 209,012 354,508 1,593,765 2,532,753 305,023 305,572 964,739 1,165,697 637,151 1,120,891 52,335 28,286 3,852,069 5,559,965 (30,006) (201,579) 3,822,063 5,358,386Short term investments 63 100 340 371 34,682 37,128 1,500 1,500 9,822,154 5,893,821 260,200 - 115,238 130,834 10,234,177 6,063,754 (876,946) (14,358) 9,357,231 6,049,396Cash in hand and at bank 75,912 39,858 200,976 100,246 777,633 1,496,718 7,546 6,706 671,285 1,286,337 1,188,092 242,986 804,652 23,499 3,726,096 3,196,350 - - 3,726,096 3,196,350

2,271,565 1,861,865 1,408,818 1,752,833 19,732,991 21,503,697 776,582 1,967,432 27,180,792 23,425,951 3,707,291 2,514,028 1,680,439 1,111,583 56,758,478 54,137,389 (2,496,413) (2,008,374) 54,262,065 52,129,015Amounts due from related parties 392,652 179,998 152,446 182,956 1,319,064 1,517,469 - 96,331 4,273 8,073 1,653,621 7,671,235 18,536,202 14,205,976 22,058,258 23,862,038 (22,053,588) (23,848,346) 4,670 13,692Total current assets 2,664,217 2,041,863 1,561,264 1,935,789 21,052,055 23,021,166 776,582 2,063,763 27,185,065 23,434,024 5,360,912 10,185,263 20,216,641 15,317,559 78,816,736 77,999,427 (24,550,001) (25,856,720) 54,266,735 52,142,707Total assets 176,737,450 160,811,640 (26,693,486) (30,141,312) 150,043,964 130,670,328

Insurance contract liabilities - - - - - - - - 13,133,911 8,309,628 - - - - 13,133,911 8,309,628 - - 13,133,911 8,309,628Interest bearing borrowings 71,500 47,588 9,789,805 7,476,587 5,125,861 3,357,663 - 13,693 3,054,879 1,507,385 7,157,986 5,894,411 6,027,599 6,817,718 31,227,630 25,115,045 (186,200) - 31,041,430 25,115,045Lease liability 8,097 - 55,217 - 3,115,408 - 88,610 - 748,617 - 305,463 - 3,236 - 4,324,648 - (2,315) - 4,322,333 -Public deposits - - - - - - - - 4,860,256 4,603,080 - - - - 4,860,256 4,603,080 (1,528) (1,251) 4,858,728 4,601,829Employee benefit liabilities 144,852 109,866 33,329 26,950 297,544 216,982 11,179 6,369 219,859 154,017 557,037 484,451 105,786 82,685 1,369,586 1,081,320 - - 1,369,586 1,081,320Other deferred liabilities - 19,641 - - 7,750 53,524 - - - - - - 39,640 75,676 47,390 148,841 - - 47,390 148,841Other non-current financial liabilities 31,687 39,687 2,226,668 1,575,821 560,103 562,279 1,079,704 843,673 168,345 - - - - 186,200 4,066,507 3,207,660 (3,218,415) (3,092,455) 848,092 115,205Segment non-current liabilities 256,136 216,782 12,105,019 9,079,358 9,106,666 4,190,448 1,179,493 863,735 22,185,867 14,574,110 8,020,486 6,378,862 6,176,261 7,162,279 59,029,928 42,465,574 (3,408,458) (3,093,706) 55,621,470 39,371,868Deferred tax liabilities 3,346,327 3,306,076 - - 3,346,327 3,306,076Total non-current liabilities 256,136 216,782 12,105,019 9,079,358 9,106,666 4,190,448 1,179,493 863,735 22,185,867 14,574,110 8,020,486 6,378,862 6,176,261 7,162,279 62,376,255 45,771,650 (3,408,458) (3,093,706) 58,967,797 42,677,944

Trade and other payables 1,388,189 1,184,934 1,066,686 1,151,402 3,008,927 2,880,680 161,148 415,221 1,979,622 1,600,006 2,065,310 2,594,301 237,810 109,679 9,907,692 9,936,223 (1,261,885) (1,507,968) 8,645,807 8,428,255Income tax liabilities 28,638 15,287 (414) (300) (185,189) (54,304) (4,137) (4,662) (5,755) (4,957) 379,697 384,329 (23,451) 16,296 189,389 351,689 - - 189,389 351,689Other current financial liabilities 961,326 725,960 28,273 28,273 21,762,535 21,111,236 268,971 1,282,132 820,057 1,134,357 3,673,484 803,609 16,352,555 9,990,472 43,867,201 35,076,039 (16,177,002) (11,947,414) 27,690,199 23,128,625Current portion of interest bearing borrowings 30,928 26,840 232,702 1,185,341 2,393,698 1,653,817 14,168 26,361 1,036,936 1,269,778 1,600,876 1,662,317 5,207,906 3,958,498 10,517,214 9,782,952 - - 10,517,214 9,782,952Current portion of lease liability 7,039 - 238 - 886,635 - 15,428 - 257,315 - 171,350 - 10,621 - 1,348,626 - (405) - 1,348,221 -Other current liabilities 127,642 136,279 491,223 376,304 318,498 532,909 75,406 880 373,951 397,166 41,982 20,833 93,804 82,642 1,522,506 1,547,013 (15,889) (234,621) 1,506,617 1,312,392Public deposits - - - - - - - - 12,174,626 12,399,418 - - - - 12,174,626 12,399,418 (16,913) (14,359) 12,157,713 12,385,059Bank overdrafts 82,802 98,280 666,945 615,122 1,968,917 1,654,093 17,832 40,062 833,510 1,287,746 3,617,713 3,891,219 75,118 174,702 7,262,837 7,761,224 - - 7,262,837 7,761,224Segment current liabilities 2,626,564 2,187,580 2,485,653 3,356,142 30,154,021 27,778,431 548,816 1,759,994 17,470,262 18,083,514 11,550,412 9,356,608 21,954,363 14,332,289 86,790,091 76,854,558 (17,472,094) (13,704,362) 69,317,997 63,150,196Amounts due to related parties 212,510 193,448 1,711,549 1,402,758 3,784,074 3,633,355 216,928 313,439 13,887 14,926 25,022 2,801,220 93,749 51,183 6,057,719 8,410,329 (6,025,314) (8,407,598) 32,405 2,731Total current liabilities 2,839,074 2,381,028 4,197,202 4,758,900 33,938,095 31,411,786 765,744 2,073,433 17,484,149 18,098,440 11,575,434 12,157,828 22,048,112 14,383,472 92,847,810 85,264,887 (23,497,408) (22,111,960) 69,350,402 63,152,927Total liabilities 155,224,065 131,036,537 (26,905,866) (25,205,666) 128,318,199 105,830,871

Total segment assets 3,582,405 2,930,854 18,095,705 16,956,026 42,608,751 37,610,295 1,140,666 4,454,678 45,817,822 37,681,354 31,498,828 32,283,718 22,710,938 17,699,087 176,737,450 160,811,640 150.043..964 130,670,328Total segment liabilities 3,095,210 2,597,810 16,302,221 13,838,258 43,044,761 35,602,234 1,945,237 2,937,168 39,670,016 32,672,550 19,595,920 18,536,690 28,224,373 21,545,751 155,224,065 131,036,537 128,318,199 105,830,871


161



Leisure & Property


Healthcare Services


Group

As at 31 March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019

Property, plant and equipment 73,228 83,811 10,113,566 10,554,530 8,855,464 6,743,496 257,699 171,800 1,223,508 1,158,622 24,270,835 20,792,877 85,795 171,800 44,880,095 39,676,936 7,253,053 6,917,076 52,133,148 46,594,012Right of use assets/ Lease rental paid in advance 16,523 - 52,796 - 4,062,457 3,686 97,085 - 1,044,972 - 1,262,939 785,409 63,364 - 6,600,136 789,095 - - 6,600,136 789,095Investment property 202,000 204,000 1,945,780 1,791,640 6,204,380 5,640,537 - 744,000 - - 215,000 193,724 794,500 744,000 9,361,660 9,317,901 (7,331,280) (7,622,640) 2,030,380 1,695,261Intangible assets 438,996 411,055 16,872 24,541 418,297 374,596 - 686 205,396 83,376 135 165 1,468 686 1,081,164 895,105 - - 1,081,164 895,105Non-current financial assets 186,200 186,200 - - 1,523,994 1,279,699 - 1,465,042 14,999,358 11,866,315 360,695 323,946 1,549,170 1,465,042 18,619,417 16,586,244 (2,065,258) (3,579,028) 16,554,159 13,007,216Rental receivable on lease assets and hire purchase - - - - - - - - 1,156,023 1,135,517 - - - - 1,156,023 1,135,517 - - 1,156,023 1,135,517Other non-current assets 1,241 3,925 4,405,427 2,649,526 492,104 547,115 9,300 9,387 3,500 3,500 28,312 2,334 - - 4,939,884 3,215,787 - - 4,939,884 3,215,787Segment non-current assets 918,188 888,991 16,534,441 15,020,237 21,556,696 14,589,129 364,084 2,390,915 18,632,757 14,247,330 26,137,916 22,098,455 2,494,297 2,381,528 86,638,379 71,616,585 (2,143,485) (4,284,592) 84,494,894 67,331,993

Investments in equity accounted investees 109,355 78,249 - - 109,355 78,249Goodwill 4,604,797 4,604,797 - - 4,604,797 4,604,797Intangible assets through business combinations 3,119,045 3,264,632 - - 3,119,045 3,264,632Deferred tax assets 3,449,138 3,247,950 - - 3,449,138 3,247,950Total non-current assets 918,188 888,991 16,534,441 15,020,237 21,556,696 14,589,129 364,084 2,390,915 18,632,757 14,247,330 26,137,916 22,098,455 2,494,297 2,381,528 97,920,714 82,812,213 (2,143,485) (4,284,592) 95,777,229 78,527,621

Inventories 670,406 538,045 758,210 971,622 9,747,135 8,288,727 433,582 355,773 193,635 174,243 674,494 452,519 - - 12,477,462 10,780,929 (42,698) (91,908) 12,434,764 10,689,021Trade and other receivables 1,435,140 1,231,604 240,280 326,086 7,579,776 9,148,371 28,931 1,297,881 2,625,544 1,857,953 947,354 697,632 708,214 928,964 13,565,239 15,488,491 (1,174,013) (1,446,097) 12,391,226 14,042,394Loans and advances - - - - - - - - 11,899,173 12,214,401 - - - - 11,899,173 12,214,401 (372,750) (251,411) 11,526,423 11,962,990Rental receivable on lease assets and hire purchase - - - - - - - - 1,004,262 833,499 - - - - 1,004,262 833,499 - (3,021) 1,004,262 830,478Other current assets 90,044 52,258 209,012 354,508 1,593,765 2,532,753 305,023 305,572 964,739 1,165,697 637,151 1,120,891 52,335 28,286 3,852,069 5,559,965 (30,006) (201,579) 3,822,063 5,358,386Short term investments 63 100 340 371 34,682 37,128 1,500 1,500 9,822,154 5,893,821 260,200 - 115,238 130,834 10,234,177 6,063,754 (876,946) (14,358) 9,357,231 6,049,396Cash in hand and at bank 75,912 39,858 200,976 100,246 777,633 1,496,718 7,546 6,706 671,285 1,286,337 1,188,092 242,986 804,652 23,499 3,726,096 3,196,350 - - 3,726,096 3,196,350

2,271,565 1,861,865 1,408,818 1,752,833 19,732,991 21,503,697 776,582 1,967,432 27,180,792 23,425,951 3,707,291 2,514,028 1,680,439 1,111,583 56,758,478 54,137,389 (2,496,413) (2,008,374) 54,262,065 52,129,015Amounts due from related parties 392,652 179,998 152,446 182,956 1,319,064 1,517,469 - 96,331 4,273 8,073 1,653,621 7,671,235 18,536,202 14,205,976 22,058,258 23,862,038 (22,053,588) (23,848,346) 4,670 13,692Total current assets 2,664,217 2,041,863 1,561,264 1,935,789 21,052,055 23,021,166 776,582 2,063,763 27,185,065 23,434,024 5,360,912 10,185,263 20,216,641 15,317,559 78,816,736 77,999,427 (24,550,001) (25,856,720) 54,266,735 52,142,707Total assets 176,737,450 160,811,640 (26,693,486) (30,141,312) 150,043,964 130,670,328

Insurance contract liabilities - - - - - - - - 13,133,911 8,309,628 - - - - 13,133,911 8,309,628 - - 13,133,911 8,309,628Interest bearing borrowings 71,500 47,588 9,789,805 7,476,587 5,125,861 3,357,663 - 13,693 3,054,879 1,507,385 7,157,986 5,894,411 6,027,599 6,817,718 31,227,630 25,115,045 (186,200) - 31,041,430 25,115,045Lease liability 8,097 - 55,217 - 3,115,408 - 88,610 - 748,617 - 305,463 - 3,236 - 4,324,648 - (2,315) - 4,322,333 -Public deposits - - - - - - - - 4,860,256 4,603,080 - - - - 4,860,256 4,603,080 (1,528) (1,251) 4,858,728 4,601,829Employee benefit liabilities 144,852 109,866 33,329 26,950 297,544 216,982 11,179 6,369 219,859 154,017 557,037 484,451 105,786 82,685 1,369,586 1,081,320 - - 1,369,586 1,081,320Other deferred liabilities - 19,641 - - 7,750 53,524 - - - - - - 39,640 75,676 47,390 148,841 - - 47,390 148,841Other non-current financial liabilities 31,687 39,687 2,226,668 1,575,821 560,103 562,279 1,079,704 843,673 168,345 - - - - 186,200 4,066,507 3,207,660 (3,218,415) (3,092,455) 848,092 115,205Segment non-current liabilities 256,136 216,782 12,105,019 9,079,358 9,106,666 4,190,448 1,179,493 863,735 22,185,867 14,574,110 8,020,486 6,378,862 6,176,261 7,162,279 59,029,928 42,465,574 (3,408,458) (3,093,706) 55,621,470 39,371,868Deferred tax liabilities 3,346,327 3,306,076 - - 3,346,327 3,306,076Total non-current liabilities 256,136 216,782 12,105,019 9,079,358 9,106,666 4,190,448 1,179,493 863,735 22,185,867 14,574,110 8,020,486 6,378,862 6,176,261 7,162,279 62,376,255 45,771,650 (3,408,458) (3,093,706) 58,967,797 42,677,944

Trade and other payables 1,388,189 1,184,934 1,066,686 1,151,402 3,008,927 2,880,680 161,148 415,221 1,979,622 1,600,006 2,065,310 2,594,301 237,810 109,679 9,907,692 9,936,223 (1,261,885) (1,507,968) 8,645,807 8,428,255Income tax liabilities 28,638 15,287 (414) (300) (185,189) (54,304) (4,137) (4,662) (5,755) (4,957) 379,697 384,329 (23,451) 16,296 189,389 351,689 - - 189,389 351,689Other current financial liabilities 961,326 725,960 28,273 28,273 21,762,535 21,111,236 268,971 1,282,132 820,057 1,134,357 3,673,484 803,609 16,352,555 9,990,472 43,867,201 35,076,039 (16,177,002) (11,947,414) 27,690,199 23,128,625Current portion of interest bearing borrowings 30,928 26,840 232,702 1,185,341 2,393,698 1,653,817 14,168 26,361 1,036,936 1,269,778 1,600,876 1,662,317 5,207,906 3,958,498 10,517,214 9,782,952 - - 10,517,214 9,782,952Current portion of lease liability 7,039 - 238 - 886,635 - 15,428 - 257,315 - 171,350 - 10,621 - 1,348,626 - (405) - 1,348,221 -Other current liabilities 127,642 136,279 491,223 376,304 318,498 532,909 75,406 880 373,951 397,166 41,982 20,833 93,804 82,642 1,522,506 1,547,013 (15,889) (234,621) 1,506,617 1,312,392Public deposits - - - - - - - - 12,174,626 12,399,418 - - - - 12,174,626 12,399,418 (16,913) (14,359) 12,157,713 12,385,059Bank overdrafts 82,802 98,280 666,945 615,122 1,968,917 1,654,093 17,832 40,062 833,510 1,287,746 3,617,713 3,891,219 75,118 174,702 7,262,837 7,761,224 - - 7,262,837 7,761,224Segment current liabilities 2,626,564 2,187,580 2,485,653 3,356,142 30,154,021 27,778,431 548,816 1,759,994 17,470,262 18,083,514 11,550,412 9,356,608 21,954,363 14,332,289 86,790,091 76,854,558 (17,472,094) (13,704,362) 69,317,997 63,150,196Amounts due to related parties 212,510 193,448 1,711,549 1,402,758 3,784,074 3,633,355 216,928 313,439 13,887 14,926 25,022 2,801,220 93,749 51,183 6,057,719 8,410,329 (6,025,314) (8,407,598) 32,405 2,731Total current liabilities 2,839,074 2,381,028 4,197,202 4,758,900 33,938,095 31,411,786 765,744 2,073,433 17,484,149 18,098,440 11,575,434 12,157,828 22,048,112 14,383,472 92,847,810 85,264,887 (23,497,408) (22,111,960) 69,350,402 63,152,927Total liabilities 155,224,065 131,036,537 (26,905,866) (25,205,666) 128,318,199 105,830,871

Total segment assets 3,582,405 2,930,854 18,095,705 16,956,026 42,608,751 37,610,295 1,140,666 4,454,678 45,817,822 37,681,354 31,498,828 32,283,718 22,710,938 17,699,087 176,737,450 160,811,640 150.043..964 130,670,328Total segment liabilities 3,095,210 2,597,810 16,302,221 13,838,258 43,044,761 35,602,234 1,945,237 2,937,168 39,670,016 32,672,550 19,595,920 18,536,690 28,224,373 21,545,751 155,224,065 131,036,537 128,318,199 105,830,871

162


50 CONTINGENT LIABILITIES

ACCOUNTING POLICY

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an 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. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only if it is virtually certain.

The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote. A contingent liability recognised in a business combination is initially measured at its fair value.

Subsequently, it is measured at the higher of:

» the amount that would be recognised in accordance with the general guidance for provisions above (LKAS 37) or

» the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the guidance for revenue recognition (LKAS 18)

Contingent assets are disclosed where inflow of economic benefit is probable.

As at reporting date, there were no significant contingent liabilities at the date of the statement of financial position which require adjustment to or disclosure in the financial statements, other than disclosed below.

No provision has been made in respect of the contingent liabilities stated below for the reasons given.

50.1 Asiri Surgical Hospital PLC

A dispute has arisen with the Department of Inland Revenue on the tax exemption applicable as per the agreement between Asiri Surgical Hospital PLC and the Board of Investment (BOI) in 2000.

Since there is litigation in the Court of Appeal in CA (Writ) 386/2016 with regard to this matter, in accordance with Paragraph 92 of LKAS 37, the group is unable to provide further information on this and associated risks, in order not to impair the outcome and/ or prejudice the subsidiary’s position in this matter. Due to the situation prevailing in the country with the outbreak of COVID-19, Court has postponed all cases and next date for argument at the Court of Appeal will be announced when the courts are re-open.

50.2 Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC and Central Hospitals Ltd

Pending litigations against Asiri Hospital Holdings PLC , Asiri Surgical Hospital PLC and Central Hospitals Ltd with a maximum liability of Rs. 41.00 Mn, Rs. 13.20 Mn and Rs. 100.00 Mn respectively exist as at 31 March 2020 (2019 - Asiri Hospital Holdings PLC : Rs. 41.00 Mn, Asiri Surgical Hospital PLC : Rs. 105.00 Mn and Central Hospitals Ltd - Rs. 100.00 Mn).

Although there can be no assurance, the Directors believe, based on the information currently available, that the resolution of such legal processes are not likely to have a material adverse effect on the companies or the Group.

50.3 Asiri Central Hospitals Ltd

H.C. (Civil) 417/2015/MR - Krishnan Thangaraj Vs. Asiri Central Hospitals Ltd, Oraz International Property Developers and Construction (Pvt) Ltd and H.G. Shalika Perera relating to a permanent injunction restraining the payment of any commission on the sale of the land and premises bearing assessment no. 37, Horton Place, Colombo 07 to P.P.M. Edwards.

An enjoining order was issued restraining above at the first instance.

50.4 Softlogic Finance PLC

District Court of Colombo DMR 3743/19 - Customer of Softlogic Finance PLC has filed a case against the Company claiming damages of Rs. 100.00 Mn for the reputational loss and mental agony suffered.


163


50.5 Softlogic Life Insurance PLC (SLI)

Value Added Tax (VAT)

VAT Assessments were received by Softlogic Life Insurance PLC in April 2013 and March 2016 for the taxable periods ended 31 December 2010 and 31 March 2014, amounting to Rs. 46.50 Mn and Rs. 57.40 Mn respectively.

The Company has filed an appeal on the basis that the underlying computation includes items which are exempt/ out of scope of the Value Added Tax Act. The Commissioner General of Inland Revenue has determined the assessment and the Company has appealed to the Tax Appeals Commission and awaits the final decision. For the VAT assessment issued for the quarter ended 31 March 2014, the Company has filed an appeal in April 2016 on the basis that the underlying computation includes items which are exempt/ out of scope of the Value Added Tax Act. The Company is awaiting the CGIR determination.

Value Added Tax on Financial Services

The Company has received a tax assessments on Value Added Tax on Financial Services in July 2018, August 2019 and February 2020 for the taxable period ended 31 December 2014, 31 December 2016 and 31 December 2017 amounting to Rs. 68.70 Mn, Rs. 28.00 Mn and Rs. 102.4 Mn respectively.

The Company has filed an appeal in August 2018, September 2019 and February 2020 respectively on the basis that the underlying computation includes items which are out of scope of the Value Added Tax Act. The Company is awaiting the CGIR determination.

Nation Building Tax on Financial Services

The Company has received a tax assessments on Nation Building Tax on Financial Services in August 2019 and December 2019 for the taxable period ended 31 December 2016 and 31 December 2017 amounting to Rs. 4.30 Mn and Rs. 13.70 Mn respectively.

The Company has filed an appeal in September 2019 and February 2020 respectively on the basis that the underlying computation includes items which are out of scope of the Nation Building Tax Act. The Company is awaiting the CGIR determination.

Life Insurance Taxation

The Commissioner General of Inland Revenue has issued it’s determination notices on appeals filed for Life Insurance taxation for the year of assessment 2010/11, 2011/12, 2012/13, 2014/15 and 2015/16 amounting to Rs. 349.48 Mn with penalty. The Company has appealed to the Tax Appeals Commission and awaits the final decision.

Further, the Company has received tax assessment for Life Insurance taxation for the year of assessment 2013/14, 2016/17 and 2017/18 amounting to Rs. 691.30 Mn with penalty. The Company has lodged a valid appeal against the said assessment.

Based on the information available and the advice of the tax consultants, the Directors are confident that the resolution of this contingency is unlikely to have a material adverse effect on the company or the Group.

51 CAPITAL AND OTHER COMMITMENTS

51.1 Capital commitments


Capital commitments approved but not provided for 4,796,645 9,080,052 Capital commitments approved but not contracted 8,310,000 8,310,000

51.2 Guarantees issued and in-force, and commitments for unutilised facilities


Guarantees issued and in-force 238,471 1,952,507 23,855,456 23,282,722 Commitment for unutilised facilities 549,808 161,016 - -

164


52 IMPACT OF COVID-19

Following the declaration of COVID-19 as a global pandemic by World Health Organisation (“WHO”) during March 2020, Softlogic Holdings PLC and its subsidiaries have been operating with strict adherence to the guidelines issued by the Government to curtail the spread of the virus.

In order to ensure the health and safety of employees’, Human Capital Department has introduced the COVID-19 preventative measures for the Group. Also, we have arranged remote working facilities for our employees to work from home. We have educated the staff to maintain at least one-meter (1M) gap between the customers and our team members who have direct customer relationships. Further, COVID Combat Teams have been appointed for all locations within the Group to monitor and run the preventative measures.

In terms of continuity of business in these challenging times, SHPLC Group has established and set out clear guide lines for cost rationalisation initiatives such as reducing cost of training employees by engaging employees with required skills and knowledge to train other employees by being “trainers“ rather than getting outside trainers to fulfill the in-house training requirement. Also, salary reduction at various salary slabs as a percentage was introduced considering the salary range and thus was applicable to all staff across the entire group on a fair and equitable basis. Further, the group has minimised recruitments and instead allocated the current work amongst the existing employees where ever possible. The Group has sought to enhance the marketing strategies using online platforms and other social media networks.

Impact of COVID-19 on our Key Business Sectors

Retail

The Groups Retail arm recorded similar sales levels compared to the previous year reflecting consumer confidence in our brands and our product offerings and this is happened between the curfews and lockdowns. Import restrictions that were imposed were subsequently lifted, a fall in exchange rates and the perception that disposable incomes and fallen did not damped customer sentiment. Mobile phone and other communication equipment sales were high due to the increase in online teaching and businesses.

We are confident of a closer than longer return to normalcy however the recovery in the next 12 months will be of extreme importance.

Financial Services

The Central Bank of Sri Lanka (“CBSL”) issued Circular No. 04 and 05 of 2020 on “Debt Moratorium” which caused a direct impact to cash inflows of Softlogic Finance PLC. To comply with the issued circular, the Company established effective procedures to ensure that all Moratorium requests are properly collected and attended with top priority on individual basis to make sure impacted customers received the required relief. However, the decision on “Debt Moratorium” and the decision of country lock down resulted negative consequences on the Company’s performance and its liquidity position.

The Board of Directors of Softlogic Life Insurance PLC assessed potential operational impact and impairment loss of financial and non-financial assets as at the reporting date. Based on the available information and the Management’s best judgements, the Board of Directors of the Company concluded that no additional impairment provision is required to be made in the Financial Statements as at the reporting date in respect of COVID-19 Pandemic.

Healthcare Services

Following the outbreak of COVID-19, extremely stringent hygiene protocols were adopted across all our hospitals, providing assurance to both patients and doctors on the safety levels offered at our hospitals. We were also the first private sector operator to obtain the accreditation to carry out PCR testing. While patient volumes declined in the months immediately following the lockdown, the segment has now seen definite signs of recovery and is confident that the remaining quarters of 2020/21 would see continued growth. We have also partnered India’s leading IVF provider and hope to launch a dedicated IVF center in the short- to medium term.

Leisure

Both our hotels experienced the full effect of the COVID-19 pandemic, with total to partial closures due to the lockdowns and curfews. Occupancy rates were close to zero, while Restaurants sales and Banquet sales were non-existent with conferences and weddings being postponed. Travel restrictions, boarder closures mean that the outlook for the sector looks bleak. However, we are hopeful that with the reported opening of the Airport in early 2021 things will improve.

Despite the moratorium of loan repayment which were granted to this sector recently extended to September 2021, regular cash assistance from the holding company has become necessary, however this cannot continue indefinitely, and more governmental assistance may be required to meet salaries and direct overheads such as electricity etc. This assistance required is to avert salary reductions and staff layoffs. The loss of service charge has impacted on the earnings of our leisure sector employees significantly. We have consolidated operations and have eliminated expensive overheads and we have even started online food deliveries. The news of the approval of the COVID-19 vaccine is in need very welcome.


165



Demand for the IT segment’s services remained resilient during the pandemic given our presence in essential industrial such as healthcare, banking, and the military. The outlook is promising given the Government’s thrust towards leveraging technology to enhance several key areas of public service as well as increased digital adoption by private sector organisations. On the other hand, key downside risks such as import restrictions and exchange rate volatility is likely to temper the Segment’s earnings outlook in the next financial year.

Automobiles

This sector has also been impacted severely with a total ban on the import of vehicles, the imports of spare parts was only recently lifted partially. Extended credit on letters of credit was also agreed to by our suppliers with much persuasion but at additional cost.

The Future for this sector is uncertain in the short to medium term and we look forward to an early lifting on the ban of vehicle imports. Here to operations, have been rationalised, workshops consolidated.

53 POST BALANCE SHEET EVENTS

There were no significant events subsequent to the date of the statement of financial position, which require disclosure in the financial statements other than the following.

53.1 Rights issue announcement - Softlogic Capital PLC

The Directors of Softlogic Capital PLC, a subsidiary of Softlogic Holdings PLC, announced that the Company will issue 289,027,200 ordinary shares by way of a Rights Issue at a price of Rs. 3.50 per share. The issue of shares by the way of a Rights Issue approved by shareholder at an Extraordinary General Meeting held on 29 October 2020.

The proceeds from the aforesaid Rights Issue will be used for the purpose of investing in Softlogic Finance PLC, a subsidiary of Softlogic Capital PLC.

53.2 Rights issue announcement - Softlogic Finance PLC

The Directors of Softlogic Finance PLC, a subsidiary of Softlogic Holdings PLC, announced that the Company will issue 165,390,848 ordinary shares by way of a Rights Issue at a price of Rs. 11.50 per share. The issue of shares by the way of a Rights Issue approved by shareholder at an Extraordinary General Meeting held on 9 November 2020.

The proceeds from the aforesaid Rights Issue will be used for the purpose of improving Core Capital (Tier 1) requirements of Softlogic Finance PLC.

53.3 Business Combinations and Acquisitions - Softlogic Capital PLC

The Directors of Softlogic Capital PLC, a subsidiary of Softlogic Holdings PLC, announced that the Company has agreed to acquire 33,063,877 (49.67%) Ordinary Shares of Abans Finance PLC from its major shareholder of Abans PLC at a price of Rs. 30.10 per share subject to the required Regulatory approvals. After the aforesaid acquisition, the company will make a mandatory offer to the minority shareholders of Abans Finance PLC in terms of the Take-Overs and Merger Code 1995 as amended in 2003.

Immediately after the mandatory offer is completed and in accordance with Finance Sector Consolidation Plan initiated by the Central Bank of Sri Lanka in 2004, Softlogic Capital PLC intends to initiate a process for the amalgamation of Abans Finance PLC into Softlogic Finance PLC with Softlogic Finance PLC being the surviving entity. This amalgamation is subject to receiving all required regulatory approvals.

53.4 Tier II Subordinated Debt Transaction - Softlogic Life Insurance PLC

The Directors of Softlogic Life Insurance PLC has entered Tier II Subordinated Debt Transaction with “Finnish Fund for Industrial Corporation Ltd” and “Norfund (Norwegian Investment Fund for Developing Countries)” amounting USD 15.00 Mn to provide funding for further development of business objectives of the company.

166


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AWPL

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ceiv

able

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all

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ts o

f the

Sof

tlogi

c Re

stau

rant

s (P

vt) L

td

Hat

ton

Nat

iona

l Ba

nk P

LCTe

rm lo

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PLR

plus

m

argi

n60

equ

al m

onth

ly in

stal

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ts

com

men

cing

from

Apr

il 20

17 5

0,00

0 7

2,00

0 12

0.00

Corp

orat

e gu

aran

tee

from

Sof

tlogi

c H

oldi

ngs

PLC

for

Rs. 1

20.0

0 M

nTe

rm lo

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PLR

plus

m

argi

n48

equ

al m

onth

ly in

stal

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ts

com

men

cing

from

Sep

tem

ber

2017

1,5

94

2,7

19

Bank

of C

eylo

nTe

rm lo

anAW

PLR

plus

m

argi

n48

mon

thly

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allm

ents

co

mm

enci

ng a

fter

a g

race

pe

riod

of 1

2 m

onth

s fr

om

Febr

uary

201

8

464

,000

2

97,9

97

500.

00Co

rpor

ate

guar

ante

e fr

om S

oftlo

gic

Hol

ding

s PL

C fo

r Rs

. 500

.00

Mn

Futu

re

Auto

mob

iles

(Pvt

) Ltd

Sam

path

Ban

k PL

CTe

rm lo

anAW

PLR

plus

m

argi

n72

mon

thly

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allm

ents

co

mm

enci

ng a

fter

a g

race

per

iod

of 6

mon

ths

from

Jul

y 20

14

14,

168

35,

413

200.

00Co

rpor

ate

guar

ante

e fr

om S

oftlo

gic

Hol

ding

s PL

C fo

r Rs

. 200

.00

Mn

Soft

logi

c Pr

oper

ties

(Pvt

) Ltd

Unio

n Ba

nk o

f Co

lom

bo P

LCTe

rm lo

an -

3

07,3

96

170


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pany

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ndin

g

inst

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n N

atur

e of

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lity

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rest

rate

Repa

ymen

t ter

m O

utst

andi

ng b

alan

ce

Car

ryin

g va

lue

of

colla

tera

ls

Secu

rity

202

0 2

019

Rs.

‘000

R

s. ‘0

00

Rs.

Mn.

Soft

logi

c B

P O

Serv

ices

(Pvt

) Lt

d

Sam

path

Ban

k PL

CTe

rm lo

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PLR

plus

m

argi

n60

equ

al m

onth

ly in

stal

lmen

ts

com

men

cing

from

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embe

r 20

16

40,

428

64,

105

120.

00Co

rpor

ate

guar

ante

e fr

om S

oftlo

gic

Hol

ding

s PL

C fo

r Rs

. 120

.00

Mn

Term

loan

AWPL

R pl

us

mar

gin

48 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Nov

embe

r 20

20

62,

000

-

Soft

logi

c Su

perm

arke

ts

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Bank

of C

eylo

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PLR

plus

m

argi

n60

equ

al m

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ly in

stal

lmen

ts

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cing

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er a

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ce p

erio

d of

12

mon

ths

com

men

cing

from

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tobe

r 201

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466

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3

95,0

96

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420,

000

shar

es o

f Ode

l PLC

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ned

by S

oftlo

gic

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il H

oldi

ngs

(Pvt

) Ltd

b) C

orpo

rate

gua

rant

ee fr

om S

oftlo

gic

Hol

ding

s PL

C fo

r Rs.

500

.00

Mn

Term

loan

AWPL

R pl

us

mar

gin

60 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng a

fter

a g

race

per

iod

of 1

2 m

onth

s co

mm

enci

ng fr

om

Octo

ber 2

018

436

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-

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8.75

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sha

res

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del P

LC o

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d by

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c Re

tail

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ding

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vt) L

td

b) C

orpo

rate

gua

rant

ee fr

om S

oftlo

gic

Hol

ding

s PL

C fo

r Rs.

500

.00

Mn

Soft

logi

c Ca

pita

l PLC

Sam

path

Ban

k PL

CTe

rm lo

anAW

PLR

plus

m

argi

n5

annu

al in

stal

lmen

ts

com

men

cing

aft

er a

gra

ce

perio

d of

12

mon

ths

com

men

cing

from

Mar

ch 2

017

712

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12,0

00

4,91

0.67

158,

611,

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shar

es o

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tlogi

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fe In

sura

nce

PLC

and

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81 s

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s of

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nanc

e PL

C ow

ned

by S

oftlo

gic

Capi

tal P

LC

Term

loan

AWPL

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us

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gin

4 an

nual

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ents

co

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enci

ng fr

om A

pril

2018

46,

000

48,

000

Nat

ions

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st

Bank

PLC

Term

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us

mar

gin

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t pay

men

t at t

he m

atur

ity

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race

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40 s

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fe In

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PLC

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pita

l PLC

Soft

logi

c Fi

nanc

e PL

CUn

ion

Bank

of

Colo

mbo

PLC

Term

loan

AWPL

R pl

us

mar

gin

48 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Jun

e 20

18 1

42,4

71

200

,634

1

77.0

0 M

ortg

age

over

loan

s re

ceiv

able

s of

Sof

tlogi

c Fi

nanc

e PL

CH

atto

n N

atio

nal

Bank

PLC

Term

loan

AWPL

R pl

us

mar

gin

36 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Mar

ch 2

020

303

,705

-

4

20.0

0 M

ortg

age

over

leas

e an

d ve

hicl

e lo

an re

ceiv

able

s of

So

ftlo

gic

Fina

nce

PLC

Com

mer

cial

Ba

nk o

f Cey

lon

PLC

Term

loan

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32,

301

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ank

PLC

Term

loan

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58,

300

Peop

le’s

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kTe

rm lo

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0

Secu

ritis

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owin

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rate

31 m

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ly in

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ts

com

men

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from

Nov

embe

r 20

18

112

,663

1

80,3

38

118

.00

Mor

tgag

e ov

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ase

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les

of S

oftlo

gic

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nce

PLC

HN

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ust 2

Fixe

d ra

te24

mon

thly

inst

allm

ents

co

mm

enci

ng a

fter

a g

race

pe

riod

of 6

mon

ths

com

men

cing

fr

om J

uly

2019

353

,771

-

4

17.0

0 M

ortg

age

over

leas

e an

d ve

hicl

e lo

an re

ceiv

able

s of

So

ftlo

gic

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nce

PLC


171


Com

pany

Le

ndin

g

inst

itutio

n N

atur

e of

faci

lity

Inte

rest

rate

Repa

ymen

t ter

m O

utst

andi

ng b

alan

ce

Car

ryin

g va

lue

of

colla

tera

ls

Secu

rity

202

0 2

019

Rs.

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s. ‘0

00

Rs.

Mn.

HN

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ust 3

Fixe

d ra

te24

mon

thly

inst

allm

ents

co

mm

enci

ng a

fter

a g

race

pe

riod

of 6

mon

ths

com

men

cing

fr

om S

epte

mbe

r 201

9

237

,164

-

2

89.0

0 M

ortg

age

over

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e an

d ve

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e lo

an re

ceiv

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s of

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ftlo

gic

Fina

nce

PLC

HN

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Fixe

d ra

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mon

thly

inst

allm

ents

co

mm

enci

ng a

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race

pe

riod

of 6

mon

ths

com

men

cing

fr

om N

ovem

ber 2

019

464

,175

-

5

83.0

0 M

ortg

age

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leas

e an

d ve

hicl

e lo

an re

ceiv

able

s of

So

ftlo

gic

Fina

nce

PLC

BOC

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st 1

-

16,

441

HN

B Tr

ust 1

-

186

,293

As

iri H

ospi

tal

Hol

ding

s PL

CCo

mm

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al

Bank

of C

eylo

n PL

C

Term

loan

AWPL

R pl

us

mar

gin

96 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Apr

il 20

15 9

33,5

21

1,2

03,7

30

2,14

3.05

74,4

54,0

26 s

hare

s of

Cen

tral

Hos

pita

ls L

td h

eld

by

Asiri

Hos

pita

l Hol

ding

s PL

CTe

rm lo

anAW

PLR

plus

m

argi

n96

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om A

pril

2015

208

,319

2

68,6

29

550.

00Co

rpor

ate

guar

ante

e fr

om A

siri

Surg

ical

Hos

pita

l PLC

fo

r Rs.

550

.00

Mn

Term

loan

AWPL

R pl

us

mar

gin

72 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Jul

y 20

14 2

0,59

3 7

6,77

2 37

5.00

a) P

rimar

y co

ncur

rent

mor

tgag

e bo

nd fo

r Rs.

10

0.00

Mn

over

pro

pert

y at

No.

181

, Kiru

la R

oad,

N

arah

enpi

ta o

wne

d by

Asi

ri H

ospi

tal H

oldi

ngs

PLC

b) S

econ

dary

mor

tgag

e fo

r Rs.

275

.00

Mn

over

pr

oper

ty a

t No.

181

, Kiru

la R

oad,

Nar

ahen

pita

ow

ned

by A

siri

Hos

pita

l Hol

ding

s PL

CTe

rm lo

anAW

PLR

plus

m

argi

n90

mon

thly

inst

allm

ents

aft

er a

gr

ace

perio

d of

40

mon

ths

from

De

cem

ber 2

015

557

,189

-

63

0.60

Corp

orat

e gu

aran

tee

from

Asi

ri H

ospi

tal H

oldi

ngs

PLC

for R

s. 6

30.6

0 M

n (lo

an tr

ansf

erre

d fr

om A

siri

Hos

pita

l Ka

ndy

(Pvt

) Ltd

)Te

rm lo

an

AWPL

R pl

us

mar

gin

96 m

onth

ly in

stal

lmen

ts a

fter

a

grac

e pe

riod

of 2

4 m

onth

s fr

om

Sept

embe

r 201

6

1,9

00,3

89

-

2,12

0.00

Corp

orat

e gu

aran

tee

from

Asi

ri H

ospi

tal H

oldi

ngs

PLC

for R

s. 2

,120

.00

Mn

(loan

tran

sfer

red

from

Asi

ri H

ospi

tal K

andy

(Pvt

) Ltd

)Sa

mpa

th B

ank

PLC

Term

loan

AWPL

R pl

us

mar

gin

60 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om A

pril

2015

6,1

05

72,

754

363.

00Co

rpor

ate

guar

ante

e fr

om A

siri

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ical

Hos

pita

l PLC

fo

r Rs.

363

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Mn

Term

loan

AWPL

R pl

us

mar

gin

120

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om D

ecem

ber

2015

393

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45

2,53

7 39

3.22

Secu

ritis

atio

n of

all

futu

re c

redi

t/ d

ebit

card

re

ceiv

able

s of

Asi

ri H

ospi

tal H

oldi

ngs

PLC

Term

loan

AWPL

R pl

us

mar

gin

108

mon

thly

inst

allm

ents

co

mm

enci

ng a

fter

12

mon

ths

of

grac

e pe

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from

Mar

ch 2

019

454

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4

51,0

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4.68

a) T

hird

par

ty p

rimar

y m

ortg

age

bond

for R

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50.0

0 M

n ov

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tal p

rope

rty

at N

o. 1

0, W

ackw

ella

Ro

ad, G

alle

ow

ned

by A

siri

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pita

l Gal

le (P

vt) L

td

b) A

dditi

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sec

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r 100

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of o

rdin

ary

shar

es

of A

siri

Hos

pita

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le (P

vt) L

td o

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d by

Asi

ri H

ospi

tal H

oldi

ngs

PLC

Hat

ton

Nat

iona

l Ba

nk P

LCTe

rm lo

anAW

PLR

plus

m

argi

n48

equ

al m

onth

ly in

stal

lmen

ts

com

men

cing

from

Mar

ch 2

017

189

,236

3

60,5

69

172


Com

pany

Le

ndin

g

inst

itutio

n N

atur

e of

faci

lity

Inte

rest

rate

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ymen

t ter

m O

utst

andi

ng b

alan

ce

Car

ryin

g va

lue

of

colla

tera

ls

Secu

rity

202

0 2

019

Rs.

‘000

R

s. ‘0

00

Rs.

Mn.

Asiri

Sur

gica

l H

ospi

tal P

LCCo

mm

erci

al

Bank

of C

eylo

n PL

C

Term

loan

AWPL

R pl

us

mar

gin

96 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Apr

il 20

15 1

91,7

46

255

,958

27

3.40

a) P

rimar

y co

ncur

rent

mor

tgag

e bo

nd fo

r Rs.

125

.00

Mn

over

hos

pita

l pro

pert

y at

No.

181

, Kiru

la R

oad,

N

arah

enpi

ta o

wne

d by

Asi

ri H

ospi

tal H

oldi

ngs

PLC

b) C

orpo

rate

gua

rant

ee fr

om A

siri

Hos

pita

l Hol

ding

s PL

C fo

r Rs.

148

.40

Mn

DFCC

Ban

k PL

CTe

rm lo

anAW

PLR

plus

m

argi

n72

mon

thly

inst

allm

ents

co

mm

enci

ng a

fter

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mon

ths

of

grac

e pe

riod

from

Mar

ch 2

020

1,2

12,4

45

-

1,2

00.0

0 Co

rpor

ate

guar

ante

e fr

om A

siri

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pita

l Hol

ding

s PL

C fo

r Rs.

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00.0

0 M

n

Boar

d of

In

vest

men

tLe

ase

-

22,

057

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ral

Hos

pita

ls L

tdBa

nk o

f Cey

lon

Term

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nAW

PLR

plus

m

argi

n96

equ

al m

onth

ly in

stal

lmen

ts

com

men

cing

aft

er 2

4 m

onth

s of

gr

ace

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d fr

om J

uly

2014

280

,960

3

91,8

42

280.

96Pr

imar

y co

ncur

rent

mor

tgag

e ov

er th

e pr

emis

es a

t N

o. 1

14, N

orris

Can

al R

oad,

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ombo

- 1

0 ow

ned

by

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ral H

ospi

tals

Ltd

Sam

path

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k PL

CTe

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oan

AWPL

R pl

us

mar

gin

96 m

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ly in

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ts

com

men

cing

from

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15

126

,631

1

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92

326.

00Co

rpor

ate

guar

ante

e fr

om A

siri

Hos

pita

l Hol

ding

s PL

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r Rs.

326

.00

Mn

Term

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nAW

PLR

plus

m

argi

n12

0 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Dec

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r 20

15

675

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00

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18Se

curit

isat

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ll fu

ture

cre

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rd

rece

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les

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entr

al H

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tals

Ltd

Com

mer

cial

Ba

nk o

f Cey

lon

PLC

Term

loan

AWPL

R pl

us

mar

gin

54 m

onth

ly in

stal

lmen

ts

com

men

cing

aft

er 4

mon

ths

of

grac

e pe

riod

from

Apr

il 20

19

1,0

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Prim

ary

mor

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r Rs.

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0 M

n ov

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e pr

emis

es a

t No.

907

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aden

iya

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dy (A

siri

Kand

y H

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tal)

owne

d by

Asi

ri H

ospi

tal H

oldi

ngs

PLC

Asiri

Hos

pita

l M

atar

a (P

vt)

Ltd

Nat

ions

Tru

st

Bank

PLC

Term

loan

AW

PLR

plus

m

argi

n60

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om O

ctob

er 2

016

28,

951

49,

860

66.1

0As

sign

men

t ove

r AM

EX re

ceiv

able

s

Term

loan

AW

PLR

plus

m

argi

n24

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om M

ay 2

019

37,1

50

-

Asiri

Hos

pita

l Ka

ndy

(Pvt

) Ltd

Com

mer

cial

Ba

nk o

f Cey

lon

PLC

Term

loan

-

630

,600

On

14

Dece

mbe

r 201

8, th

e Bo

ard

of D

irect

ors

of A

siri

Hos

pita

l Hol

ding

s PL

C an

d As

iri H

ospi

tal K

andy

(Pvt

) Lt

d ha

ve re

solv

ed to

am

alga

mat

e As

iri H

ospi

tal K

andy

(P

vt) L

td w

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2


SUPPLEMENTARY INFORMATIONShareholder Information 176Corporate Directory 178Notice of Meeting 182Form of Proxy 183

6We continue to hold the people’s needs foremost in our agenda of transformation and adaptability in the years ahead.

176


SHAREHOLDER INFORMATIONSUPPLEMENTARY INFORMATION

GENERAL

Stated Capital as at 31 March 2020 was Rs. 12,119,234,553.00.

STOCK EXCHANGE LISTING

The ordinary shares of Softlogic Holdings PLC were listed in the Colombo Stock Exchange of Sri Lanka on 20 June 2011 and the trading commenced on 12 July 2011.

PUBLIC SHAREHOLDING

» Public Holding Percentage was13.02% as at 31 March 2020.

» The number of public shareholders as at 31 March 2020 was 10,713

» Float adjusted market capitalisation as at 31 March 2020 was Rs.1,910Mn

» Minimum public holding percentage - The Company is not in compliance with this under Option 4 of the Listing Rule 7.13.1(a)

DISTRIBUTION OF SHAREHOLDING

There were 10,729 registered shareholders as at 31March 2020

No of Shares held No of Shareholders % of Shareholders Total holding % of Total Holding

1 - 1,000 6997 65.22 4,183,939 0.35

1,001 - 10,000 3199 29.82 10,675,906 0.89

10,001 - 100,000 439 4.09 12,585,515 1.06

100,001 - 1,000,000 64 0.60 17,175,657 1.44

Over 1,000,000 30 0.27 1,147,922,192 96.26

10729 100.00 1,192,543,209 100.00

ANALYSIS REPORT OF SHAREHOLDERS AS AT 31 MARCH, 2020

Category No of Shareholders % of Shareholders Total Holdings % of Total Holding

Individual 10534 98.18 481,459,525 40.37

Institutions 195 1.82 711,083,684 59.63

Total 10729 100.00 1,192,543,209 100.00

Resident 10685 99.59 811,860,891 68.08

Non-Resident 44 0.41 380,682,318 31.92

Total 10729 100.00 1,192,543,209 100.00

177


TWENTY MAJOR SHAREHOLDERS

The 20 major shareholders as at 31 March 2020

Name Shares %

1 Mr. Asoka Kariyawasam Pathirage 486,244,633 40.774

2 Samena Ceylon Holdings Limited 247432455 20.748

3 Mr. Haresh Kumar Kaimal 80,439,792 6.745

4 Mr. Ranjan Janaka Perera 75,437,508 6.326

5 Mr. Govinda Waduge Don Hemantha Udaya Gunawardena 71,333,852 5.982

6 Pemberton Asian Opportunities Fund 57,040,000 4.783

7 Samena Special Situations Fund III L.P. 53,653,654 4.499

8 Samena Special Situations Fund II L.P. 15,000,000 1.258

9 Employees Provident Fund 7,230,500 0.606

10 J.B. Cocoshell (Pvt) Ltd 6,220,017 0.522

11 Mrs. Arunthathi Selliah 5,252,640 0.440

12 Mr. Samir Jimmy Fancy 4,960,000 0.416

13 Arunodhaya Industries (Private) Limited 4,757,864 0.399

14 Miss. Sivamalar Subramaniam 4,712,000 0.395

15 Mrs. Abiramipillai Kailasapillai 4,512,000 0.378

16 Dr. Karunamuni Manjula Prasanna Karunaratne 4,470,000 0.375

17 Mr. Kailasapillai Aravinthan 3,801,018 0.319

18 Arunodhaya Investments (Private) Limited 3,147,668 0.264

19 Arunodhaya (Private) Limited 3,000,000 0.252

20 Dr. Sivakumar Selliah 2,480,000 0.208

SHARE TRADING INFORMATION

Market price (LKR) 2019/2020 2018/19

Highest (Rs.) 17.00 25.80

Lowest (Rs.) 11.00 15.90

Closing (Rs.) 12.30 16.00

Turnover (Rs.) 554,676,238.50 994,409,695

Number of shares traded 35,530,251 46,917,043

No. of Trades (Rs.) 7,448 6,803

EQUITY INFORMATION

2019/2020 2018/19

Earnings per share (Rs.) (3.96) 0.25

Dividend per share (Rs.) 0.50 0.65

Net Asset Value per share (Rs.) 8 14.05

178


CORPORATE DIRECTORYSUPPLEMENTARY INFORMATION

Name of the Company Date of Registration

Registered office

Softlogic Holdings PLC 25/02/1998 No. 14, De Fonseka Place, Colombo 05

1 Asiri A O I Cancer Centre (Private) Limited 17/03/2017 No. 21, Kirimandala Mawatha, Colombo 05

2 Asiri Central Hospitals Ltd 07/09/1992 No. 114, Norris Canal Road, Colombo 10

3 Asiri Diagnostics Services (Pvt) Ltd 19/09/1995 No. 181, Kirula Road, Colombo 05

4 Asiri Hospital Holdings PLC 29/09/1980 No. 181, Kirula Road, Colombo 05

5 Asiri Hospital Galle (Private) Limited 29/05/2007 No. 181, Kirula Road, Colombo 05

6 Asiri Hospital Matara (Pvt) Ltd 17/04/2007 No. 26, Esplanade Road, Uyanwatta, Matara

7 Asiri Laboratories (Pvt) Ltd 08/03/2016 No. 181, Kirula Road, Colombo 05

8 Asiri Surgical Hospital PLC 30/03/2000 No. 21, Kirimandala Mawatha, Colombo 05

9 BSL International (Pvt) Ltd 22/07/2009 No.475/32, Kotte Road, Rajagiriya

10 Softlogic Asset Management (Pvt) Ltd 24/05/2006 Level 16, One Galle Face Tower, Colombo 02

11 Central Hospital Ltd 14/09/2006 No. 114, Norris Canal Road, Colombo 10

12 Ceysand Resorts Ltd 06/03/1973 No. 14, De Fonseka Place, Colombo 05

13 Cotton Collection (Pvt) Ltd 29/04/1993 No. 475/32, Kotte Road, Rajagiriya

14 Dai-Nishi Securities (Pvt) Ltd 26/07/1993 No. 14, De Fonseka Place, Colombo 05

15 Digital Health (Private) Limited 14/08/2015 No. 475, Union Place, Colombo 02

16 Future Automobiles (Pvt) Ltd 06/12/2010 No. 14, De Fonseka Place, Colombo 05

17 Jendo Innovations (Pvt) Ltd 22/06/2015 No. 14, De Fonseka Place, Colombo 05

18 Nextage (Pvt) Ltd 11/04/2012 No. 79, C W W Kannangara Mawatha, Colombo 07

19 Odel Apparels (Pvt) Ltd 10/10/1991 No. 475/32, Kotte Road, Rajagiriya

20 Odel Information Technology Services (Pvt) Ltd 30/11/2007 No. 475/32, Kotte Road, Rajagiriya

21 Odel Lanka (Pvt) Ltd 04/07/2006 No. 475/32, Kotte Road, Rajagiriya

22 Odel PLC 31/10/1990 No. 475/32, Kotte Road, Rajagiriya

23 Odel Properties (Pvt) Ltd 10/10/1991 No. 475/32, Kotte Road, Rajagiriya

24 Odel Properties One (Pvt) Ltd 10/06/2016 No. 475/32, Kotte Road, Rajagiriya

25 Odel Restaurants (Private) Limited 19/02/2018 No. 475/32, Kotte Road, Rajagiriya

26 Sabre Travel Network Lanka (Pvt) Ltd 21/01/1999 No. 14, De Fonseka Place, Colombo 05

27 Silk Route Foods (Private) Limited 10/10/2014 No. 14, De Fonseka Place, Colombo 05

28 SML Holdings (Private) Limited 27/04/2000 No. 371, New Nuge Road, Peliyagoda

29 Softlogic Australia (Pty) Ltd 05/01/2000, Unit 2, Building B, 18-24 Ricketts Road, Mount Waverley, Vic 3149

30 Softlogic Automobiles (Pvt) Ltd 02/04/2012 No. 14, De Fonseka Place, Colombo 05

31 Softlogic B P O Services (Private) Limited 13/12/2013 No. 14, De Fonseka Place, Colombo 05

32 Softlogic Brands (Pvt) Ltd 08/11/1993 No. 14, De Fonseka Place, Colombo 05

33 Softlogic Capital PLC 21/04/2005 Level 16, One Galle Face Tower, Colombo 02

34 Softlogic City Hotels (Pvt) Ltd 30/06/2011 No. 14, De Fonseka Place, Colombo 05

35 Softlogic Communication Services (Pvt) Ltd 16/09/2009 No. 14, De Fonseka Place, Colombo 05

36 Softlogic Communications (Pvt) Ltd 30/10/2000 No. 14, De Fonseka Place, Colombo 05

37 Softlogic Computers (Pvt) Ltd 13/09/1995 No. 14, De Fonseka Place, Colombo 05

38 Softlogic Corporate Services (Pvt) Ltd 24/06/2005 No. 14, De Fonseka Place, Colombo 05

179


Name of the Company Date of Registration

Registered office

39 Softlogic Destination Management (Pvt) Ltd 22/03/2012 No. 14, De Fonseka Place, Colombo 05

40 Softlogic Finance PLC 24/08/1999 No. 13, De Fonseka Place, Colombo 04

41 Softlogic Healthcare Holdings Ltd 28/08/2018 No. 181, Kirula Road, Colombo 05

42 Softlogic Information Technologies (Pvt) Ltd 02/09/1992 No. 14, De Fonseka Place, Colombo 05

43 Softlogic International (Pvt) 09/01/1997 No. 14, De Fonseka Place, Colombo 05

44 Softlogic Life Insurance PLC 21/04/1999 Level 16, One Galle Face Tower, Colombo 02

45 Softlogic Mobile Distribution (Private) Limited 30/09/2014 No. 14, De Fonseka Place, Colombo 05

46 Softlogic Properties (Pvt) Ltd 04/01/2005 No. 14, De Fonseka Place, Colombo 05

47 Softlogic Restaurants (Private) Limited 05/08/2013 No. 14, De Fonseka Place, Colombo 05

48 Softlogic Retail (Private) Limited 06/09/1969 No. 14, De Fonseka Place, Colombo 05

49 Softlogic Retail Holdings (Private) Limited 09/03/2018 No. 14, De Fonseka Place, Colombo 05

50 Softlogic Retail One (Private) Limited 04/07/2014 No. 14, De Fonseka Place, Colombo 05

51 Softlogic Rewards (Private) Limited 05/11/2018 No. 14, De Fonseka Place, Colombo 05

52 Softlogic Solar (Pvt) Ltd 14/11/2002 No. 14, De Fonseka Place, Colombo 05

53 Softlogic Stockbrokers (Pvt) Ltd 26/11/2010 Level 16, One Galle Face Tower, Colombo 02

54 Softlogic Supermarkets (Pvt) Ltd 27/08/2014 No. 14, De Fonseka Place, Colombo 05

55 Suzuki Motors Lanka Limited 12/09/1985 No. 371, New Nuge Road, Peliyagoda

56 Asiri Myanmar Limited 04/11/2019 Pan Hlaing Street, Unit 1#, Level 8, Uniteam Marine Office Building, No 84, Pan Hlaing Street, Sanchaung Township, Yangon, Myanmar.

57 Asiri Diagnostic Services (Asia) Pte. Limited 05/10/2019 8 Temasek Boulevard No. 35 -03, Suntec Tower three, Singapore (038988)

180


NOTES

181


182


NOTICE OF MEETINGSUPPLEMENTARY INFORMATION

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Softlogic Holdings PLC will be held as a Hybrid Meeting at the Auditorium of Central Hospital Limited (4th Floor), No 114, Norris Canal Road, Colombo 10, on Tuesday, the 19th day of January, 2021 at 10.00 a.m. for the following purposes:

1. To receive and consider the Annual Report of the Board of Directors and the Financial Statements of the Company and of the Group for the year ended 31st March, 2020 together with the Report of the Auditors thereon.

2. To re-elect Mr. R.J. Perera who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director

3. To re-elect Mr. Aaron Russell- Davison who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director

4. To re-elect Mr. Shirish Saraf who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director

5. To pass the ordinary resolution set out below to re-appoint Mr. G.L.H.Premaratne who is 72 years of age, as a Director of the Company

“IT IS HEREBY RESOLVED THAT the age limit stipulated in Section 210 of the Companies Act No. 07 of 2007 shall not apply to Mr. G.L.H Premaratne who is 72 years of age and that he be and is hereby appointed as a Director of the Company in terms of Section 211 of the Companies Act No. 07 of 2007”.

6. To re-appoint the retiring Auditors, Messrs. Ernst & Young of the Company for the ensuring year and to authorise the Directors to determine their remuneration

7. To authorise the Directors to determine and make donations for the year ending 31 March, 2021 and up to the date of the next Annual General Meeting.

8. To discuss the matter pertaining to the securities of the Company being transferred to the Second Board of the Colombo Stock Exchange with effect from 9th November, 2020 and the remedial action intended to be adopted by the Company in this regard to ensure compliance with Rule 7.13 of the Listing Rules of the Company.

By order of the Board

SOFTLOGIC CORPORATE SERVICES (PVT) LTD

SECRETARIES

15 December 2020

Colombo

Note: A Form of Proxy is enclosed in this Report. The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 14, De Fonseka Place, Colombo 05, not less than 48 hours before the time for holding the Meeting.

183


SUPPLEMENTARY INFORMATION

FORM OF PROXY

*I/We ……………………………………………………………………………............................................................................………………………………………………………… of

………………………………………………………………………………………………………………………………………………………….................................................................…….

being * member/members of SOFTLOGIC HOLDINGS PLC, do hereby appoint ………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………………………......................................................................…….

(holder of N.I.C No. ……………………………………………) of ……………………………………………………………………………………………………………………………………

…………………………………………………...........................................................................................................................................................……… or ( whom falling)

Mr. A.K. Pathirage of Colombo whom failing Mr. G.W.D.H.U. Gunawardena of Colombo whom failingMr. R.J. Perera of Colombo whom failing Mr. H.K. Kaimal of Colombo whom failing Mr. M.P.R. Rassool of Colombo whom failing Dr. S. Selliah of Colombo whom failing Mr. W.M.P.L De Alwis, PC of Colombo whom failing Mr. G.L.H. Premaratne of Colombo whom failing Prof. A.S. Dharmasiri of Colombo whom failing Mr. A. Russell Davison of Colombo whom failing Mr. J.D.N. Kekulawala of Colombo whom failingMr. S. Saraf of India whom failing

as *my/our Proxy to represent *me/us and to speak and vote for *me/us on *my/our behalf at the Annual General Meeting of the Company to be held as a Hybrid meeting at the Auditorium of Central Hospital Limited (4th Floor), No 114, Norris Canal Road, Colombo 10, at 10.00 a.m. on the 19th January, 2021 and at any adjournment thereof

For Against

1. To receive and consider the Annual Report of the Board of Directors and the Financial Statements of the Company and of the Group for the year ended 31st March, 2020 together with the Report of the Auditors thereon.

2. To re-elect Mr. R.J. Perera who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company, as a Director

3. To re-elect Mr. Aaron Russell- Davison who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director

4. To re-elect Mr. Shirish Saraf who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company

5. To pass the ordinary resolution set out below to re-appoint Mr. G.L.H. Premaratne who is 72 years of age, as a Director of the Company“ IT IS HEREBY RESOLVED THAT the age limit stipulated in Section 210 of the Companies Act No. 07 of 2007 shall not apply to Mr. G.L.H. Premaratne who is 72 years of age and that he be and is hereby appointed as a Director of the Company in terms of Section 211 of the Companies Act No. 07 of 2007.

6. To re-appoint Messrs. Ernst & Young, as Auditors and to authorise the Directors to determine their remuneration

7. To authorise the Directors to determine and make Donations 8. To discuss matter pertaining to the securities of the Company being transferred to the Second Board of

the Colombo Stock Exchange with effect from 9th November, 2020 and the remedial action intended to be adopted by the Company in that regard to ensure compliance with Rule 7.13 of the Listing Rules of the Company.

…………………………………………………….. ……………………………………….

Signature Date Note:* Please delete the inappropriate words Instructions as to completion are noted on the reverse hereof.

184


FORM OF PROXYSUPPLEMENTARY INFORMATION

Instruction as to completion

1. Kindly perfect the Form of Proxy after filling in legibly your full name, address and National Identity Card Number and signing in the space provided and filling in the date of signature.

2. A proxy who need not be a member to attend and vote on behalf of him. Please indicate with an “X” in the boxes provided how your Proxy is to vote on each resolution. If no indication is given the Proxy in his discretion will vote as he thinks fit.

3. Shareholders who are unable to participate at the meeting are encouraged to duly complete the Form of Proxy clearly setting out their preference of vote under each matter set out therein and appoint a director of the company to act on their behalf.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

5. In the case of a Corporate Member, the Form of Proxy must be executed in the manner prescribed by the Articles of Association/ Statute.

6. The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 14, De Fonseka Place, Colombo 05, not less than forty-eight (48) hours before the time appointed for the holding of the meeting.

7. As mentioned in the Circular to Shareholders, the AGM will be held as a Hybrid meeting. Instructions given in the Circular to Shareholder must be followed to join the meeting physically or virtually.

Designed & produced by

Softwave Printing and Publishing (Pvt) Ltd Photography by Danush De Costa

CORPORATE INFORMATION

NAME OF COMPANY


LEGAL FORM

Company was incorporated on 25th February 1998 under the name of Softlogic Holdings (Private) Limited and re-registered on 17th December 2007 under the Companies Act No. 7 of 2007. Changed to a Public Limited Liability Company on 10th December 2008. The shares of the Company were listed on the Colombo Stock Exchange on 20th June 2011 and the name of the Company was changed to Softlogic Holdings PLC on 25th August 2011.

COMPANY REGISTRATION NO

PV 1536 PB/PQ

REGISTERED OFFICE OF THE COMPANY

14, De Fonseka Place,

Colombo 05

Sri Lanka

Contact Details


Colombo 05

Sri Lanka

Tel : +94 11 5575 000

Fax : +94 11 2508 291

E-mail : [email protected]

Web : www.softlogic.lk

DIRECTORS

A K Pathirage - Chairman/ Managing Director

G W D H U Gunawardena

R J Perera

H K Kaimal

M P R Rasool

Dr. S Selliah

W M P L De Alwis, PC

G L H Premaratne

Prof. A S Dharmasiri

A Russell-Davison

S Saraf

J D N Kekulawala

C K Gupta (Alternate Director)

AUDIT COMMITTEE

J D N Kekulawala - Chairman

Dr. S Selliah

Prof A S Dharmasiri


HR AND REMUNERATION COMMITTEE

Prof. A S Dharmasiri - Chairman


G L H Premaratne

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE

Dr. S Selliah - Chairman


H K Kaimal

SECRETARIES AND REGISTRARS



Colombo 05

Sri Lanka

Tel : +94 11 5575 000

Fax : +94 11 2508 291

INVESTOR RELATIONS



Colombo 05

Sri Lanka

Tel : +94 11 5575 000 Ext: 5305

Fax : +94 11 2595 441

CONTACT FOR MEDIA



Colombo 05

Sri Lanka

Tel : +94 11 5575 000 Ext: 5305

Fax : +94 11 2595 441

BANKERS

Bank of Ceylon

Commercial Bank of Ceylon PLC

DFCC Bank PLC

Hatton National Bank PLC

Nations Trust Bank PLC

Pan Asia Banking Corporation PLC

People’s Bank

Sampath Bank PLC

Seylan Bank PLC

Union Bank of Colombo PLC

AUDITORS

Ernst & Young

Chartered Accountants

No. 201, De Saram Place

Colombo 10

Sri Lanka

LAWYERS

Nithya Partners,

Attorneys-at- Law

No. 97 A, Galle Road

Colombo 03

Sri Lanka

Softlogic Holdings PLC14, De Fonseka Place, Colombo 05, Sri Lanka

Tel : +94 (11) 557 5000, Fax : +94 (11) 250 8291 E-mail : [email protected], [email protected]

www.softlogic.lk

softlogic holdings plc · 2020. 12. 18. · softlogic holdings plc is one of sri lanka’s leading...

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