morison plc annual report 2017/18...morison plc | annual report 2017/18 morison plc “hemas...

Morison PLC | Annual Report 2017/18

MORISON PLCANNUAL REPORT 2017/18“Hemas House” No. 75 Braybrooke Place, Colombo 2

Tel; 0114 731 731 Fax: 0114731777 www.morison.lk

Legal FormQuoted Public Company with Limited Liability.Listed on the Colombo Stock Exchange on 1st January 1964

Date of Incorporation31st January 1939

Date of Re-registration5th September 2007

New Registration NumberPQ 77

Accounting Year End31st March

Registered Office“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

AuditorsErnst & YoungChartered AccountantsNo. 201, De Saram Place,Colombo 10

DirectorsMr. H.N. Esufally (Chairman)Mr. M.A.H. Esufally (MD)Ms. B.A. I. RajakarierMs. K.A.C. WilsonProfessor P. R. FernandoMr. R. ChakravartiMr. S.M. Enderby

SecretariesHemas Corporate Services (Pvt) Ltd“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

RegistrarsSSP Corporate Services (Pvt) Ltd101, Inner Flower Road,Colombo 3

Lawyers to the CompanyJulius & CreasyNo. 41, Janadhipathi Mawatha,Colombo 1.

BankersBank of CeylonPeople’s BankStandard Chartered BankNDB BankNations Trust BankHSBC BankSampath BankDeutsche BankCommercial Bank

CORPORATE INFORMATION

Contents

Milestones and Events 2Chairman’s Message 6Managing Director’s Message 8Directors’ Profiles 10Sustainability Report 12Corporate Governance 15Report of the Board of Directors 19Annual Report of the Directors 20The Audit Committee Report 24The Related Party Transactions Review Committee Report 26Statement of Directors’ Responsibility 28Independent Auditors’ Report 29Statement of Financial Position 32Statement of Profit or Loss 33Statement of Comprehensive Income 34Statement of Changes in Equity 35Statement of Cash Flows 36Notes to the Financial Statements 37Analysis of Shareholders According to the Number of Shares As at 31 March 2018 72Other Information to Shareholders & Investors 73Computation of % of Public Shareholding - 31 March 2018 (Voting) 74Computation of % of Public Shareholding - 31 March 2018 (Non-Voting) 76Group Financial Highlights - 5 Year Summary 78Notice of Meeting 79Notes 80Form of Proxy - Morison PLC (Voting) 81Form of Proxy - Morison PLC (Non-Voting) 83Corporate Information Inner Back Cover

1 MORISON PLCANNUAL REPORT 2017 / 18

Morison is a fully Sri Lankan owned company with seven decades of experience and working relationships in the country.

At Morison’s our purpose is to offer wellness and a better quality of life to Sri Lankans. We accomplish this through the provision of trusted pharmaceutical and OTC products that are efficacious and of high quality at an affordable cost.

As one of the oldest and largest pharmaceutical manufacturers in Sri Lanka, we take pride in providing for the healthcare needs of the private and public sector.

In addition to manufacturing high quality pharmaceutical and OTC products, we also import and distribute internationally renowned healthcare and consumer products via our island wide distribution network.

MORISON PLC


MILESTONES AND EVENTS

1937-19501937Mr. Russell Elliot was posted by J. L. Morison Son & Jones (UK) as the first agent to set up a trading outpost in Sri Lanka.

1939J. L. Morison Son & Jones (Ceylon) was incorporated on 31 January 1939, on the eve of the Second World War by Mr. J E Ogle, a director of the parent company.

1941-1950During World War IIOperations were temporarily shifted to Kadugannawa in the Kandy district, where business was tapered and remained subdued.

Post World War II Recommenced the Colombo operations and increased brand presence for its earlier products viz. Marmite & Brylcreem.

1950 Secured the agency rights for Mead Johnson Nutritionals Ltd to distribute the brands in its portfolio, leading up to popularising ‘Sustagen’ as a trusted household brand.

1951-19601952Mr. M. B. Ogle took over the reins of J. L. Morison (Ceylon) and went on to extend an invaluable service for over 30 years to the Company.

Mr. Reginald Abeyawira who led J. L. Morison (Ceylon) with farsightedness for over a period of 60 years, joins the cadre as a trainee clerk.

1959MSJ Industries (Ceylon) Ltd, a pioneer in generic pharmaceutical manufacturing is incorporated as a wholly owned subsidiary under the aegis of the Founder/Director, Mr. U. Karunatileka.

1960 Shifted operations to its own premises equipped with modern amenities and factory at 126, Aluthmawatha Road, Colombo 15.


1961-19701964 Broad based 100% foreign shareholding of J. L. Morison (Ceylon) listed on the Colombo Stock Exchange on 27 March 1964; as one of the first commercial ventures to list in Sri Lanka.

1968Established a subsidiary, MSJ Cargoes (Ceylon) Ltd to offer a one-stop solution for clearing, forwarding, warehousing and transportation.

1969Ventured into trading food products - tinned fruits and juices under the MSJ brand name.

1970 Set up a book division with an agency agreement with Granada Publishing Ltd, UK and began the MSJ picture postcards project.

1971-19801971Commenced importing and distributing agro based products in affiliation with a Japanese company, Tozai Boeki Kaisha Ltd.

Acquired 78% stake of Canned & Preserved Foods Ltd, adding value to the food trading operations with a range of canned and preserved food products including catering to the export market.

1972A new subsidiary, MSJ Foods (Ceylon) Ltd commenced its trading operations.

1977Purchased 6 ½ acres at 620, Biyagama Road, Pethiyagoda, Kelaniya to erect a new office complex to accommodate the growing operations.


1981-19901981Mr. M. B. Ogle retired after nearly 3 decades of invaluable service to J. L. Morison (Ceylon)

1983With the parent company in UK winding down its operations, the majority stake of the Company was taken over by nationals, diluting the foreign shareholding from 49% to 33%.

1986Erected a new office premises and shifted part of the operations - the stores and marketing division to Pethiyagoda, Kelaniya.

1991-20001991Pioneered and established Compak Morison (Lanka) Ltd to manufacture particle Board out of paddy straw.

1992Compak Morison (Lanka) Ltd was listed on the Colombo Stock Exchange with an initial public offer which was oversubscribed. Non-viability of the project was subsequently established and discontinued operations in the mid 1990s.

1993Mr. Richard Gunatilake, after a dedicated stint of over 45 years, retired from his duties as a Board Director.

1997Bought over the 33% non-resident shareholding to become a fully owned local entity.

1998Mr. U. Karunatileka, the founding Director of MSJ Industries who played a critical role in taking forward the manufacturing operations and also the generic pharmaceutical industry in Sri Lanka, retired from service after nearly 40 years.

2000In conformance with the Sri Lanka Accounting Standards, J. L. Morison (Ceylon) consolidated its accounts with the Colombo Pharmacy Ltd with which it had an equity investment of 24%.

Milestones and Events (Contd.)


2001-20102002Principals of Godrej Sara Lee and Sara Lee TTK commenced local manufacturing operations in collaboration with J. L. Morison (Ceylon).

2004Shifted the administration and finance division to the new premises in Pethiyagoda, Kelaniya.

Supported Tsunami affected families with dry rations, clothes, water and pharmaceuticals and initiated a housing project in the Galle district in partnership with the employees and principals.

2011-20172013Diversified conglomerate Hemas Holdings PLC acquired the majority shareholding.

Restructured and streamlined operations at J. L. Morison (Ceylon) with focus on healthcare and wellness products.

2014Upgraded the manufacturing plant at Aluthmawatha Road, Colombo to increase capacity.

2015Signed a 5 year buy back agreement with the Government of Sri Lanka.

Launched Atorvastatin, a new generic molecule.

2016Launched the Morison’s Rx branded pharmaceuticals range, Gripe Ginger and Lacto Sun Lotion.

The Board of Directors resolved to build a new state of the art pharmaceutical research and manufacturing facility within the SLINTEC Nano Technology Park in Pitipana, Homagama.

2017The Corporate name of J L Morison Son & Jones (Ceylon) PLC has been changed as Morison PLC

Secured the distribution for Biocon Ltd, Asia’s premier biopharmaceutical company in diabetes.


CHAIRMAN’S MESSAGE

“BRINGING IN RELEVANT AND INNOVATIVE MEDICINAL SOLUTIONS AT AN AFFORDABLE PRICE SUSTAINING THE HIGHEST QUALITY STANDARDS IS WHAT OUR BUSINESS IS ABOUT ”

Your Company is built upon our purpose to offer our consumers wellness and a better quality of life, through trusted products of high quality that provide value for money. Our strong commitment towards this inspires us to explore new market opportunities that align our product portfolio with patients needs and advancements in the pharmaceutical industry. As such, bringing in relevant and innovative medicinal solutions at an affordable price sustaining the highest quality standards is what our business is about. To better reflect this vision, “J.L. Morison” was relaunched as “Morison PLC” with a logo that is simple and contemporary.

The Company continued to deliver sustainable performance under a challenging market environment due to the national economic slow-down. Revenues for the year under review closed at Rs 3.8 Bn which is a 5% de-growth compared to the previous financial year. However, Morison PLC secured an EBITDA of Rs 685 Mn and a net profit of Rs 564 Mn, which represents a growth of 9% and 9% respectively in comparison to the previous year. The Managing Director will provide more details on operational performance. Given these results, the Board has declared an interim dividend per share of Rs. 15.00 which will be the final dividend for the year under review.

The marginal decline in revenues was mainly on account of poor performance of our over-the-counter (OTC) brands, together with slower sales in our range of distributed cosmetics. During the year, we lost Alcon, one of our longstanding principals due to a global acquisition.

In view of continued encouragement by the government for local manufacturing of pharmaceuticals, the Board approved the construction of a new research and manufacturing facility, to be located within the SLINTEC Nano Technology Park in Homagama. The management has been through various iterations of the plant design assisted by a foreign consultant, and we expect to start construction shortly. We are hopeful that the government buy-back scheme which is a major factor in facilitating local manufacturers to upgrade legacy facilities would continue going forward.

I would like to take this opportunity to express my sincere appreciation to Mr. Trihan Perera, our former Managing Director who decided to step down during the year, for his commendable contribution over the last four and a half years. Mr. Murtaza Esufally who is an Executive Director of Hemas Holdings PLC, has now taken over as the Managing Director. Let me also thank the management team and the entire Morison family for their tireless efforts to steer the business during a challenging year. Their


passion and commitment are a great source of inspiration as we seek to accelerate growth.

We are fortunate to have an experienced and supportive Board, whose collective wisdom is invaluable as we seek to drive Morison into our next phase of growth, and my sincere thanks go out to them.

Finally, my deep appreciation goes to our valued customers and business partners for the continued trust vested on us, and especially to our shareholders for their confidence in the company. We look forward to your continued support in the years to come.

Husein EsufallyChairman

21 May 2018


MANAGING DIRECTOR’S MESSAGE

“WE CONTINUE OUR EFFORTS IN ENHANCING THE QUALITY STANDARDS BY BRINGING IN EXPERTISE FROM GLOBAL COMPANIES IN PHARMA MANUFACTURING IN THE FORM OF SENIOR LEADERSHIP TALENT”

Morison PLC recorded a revenue of LKR 3.8 billion which is a 5% de-growth compared to the previous year. However, the company had an EBITDA growth of 9% and net profit growth of 9% reflecting a net profit margin of 15%.

The year saw many challenges that had an adverse effect on the performance of your Company. The slow growth of the economy, high food inflation and high taxes led to less consumer demand both for pharmaceuticals and consumer products. As per IMS Q3 2017, the private pharmaceutical industry grew by only 1% as compared to the 11% growth in the previous year.

Government purchases of medicine was also flat during the year. A sudden introduction of regulations by the National Medicine Regulatory Authority (NMRA) for cosmetic products prevented us from supplying much needed goods to the market. In addition, our long-standing principal Alcon moved their product distribution from Morison due to a global acquisition of Alcon by Novartis. As such, Novartis made a policy decision to change the distribution partners of their acquisitions to Novartis’ pre-existing distributors in Sri Lanka.

The challenges in maintaining product margins continued in the year under review, as we operate in a price-controlled pharmaceutical market. The increase in raw material costs and LKR depreciation significantly impacted margins. However, productivity gains and efficiency improvements in the production facility helped the Company to maintain margin levels on par with the previous year.

Continuous enhancement in quality is a requirement within the industry in which we operate. The National Medicine Regulatory Authority (NMRA) once again renewed our license to operate our factory at Mutwal after their inspectors satisfied themselves that the factory adheres to Good Manufacturing Practices (GMP) with zero non-conformities. We continue our efforts in enhancing the quality standards by bringing in expertise from global companies in pharma manufacturing in the form of senior leadership talent. Much work was done on significantly improving employee health and safety standards during the year.

We were pleased to secure the distribution for Biocon Ltd, Asia’s premier biopharmaceutical company in diabetes. Biocon has harnessed the power of biotechnology through affordable innovation to enhance access to new and differentiated therapies


for chronic diseases. This will be a strategically valuable partnership as Morison’s positions itself as a company focused on finding cost effective solutions for diabetes and cardiovascular disease.

We believe our investment in constructing the new research and manufacturing facility in Pitipana, Homagama will add significant value in the long run with its alignment to the government vision of strengthening the local pharmaceutical manufacturing industry. Much work was done on planning, designing and approvals for our new factory. Construction would begin in August 2018 and will be ready for commercial production in early 2020.

We ended the year with much thought and deliberation about the future of Morison PLC. Management presented several vectors of future growth. They consisted of the development of Morison own branded pharma in the diabetes and cardiovascular space; contract manufacturing for international pharma companies, exports and developing a stronger paediatrics range of products initially to be sourced from the best formulation companies overseas.

The year saw a range of activities to enhance employee engagement. The efforts of creating better employee engagement in past years resulted in a significant enhancement in managerial employee engagement score from 33% in 2016 to 48% in 2017 based on a survey done by the global HR consulting company AON Hewitt. The Company will continue retaining and attracting the best talent in the Company to facilitate our future growth plans.

Some efforts were made in improving the culture of the Company to be more people and customer centric with more metrics around these dimensions of performance. We recognized that the Company needs to enhance its innovation capability and its sense of urgency.

We did much work in lining up some much-needed new pharma products for next year, by developing some in-house and some by sourcing from strong companies in India.

The year in review also saw a name change from J.L. Morison to “Morison PLC” to reflect the progressive steps the Company is taking in developing its own brands, introducing new products and the building of a new state of the art factory to facilitate more international business.

I would like to thank the departing Managing Director Trihan Perera for all his efforts to improve the Company over his four-year tenure.

I wish to thank my Chairman and Board of Directors for their support in leading the company. I convey my sincere gratitude to our valued employees, customers and business partners for the trust and support extended to Morison PLC. Finally, my sincere thanks go out to all our shareholders for the confidence kept in Morison and its future undertakings.

Murtaza EsufallyManaging Director

21 May 2018


DIRECTORS’ PROFILES

Husein Esufally - Non-Executive Chairman

Mr. Husein Esufally started his career with the Group’s FMCG (Fast Moving Consumer Goods) business, where he steered the Company for a period of 19 years, during which, the business established a strong consumer franchise. Thereafter, he served for 13 years as the Chief Executive Officer of the Hemas Group until he relinquished his position in March 2014. Presently, he serves as the Non-Executive Chairman of Hemas Holdings PLC, whilst also chairing the Boards of several of its subsidiaries.

Mr. Esufally serves as the Non-Executive Chairman of Janashakthi Insurance PLC and is a Board member of the Ceylon Chamber of Commerce. Whilst serving on the Boards of several other companies, he is actively involved in several social projects. Mr. Esufally holds a Bachelor of Science (Honours) Degree in Electronics from the University of Sussex, UK having received his primary education at St. Thomas College, Mt Lavinia.

Murtaza Esufally - Executive Manging Director

Mr. Murtaza Esufally counts more than 27 years of experience in senior management levels and has been assigned with a new role of Group Director Human Performance and Leadership. He is the Chairman of Hemas Hospitals (Pvt) Ltd and Hemas Pharmaceuticals (Pvt) Ltd, and is the Non-Executive Chairman of the Centre for Poverty Analysis. He was also appointed as the Managing Director of Morison PLC in January 2018. He holds a Master’s Degree in Business Administration from the Melbourne Business School of the University of Melbourne. He is a Barrister of the Lincoln’s Inn and holds a Bachelor of Law Degree from the University of Essex, UK. Mr. Esufally is an Attorney-at-Law of the Supreme Court of Sri Lanka.

Arundathi Rajakarier - Independent Non-Executive Director

Ms. Rajakarier has over 25 years working experience as a finance professional and is a founder Director of SheConsults (Pvt) Ltd., a financial consulting company. She serves on the Boards of Morison PLC and John Keells PLC as an Independent Director and previously served on the Board of NCAP as an Independent Non- Executive Director, the Chairperson of the Audit, Risk and Compliance Committee and the Remuneration Committee and a member of the Investment Committee. An Associate member of the Institute of Chartered Accountants, Sri Lanka, she served as the Country Manager for ACCA Sri Lanka with additional responsibility for the Maldives and in several senior roles at NDB Bank. Prior to this she

served as Finance Director of Lanka Cellular Services (Pvt) Ltd. She was trained at Ernst & Young where she served as Senior Manager in both auditing, consultancy and training.

Ravindra Fernando - Independent Non-Executive Director

Professor Ravindra Fernando has served as a Senior Lecturer in the Division of Forensic Medicine of the United Medical and Dental schools of Guy’s and St. Thomas’s hospital, University of London and the Department of Forensic Medicine and Science in the University of Glasgow. He was a Consultant Home Office (England and Wales) and a Crown Office Pathologist in Scotland. Prof. Fernando was the Senior Professor of Forensic Medicine and Toxicology at the University of Colombo, Sri Lanka.

He was a Founder Secretary General of the Indo-Pacific Association of Law, Medicine and Science and past President of the Ceylon College of Physicians, Sri Lanka Medical Association and the College of Forensic Pathologists of Sri Lanka Asia-Pacific Association of Medical Toxicology.

Professor Fernando was the Founder Head of the National Poisons Information Centre, National Hospital of Sri Lanka, Colombo, and he is the Chairman of the National Dangerous Drugs Control Board.

Steven Enderby - Non-Independent Non-Executive Director

Mr. Steven Enderby joined Hemas in March 2013 to head the Group’s efforts in Mergers and Acquisitions. He took up the position of Deputy CEO and Director of Hemas Holdings PLC in November 2013 and was subsequently appointed the Chief Executive Officer of the Company on April 2014. Mr. Enderby has had a successful track record in private equity with Actis, a leading global emerging markets fund, until his retirement in 2011 as an Actis Partner. He has led many of the most successful private equity transactions in Sri Lanka including South Asia Gateway Terminal, Ceylon Oxygen and Millennium Information Technologies. Mr. Enderby is also Non-Executive Chairman of Ironwood Capital Partners Sri Lanka’s leading private equity fund. He has served on the Boards of many leading companies in Sri Lanka and India. He is a Fellow of the Chartered Institute of Management Accountants, holds a Degree in Economics and Accounting from Queens University Belfast, and a Master’s Degree in Development Studies from the University of Melbourne


Ranjan Chakravarti - Independent Non-Executive Director

Mr. Ranjan Chakravarti is a Management Consultant & a Certified Executive & Life Coach. He is a Science graduate with post-graduate in Business Management.

Mr. Chakravarti has over 40 years’ experience in the global pharmaceutical industry, of which 17 years have been with innovator companies like Boehringer-Knoll, Reckitt & Colman, and Eskayef Ltd. and 23 years with leading Indian multinational companies like Lupin Laboratories and Ranbaxy.

The last 26 years he has been in senior leadership roles in India and other geographies like Asia, Middle East, Africa and Latin America, Russia, CIS & EEU. The most recent position prior to retirement in 2015 was as Head Global Pharmaceutical Business (excluding US), in Ranbaxy.

Mr. Chakravarti has worked as a lead member of the Integration Team post merger of two of the largest pharmaceutical companies from India- Sun Pharmaceuticals & Ranbaxy Laboratories.A veteran of Pharmaceutical Industry worked extensively in multicultural environments in Functional and General Management positions across geographies. As a Marketing & Sales professional Mr. Chakravarti has launched & built strong brands in ethical/OTC and successfully led large teams in India & overseas.

He has handled many responsibilities in areas as varied as Marketing and Sales; Restructuring and Revitalizing Businesses, Setting up and managing large operations in overseas markets, Head Global Strategy & Business Development; Head Formulation Sourcing and Alliance Management; Acquisition and Divestment projects; and Organization Restructuring & Business Processes.

Mr. Chakravarti has developed many leaders over the years who are currently occupying senior leadership roles in large & successful organizations.

Mr. Chakravarti has served on the Board of 15 Subsidiaries of Ranbaxy spread across Western Europe, Africa, Canada, Brazil, Russia, Ukraine & Romania either as a Director or Chairman of the Board.

Currently, working as a Management Consultant and Executive & Life Coach specializing in helping organizations in transition & successful high potential professionals in achieving their life goals.

Kasturi Wilson - Non-Independent Non-Executive Director

Ms. Kasturi Wilson is the Managing Director of Hemas Pharmaceuticals and Hemas Logistics and Maritime Sector of Hemas Holdings PLC. Having joined the group in 2002 as the Finance Director of Hemtours (presently, Diethelm Travels), she was appointed as the Head of Hemas’s Shared Services Unit, Vishwa BPO in 2005. During her two-year stint there, she built a highly motivated business support team which streamlined transaction processing and SBU reporting across the group. In 2007, Kasturi was appointed as the Chief Process Officer of Hemas Holdings PLC where she also managed the group’s Process and IT infrastructure which significantly enhanced her scope and influence over the group’s processes.

After a successful tenure, she took on a role as MD transportation sector assignment in 2011 and has since overseen the rapid growth of the Transportation Sector especially in Maritime and Logistics. In 2016 April She was apppointed as the Managing Director of the Pharmaceutical cluster of Hemas and continued as MD of Logistics and Maritime. In 2017 Kasturi was appointed as a Non executive Director of Morisons PLC .

Kasturi began her career as an 18 year old audit trainee at Someswaran Jayawickrama & Co.(Currently Deloitte ) where she rose to the position of Audit Manager / Director Consulting. Her dynamic personality and capacity to work had little trouble in accommodating national basket ball practices and tours whilst also settling down to have her two sons. She later worked as Financial Controller of Aramex Airborne Lanka and as Financial controller of Confifi Hotels prior to joining Hemas.

Kasturi is a Fellow Member of the Chartered Institute of Management Accountants UK and has served on the board of CIMA. Additionally, she is a member of the sub-committee on Economic, Fiscal and Policy Planning of the Ceylon Chamber of Commerce and also serves as a member of the National Agenda Committee for Logistics and Maritime. Kasturi currently holds the position of Senior Vice President of the Chamber of the Pharmaceutical Industry of Sri Lanka.

She is also a non executive board director of Capital Alliance Ltd .

Kasturi was also awarded with the outstanding women leadership achievement award in 2015 and women super achiever award in 2016 at the world Women Leadership Congress Awards held in Mumbai India.

She is a proud product of Holy Family Convent Bambalapitiya and represented National Basket Ball team from 1989 to 1993 which she captained in 1989.


SUSTAINABILITY REPORT

As a company that practices Triple-Bottom-Line reporting, we at Morison PLC believe that sustainability plays a vital role and continuously endeavour to embed it to the culture of how we do business. We are proud of our heritage in remaining dedicated and committed to doing sustainable business primarily focusing on nurturing our employees, winning consumer trust, giving back to the community we operate in and maintaining optimal environmental resource utilisation.

Our EmployeesWe understand that our employees are a key resource to our organization and that a well engaged employee is a priceless asset to our company to achieve our long term company goals. For this, our company has passionately facilitated driving a year-round events calendar with various team trainings and motivation programs , employee bonding, knowledge sharing , wellness programmes and social events.

Inculcated by our top management, we maintain an open-door culture in the workplace, which allows any employee to voice their concerns, grievances and suggestions to the management which has greatly influenced in being proactive to the market. The management has adopted a transparent approach in keeping employees well informed of the future of the organisation by organising quarterly townhall meetings. Activities such as these have been key to sustaining team momentum during challenging years.

In the year under review, the Company did not record any incidents of industrial disputes, signifying the prevalence of a harmonious work environment. We are proud to have continuously ensured to make it our utmost priority to assure the Health and Safety of our team. The Health and Safety Committee regularly reviews operational risk factors while taking continuous preventive and corrective action to minimise workplace accidents. In the factory floor, safety trainings, regular observation tours, workshops and refreshing programmes for employees on preventive maintenance are conducted in to prevent health and safety hazards.

At Morison, we are committed to function as an equal opportunity provider, where measures are taken to improve equality and diversity by avoiding discrimination based on gender, age, religion, race or physical ability.

In the wellness space, our team has actively provided numerous awareness sessions on health issues such as non-communicable diseases which reduce workforce health , happiness and productivity over time throughout the year. Keeping our employees and their families well informed is an act of a responsible corporate citizen. These activities were spanned out for several months over the past year. Awareness programmes which include programmes on blood pressure, hydration, mental well-being, tobacco and alcohol cessation management and dengue monitoring sessions were conducted during office hours with active employee participation. The culture of wellness and a healthy life was introduced by team activities such as the “Morison Wellness Club” which provide an opportunity for wellness conscious members to get together and to promote a wellness driven culture across the company. The management has also taken steps to renovate the entrance, the recreation area at the factory premises and introduce a Learning Center for the Kelaniya office.

The year-round social event calendar has also provided an opportunity to keep employees well engages in their busy schedules. Religious events and celebrations such as the Christmas and Thai Pongal celebration, Annual Dharma Deshana, Pirith ceremony, New year celebration, Casual Social events and all staff events such as the Annual Department Trips, brought the Morison family together during the past year. Initiatives such “Morison’s got Talent” was a novel initiative organized this year which captured everyone’s hearts. Graced by renounced artists in the country, it provided an opportunity to showcase the talents of our very own Morison employees in the singing, dancing, instrumental, poetry and drama categories.


to strictly adhering to all regulatory testing and evaluations for its products portfolio and not compromising patient wellbeing. We have a humble pride as a local pharmaceutical manufacturer that supplies quality drugs, at a cost competitive drugs with a longer shelf life to the Sri Lankan community through the Health Ministry of Sri Lanka.

Another outstanding social activity sponsored by Morison PLC during the Kataragama Perahera time was to aid mothers to provide a secure place to feed their child in the zone.

A consumer hotline as well as a digital media platform are open for customers in case of queries, and we have promptly reacted to consumer complaints with immediate attention. Constant customer insight is being drawn from various market researches to develop new products which appeal to needs of the modern customer.

Our CommunityMorison PLC has always committed to maintain cordial relationships with the Local Authorities, Public Health Inspectors, Local Police, nearby Religious places and the Neighborhood. We believe that these relationships have placed great emphasis on maintaining harmonious relations and giving back to the communities around the organisation. In an effort to fulfill our social responsibility, the company organised several CSR projects during the year. A medical camp was organised in October 2017 at Paramananda Purana Viharaya, Kotehena. Generous sponsorships was given for the Annual Kelaniya Temple Perahera, and supported PHIs of the Kelaniya Area. Another successful key initiative proactively taken by our own Engineering department was to find ways to reduce noise caused by specialised industrial machinery.

Community projects conducted to serve our surrounding residents: Medical Camp at Paramananda Purana Viharaya, Kotehena

Winner of Morison’s got Talent

This year too, the glorious “Annual Morison Awards Night” was organized to recognise & celebrate our Star Performers Service Excellence, Brand of the year, Best Sales Representative and Best Agency were a few of the forty awards that were distributed on this occasion.

Morison Finance Team won Group Finance Award at Hemas Award Ceremony

All the above efforts have been well acknowledged and appreciated by our employees and the management has been able to secure a positive increase in the engagement scores conducted independently by AON.

Our CustomersAs depicted in our purpose, we strive to offer our customers wellness and better quality of life through trusted products that are efficacious and of high quality, that provide value for money. The factory at Mutwall was approved by the NMRA for Good Manufacturing Practices (GMP) with zero non-conformities and renewal of the certification for further two years. This is a tribute


Pharmaceuticals and OTC products are manufactured at our GMP certified plant, ensuring the highest standards

Our EnvironmentA forward-thinking approach to the environment is of paramount importance in a regulated environment and we constantly endeavour to improve our systems to maintain excellent records. With a bold intention to achieve a higher clarity in waste water being discharged from the Effluent Treatment Plant (ETP), our team has installed advanced equipment (such as activated carbon filters and activated media filters). This investment has made it possible to ensure effluent released from the plant to record Chemical Oxygen Demand (COD) and Biological Oxygen Demand (BOD) levels much lower than the required level set by the Central Environment Authority Act no. 47 of 1980. The team aspires to use this water for other than drinking purposes in the years to come.

In designing of Morisons new manufacturing plant in Homagama, our design consultants have also considered zero discharge of waste water, emission controls, and energy efficient systems.

As a proactive measure, we introduced the Air Flushing system for the bottle washing operation which helps in eliminating water usage for bottle washing.

Under energy conservation, implementation of energy efficient technologies such as completely installing LED lighting systems, inverter driven motors and insulation of steam lines was initiated as a means of reducing the energy consumption to reduce the carbon foot print.

Sound proofing of the main motor compressor and isolation of the dust extraction system initially in the production area were key initiatives taken to reduce the noise pollution. Further, installation of wet scrubbers and coating systems have assisted in further reducing emitting of polluted air.

In both locations Mutwal and Kelaniya, a proper waste segregation method for waste disposal has been introduced. This process of sorting enabled selling of discarded raw material and packing waste. We have also been closely working with Insee- EcoCycle Company Limited to safely dispose hazardous chemicals ensuring the least harm to the environmental system.Continuous training and awareness building among our team and providing training and support to our stakeholders have been a continuous practice at Morison.

As a responsible corporate citizen, we aspire to continue our efforts with a constant look out for opportunities to enhance our sustainability initiatives towards stakeholders in the value creation process.

Sustainability Report (Contd.)


CORPORATE GOVERNANCE

The Board of Directors has the overall responsibility to ensure that proper standards of Governance are maintained. The Board of Directors of Morison PLC is committed to maintaining the highest standards of corporate governance in line with the Code of Best Practice on Corporate Governance and the Listing Rules of the Colombo Stock Exchange.

Set out below is a report on the Company’s corporate governance principles, which were in place throughout the reporting period under review. The report also attempts to explain how power is exercised to ensure that the objectives of the Company are achieved lawfully and ethically.

1. The BoardCode Provision:- “Every company should be headed by an effective Board, which should direct, lead and control the Company”

The Board met regularly during the period under review with an effective participation of all members of the Board. The Board Meetings were held once in the first, second and third quarters and twice in the fourth quarter ended 31.03.2018.

The Board’s role is to provide entrepreneurial leadership to the Company within a framework of prudent and effective controls which enables risks to be assessed and managed. In effectively executing the Board’s role, the meetings held during the year focused on the long term vision, objectives and strategy of the Company and the Group, ensuring the formulation and implementation of a sound business strategy, ensuring that the management team possess the skills, experience and knowledge to implement the strategy, the performance of the Company and the Group, ensuring effective system to secure integrity of information, internal controls, business continuity and risk management, operational performance and quality, statutory and regulatory compliance, approval of the operating and capital expenditure budgets, oversight of the group’s operations, financial reporting and control, internal controls, proposals for major capital projects, Human Resources, Corporate Governance and approval of policies.

The Board collectively and Directors individually ensure that actions have been carried out in accordance with the laws of the Country, as applicable to the business of the Company and the Group. The Board ensures that ethical standards, all stakeholder interests are considered in corporate decisions, recognising sustainable business development in corporate strategy, decisions and activities, and that the Company’s values and standards are set with emphasis on adopting appropriate accounting policies and fostering compliance with financial regulations. The Board

has agreed to and also advised the management to obtain independent professional advice where necessary. The Company has arranged appropriate insurance cover.

During the year, the Directors have dedicated adequate time and effort to the matters of the Board, the Company and the Group. The agenda and the connected Board Papers of each Board Meeting are circulated to the Board by the Company Secretary, providing adequate time for review. The Directors call for clarification or additional information directly from the Management and also through the Company Secretary. All Directors have access to the advice and services of the Company Secretary at all times.

The names of the Directors who served during the year under review are disclosed in Page 20 of this report. The table below records the attendance of each director at Board Meetings, Audit Committee Meetings and Related Party Transactions Review Committee Meetings held during the period under review.

Board Audit Committee

Related Party Transactions

Review Committee

Mr. Husein Esufally 5

Mr. Steven Enderby 5 4 4

Prof. Ravindra Fernando 5 1 1

Ms. Arundathi Rajakarier 5 4 4

Mr. Ranjan Chakravarti 5

Mr. Murtaza Esufally (Appointed w.e.f. 27 October 2017)

3 1 1

Ms. Kasturi Wilson (Appointed w.e.f. 27 October 2017)

2

Mr. Trihan Perera (Resigned w.e.f. 3 January 2018)

3 3 3

2. Chairman and Chief Executive Officer (CEO)Code Provision:- “There should be a clear division of responsibilities at the head of the company, which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision.

The roles of the Chairman and CEO have been divided between two members of the Board providing a better balance of power


Corporate Governance (Contd.)

on the Board. Accordingly, a clear division of responsibilities is ensured at the head of the Company and, a balance of power and authority. The chief executive holds responsibility for the executive management. Chairman’s role is pivotal in creating the conditions for the effectiveness of the board as a whole and the individual directors. Chairman of the Company is a non-executive director of the Board.

3. Chairman’s RoleCode Provision:- “Chairman should preserve order and facilitate the effective discharge of Board functions”

The Chairman leads the Board, ensuring its effectiveness, while taking account of the interests of the Company and the Group. The Chairman ensures that adequate notice of meetings is provided to the members of the Board through the Company Secretary. The agenda of all Board Meetings are prepared by the Company Secretary under the advice and approval of the Chairman. Chairman facilitates effective discharge of Board functions. In conducting Board proceedings in a proper manner, Chairman ensures effective participation of both executive and non- executive directors and that the expertise they bring in is received by the Company to better run its functions.

4. Financial AcumenCode Provision:- “ The Board should ensure the availability within it of those with sufficient financial acumen and knowledge to offer guidance on matters of finance”

The Board comprises members with a wide range of expertise. The independent non- executive director, who also serves as the Chairperson of the Audit Committee is a financial professional.

5. Board Balance and IndependenceCode Provision:- “The Board should have a balance of executive and non executive directors such that no individual or small group of individuals can dominate the board’s decision taking”

As at 31 March 2018, the Board comprised three independent non-executive directors, three non- independent non-executive directors and one executive director. The independent non- executive directors are deemed independent in accordance with the Listing Rules of the Colombo Stock Exchange and the Code of Corporate Governance. The Board of Directors of Morison PLC believes that the composition of the Board is of sufficient size and ensures a balance of skills and experience appropriate for the requirements of the business.

6. Appointments to The BoardCode provision;- “There should be a formal, rigorous and transparent procedure for the appointment of new directors to the Board”

The Board has not established a Nominations Committee for making recommendations on board appointments. The appointments to the Board are decided as a whole assessing the requirements and strategic demands of the Company. However, any director appointed by the Board within a financial year will vacate office at the Annual General Meeting held immediately following the appointment and on the recommendation of the Board present himself/ herself for re-election by the shareholders. During the year under review, there were two new appointments to the Board. Ms. Kasturi Wilson was appointed to the Board in the capacity of Non-Independent Non-Executive Director w.e.f. 27 October 2017 and Mr. Murtaza Esufally was appointed to the Board in the capacity of Executive Director w.e.f. 27 October 2017. Mr. Trihan Perera resigned from the position of Managing Director and the Board w.e.f. 3 January 2018 and Mr. Murtaza Esufally was appointed as the Managing Director of the Company w.e.f. 3 January 2018.

7. Supply of InformationCode Provision:- “The Board should be provided with timely information in a form and of a quality appropriate to enable it to discharge its functions”

The Management has an obligation to provide the Board with appropriate and timely information, and Directors make further inquiries where necessary. The Chairman is responsible for ensuring that the directors receive accurate, timely and clear information.

Under the direction of the Chairman, the Company Secretary makes certain that the minutes of the previous meeting, the agenda and connected papers required for a Board Meeting are provided to all members of the Board in a timely and effective manner to facilitate effective conduct of the Board.

8. Re-ElectionCode provision:- “All directors should be required to submit themselves for re-election at regular intervals”

The Articles of Association require directors to seek re-election, in line with the provisions of the Code of Best Practice on Corporate Governance. A director who retires by rotation is eligible for re-election by the shareholders at the Annual General Meeting.


A director who has reached the age of seventy years of age shall present himself for re-appointment in accordance with section 211 (1) of the Companies Act.

9. Appraisal of Board PerformanceCode provision:-“Board should periodically appraise their own performance in order to ensure that Board responsibilities are satisfactorily discharged.”

The Board conducts an internal Board evaluation each year. The review is led by the Chairman and the evaluation considers a range of factors relevant to the effectiveness of the Board.

10. Disclosure of Information in Respect of DirectorsCode Provision:- “Shareholders should be kept advised on relevant details in respect of Directors”

The Directors’ Profiles provided in this report from page 10 to 11 provide relevant details of the directors of the Company.

11. Appraisal of Chief Executive Officer (CEO)Code Provision:- “The Board should be required at least annually, to assess the performance of the CEO”

The performance of the CEO is reviewed annually against the Goals which are set at the beginning of the financial year.

12. RemunerationCode provisions;- “Companies should establish a formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages.”

The Remuneration Committee of the ultimate parent company functions as the remuneration committee of the Company. The Remuneration Committee has been delegated with responsibility for both developing remuneration policy and for setting the remuneration for all executive directors and senior executives.

The Composition of the Remuneration Committee is provided in Page 22 of this report.

13. Relations With ShareholdersCode Provision:- “Boards should use the AGM to communicate with Shareholders and should encourage their participation”

The Notice of the Annual General Meeting and a copy of the Annual Report are sent out to the shareholders 15 working days prior to the date of the AGM. This year the AGM is scheduled to

be held on 26 June 2018, at the Auditorium of the Institute of Chartered Accountants, 30A Malalasekera Mawatha, Colombo -07.

14. Accountability and AuditCode Provision:- “The Board should present a balanced and understandable assessment of the Company’s financial position, performance and prospects”

The Financial Review from Page 32 to 71 provides a fair assessment of the Company’s performance and plans for the future.

15. Internal ControlCode Provision:- “The Board must have a process of risk management and a sound system of internal control”

The group risk and control division of Hemas Holdings PLC, conducts regular internal audits to assess and evaluate the internal control systems in place and reports the findings to the Audit Committee of the Company regularly. Any significant issues would be reported to the Board thereafter.

16. Financial ReportingCode Provision:- “The Board should establish formal and transparent arrangements for considering how they should select and apply accounting policies, financial reporting and internal control principles”

The responsibility of the directors in relation to the Financial Statements is set out in the Statement of Directors’ Responsibility on Page 28.

17. Audit Committee and AuditorsThe Audit CommitteeThe Committee reviews and monitors the integrity of the Company’s annual and interim financial statements and any formal statements relating to the company and the group’s financial performance including significant financial judgments contained in them. Ultimate responsibility for the approval of the annual and interim financial statements, however, rests with the Board. At least once each year, the committee meets with the external auditors to discuss issues arising from their respective audits.

The Composition and functions of the Audit Committee are set out in page 24 and 25 of this report.


Corporate Governance (Contd.)

Auditor Independence and objectivityThe Company has adopted a policy on the use of non–audit services provided by the Company’s external auditors Messrs. Ernst & Young, The Committee’s prior approval is required before the Company uses non audit services. Such services will only be used where the Company benefits in a cost effective manner and the auditor maintains the necessary degree of independence and objectivity.

Code of Ethics And ConductThe Directors exercise their independent and objective judgment on issues of strategy, policy, resources and standards of conduct. The Directors ensure that all information is of confidential nature except those disclosed in the Annual Report.

COMPLIANCE WITH THE RULES ON CORPORATE GOVERNANCE OF THE COLOMBO STOCK EXCHANGECode Provision:- “ Directors must disclose the extent to which the Company adheres to established principles and practices of good governance”

CSE Rule No. Requirement Status of Compliance

7.10.1 Two or at least one third of the total number of Directors should be Non-Executive Directors (NEDs)

Complied.The Board of Directors as at 31 March 2018 comprised 7 Directors 6 of whom, were Non- Executive Directors.

7.10.2(a) Two or at least one third of the NEDs (whichever is higher) should be independent

Complied.Three Non- Executive Directors have been declared as independent.

7.10.2(b) Each Non-Executive Director should submit a declaration of independence in the prescribed format

Complied.Three Independent Directors have submitted a declaration confirming their independence.

7.10.3 (A) and (b) Names of the Independent Directors should be disclosed in the Annual Report

Complied.The relevant disclosures are made in the Annual Report of the Directors

7.10.3 (c ) A brief resume of each Director should be included in the Annual Report, including his area of expertise

Complied.A brief profile of each Director is provided in the Annual Report

7.10.5 (a), (b) and (c )

Remuneration Committee – composition, functions and relevant disclosures

Complied.The Annual Report sets out the composition and the relevant disclosures

7.10.6 (a), (b) and (c )

The Audit Committee – Composition, functions and report of the Audit Committee

Complied.The Audit Committee Report sets out the composition and the relevant disclosures

Directors’ DeclarationThe Directors declare that:

(a) the Company complied with all applicable laws and regulations in conducting its business;

(b) all material interests in contracts involving the Company have been declared and they have refrained from voting on matters in which they were materially interested;

(c) the Company has made all endeavors to ensure the equitable treatment of shareholders;

(d) the business is a going concern with supporting assumptions or qualifications as necessary; and

(e) they have conducted a review of internal controls covering financial operational and compliance controls and risk management and have obtained a reasonable assurance of their effectiveness and successful adherence herewith;


REPORT OF THE BOARD OF DIRECTORS

DIRECTORS’ INTEREST IN CONTRACTS WITH THE COMPANYThe Directors have made general declarations as provided for in section 192 (2) of the Companies Act No. 7 of 2007.

The remuneration paid to Directors and the share ownership of Directors during the year are as indicated on pages 68 and 21 respectively of this report.

Details of transactions carried out in the ordinary course of business with the Directors and related entities during the year 2017/2018 are set out below.

Name of Related Party Name ofDirector

Details Balance OutstandingAs At 31.03.2018

M.S.J.Industries (Ceylon)(Private) Limited

Mr. Murtaza EsufallyMr. Steven Enderby

Rent - Rs. 637,162/-

(Rs.807,590920/-)Purchase of goods - Rs. 561,475,367/-

Administrative staff salary - Rs. 40,911,170/-

Purchase of Land and Building - Rs. 266,000,000/-

Hemas Holdings PLC Mr. Husein Esufally Mr. Steven Enderby

Reimbursement of expenses - Rs. 40,415,477/-(Rs. 14,484,911/-)

Hemas Corporate Services (Private) Limited

Mr. Steven Enderby Secretarial services obtained - Rs.1,092,468/- (Rs. 254,922/-)

Vishwa BPO (Private) Limited Mr. Steven Enderby Services obtained - Rs. 459,850/- (Rs. 151,286/-)

Hemas Capital Hospital (Private)Limited


Sales of goods - Rs. 13,617,539/- Rs. 1,635,535/-

Hemas Hospitals (Private)Limited

Mr. Murtaza EsufallySales of goods - Rs. 5,760,412/-

Rs. 245,927/-

Mr. Steven Enderby

Hemas Southern Hospitals(Private) Limited


Sales of goods - Rs. 9,700,802/-Rs. 1,081,259/-

Hemas Pharmaceuticals(Private) Limited

Mr. Murtaza EsufallyPurchase of goods - Rs. 11,952,074/-

(Rs. 3,442,563/-)

Mr. Steven Enderby

Hemas Travels (Private) Limited Mr. Steven Enderby Services obtained - Rs. 11,208,805/- (Rs. 1,458,874/-)

Hemas Manufacturing (Private) Limited

Mr. Husein EsufallyMr. Steven Enderby

Purchase of goods - Rs. 4,720,424/- (Rs. 2,512,200/-)

Diethelm Travel Lanka (Private) Limited

Mr. Steven Enderby Services obtained - Rs. 2,441,576/- (Rs. 950,917/-)

Takas (Private) Limited Mr. Murtaza Esufally Sales of goods - Rs. 146,601/- Nil


ANNUAL REPORT OF THE DIRECTORS

The Directors have pleasure in presenting to the Members their report together with the audited financial statements of the Company and the Group, for the year ended 31 March 2018.

1. Principal Activities of the GroupManufacturing and trading in Pharmaceuticals and Cosmetics, Importing and distribution of pharmaceuticals, medical aid, hair care products, diagnostics reagent and equipment, and other consumer products. The Chairman’s Report and the Managing Directors Report on page 6 and 8 of this report, respectively, describe in detail the year’s operations and all important events that occurred during the accounting period under review.

2. Financial Statements of the Company and the GroupThe financial statements of the Company and the Group, duly certified by the Finance Director and signed by the Directors of the Company, in compliance with sections 152, 153 and 168 of the Companies Act No. 7 of 2007 are given on page 32 of the Annual Report.

3. Property, Plant & EquipmentMovements in Property, Plant & Equipment during the year are set out in Note 3 to the Financial Statements.

4. 2017/18 ResultsThe total revenue of the Group for the year ended 31 March 2018 was reported as Rs.3,799,845,136 (for the year ended 31 March 2017–Rs.4,018,065,105)

The profit before income tax of the Group for the year ended 31 March 2018 was Rs. 710,153,126 (for the year ended 31 March 2017 - Rs. 646,284,881) and Profit after tax for the year ended 31 March 2018 was reported as Rs. 564,484,241 (for the year ended 31 March 2017 – Rs. 516,716,126).

5. DividendsAn Interim Dividend of Rs. 15.00 per Ordinary Voting and Non- Voting share was declared and paid to the shareholders on 29 March 2018. A further dividend declaration has not been made for the financial year ended 31 March 2018. Accordingly, the dividend paid on 29 March 2018 would be the first and final dividend payment for the financial year 2017/18 amounting to a total dividend payout of Rs.15.00 per Ordinary Voting and Non- Voting share.

6. DirectorsThe Board of Directors of the Company as at date of this report comprises 7 Directors.

The profiles of the Directors are set out in pages 10 and 11.

The names of the persons who held office as Directors of the Company during the year under review are as follows.

1. Mr. Husein N. Esufally - Non-Executive Director/ Chairman

2. Ms. B. Arundathi I. Rajakarier

- Independent Non-Executive Director

3. Mr. Ranjan Chakravarti - Independent Non-Executive Director

4. Professor P. Ravindra Fernando

- Independent Non-Executive Director

5. Mr. Steven M. Enderby - Non- Independent Non-Executive Director

6. Ms. Kasturi A. Chellarja Wilson

- Non-Independent Non- Executive Director, appointed w.e.f. 27 October 2017

7. Mr. Murtaza A. H. Esufally

- Executive Director/ Managing Director, appointed w.e.f. 27 October 2017

8. Mr. R. A. J. Trihan Perera

- Executive Director, resigned w.e.f. 3 January 2018

Ms. Kasturi Wilson and Mr. Murtaza Esufally were appointed to the Board of Directors w.e.f. 27 October 2017. Mr. Trihan Perera resigned from the position of Managing Director and the Board of Directors w.e.f. 3 January 2018. Mr. Murtaza Esufally was appointed as the Managing Director of the Company w.e.f. 3 January 2018.

6.1 Independence of DirectorsThe board has made a determination as to the independence of each non- executive director and confirms that three of the non- executive directors meet the criteria of independence in terms of Rule 7.10.4 of the Listing Rules of the Colombo Stock Exchange.

Each of the independent directors has submitted a signed and dated declaration of his/her independence against the specified criteria.

6.2 Re-election of DirectorsMr. Husein Esufally retires by rotation in accordance with Article 84 of the Articles of Association, but being eligible, offers himself for re-election with the unanimous support of the Board.

Mr. Ranjan Chakravarti retires by rotation in accordance with Article 84 of the Articles of Association, but being eligible, offers himself for re-election with the unanimous support of the Board.


Mr. Murtaza Esufally who retires in accordance with Article 72 of the Articles of Association, but being eligible, offers himself for re-election with the unanimous support of the Board.

Ms. Kasturi Wilson who retires in accordance with Article 72 of the Articles of Association, but being eligible, offers herself for re-election with the unanimous support of the Board.

6.3 Directors’ Disclosure in dealing in sharesDirectors’ Interest in Ordinary Voting Shares of the Company – Direct

31.03.2018 31.03.2017

Mr. Husein Esufally (Chairman) Nil Nil

Mr. Murtaza Esufally Nil Nil

Professor Ravindra Fernando Nil Nil

Ms. Arundathi Rajakarier Nil Nil

Mr.Ranjan Chakravarti Nil Nil

Mr. Steven Enderby Nil Nil

Ms.Kasturi Wilson Nil Nil

Directors’ Interest in Ordinary Non- Voting Shares of the Company - Direct

31.03.2018 31.03.2017

Mr. Husein Esufally (Chairman) 600 600







Directors’ Interest in Ordinary Voting and Non- Voting Shares of the Company - Indirect

31.03.2018 31.03.2017

Mr. Husein Esufally (Chairman) Nil Nil







7. Share InformationInformation relating to earnings, dividend, net assets and market price per share is given in the 5 year summary on page 78.

8. DonationsDuring the year charitable donations amounting to Rs. 372,245/- were made by the Company. (2017 - Rs. 542,955/-)

9. Segmental AnalysisA segmental analysis of Group operations is given in Note 28 on page 69 to the accounts.

10. Major ShareholdingDetails of the 20 largest shareholders of Voting & Non-Voting shares of the Company as at 31.03.2018 are given on page 73.

11. Public holding of sharesThe number of ordinary voting shares held by the public as at 31 March 2018 was 546,151 amounting to 9.40% of the issued share capital of the Company and the number of ordinary non-voting shares held by the public as at 31 March 2018 was 161,465 amounting to 9.27% of the issued share capital of the Company. With respect to the ordinary voting shares of the Company, the float adjusted market capitalization as at 31 March 2018 was 338,507,141.20 with a public holding percentage amounting to 9.40% and the number of public shareholders as at 31 March 2018 was 593.The Company is currently not compliant with the minimum public holding requirement in terms of the Listing Rules of the Colombo Stock Exchange.

12. Statutory PaymentsThe Directors, to the best of their knowledge and belief, are satisfied that all statutory payments due to the Government and in relation to employees have been made up to date.

13. ReservesDetails of Capital and Revenue Reserves of the Company are given in Note 11 on pages 57 to the Financial Statements.

14. Change of Company NameThe name of the Company could be changed by passing special resolution. On 23 June 2017 an Extraordinary General Meeting (“EGM”) was held immediately after the conclusion of the Annual General Meeting and Shareholders’ approval was obtained to change Company name from J L Morison Son & Jones (Ceylon) PLC to Morison PLC. The above was certified by the Registrar of Companies and the Company was presented with a certificate of name change by the Registrar of Companies on 17 August 2017.


Annual Report of the Directors (Contd.)

15. Articles of AssociationThe Articles of Association of the Company may be amended by passing a special resolution.

On 23 June 2017 an EGM was held immediately after the conclusion of the Annual General Meeting and Shareholders’ approval was obtained to amend the Articles of Association. Accordingly, new Articles of Association has been adopted in place of the previous Articles of Association and Memorandum of Articles.

16. Stated CapitalDetails of the Stated Capital of the Company are given in Note 10 to the financial statements. There was no movement in the stated capital during the accounting period under review. The issued no. of shares of the Company remains as 7,550,780.

17. Events occurring after the Balance Sheet dateThere have been no material events which occurred after the Balance Sheet date that would require adjustments to or disclosure in the Financial Statements.

18. Interest RegisterThe Company has maintained an Interest Register in accordance with the Companies Act No. 7 of 2007 and is available for inspection as required by Section 119 (1) (d) of the aforesaid Act.

19. Environmental ProtectionThe Directors to the best of their knowledge and belief are satisfied that the Company has complied with the applicable environmental regulations and have not engaged in any activities, which may cause detriment to the environment.

20. Significant Accounting PoliciesSignificant Accounting Policies adopted by the Company in the preparation of the Financial Statements are given on pages 37 to 47 of the Annual Report.

21. Going ConcernThe Directors, having reviewed the basis of the current financial projections and resources available to continue business operations, are confident that the Company has adequate resources to continue business operations in the foreseeable future. Accordingly, the Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements.

22. Audit CommitteeThe Composition of the Audit Committee and their report is given on pages 24 and 25 of this report.

23. Related Party Transactions Review CommitteeThe Composition of the Related Party Transactions Review Committee and their report is given on page 26 of this report.

The Related Party Transactions Review Committee has reviewed the related party transactions of the company during the financial year and reported their comments and observations to the Board of Directors. The details of the related party transactions of the Company during the year are set out in pages 27 and 68 of the Annual Report. During the year under review, the Company obtained a Term Loan of Rupees One Billion Four Hundred Million (Rs.1.4Bn) from Hemas Holdings PLC (“HHL”), the ultimate parent company, which amounted to a non-recurrent related party transaction of the Company. The transaction was reviewed by the Related Party Transactions Review Committee. An immediate market disclosure was made following the Board Resolution and shareholders’ approval was obtained prior to the transaction, at the EGM held on 23 June 2017. The above loan was obtained as part of the project investment, for construction of a new research and manufacturing facility at Pitipana, Homagama. The Project is currently in progress. However, the Company is yet to withdraw the funds from the aforementioned loan.

The transaction also amounted to a major transaction of the Company, and at the EGM held on 23 June 2017, Shareholders’ approval was obtained in this regard.

On 27 March 2018, the Company also entered into a related party transaction with MSJ Industries (Ceylon) (Private) Limited, a wholly owned subsidiary, for purchase of land and Building for a total consideration of Rupees Two Hundred and Sixty Six Million (Rs.266,000,000/-). An immediate market disclosure was made in this regard. However, in terms of the Listing Rules of the Colombo Stock Exchange, the shareholders’ approval was not required.

The Company has not entered into any other related party transactions during the year, which would require Shareholders’ approval or an immediate market disclosure to be made to the Colombo Stock Exchange. The Directors declare that the Company is in compliance with the Rules of the Colombo Stock Exchange and the Code of Best Practices on Related Party Transactions.

24. Remuneration CommitteeThe Remuneration Committee of the ultimate parent company, Hemas Holdings PLC functions as the Remuneration Committee of the Company. The remuneration committee comprises two independent directors, Dr. Anura Ekanayake and Mr. Shakta Amaratunga, and one Non-Executive Director, Mr. Husein Esufally. In addition, Mr. Murtaza Esufally attends meetings by invitation.


25. External AuditorsThe following payments were made to the Group’s External Auditors, Messrs. Ernst & Young.

Group Company 2017/18 2016/17 2017/18 2016/17 Rs. Rs. Rs. Rs.

Audit Fees and Expenses 2,046,331 1,919,000 1,116,278 1,043,250Fees for other services and Expenses 960,292 879,844 745,965 724,424

As far as the Directors are aware, the Auditors do not have any interest or relationship with the Company or any of its subsidiaries other than those disclosed above.

The Report of the Auditors on the Financial Statements of the Company and the Group is set out on Page 29 of the Annual Report.

A resolution to re-appoint the present Auditors, Messrs Ernst & Young, who have expressed their willingness to continue, will be proposed at the Annual General Meeting.

Annual General Meeting (AGM)The AGM of the Company for the financial year 2017/18 will be held at 3.00 PM on Tuesday, 26 June 2018 at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No. 30A, Malalasekera Mawatha, Colombo 7.

Acknowledgement of Contents of the ReportAs required by Section 168 (1) (K) of the Companies Act No. 7 of 2007, the Board of Directors hereby acknowledge the contents of this Report.

Signed for and on behalf of the Board

Husein Esufally Murtaza EsufallyDirector Director

Hemas Corporate Services (Pvt) LtdSecretaries

Colombo21 May 2018


THE AUDIT COMMITTEE REPORT

The members of the Audit Committee as at the Balance sheet date were as follows.

Ms. B. Arundathi Rajakarier - Independent Non-Executive Director (Chairperson)

Professor Ravindra Fernando - Independent Non-Executive Director (Member)

Mr. Steven Enderby - Non-Independent Non- Executive Director (Member)

The Audit Committee (“the Committee”) is formally appointed by the Board of Directors of the Company in conformity with the Listing Rules of the Colombo Stock Exchange. The Committee comprises two Independent Non-Executive Directors and one Non-Independent Non- Executive Director. The Chairperson of the Audit Committee is an Independent Non-Executive Director.

The main role, functions and responsibilities of the Audit Committee include:• Assisting Board oversight of the preparation, presentation

and adequacy of disclosures in the financial statements, in accordance with Sri Lanka Accounting Standards;

• To ensure Company’s compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements;

• Review processes to ensure that the Company’s internal controls and risk management procedures are adequate to meet the requirements of the Sri Lanka Accounting and Auditing Standards;

• Assessing the Company’s ability to continue as a going concern in the foreseeable future;

• Independence and performance of the Company’s external Auditors; and

• To make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors and to approve the remuneration and terms of engagement of the external auditors.

The Audit Committee held 4 meetings during the year under review. Mr. Dinesh Athapaththu – Finance Director and Mr. Prasenna Balachandran- General Manager Risk & Control attended

all meetings by invitation of the Committee. Mr. Murtaza Esufally was appointed to the Board w.e.f. 27 October 2017 and to the position of Managing Director w.e.f. 3 January 2018. As the Managing Director of the Company, Mr. Murtaza Esufally has attended the meeting held in the 4th Quarter in FY2017/18 by invitation of the Committee. The minutes of all audit committee meetings were submitted for review and information of the Board of Directors.

During the year under review, the Committee reviewed and discussed in detail with the management the unaudited quarterly financial statements and the audited financial statements of the Company and the Group, prior to recommendation for approval of the Board. The audited financial statements were reviewed and discussed with Ernst and Young, the External Auditors in attendance. The Audit Committee has committed adequate time to ensure that the financial statements have been prepared in accordance with the Sri Lanka Accounting Standards and that the Company and the Group have complied with all regulatory compliances.

The Audit Committee also committed adequate time during year to review the overall regulatory compliance, internal controls and risk management of the Company and the Group. Accordingly, the internal audit reports have been reviewed by the Audit Committee and discussed in detail with the Management, General Manager Risk and Control and the Internal Auditors. The agreed follow up action plans with respect each internal audit have been reviewed by the Audit Committee and, progress of same has been regularly monitored by the Audit Committee. A report on the Progress of the Agreed Follow up Action Plans is presented to the Audit Committee on a quarterly basis by General Manager Risk and Control.

During the year the Committee has also dedicated its time to monitor the progress made in IT, Regulatory Compliance, Human Resources Management, and the policies and practices with respect to Risk Management of the Company and the Group. The Risk Highlights in respect of each quarter were reviewed and discussed by the Committee at the meeting held in the preceding quarter to ensure that the necessary risk mitigation plans were implemented in a timely and effective manner.

At each Audit Committee meeting, a quarterly compliance statement was presented by the Management, confirming compliance with all internal policies and processes of the Group. The Committee has also been presented with a quarterly statutory compliance statement confirming all statutory payments made by the Company.


The Annual Internal Audit Plan is approved by the Audit Committee and the Committee dedicates adequate time to ensure that the Internal Audit Plan is effectively structured to ensure effective monitoring of the internal controls. The progress of the Internal Audit Plan is reported to the Audit Committee on a quarterly basis by General Manger – Risk and Control.

Annually the Audit Committee meets the External Auditors of the Company with the Management and also hold a private discussion without the management to understand the audit procedure followed and any improvements that could be made.

The Audit Committee is of the view that adequate internal controls and procedures have been established by the management to ensure the effectiveness of the operations of the Company and to safeguard its assets.

The Audit Committee has recommended to the Board of Directors that Messrs Ernst & Young, Chartered Accountants, be re-appointed as external auditors of the company for the financial year ending 31 March 2019, subject to approval of the shareholders at the next Annual General Meeting.

Ms. Arundathi RajakarierChairperson

Colombo21 May 2018


THE RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT

Ms. Arundathi Rajakarier - Independent Non-Executive Director (Chairperson)

Professor Ravindra Fernando

- Independent Non-Executive Director (Member)

Mr. Steven Enderby - Non-Independent Non- Executive Director (Member)

Mr. Murtaza Esufally - Executive Director (Member)

The Related Party Transactions Review Committee (“the Committee”) is formally appointed by the Board of Directors. The Committee comprises two Independent Non – Executive Directors, one Non-Independent Non-Executive Director and one Executive Director. Mr. Dinesh Athapaththu - Finance Director attends the meetings by invitation.

The main objective and role of the Committee is to assist Board oversight on Related Party Transactions (“RPT”) of the Company and ensure that required disclosures are made and compliance with the Listing Rules of the Colombo Stock Exchange (“Listing Rules”) and the Code of Best Practices on Related Party Transactions, issued by the Securities and Exchange Commission of Sri Lanka (“the Code”) are attained at all times. The RPTs that are subject to review of the Committee are all RPTs of the Company other than those set out in Section 9.5 of the Listing Rules and exempted by the Code.

On the recommendation of the Committee, the Board of Directors has adopted a formal policy consisting the principles, guidelines and procedures to be adhered with respect to RPTs, including but not limited to the following:

• Threshold values for RPTs which require discussion in detail, RPTs which have to be pre-approved by the Board and RPTs which require to be reviewed annually

• Guidelines on which RPTs require pre approval of the Board and which transactions do not require prior Board approval and therefore, can be reviewed retrospectively.

• Guidelines and processes to ensure accurate identification of Recurrent RPTs.

• Guidelines which the senior management must follow in dealing with Related Parties, including conformity with Transfer Pricing regulations.

• Instances where an immediate market disclosure of the RPT is required in terms of the Listing Rules of the Colombo Stock Exchange

• Instances where RPTs would require approval of the shareholders

• Documentation formats to be used by the management in presenting the RPT information to the Related Party Transactions Review Committee

The Committee meetings are held at least once in every quarter or more frequently as required. The proceedings of the meetings are recorded and communicated to the Board of Directors.

The Committee held four meetings during the period under review. All RPTs the Company has entered into during the year have been reviewed and discussed by the Committee. The Comments/observations of the Committee have been communicated to the Board.

During the year under review, the Company obtained a Term Loan of Rupees One Billion Four Hundred Million (Rs.1.4Bn) from Hemas Holdings PLC (“HHL”), the ultimate parent company, which amounts to a non-recurrent related party transaction. The transaction was reviewed by the Related Party Transactions Review Committee. However, as Mr. Steven Enderby is a member of the Board of Directors of Hemas Holdings PLC, he has abstained from reviewing the transaction as a member of Related Party Transactions Review Committee of Morison PLC. An immediate market disclosure was made to the Colombo Stock Exchange following the Board Resolution on 30 May 2017. The shareholders’ approval was obtained at the Extraordinary General Meeting held on 23 June 2017 prior to the transaction. The above loan was obtained as part of the project investment for construction of a new research and manufacturing facility at Pitipana, Homagama.

On 27 March 2018, the Company also enterred into a non- recurrent related party transaction with MSJ Industries (Ceylon) (Private) Limited, a wholly owned subsidiary of Morison PLC, for purchase of land and Building, for a total consideration of Rupees Two Hundred and Sixty Six Million (Rs.266,000,000/-). The aforementioned transaction was reviewed by the Committee prior to the transaction. However, as Mr. Steven Enderby is a member of the Board of Directors of M S J Industries (Ceylon) (Private) Limited, he has abstained from reviewing the transaction as a member of the Related Party Transactions Review Committee of Morison PLC.


An immediate market disclosure of the transaction was made on 28 March 2018. In accordance with the Listing Rules of the Colombo Stock Exchange, shareholders’ approval was not required.

Set out below are the details of the aforementioned non-recurrent related party transactions of the Company.

NAME OF THE RELATED PARTY

RELATIONSHIP VALUE OF THE RELATED PARTY TRANSACTIONS ENTERED INTO DURING THE FINANCIAL YEAR

VALUE OF RELATED PARTY TRANSACTIONS AS A % OF EQUITY AND AS A % OF TOTAL ASSETS

TERMS AND CONDITIONS OF THE RELATED PARTY TRANSACTIONS

THE RATIONALE FOR ENTERING INTO THE TRANSACTIONS

Hemas Holdings PLC

Ultimate Parent Company

Rs. 1.4Bn 84% of Equity

38% of Total Assets

To repaid in 6 years As part of the project financing for construction of a new pharmaceutical manufacturing plant, within the SLINTEC Nano Technology Park in Pitipana, Homagama

MSJ Industries (Ceylon) (Private) Limited

Wholly owned Subsidiary

Rs. 266 Mn 16% of Equity

7% of Total Assets

- To streamline the property ownership under Morison PLC as part of the land is already registered under the name of Morison PLC

During the year under review the Company has not entered into any other related party transactions which would require Shareholders’ approval or an immediate market disclosure to be made to the Colombo Stock Exchange. The Directors declare that the Company is in compliance with the Rules of the Colombo Stock exchange and the Code of Best Practices on Related Party Transactions.

Ms. Arundathi Rajakarier Chairperson

Colombo21 May 2018


STATEMENT OF DIRECTORS’ RESPONSIBILITY

In keeping with the provisions of the Companies Act No. 7 of 2007 the Directors of Morison PLC acknowledge their responsibility to prepare and present the Financial Statements of both the Company and the Group, in accordance with the relevant sections of the aforesaid Act and the Sri Lanka Accounting Standards (SLFRSs/ LKASs).

The Financial Statements for the year ended 31 March 2018, presented in this Report have been prepared in compliance with the requirements of the Sri Lanka Accounting Standards, the Companies Act No. 7 of 2007 and the Listing Rules of the Colombo Stock Exchange. The Directors consider that appropriate accounting policies and Standards have been applied and reasonable estimations made when preparing the statements presented in this annual report. A material deviation, if any, from these Standards has been disclosed where necessary.

The Directors confirm their responsibility for ensuring the maintenance of proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and Group and, enable them to ensure that it’s Financial Statements comply with the Companies Act No. 7 of 2007. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

In compliance with the Companies Act No. 7 of 2007 and the Listing Rules of the Colombo Stock Exchange, the Directors have caused to issue a copy of the annual report of the Company in a CD ROM, to every shareholder, fifteen working days before the date of the Annual General Meeting. A copy of the Financial Statements has also been delivered to the Registrar General of Companies.

Responsibility Statement of the Directors in respect of the Annual ReportWe, the Directors of the Company, confirm that to the best of our knowledge the Financial Statements of the Company and the Group have been prepared in accordance with applicable laws and regulations and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and the Directors’ Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that face the Group.

Husein EsufallyChairman

Murtaza EsufallyMD

Dinesh Athapaththu Finance Director

Colombo21 May 2018


INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF MORISON PLCReport on the audit of the financial statements

OpinionWe have audited the financial statements of Morison 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 2018, 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 2018, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for opinionWe 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 mattersKey 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.

Key audit matters

KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE MATTER

Revaluation of freehold land and buildings

As of 31 March 2018, Group and the Company carried freehold land and building at fair value amounting to Rs.1,331 million and Rs 476 million respectively, which represent 26% of the total asset of the Group and 13 % of the total assets of the Company.

The Group engaged an external valuer in determining the value. The method of valuation requires significant assumptions and the use of unobservable inputs as disclosed in note 03 to the financial statements, due to which we have determined this to be a key audit matter.

Our audit procedures included among other,

• Assessing the objectivity, competence and capabilities of the external valuer appointed by the management.

• We read the valuation report to obtain an understanding of the work done by the valuer and scope of work.

• We engaged internal specialized resources to evaluate the appropriateness of the valuation method and other key assumptions applied by the external valuer in appraising the value.

• We have also assessed the appropriateness of the disclosures relating to the valuation techniques and key inputs applied by the professional valuer.


Other Information included in the Company’s 2018 Annual ReportOther 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 governanceManagement 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 statementsOur 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.

• 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.

Independent Auditors’ Report (Contd.)


• 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 requirementsAs required by section 163 (2) of the Companies Act No. 07 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 2097.

21 May 2018Colombo


STATEMENT OF FINANCIAL POSITION Group CompanyAs at 31 March 2018 Note 2018 2017 2018 2017 Rs. Rs. Rs. Rs. ASSETS Non-Current Assets Property, Plant and Equipment 3 1,790,016,312 1,396,296,717 763,944,834 326,244,048Intangible Assets 4 15,000,000 15,000,000 15,000,000 15,000,000Investments in Subsidiaries 5 1 1 57,700,000 57,700,000Investments in Associates 6 1 1 - -Other Financial Assets 7 - - - - 1,805,016,314 1,411,296,719 836,644,834 398,944,048 Current AssetsInventories 8 893,027,539 796,769,138 678,044,390 633,152,171Trade and Other Receivables 9 934,856,266 901,482,914 651,507,963 668,145,492Advances and Prepayments 49,499,825 39,116,828 27,673,962 17,971,046Cash and Cash Equivalents 16 1,447,294,516 1,448,017,600 1,446,764,725 1,123,650,633 3,324,678,146 3,185,386,481 2,803,991,040 2,442,919,343Total Assets 5,129,694,460 4,596,683,200 3,640,635,875 2,841,863,390 EQUITY AND LIABILITIESStated Capital 10 7,924,800 7,924,800 7,924,800 7,924,800Reserves 11 1,576,426,339 1,536,392,775 880,560,860 858,068,828Retained Earnings 1,903,620,117 1,488,766,109 781,415,898 644,613,713Equity Attributable to Equity Holders of Parent 3,487,971,256 3,033,083,684 1,669,901,558 1,510,607,341Total Equity 3,487,971,256 3,033,083,684 1,669,901,558 1,510,607,341

Non-Current LiabilitiesInterest Bearing Loans and Borrowings 12 - 125,024,000 - 125,024,000Deferred Tax Liabilities 21 293,731,097 86,686,083 59,949,671 10,179,625Retirement Benefit Liability 13 88,001,141 93,151,155 46,318,750 48,137,162 381,732,238 304,861,238 106,268,421 183,340,787 Current Liabilities Trade and Other Payables 14 644,458,997 860,912,913 1,305,409,642 867,319,082Interest Bearing Loans and Borrowings 12 437,197,864 339,163,726 390,887,880 259,614,241Income Tax Liabilities 67,076,958 47,145,722 56,911,227 9,466,023Dividends Payable 15 111,257,147 11,515,916 111,257,147 11,515,916 1,259,990,966 1,258,738,278 1,864,465,896 1,147,915,262Total Equity and Liabilities 5,129,694,460 4,596,683,200 3,640,635,875 2,841,863,390

These financial statements are in compliance with the requirements of the Companies Act No.07 of 2007.

Dinesh AthapaththuFinance Director

The Board of Directors is responsible for these financial statements. Signed for and on behalf of the Board by,

Husein Esufally Murtaza EsufallyChairman MD

The Accounting Policies and Notes on pages 37 through 71 form an integral part of these financial statements.

21 May 2018Colombo


STATEMENT OF PROFIT OR LOSS Group CompanyYear ended 31 March 2018 Note 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Revenue 17 3,799,815,136 4,018,065,105 3,135,682,804 3,320,196,544 Cost of Sales (2,316,765,883) (2,527,981,588) (2,099,593,827) (2,354,026,427) Gross Profit 1,483,049,253 1,490,083,517 1,036,088,977 966,170,117 Other Operating Income and Gains 18 7,214,634 20,753,126 4,224,565 71,928,941 Selling and Distribution Costs (484,436,880) (531,700,157) (483,899,187) (530,982,293) Administrative Expenses (407,727,862) (418,430,630) (258,151,102) (266,132,523) Operating Profit 598,099,145 560,705,856 298,263,253 240,984,243 Finance Cost 19.1 (32,584,296) (45,431,198) (28,228,162) (35,679,555) Finance Income 19.2 144,638,277 131,010,224 117,963,553 98,471,709 Profit Before Tax 20 710,153,126 646,284,881 387,998,644 303,776,397 Income Tax Expense 21 (145,668,885) (129,568,755) (99,917,071) (46,346,087)

Profit for the Year 564,484,241 516,716,126 288,081,573 257,430,310 Attributable to: Equity Holders of the Parent 564,484,241 516,716,126 564,484,241 516,716,126 Earnings Per Share - Basic 22 74.76 68.43 38.15 34.09



STATEMENT OF COMPREHENSIVE INCOME

Group CompanyYear ended 31 March 2018 Note 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Profit for the Year 564,484,241 516,716,126 288,081,573 257,430,310

Other Comprehensive IncomeOther comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods Net Losses on Available-for-Sale Financial Assets - (1,598,216) - (1,598,216)Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods - (1,598,216) - (1,598,216)

Other comprehensive income not to be reclassified to profit or loss in subsequent periodsActuarial Gains / (Losses) on Defined Benefit Plans - Net of Tax effect 13 1,385,366 (5,124,784) (263,789) (3,802,622)

Revaluation of Land and Buildings - Net of Tax effect 11.1 40,033,564 - 22,492,033 -

Net other comprehensive income / (loss) not to be reclassified to profit or loss in subsequent periods 41,418,930 (5,124,784) 22,228,245 (3,802,622)

Other Comprehensive Income/(Loss) for the Year, net of tax 41,418,930 (6,723,000) 22,228,245 (5,400,838)

Total Comprehensive Income for the Year, net of tax 605,903,171 509,993,127 310,309,818 252,029,472

Attributable to:Equity Holders of the Parent 605,903,171 509,993,127 605,903,171 509,993,127



STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2018 Available Non-Group Stated Revaluation General for Sale Retained controlling Total Capital Reserve Reserve Reserve Earnings Total Interest Equity Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

As at 31 March 2016 7,924,800 805,592,775 730,800,000 1,598,217 1,128,083,136 2,673,998,928 107,231 2,674,106,159Profit for the year - - - - 516,716,127 516,716,127 - 516,716,127Other Comprehensive Income - - - (105,541) (5,124,784) (5,230,324) - (5,230,324)Transfers during the year - - - (1,492,676) 107,231 (1,385,445) (107,231) (1,492,676)Total Comprehensive Income - - - (1,598,217) 511,698,574 510,100,357 (107,231) 509,993,126

Final Dividend - 2015/16 - - - - (75,507,800) (75,507,800) - (75,507,800)Interim Dividend - 2016/2017 - - - - (75,507,800) (75,507,800) - (75,507,800)

As at 31 March 2017 7,924,800 805,592,775 730,800,000 - 1,488,766,110 3,033,083,685 - 3,033,083,685

Revaluation Gain/(Loss) 254,405,655 - - - 254,405,655 - 254,405,655Profit for the year - - - - 564,484,241 564,484,241 - 564,484,241Other Comprehensive Income - (214,372,091) - - 1,385,366 (212,986,725) - (212,986,725)Transfers during the year - - - - - - -Total Comprehensive Income - 40,033,564 - - 565,869,607 605,903,171 - 605,903,171

Final Dividend - 2016/17 - - - - (37,753,900) (37,753,900) - (37,753,900)Interim and Final Dividend - 2017/2018 - - - - (113,261,700) (113,261,700) - (113,261,700)

As at 31 March 2018 7,924,800 845,626,339 730,800,000 - 1,903,620,117 3,487,971,256 - 3,487,971,256

Available Company Stated Revaluation General for Sale Retained Capital Reserve Reserve Reserve Earnings Total Rs. Rs. Rs. Rs. Rs. Rs.

As at 31 March 2016 7,924,800 129,140,706 728,928,122 1,598,216 542,001,626 1,409,593,470

Profit for the year - - - - 257,430,310 257,430,310Other Comprehensive Income - - - (105,541) (3,802,622) (3,908,163)Transfers during the year - - - (1,492,675) - (1,492,675)Total Comprehensive Income - - - (1,598,216) 253,627,688 252,029,472 Final Dividend - 2015/16 - - - - (75,507,800) (75,507,800)Interim Dividend - 2016/2017 - - - - (75,507,800) (75,507,800)

As at 31 March 2017 7,924,800 129,140,706 728,928,122 - 644,613,713 1,510,607,341 Profit for the year - - - - 288,081,573 288,081,573Revaluation Gain/(Loss) - 62,760,985 - - - 62,760,985Other Comprehensive Income - (40,268,952) - - (263,789) (40,532,740)Transfers during the year - - - - - -Total Comprehensive Income - 22,492,033 - - 287,817,785 310,309,818 Final Dividend - 2016/17 - - - - (37,753,900) (37,753,900)Interim and Final Dividend - 2017/18 - - - - (113,261,700) (113,261,700)

As at 31 March 2018 7,924,800 151,632,739 728,928,122 - 781,415,898 1,669,901,558



STATEMENT OF CASH FLOWS

Year ended 31 March 2018 Group Company Note 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Cash Flows From Operating Activities Profit before Income Tax Expense 710,153,126 646,284,881 387,998,644 303,776,397

Adjustments forDividend Income 18 - (193,615) - (49,963,615)Depreciation 3 85,636,359 68,243,820 55,633,655 43,209,368Profit on Sale of Property, Plant and Equipment 18 (3,181,729) (13,914,939) (3,181,729) (13,914,939)Profit on Disposal of Available-for-Sale Investments - (1,492,675) - (1,492,675)Interest Income 19.2 (144,638,277) (131,010,224) (117,963,553) (98,471,709)Finance Costs 19.1 32,584,296 45,431,198 28,228,162 35,679,555Impairment of Investment - - - 5,200,000Provision for Defined Benefit Plans - Gratuity 13 19,795,899 16,548,786 11,677,768 9,794,638Operating Profit before Working Capital Changes 700,349,673 629,897,232 362,392,947 233,817,020

Increase in Inventories (96,258,401) (24,208,379) (44,892,219) (25,532,881)Increase in Trade and Other Receivables (33,373,352) (118,172,434) 16,637,529 135,390,074(Increase) / Decrease in Advances and Prepayments (10,382,997) (22,711,212) (9,702,916) (6,269,930)Increase / (Decrease) in Trade and Other Payables (216,453,916) 41,247,262 163,390,561 144,953,010Cash Generated from Operations 343,881,008 506,052,470 487,825,902 482,357,293

Finance Costs Paid 19.1 (32,584,296) (45,431,198) (28,228,162) (35,679,555)Defined Benefit Plan Costs Paid 13 (23,021,793) (15,658,367) (13,862,553) (12,593,873)Tax Paid (133,603,479) (124,640,330) (42,868,191) (45,950,759)Net Cash Flows from Operating Activities 154,671,440 320,322,575 402,866,997 388,133,107

Cash Flows From / (Used in) Investing ActivitiesAcquisition of Property, Plant and Equipment 3.1.4 (243,332,714) (186,321,101) (174,255,872) (144,487,316)Proceeds from Sale of Property, Plant and Equipment 21,564,146 31,406,260 21,564,146 31,406,261Dividends Received - 193,615 - 49,963,615Proceeds from Disposal of Available-for-Sale Investments - 4,510,730 - 4,510,730Interest Received 144,638,277 131,010,224 117,963,553 98,471,709Net Cash Flows Used in Investing Activities (77,130,292) (19,200,273) (34,728,173) 39,864,999

Cash Flows From / (Used in) Financing ActivitiesProceeds From Interest Bearing Loans and Borrowings 12.1.1 313,165,443 345,598,056 281,265,443 225,822,241Repayment of Interest Bearing Loans and Borrowings 12.1.1 (468,262,684) (334,708,789) (390,879,684) (260,415,974)Dividends Paid (51,274,369) (144,243,390) (51,274,369) (144,243,390)Net Cash Flows Used in Financing Activities (206,371,610) (133,354,123) (160,888,610) (178,837,123)

Net Increase in Cash and Cash equivalents (128,830,463) 167,768,178 207,250,214 249,160,983

Cash and Cash equivalents at the beginning of the year 16 1,413,951,115 1,246,182,937 1,123,650,633 874,489,650Cash and Cash equivalents at the end of the year 16 1,285,120,651 1,413,951,115 1,330,900,846 1,123,650,633



NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION1.1 GENERALMorison PLC (“Company”) is a Public Limited Liability Company, incorporated and domiciled in Sri Lanka. The registered office is located at “Hemas House”, No. 75, Braybrooke Place, Colombo 2 and the principal place of business of the Company is situated at No. 620, Biyagama Road, Pethiyagoda, Kelaniya.

Ordinary shares of the Company are listed on the Colombo Stock Exchange.

The financial statements for the year ended 31 March 2018, comprises “the Company” referring to Morison PLC as the holding company, and “the Group” referring to the companies whose accounts have been consolidated therein.

1.2 Principal Activities and Nature of OperationsDuring the year, the principal activities of the Group were as follows;

Morison PLC - Importing and distribution of pharmaceuticals, medical aid, hair care products, diagnostics reagent and equipments, and other consumer products.

M.S.J. Industries (Ceylon) (Private) Limited - Manufacturing and Trading in Pharmaceuticals and Cosmetics.

1.3 Parent and Ultimate Parent EntityThe Company’s parent undertaking is Hemas Manufacturing (Private) Limited with the Company’s ultimate parent undertaking and controlling party being Hemas Holdings PLC, incorporated in Sri Lanka.

1.4 Date of Authorisation for IssueThe financial statements of Morison PLC and its Subsidiaries for the year ended 31 March 2018 were authorised for issue in accordance with a resolution of the Board of Directors on 21 May 2018.

2. SIGNIFICANT ACCOUNTING POLICIES2.1 GENERAL ACCOUNTING POLICIES2.1.1 Statement of ComplianceThe Financial Statements of Morison PLC comprise the Statement of Financial Position and the Statement of Profit or Loss, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows, together with the Accounting Policies and Notes to the Financial Statements.

These financial statements are prepared in accordance with the Sri Lanka Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka, and also in compliance with the requirements of the Companies Act No. 7 of 2007.

2.1.2 Basis of PreparationThe financial statements have been prepared on a historical cost basis, except for the following material items in the statement of Financial Position,

• Lands and Buildings are measured at cost at the time of the acquisition and are subsequently revalued

The financial statements are presented in Sri Lankan Rupees.

2.1.3 Comparative InformationThe accounting policies have been consistently applied by the Company and, are consistent with those used in the previous year. Previous year’s figures and phrases have been re-arranged whenever necessary to conform to current presentation.

2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES2.2.1 Basis of ConsolidationThe consolidated financial statements comprise the financial statements of Morison PLC and its Subsidiaries, M.S.J. Industries (Ceylon) (Private) Limited, for the year ended 31 March 2018, which are incorporated in Sri Lanka.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

The financial statements of Compak Morison (Lanka) Limited, have been excluded from consolidation from the year 1998 under Section 146 (2) B (ii) of the Companies Act. No 17 of 1982 and under the Section 153 (6) (B) of the Companies Act No.7 of 2007.

As per the letter given by Messrs. Julius & Creasy, on February 11, 1998, the movable and immovable properties of Compak Morison (Lanka) Limited, which were under mortgage to the National Development Bank (NDB) were handed over to the NDB in exercise of the rights of parate execution, NDB having advertised the property for sale in the public auction brought it in, at the auction towards the claim of NDB.


Notes to the Financial Statements (Contd.)

SubsidiariesSubsidiaries are those enterprises controlled by the parent. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

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

2) Exposure, or rights, to variable returns from its involvement with the investee

3) The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

1) The contractual arrangement with the other vote holders of the investee

2) Rights arising from other contractual arrangements3) The Group’s voting rights and potential voting rights

Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, which is for the 12 months ending 31 March, using consistent accounting policies.

2.2.2 Foreign Currency TranslationThe Financial Statements are presented in Sri Lankan Rupees, which is the Company’s functional and presentation currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the income statement. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

2.2.3 Taxationa) Current Income TaxCurrent income tax assets and liabilities for the current period 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 taxes relating to items recognised directly equity is also recognised in equity and not in the Statement of Profit or Loss. 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.

b) Deferred TaxDeferred 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.

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, 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 taxable profit or loss


• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only 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 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 asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in 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 at the reporting date.

Current tax and deferred tax relating to items recognised directly in equity are also recognised in equity and not in the statement of profit or loss.

Deferred tax assets and liabilities are set off if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

c) Sales TaxRevenues, expenses and assets 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

• 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.

2.2.4 LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Group as a lesseeFinance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

2.2.5 Borrowing CostsBorrowing 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 they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

2.3 ASSETS AND BASES OF THEIR VALUATIONAssets classified as current assets in the Statement of Financial Position are cash and those which are expected to be realised in cash during the normal operating cycle of the Company’s business or within one year from the reporting date.

Assets other than current assets are those which the Company intends to hold beyond a period of one year from the reporting date.

2.3.1 Property, Plant and Equipment(1) ValuationProperty, Plant & Equipment are stated at cost or valuation less accumulated depreciation, provided on the basis stated in (3) below.



When item of property, Plant and Equipment are subsequently revalued, the entire class of such assets are revalued. Any revaluation surplus is recognized in Other Comprehensive Income and accumulated in equity in revaluation reserve, except to the extent that it reverse a revaluation decrease of the same asset previously recognized in the Statement of Profit or Loss, in which case the increase is recognized in the Statement of Profit or Loss. A revaluation deficit is recognized in the Statement or Profit or Loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve. The company has adopted a policy of revaluing lands and building by professional valuers at least every two years unless otherwise there are indications that the fair value of the lands and buildings differs materially from its carrying values.

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.

(2) CostCost of Property, Plant & Equipment is the cost of acquisition or construction together with any expenses incurred in bringing the assets to its working condition for its intended use.

Expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which to carry on the business or to increase the earning capacity of the business has been treated as capital expenditure.

(3) DepreciationThe provision for depreciation is calculated by using a straight line method on the cost or valuation of all Property, Plant & Equipment other than freehold land, in order to write off such amounts over the estimated useful lives.

The principal annual rates used are:

Freehold Buildings 35 Years

Plant and Machinery 5-13.33 Years

Furniture and Fittings 10 Years

Motor Vehicles 5 Years

Office Equipment 5 Years

Computer Hardware 5 Years

Office Software 5 Years

No depreciation is provided on freehold land.

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

The appropriateness of useful lives of the assets and the residual value is assessed annually.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

2.3.2 Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. 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 reflected in the statement of profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised over the 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. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable.

If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.


2.3.3 Financial Instruments – initial recognition and subsequent measurement

i) Financial assetsInitial recognition and measurementFinancial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.

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

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

The Group’s financial assets include cash and short-term deposits, loans and receivables and available for sale financial instruments.

Subsequent measurementThe subsequent measurement of financial assets depends on their classification as described below:

a) Trade and Other receivablesTrade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognised at fair value plus any directly attributable transaction cost. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. The losses arising from impairment are recognised in the profit or loss as a part of administration costs.

b) Available-for-sale financial investmentsAvailable-for-sale financial investments include equity securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other

operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the statement of profit or loss in finance costs and removed from the available-for-sale reserve.

Quoted available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for sale reserve to the income statement in finance costs.

The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets.

Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

DerecognitionA financial asset or a part of a financial asset or part of a group of similar financial assets is derecognised when:

• The rights to receive cash flows from the asset have expired• The Group has transferred its rights to receive cash flows from

the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either(a) The Group has transferred substantially all the risks and

rewards of the asset, or(b) The Group has neither transferred nor retained

substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the



Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

ii) Impairment of financial assetsThe Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Financial assets carried at amortised costFor financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred).

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of profit or loss. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account.

iii) AFS financial assetsFor AFS financial assets, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss – is removed from OCI and recognised in the statement of profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognised in OCI.

The determination of what is ‘significant’ or ‘prolonged’ requires judgement. In making this judgement, the Group evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

In the case of debt instruments classified as AFS, the impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the statement of profit or loss, the impairment loss is reversed through the statement of profit or loss.

iv) Financial liabilitiesInitial recognition and measurementFinancial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All


financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts and loans and borrowings.

Subsequent measurementTrade and other payables are measured at amortised cost.

Loans and borrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the income statement 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 in finance costs in the income statement.

DerecognitionA 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 a new liability. The difference in the respective carrying amounts is recognised in the income statement.

v) Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if:

• There is a currently enforceable legal right to offset the recognised amounts and

• There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously

vi) Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments that do not have a quoted market price in an active market and whose fair value cannot be reliability measured are carried at cost.

2.3.4 InventoriesInventories are valued at the lower of cost and net realisable value except commodity broker – traders. Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

Raw materials:The cost of raw material at weighted average cost.

Finished goods and work in progress:Cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

2.3.5 Cash and cash equivalentsCash and cash equivalents are cash in hand, demand deposits and short-term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

For the purpose statement of cash flow, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities (including investment in money market funds) i.e. three months or less from the date of acquisition are also treated as cash equivalents.

2.3.6 Impairment of non-financial assetsThe Company assesses at each reporting date whether there is any objective evidence that a non-financial asset or a group of non-financial assets is impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the group of non-financial 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 or 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 group of non-financial 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.



2.4 LIABILITIES AND PROVISIONSLiabilities classified as current liabilities in the Statement of Financial Position are those obligations payable on demand or within one year from the reporting date. Items classified as non-current liabilities are those obligations which become payable beyond a period of one year from the reporting date. All known liabilities have been accounted for in preparing these Financial Statements. Provisions and liabilities are recognised when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation.

2.4.1 Retirement Benefit Obligationsa) Defined Contribution Plans – Employees’ Provident Fund &

Employees’ Trust FundEmployees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with the respective statutes and regulations in Sri Lanka. The Company contributes 12 % and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

Defined Benefit Plan – GratuityA defined benefit plan is a post-employment benefit plan, other than a defined contribution plan. The liability recognised in the financial statements in respect of defined benefit plans are calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted.

The valuation is performed annually by the management of each company, using the projected unit credit method in accordance with LKAS 19, “Employee Benefits”.

The Group recognises all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive income and all expenses related to defined benefit plans in personnel expenses in the Statement of Profit or Loss.

The key assumptions used in the computation are stated in the Note 13 to the Financial Statements.

This liability is not externally funded and the item is grouped under non-current liabilities in the Statement of Financial Position.

2.4.2 Capital Commitments and ContingenciesAll material capital commitments and contingent liabilities which exist as at the reporting date are disclosed in the respective notes to the Financial Statements.

2.5 STATEMENT OF PROFIT OR LOSS2.5.1 RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The following specific recognition criteria must also be met before revenue is recognised:

a) Sale of GoodsRevenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to buyer with the Company retaining neither continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.

b) Rendering of ServicesRevenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

c) Interest IncomeFor all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the statement of profit or loss.

d) DividendsDividend income is recognised when the shareholder’s right to receive payment is established.

e) Rental IncomeRental income is recognised on an accrual basis.

f) Gains and LossesNet gains and losses of a revenue nature on the disposal of Property, Plant & Equipment and other non current assets


including investments are accounted for in the statement of profit or loss, after deducting from proceeds on disposal, the carrying amount of the assets and related selling expenses. On the disposal of revalued Property, Plant and Equipment, the amount remaining in the Revaluation Reserve, relating to that particular asset is transferred directly to Retained Earnings.

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.

g) Other IncomeOther income is recognised on an accrual basis.

2.5.2 Expenditure RecognitionThe expenses are recognised on an accrual basis. All expenditure incurred in the ordinary course of business and in maintaining the Property, Plant & Equipment in a state of efficiency has been charged to income in arriving at the profit for the year.

For the purpose of presentation of the statement of profit or loss, the Directors are of the opinion that “function of expenses” method presents fairly the elements of the Company’s performance, and hence such presentation method is adopted.

2.6 SEGMENT REPORTINGAn operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. All operating segments’ operating results are reviewed regularly by the senior management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the senior management and board of directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire Property, Plant and Equipment.

2.7 RELATED PARTY DISCLOSURESDisclosures are made in respect of related party transactions in accordance with LKAS 24.

2.8 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSThe preparation of financial statements in conformity with Sri Lanka Accounting Standards requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Estimates/Judgements made by management in the application of Sri Lanka Accounting Standards that have a significant effect on the financial statements are mentioned below.

Policy Note

Property, plant & equipment 2.3.1 3

Valuation and depreciation 2.3.1 3

Impairment of assets 2.3.3/2.3.6 -

Employee benefit liabilities 2.4.1 13

Financial Instruments-AFS 2.3.3 7 2.9 CURRENT VERSUS NON-CURRENT CLASSIFICATIONThe Company presents assets and liabilities in statement of financial position based on current/non-current classification. An asset as current when it is:

• Expected to be realised or intended to sold or consumed in normal operating cycle

• Held primarily for the purpose of trading• Expected to be realised within twelve months after the

reporting period or• Cash or cash equivalent unless restricted from being exchanged

or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in normal operating cycle• It is held primarily for the purpose of trading• It is due to be settled within twelve months after the reporting

period Or



• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

The Company classifies all other liabilities as non-current.

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

2.10 FAIR VALUE MEASUREMENTThe Company measures financial instruments such as investment in equity instruments, and non-financial assets such as Biological assets, Land, at fair value at each reporting date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarised in the following notes:

Disclosures for valuation methods, significant estimates and assumptions

Note 2.8

Quantitative disclosures of fair value measurement hierarchy

Note 7

Investment in unquoted equity shares Note 7

Property, plant and equipment under revaluation model

Note 3

Financial instruments Note 7

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 Company.

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 Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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 Company determines whether transfers have occurred between levels in the hierarchy by re-assessing 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.

External valuers are involved for valuation of significant assets, such as Land. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Company’s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Company’s external valuers, which valuation techniques and inputs to use for each case.

At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Company’s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Management presents the valuation results to the Audit Committee and the Company’s independent auditors. This includes a discussion of the major assumptions used in the valuations.

The Management, in conjunction with the Company’s external valuers, also compares the change in the fair value of each asset


and liability with relevant external sources to determine whether the change is reasonable.

For the purpose of fair value disclosures, the Company 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.

2.11 NEW AND AMENDED STANDARDS AND INTERPRETATIONSThe standards and amendments and interpretations that are issued but not yet effective up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

(i) SLFRS 9 -Financial InstrumentsSLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39.

SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. (ii) SLFRS 14 –Regulatory Deferral AccountsSLFRS 14 is an interim standard which provides relief for first time adopters of SLFRS in relation to the accounting for certain balances that arise from rate-regulated activities (‘regulatory deferral accounts’). The standard permits these entities to continue to apply their previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts.

SLFRS 14 is effective for annual periods beginning on or after 1 January 2016.

(iii) SLFRS 15 -Revenue from Contracts with CustomersSLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including LKAS 18 Revenue, LKAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

SLFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

Management believes that the SLFRS 14 would not be applicable for the Group, as it is an existing IFRS preparer/does not involve in

rate regulatory activities. Pending the completion of the detailed impact analysis, possible impact from SLFRS 9 and SLFRS 15 is not reasonably estimable as of the reporting date.

(iv) SLFRS 16 – LeasesSLFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted provided the new revenue standard, SLFRS 15, is applied on the same date. Lessees must adopt SLFRS 16 using either a full retrospective or a modified retrospective approach. The Lessor accounting will continue however the standard requires lessees to recognise leases on their balance sheets as lease liabilities, with the corresponding right of-use assets. The Lessee is required to recognize in their Profit & Loss Depreciation expenses and Interest expenses streaming from the Right of use Asset and Lease liability respectively. A preliminary evaluation of a sample of existing contracts of the Group has been performed in relation to the adoption of SLFRS 16. The Group’s current assessment and quantification as a result of contract evaluation has not revealed a significant Impact from adopting SLFRS 16. The Lessee has been provided with an exemption to disregard SLFRS 16 Lessee accounting if the Leases are Low value or short Term (less than 12 months). However, based on the Assessment the Group has reported that none of Leases meet this requirement.

The following amendments and improvements are not expected to have a significant impact on the Company’s/Group’s consolidated financial statements.

• Accounting for Acquisitions of Interests in Joint Operations (Amendments to SLFRS 11).

• Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to LKAS 16 and LKAS 38).

• Equity Method in Separate Financial Statements (Amendments to LKAS 27).

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to SLFRS 10 and LKAS 28).

• Annual Improvements to SLFRSs 2012–2014 Cycle – various standards.

• Investment Entities: Applying the Consolidation Exception (Amendments to SLFRS 10, SLFRS 12 and LKAS 28).

• Disclosure Initiative (Amendments to LKAS 1).



3.

PRO

PERT

Y, P

LAN

T AN

D EQ

UIP

MEN

T3.

1 G

roup

3.1.

1 Co

st o

r Val

uatio

n

Freeh

old

Freeh

old

Plant

and

Mot

or

Office

Fu

rnitu

re

Capit

al W

ork

Com

pute

r Co

mpu

ter

Tota

l

Land

Bu

ilding

s M

achin

ery

Vehic

le Eq

uipm

ents

and F

itting

s in

Prog

ress

Hard

ware

So

ftwar

e

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

01 A

pril 2

017

685,0

82,50

0 38

6,790

,476

372,6

31,95

9 10

6,708

,199

45,06

9,797

16

,749,4

97

47,93

1,590

24

,378,6

90

9,813

,274

1,695

,155,9

80Ad

dition

s 9,1

17,21

8 16

,574,7

39

46,91

9,607

26

,605,0

00

2,720

,692

3,893

,445

132,2

86,30

0 5,2

15,71

3 -

243,3

32,71

4Inc

reas

e/(D

ecre

ase)

due t

o Rev

aluati

on

205,7

87,50

0 48

,618,1

55

- -

- -

- -

- 25

4,405

,655

Disp

osals

-

- -

(27,65

2,664

) -

- -

- -

(27,65

2,664

)Tra

nsfer

s due

to Re

valua

tion

- (22

,210,7

54)

- -

- -

- -

- (22

,210,7

54)

Recla

ssific

ation

s / Tr

ansfe

rs -

1,410

,735

44,40

8,325

-

(23,40

3,518

) 76

6,790

(25

,550,3

15)

50,70

0 2,3

17,28

3 -

As at

31 M

arch

2018

89

9,987

,218

431,1

83,35

2 46

3,959

,891

105,6

60,53

5 24

,386,9

71

21,40

9,732

15

4,667

,575

29,64

5,102

12

,130,5

57

2,143

,030,9

31

3.1.

2 Ac

cum

ulat

ed D

epre

ciati

on01

April

2017

-

11,04

6,725

18

1,317

,340

50,17

4,864

30

,565,3

29

6,670

,288

- 14

,140,3

60

4,944

,358

298,8

59,26

5Ch

arge

for t

he ye

ar

- 11

,164,0

28

45,98

2,880

18

,110,3

96

2,316

,515

2,278

,502

- 3,8

06,08

3 1,9

77,95

5 85

,636,3

59Tra

nsfer

s due

to Re

valua

tion

- (22

,210,7

54)

- -

- -

- -

- (22

,210,7

54)

Disp

osals

-

- -

(9,27

0,247

) -

- -

- -

(9,27

0,247

)Re

classi

ficati

ons /

Tran

sfers

- -

18,86

3,426

-

(20,65

2,344

) -

- 39

,715

1,749

,204

-As

at 31

Mar

ch 20

18

- -

246,1

63,64

6 59

,015,0

13

12,22

9,499

8,9

48,79

0 -

17,98

6,158

8,6

71,51

7 35

3,014

,622

3.1.

3 Ca

rryi

ng V

alue

As at

31 M

arch

2018

89

9,987

,218

431,1

83,35

2 21

7,796

,245

46,64

5,522

12

,157,4

72

12,46

0,942

15

4,667

,575

11,65

8,944

3,4

59,04

1 1,7

90,01

6,312

As at

31 M

arch

2017

68

5,082

,500

375,7

43,75

0 19

1,314

,619

56,53

3,335

14

,504,4

68

10,07

9,209

47

,931,5

90

10,23

8,330

4,8

68,91

6 1,3

96,29

6,717

3.1.

4 Du

ring

the

finan

cial

yea

r, th

e Gr

oup

acqu

ired

Prop

erty

, Pla

nt a

nd E

quip

men

t to

an a

ggre

gate

val

ue o

f Rs.

243

,332

,714

/- (2

017

- Rs.

186

,321

,101

/-).

Cash

Pa

ymen

ts a

mou

nting

to R

s. 2

43,3

32,7

14/-

(201

7 - R

s.18

6,32

1,10

1/-)

wer

e m

ade

durin

g th

e ye

ar fo

r the

pur

chas

e of

Pro

pert

y, Pl

ant a

nd E

quip

men

t.

3.1.

5 In

form

ation

on

the

Free

hold

Lan

d, F

reeh

old

Build

ings

of t

he G

roup

Com

pany

Ad

dres

s O

wne

rshi

p Ex

tent

N

o. o

f Bui

ldin

gs

Incl

uded

In M

oriso

n PL

C N

o.12

6, A

luth

maw

atha

Roa

d,

Free

hold

27

.78

P 1

Prop

erty

, Pla

nt a

nd E

quip

men

t

Colo

mbo

15.

N

o.12

6/2,

Alu

thm

awat

ha R

oad,

Fr

eeho

ld

1R -1

9.15

P 2

Prop

erty

, Pla

nt a

nd E

quip

men

t

Colo

mbo

15

M.S

.J. In

dust

ries (

Ceyl

on)

Nos

. 618

and

620

, Biy

agam

a Ro

ad,

Free

hold

7A

-3R

-.25P

13

Pr

oper

ty, P

lant

and

Equ

ipm

ent

(Priv

ate)

Lim

ited

Peth

iyag

oda,

Kel

aniy

a.


3.1.6 The land and buildings belonging to Morison PLC, situated at No. 126 and 126/2, Aluthmawatha Road, Colombo 15 and the land and buildings of its fully owned Subsidiary M.S.J.Industries (Ceylon) (Private) Limited, situated at No.618 and 620, Biyagama Road, Kelaniya were revalued during the financial year 2018 by M/S Perera Sivakantha & Company, an independent valuer. The results of such revaluation were incorporated in these financial statements from its effective date which is 31 March 2018. The surplus arising from the revaluation was transferred to the revaluation reserve.

Significant unobservable valuation input: ValuationDate

Extent Range Method ofValuation

Level of Fair Value

Indicative price per Sq.ft (Aluthmawatha Building) 31.03.2018 43,831 Sq.ft Rs 65 - Rs 120 Investment Method Level 3 Level 3 Level 3

Level 3

Indicative price per Sq.ft (Pethiyagoda Building) 31.03.2018 83,686 Sq.Ft Rs 25- Rs 70 Investment Method Indicative price per perch (Aluthmawatha Land) 31.03.2018 2R-06.93P Rs 4,000,000 -

Rs. 4,500,000Investment Method

Indicative price per perch (Pethiyagoda Land) 31.03.2018 7A-3R-0.25P Rs 90,000 - Rs 490,000

Investment Method

Significant increases / (decreases) in Indicative price per perch would result in a significantly higher (lower) fair value measurement.

The carrying amount of revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows;

Cumulative Depreciation Net Carrying Net Carrying if assets were Amount Amount Cost carried at cost 2017 2016 Rs. Rs. Rs. Rs. Class of AssetFreehold Land 248,246,193 - 248,246,193 31,170,380Freehold Buildings 273,931,877 16,216,874 257,715,003 184,367,258



3.

PRO

PERT

Y, P

LAN

T AN

D EQ

UIP

MEN

T (C

ontd

.)3.

2 Co

mpa

ny

3.2.

1 Co

st o

r Val

uatio

n

Fre

ehold

Fre

ehold

Pla

nt an

d M

otor

Offi

ce

Furn

iture

Ca

pital

Wor

k Co

mpu

ter

Com

pute

r To

tal

La

nd

Build

ings

Mac

hiner

y Ve

hicle

Equip

men

ts an

d Fitti

ngs

in Pr

ogre

ss Ha

rdwa

re

Softw

are

Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

.

01 A

pril 2

017

81,96

9,600

49

,834,0

00

184,7

76,25

0 99

,959,9

99

38,46

8,806

6,2

57,68

1 29

,204,2

47

20,35

4,645

9,8

13,27

4 52

0,638

,501

Additi

ons

217,1

17,21

8 67

,156,3

42

14,05

5,581

26

,605,0

00

679,7

99

- 11

9,315

,075

4,026

,856

- 44

8,955

,872

Incre

ase/

(Dec

reas

e) du

e to R

evalu

ation

40

,900,4

00

21,86

0,585

-

- -

- -

- -

62,76

0,985

Disp

osals

-

- -

(27,65

2,664

) -

- -

- -

(27,65

2,664

)Tra

nsfer

s due

to Re

valua

tion

- (2,

867,5

76)

- -

- -

- -

- (2,

867,5

76)

Recla

ssific

ation

s / Tr

ansfe

rs -

- 36

,165,9

55

- (28

,438,9

27)

- (10

,095,0

12)

50,70

0 2,3

17,28

3 -

As at

31 M

arch

2018

33

9,987

,218

135,9

83,35

1 23

4,997

,786

98,91

2,335

10

,709,6

78

6,257

,681

138,4

24,31

1 24

,432,2

00

12,13

0,557

1,0

01,83

5,118

3.2.

2 Ac

cum

ulat

ed D

epre

ciati

on01

Apr

il 201

7 -

1,409

,770

99,51

6,605

46

,546,6

60

27,43

2,558

2,9

22,79

4 -

11,62

1,709

4,9

44,35

8 19

4,394

,454

Char

ge fo

r the

year

-

1,457

,806

30,26

3,674

17

,070,3

96

1,11

3,361

58

7,923

-

3,162

,539

1,977

,955

55,63

3,655

Trans

fers d

ue to

Reva

luatio

n -

(2,86

7,576

) -

- -

- -

- -

(2,86

7,576

)Di

spos

als

- -

- (9,

270,2

47)

- -

- -

- (9,

270,2

47)

Recla

ssific

ation

s / Tr

ansfe

rs -

- 18

,863,4

26

- (20

,652,3

44)

- -

39,71

5 1,7

49,20

4 -

As at

31 M

arch

2018

-

- 14

8,643

,705

54,34

6,809

7,8

93,57

5 3,5

10,71

7 -

14,82

3,963

8,6

71,51

7 23

7,890

,285

3.2.

3 Ca

rryi

ng V

alue

As at

31 M

arch

2018

33

9,987

,218

135,9

83,35

1 86

,354,0

81

44,56

5,526

2,8

16,10

3 2,7

46,96

4 13

8,424

,311

9,608

,237

3,459

,041

763,9

44,83

4As

at 31

Mar

ch 20

17

81,96

9,600

48

,424,2

30

85,25

9,644

53

,413,3

39

11,03

6,248

3,3

34,88

7 29

,204,2

47

8,732

,936

4,868

,917

326,2

44,04

8

3.2.

4 Du

ring

the

finan

cial

yea

r, th

e Co

mpa

ny a

cqui

red

Prop

erty

, Pla

nt a

nd E

quip

men

t to

the

aggr

egat

e va

lue

of R

s. 4

48,9

55,8

72/-

(201

7 - R

s. 1

44,4

87,3

16/-

). Ca

sh p

aym

ents

am

ounti

ng to

Rs.

174,

255,

872/

- (20

17 -

Rs. 1

44,4

87,3

16/-

) wer

e m

ade

durin

g th

e ye

ar fo

r pur

chas

e of

Pro

pert

y, Pl

ant a

nd E

quip

men

t.

3.2.

5 Th

e la

nd a

nd b

uild

ings

wer

e re

valu

ed d

urin

g th

e fin

anci

al y

ear 2

018

by M

/S P

erer

a Si

vaka

ntha

& C

ompa

ny, a

n in

depe

nden

t va

luer

. The

resu

lts o

f suc

h re

valu

ation

s wer

e in

corp

orat

ed in

thes

e fin

anci

al st

atem

ents

from

its e

ffecti

ve d

ate

whi

ch is

31

Mar

ch 2

018.

The

surp

lus a

risin

g fr

om th

e re

valu

ation

was

tr

ansf

erre

d to

the

reva

luati

on re

serv

e.


Significant unobservable valuation input: Valuation Date

Extent Range Method of Valuation

Level of Fair Value

Indicative price per Sq.ft (Aluthmawatha Building) 31.03.2018 21,930 Sq.Ft Rs 65 -Rs 120 Investment Method Level 3

Significant increases (decreases) in Indicative price per perch would result in a significantly higher (lower) fair value measurement.

The carrying amount of the revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows; Cumulative Depreciation Net Carrying Net Carrying if assets were Amount Amount Cost carried at cost 2018 2017 Rs. Rs. Rs. Rs.

Class of AssetFreehold Land 218,030,118 - 218,030,118 912,900Freehold Buildings 71,284,519 4,160,730 67,123,789 -

4. INTANGIBLE ASSETS Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Trade MarkAs at 1 April 16,500,000 16,500,000 16,500,000 16,500,000Addition made during the year - - - -Less - Provision for impairment (1,500,000) (1,500,000) (1,500,000) (1,500,000)As at 31 March 15,000,000 15,000,000 15,000,000 15,000,000

The Company acquired the Trademark "Sagara" to import & distribute Sagara Jack Mackerel on 16 November 2006. As at 31 March 2014 management has fully impaired "Sagara" Trade Mark.

Company acquired the Trademark "Paracetol " to manufacture and distribute Paracetol on 31 August 2014. "Paracetol" Trademark has indefinite useful life.

5. INVESTMENTS IN SUBSIDIARIES5.1 Group 2018 2017 Holding Holding % Rs. % Rs.

Non-QuotedCompak Morison (Lanka) Limited 54 1 54 1

This Company has been excluded from consolidation due to the reasons described in Note 2.2.1 under Accounting Policies.



5. INVESTMENTS IN SUBSIDIARIES (Contd.)5.2 Company 2018 2017 Holding Holding % Rs. % Rs.

Non-QuotedM.S.J. Industries (Ceylon) (Private) Limited 100 57,700,000 100 57,700,000M.S.J. Cargoes (Ceylon) (Private) Limited 100 - 100 1,550,000M.S.J. Promotional Services (Private) Limited 100 - 100 5,200,000Compak Morison (Lanka) Limited 54 1 54 1Total Carrying Value of Investments in Subsidiaries 57,700,001 64,450,001Less - Provision for impairment (1) (6,750,001) 57,700,000 57,700,000

*M.S.J. Cargoes (Ceylon) (Private) Limited and M.S.J. Promotional Services (Private) Limited had been liquidated during the year.

6. INVESTMENTS IN ASSOCIATES6.1 Group 2018 2017 Holding Holding % Rs. % Rs.

Non-QuotedCanned & Health Food Ltd. (Note 6.1.1) 47 1 47 1Total Carrying Value of Investments in Associates 1 1

Investments in Associate Canned & Health Food Ltd 2018 2017 Rs. Rs.

Carrying Value as at 1 April 1 1Carrying Value as at 31 March 1 1

6.1.1 The investment cost in Canned and Health Food Ltd., was written off against the post acquisition losses in the consolidated financial statements.


6.2 Company 2018 2017 Holding Holding % Rs. % Rs.

Non-QuotedCanned & Health Food Limited 47 243,028 47 243,028Less - Provision for impairment (243,028) (243,028)Total Carrying Value of Investments in Associate - -

7. OTHER FINANCIAL ASSETS Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Investments in Equity Securities (Note 7.1) - - - - - - - -

Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Total Non-current - - - -

7.1 Investments in Equity SecuritiesAvailable-for-sale InvestmentsGroup/Company 2018 2017 No. of Shares Rs. No. of Shares Rs.

Non-QuotedEastern Hotels Limited * 5,833 - 5,833 -(-) Impairment of investment - - - -

* Eastern Hotels Limited has not started its commercial operation and the investment was impaired in full during the year 2015.



7. OTHER FINANCIAL ASSETS (Contd.) 7.2 Fair values7.2.1 GroupSet out below is a comparison by class of the carrying amounts and fair values of the Group that are carried in the financial statements.

Carrying amount Fair value 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Non Financial assetsProperty, Plant and EquipmentFreehold Land 899,987,218 685,082,500 899,987,218 685,082,500 Freehold Buildings 431,183,352 375,743,750 431,183,352 375,743,750 1,331,170,570 1,060,826,250 1,331,170,570 1,060,826,250

The Management assessed that fair value of cash and short-term deposits, trade and other receivables, trade and other payables approximate their carrying amounts largely due to short maturities of these instruments.

As at 31 March 2018, the Group held the following Assets carried at fair value on the statement of financial position:

As atAssets measured at fair value 31 March 2018 Level 1 Level 2 Level 3 Rs. Rs. Rs. Rs.

Non Financial assetsFreehold Land 899,987,218 - - 899,987,218 Freehold Buildings 431,183,352 - - 431,183,352 1,331,170,570 - - 1,331,170,570


7.2.2 CompanySet out below is a comparison by class of the carrying amounts and fair values of the Company that are carried in the financial statements.

Carrying amount Fair value 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Non Financial assetsProperty, Plant and EquipmentFreehold Land 339,987,218 81,969,600 339,987,218 81,969,600Freehold Buildings 135,983,351 48,424,230 135,983,351 48,424,230 475,970,569 130,393,830 475,970,569 130,393,830

The Management assessed that fair value of cash and short-term deposits,trade and other receivables, trade and other payables approximate their carrying amounts largely due to short term maturities of these instruments.

As at 31 March 2018, the Company held the following Assets carried at fair value on the Statement of financial position:

As atAssets measured at fair value 31 March 2018 Level 1 Level 2 Level 3 Rs. Rs. Rs. Rs.

Non Financial assets Freehold Land 339,987,218 - - 339,987,218Freehold Buildings 135,983,351 - - 135,983,351 475,970,569 - - 475,970,569

8. INVENTORIES Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Raw Materials and Packing Material 212,468,994 164,293,578 - -Work in Progress 39,326,121 19,771,631 - -Finished Goods 601,888,085 543,456,928 620,539,996 573,066,850Goods in Transit 77,522,440 137,214,953 76,759,637 112,735,464 931,205,640 864,737,091 697,299,633 685,802,315(-)Provision for Obsolete Stocks (Note 8.1) (38,178,101) (67,967,953) (19,255,242) (52,650,143) 893,027,539 796,769,138 678,044,390 633,152,171



8. INVENTORIES (Contd.)8.1 Provision for Obsolete Stocks Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Balance as at 1st April 67,967,953 49,509,554 52,650,143 47,903,542Provision Made During the Year (29,789,852) 18,458,399 (33,394,901) 4,746,601Balance as at 31st March 38,178,101 67,967,953 19,255,242 52,650,143

9. TRADE AND OTHER RECEIVABLES Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Trade Debtors - Third Parties 853,502,998 814,529,704 585,528,426 576,644,866Trade Debtors - Related Parties (Note 9.1) 2,962,722 5,016,583 2,962,722 5,016,583Less: Provision for Bad Debts (Note 9.2) (9,604,741) (10,579,198) (9,038,039) (4,614,098) 846,860,979 808,967,089 579,453,110 577,047,351Non-Trade Debtors - Third Party 87,995,287 92,515,825 72,054,853 91,098,141 934,856,266 901,482,914 651,507,963 668,145,492

9.1 Trade Debtors - Related Parties Group Company 2018 2017 2018 2017 Relationship Rs. Rs. Rs. Rs.

Hemas Capital Hospital (Private) Limited Affiliate 1,635,535 2,449,543 1,635,535 2,449,543Hemas Hospitals (Private) Limited Affiliate 245,927 827,613 245,927 827,613Hemas Southern Hospital (Private) Limited Affiliate 1,081,260 1,739,426 1,081,260 1,739,426 2,962,722 5,016,583 2,962,722 5,016,583

All related party transactions have been conducted on agreed commercial terms with respective parties.

9.2 Reconciliation of Trade Debtor Impairment Group Company Rs. Rs.

Balance as at 1st April 10,579,198 4,614,098 Provision made during the year (974,456) 4,423,941 Balance as at 31st March 9,604,741 9,038,039


9.3 As at 31 March, the ageing analysis of trade receivables, is as follows:

Group Neither past Past due but not impaired due nor < 30 30-60 61-90 91-120 >120 Total impaired days days days days days Rs. Rs. Rs. Rs. Rs. Rs. Rs.

2018 846,860,979 699,565,408 44,400,330 32,144,697 21,925,707 15,642,666 33,182,1702017 808,967,089 735,377,409 55,207,571 11,317,015 519,636 2,021,250 4,524,208 Company Neither past Past due but not impaired due nor < 30 30-60 61-90 91-120 >120 Total impaired days days days days days Rs. Rs. Rs. Rs. Rs. Rs. Rs.

2018 579,453,110 537,930,739 7,459,155 9,016,864 2,831,639 6,467,567 15,747,1452017 577,047,351 553,073,399 17,025,561 - 519,636 2,021,250 4,407,505

10. STATED CAPITAL 2018 2017 Number Rs. Number Rs.

Fully Paid Ordinary Shares 5,808,290 6,182,310 5,808,290 6,182,310Fully Paid Non-Voting Ordinary Shares 1,742,490 1,742,490 1,742,490 1,742,490 7,550,780 7,924,800 7,550,780 7,924,800

10.1 Fully Paid Ordinary Shares (Voting and Non-Voting)Balance at the beginning of the year 7,550,780 7,924,800 7,550,780 7,924,800Balance at the end of the year 7,550,780 7,924,800 7,550,780 7,924,800

10.2 Rights, Preference and Restrictions of Classes of CapitalThe Non-Voting shares are ranked pari passu with the existing Ordinary Shares of the Company including the right to participate in any dividend declared after the date of the issue, but excluding the right to vote.

11. RESERVES Group Company 2018 2017 2018 2017Summary Rs. Rs. Rs. Rs.

(a) Capital ReservesRevaluation Reserve (Note 11.1) 845,626,339 805,592,775 151,632,739 129,140,706 General Reserve (Note 11.2) 730,800,000 730,800,000 728,928,122 728,928,122 Available for Sale Reserve (Note 11.3) - - - - 1,576,426,339 1,536,392,775 880,560,861 858,068,828



11. RESERVES (Contd.)11.1 Revaluation Reserve Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

On: Property, Plant and EquipmentAs at 1 April 805,592,775 805,592,775 129,140,706 129,140,706 Revaluation surplus/(deficit) during the year 254,405,655 - 62,760,985 - Tax effects on revaluation during the year (31,884,604) - (17,573,076) - Tax effects on revaluation prior periods (182,487,487) - (22,695,876) - As at 31 March 845,626,339 805,592,775 151,632,739 129,140,706

11.2 General ReserveGeneral Reserve which is a revenue reserve represents the amounts set aside by the Directors for general application. The movement of the general reserve is as follows;


As at 1 April 730,800,000 730,800,000 728,928,122 728,928,122As at 31 March 730,800,000 730,800,000 728,928,122 728,928,122

11.3 Available for Sale Reserve Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

As at 1 April - 1,598,217 - 1,598,216Impairment On Available for Sale Financial Assets Net loss on Available for Sale Financial Assets - (1,598,217) - (1,598,216)As at 31 March - - - -

12. INTEREST BEARING LOANS AND BORROWINGS12.1 Group 2018 2017 Rs. Rs.

Current Interest Bearing Loans and BorrowingsBank Loans (Note 12.1.1) 275,024,000 305,097,241Bank Overdrafts (Note 16.2) 162,173,864 34,066,485 437,197,864 339,163,726

Non-current Interest Bearing Loans and BorrowingsBank Loans (Note 12.1.1) - 125,024,000 - 125,024,000


12.1.1 Bank Loans As at Loans As at 01.04.2017 Obtained Repayment 31.03.2018 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

People's Bank PLC - 31,900,000 (31,900,000) - - -Commercial Bank of Ceylon PLC 250,016,000 150,000,000 (124,992,000) 275,024,000 275,024,000 -Nation Trust Bank 123,083,000 131,265,443 (254,348,443) - - -Standard Chartered Bank 57,022,241 - (57,022,241) - - - 430,121,241 313,165,443 (468,262,684) 275,024,000 275,024,000 -

12.2 Company 2018 2017 Rs. Rs.

Current Interest Bearing Loans and BorrowingsBank Loans (Note 12.2.1) 275,024,000 259,614,241Bank Overdrafts (Note 16.2) 115,863,880 - 390,887,880 259,614,241

Non-current Interest Bearing Loans and BorrowingsBank Loans (Note 12.2.1) - 125,024,000 - 125,024,000

12.2.1 Bank Loans As at Loans As at 01.04.2017 Obtained Repayment 31.03.2018 Current Non-current Rs. Rs. Rs. Rs. Rs. Rs.

Commercial Bank of Ceylon PLC 250,016,000 150,000,000 (124,992,000) 275,024,000 275,024,000 -Nations Trust Bank 77,600,000 131,265,443 (208,865,443) - - -Standard Chartered Bank 57,022,241 - (57,022,241) - - - 384,638,241 281,265,443 (390,879,684) 275,024,000 275,024,000 -



12. INTEREST BEARING LOANS AND BORROWINGS (Contd.)12.2.2 Terms and conditions of Bank Loan

Details Nature of the Balance 2018 Repayment Term Security Facility (Rs. ‘000)

Commercial Bank of Ceylon PLC Term Loan 125,024 Repayable in 48 instalments starting Corporate Guarantee (Fixed Interest) from April 2015. from Ultimate ParentCommercial Bank Short Term 150,000 Repayable in full within 12 months of Ceylon PLC Loan from the dates of draw-down None

13. RETIREMENT BENEFIT OBLIGATION Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

GratuityAs at 01 April 93,151,155 85,142,981 48,137,162 45,654,977Current Service Cost 8,541,951 7,183,059 5,825,499 4,772,591Interest Cost on Benefit Obligation 11,253,948 9,365,727 5,852,269 5,022,047Actuarial Loss/(Gain) for the year (1,924,120) 7,117,755 366,373 5,281,420Payments During the Year (23,021,793) (15,658,367) (13,862,553) (12,593,873)As at 31 March 88,001,141 93,151,155 46,318,750 48,137,162

13.1 Amounts charged to profit or loss Remeasurement gains/(losses) in other Comprehensive income Actuarial Sub-total changes included in arising from Sub total As at 01 Service Net profit or Benefits changes in Experience included in As at 31 April cost interest loss paid assumptions adjustments OCI March Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Group2018 93,151,155 8,541,951 11,253,948 19,795,899 (23,021,793) (239,116) (1,685,004) (1,924,120) 88,001,141 2017 85,142,981 7,183,059 9,365,727 16,548,786 (15,658,367) 113,281 7,004,474 7,117,755 93,151,155

Company2018 48,137,162 5,825,499 5,852,269 11,677,768 (13,862,553) (146,270) 512,643 366,373 46,318,750 2017 45,654,977 4,772,591 5,022,047 9,794,638 (12,593,873) 76,132 5,205,288 5,281,420 48,137,162


13.2 The principal assumptions used in determining defined benefit obligation are shown below: Group Company 2018 2017 2018 2017

Discount Rate 10.5% 12% 10.5% 12%Salary Increment 8.5% 10% 8.5% 10%Retirement Age 55- 60 years 55- 60 years 55- 60 years 55- 60 years

13.3 Sensitivity of assumptions used Discount Rate Salary Increment Group Company Group Company Rs. Rs. Rs. Rs.

Effect on the defined benefit obligation liability Increase by one percent (8,064,602) (4,920,724) 9,627,101 5,902,355Decrease by one percent 9,532,275 5,844,097 (8,271,441) (5,046,578)

14. TRADE AND OTHER PAYABLES Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Trade Payables - Third Parties 43,000,039 43,081,705 8,508,985 9,531,287- Related Parties (Note 14.1) 5,954,763 - 813,545,683 134,532,800Foreign Bills Payable 364,507,489 520,976,747 344,230,407 484,513,470Non Trade Payables - Related Parties (Note 14.2) 36,637,034 27,703,237 18,857,174 22,010,409Non Trade Creditors including Accrued Expenses 194,359,672 269,151,223 120,267,392 216,731,116 644,458,997 860,912,913 1,305,409,642 867,319,082

14.1 Trade Payables - Related Parties 2018 2017 2018 2017 Relationship Rs. Rs. Rs. Rs.

M.S.J. Industries (Ceylon) (Private) Limited Subsidiary - - 807,590,920 134,532,800Hemas Manufacturing (Private) Limited Parent 2,512,200 - 2,512,200 -Hemas Pharmaceutical (Private) Limited Affiliate 3,442,563 - 3,442,563 - 5,954,763 - 813,545,683 134,532,800



14. TRADE AND OTHER PAYABLES (Contd.) 14.2 Other Payables - Related Parties 2018 2017 2018 2017 Relationship Rs. Rs. Rs. Rs.

Hemas Holdings PLC Ultimate Parent 16,708,689 21,801,453 14,484,911 20,169,040Hemas Hospitals (Private) Limited Affiliate - 278,817 - 278,817Hemas Corporate Services (Private) Limited Affiliate 268,356 1,201,299 254,922 1,175,413Hemas Capital Hospital (Pvt) Ltd Affiliate 20,040 - - -Vishwa BPO (Private) Limited Affiliate 274,852 242,312 151,286 144,914Hemas Travels (Private) Limited Affiliate 1,458,874 201,504 1,458,874 201,504Diethelm Travel Lanka (Private) Limited Affiliate 950,917 40,721 950,917 40,721Unicorn Investment (Private) Limited Affiliate 15,399,042 3,937,131 - -Spectra Logistics (Private) Ltd Affiliate 1,556,264 - 1,556,264 - 36,637,034 27,703,237 18,857,174 22,010,409

15. DIVIDENDS PAYABLE Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Unclaimed Dividends 111,257,147 11,515,916 111,257,147 11,515,916 111,257,147 11,515,916 111,257,147 11,515,916

16. CASH AND CASH EQUIVALENTS Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

16.1 Favourable Cash and Cash EquivalentsCash at Banks and in Hand 259,528,972 116,733,272 258,999,181 99,904,820Investment in Money Market Funds (Note 16.3) - 577,040,055 - 371,602,910Investment in Short Term Deposits 1,187,765,544 754,244,274 1,187,765,544 652,142,903 1,447,294,516 1,448,017,600 1,446,764,725 1,123,650,633

16.2 Unfavourable Cash and Cash EquivalentsBank Overdrafts (162,173,864) (34,066,485) (115,863,880) -Total Cash and Cash Equivalents 1,285,120,652 1,413,951,115 1,330,900,845 1,123,650,633


16.3 Investment in Money Market Funds Group Company 2018 2017 2018 2017 No of Units Value (Rs.) No of Units Value (Rs.) No of Units Value (Rs.) No of Units Value (Rs.)

JB Vantage Money Market Fund - - 15,160,362 269,530,009 - - 15,160,362 269,530,009NDB Wealth Money Market Fund - - 15,618,592 247,532,812 - - 2,656,113 42,095,667Capital Alliance High Yield Fund - - 3,567,377 59,977,235 - - 3,567,377 59,977,235 - 577,040,055 - 371,602,910

17. REVENUE Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Gross Revenue 4,041,535,376 4,257,390,420 3,377,403,044 3,559,521,860Less: Sales Taxes (241,720,240) (239,325,316) (241,720,240) (239,325,316)Sales Net of Tax 3,799,815,136 4,018,065,105 3,135,682,804 3,320,196,544

18. OTHER OPERATING INCOME AND GAINS Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Profit on Disposal of Property, Plant and Equipment 3,181,729 13,914,939 3,181,729 13,914,939Profit on Disposal of Investments - 1,492,675 - 6,650,211Sundry Income 3,847,413 5,151,898 857,257 1,400,176Exchange Gain/Loss 185,493 - 185,579 -Dividend Income - 193,615 - 49,963,615 7,214,634 20,753,126 4,224,565 71,928,941

19. FINANCE COST AND INCOME Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

19.1 Finance CostInterest Expense on Overdrafts 4,327,076 11,318,136 2,021,207 3,640,688Interest Expense on Interest Bearing Loans and Borrowings 28,257,220 33,475,305 26,206,955 31,401,111Bank Guarantee Charges - 637,756 - 637,756 32,584,296 45,431,198 28,228,162 35,679,555

19.2 Finance IncomeIncome from Investments-Return on investment in Money Market Funds and other 144,638,277 131,010,224 117,963,553 98,471,709 144,638,277 131,010,224 117,963,553 98,471,709



20. PROFIT BEFORE TAX Group Company 2018 2017 2018 2017Stated after Charging /Crediting Rs. Rs. Rs. Rs.

Included in Cost of SalesEmployees Benefits including the following- Defined Contribution Plan Costs - EPF and ETF 12,556,835 10,002,409 - -- Salary Related Expenses 94,554,718 72,227,611 - -Depreciation 18,661,920 16,311,007 - -

Included in Administrative Expenses Employees Benefits including the following- Defined Benefit Plan Costs -Gratuity 19,795,899 16,548,786 11,677,768 9,794,638- Defined Contribution Plan Costs - EPF and ETF 13,729,808 13,541,468 5,360,151 4,660,875- Salary Related Expenses 116,552,108 130,065,068 45,048,695 54,319,070Depreciation 66,974,436 51,598,648 55,633,652 42,875,204Auditors’ Remuneration - Audit Fees 2,046,331 1,919,000 1,116,278 1,043,250 - Non-Audit Fees 960,292 879,844 745,965 724,424

Included in Selling and Distribution CostsDepreciation - 334,164 - 334,164Transport Costs 24,940,933 41,875,435 24,478,240 39,198,482Advertising and Sales of Promotion 191,677,825 184,972,513 191,602,825 184,771,728

21. INCOME TAX EXPENSEThe major components of income tax expense for the years ended 31 March are as follows: Group CompanyIncome Statement 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Current Income TaxCurrent Income Tax charge (Note 21.1) 148,848,119 132,848,580 90,189,266 45,679,912Under/(Over) Provision of current taxes in respect of prior years 4,686,596 (16,341,498) 124,126 4,025,905 153,534,715 116,507,081 90,313,392 49,705,817

Deferred Income TaxDeferred Taxation Charge/(Reversal) (Note 21.2) (7,865,831) 13,061,673 9,603,679 (3,359,729) 145,668,885 129,568,755 99,917,069 46,346,087


21.1 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows:


Accounting Profit before Tax 679,143,412 646,284,881 387,998,644 303,776,397Non Deductible Expenses 222,375,098 128,671,735 86,631,281 92,690,250Deductible Expenses (429,074,035) (307,664,775) (233,890,184) (238,390,106)Interest Income 82,795,064 7,167,372 81,726,571 5,066,002Taxable Profit 555,239,538 474,459,213 322,466,312 163,142,543

Concession Rate 12% - 12% -Statutory Tax Rate 28% 28% 28% 28%Dividend Tax 10% 10% 10% 10%

Income Tax on profits at Rate of 12% 75,935 - 75,935 -Income Tax on profits at Rate of 28% 155,289,834 132,848,580 90,113,330 45,679,912Tax Rebate under section 59(K) (6,671,315) - - - 148,694,454 132,848,580 90,189,266 45,679,912

21.2 Deferred Income Tax21.2.1 Group Statement of Statement of Financial Position Comprehensive Income 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 70,440,863 79,209,944 8,769,081 (13,310,990)Revaluation of Lands and Buildings 247,930,554 33,558,463 - - 318,371,417 112,768,407 8,769,081 (13,310,990)

Deferred Tax AssetsDefined Benefit Plans 24,640,319 26,082,323 (903,250) 249,317 24,640,319 26,082,323Deferred Income Tax Income/(Expense) 7,865,831 (13,061,673)

Other Comprehensive Income 2018 2017 Rs. Rs.

Defined Benefit Plans (538,753) (1,992,971)Revaluation of Lands and Buildings (214,372,092) - (214,910,845) (1,992,971)Net Deferred Tax Liability 293,731,097 86,686,083



21.2 Deferred Income Tax (Contd.)21.2.2 Company Statement of Statement of Financial Position Comprehensive Income 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 19,222,690 10,230,751 (8,991,939) 4,143,515Revaluation of Lands and Buildings 53,696,230 13,427,279 - - 72,918,921 23,658,030 (8,991,939) 4,143,515

Deferred Tax AssetsDefined Benefit Plans 12,969,250 13,478,405 (611,740) (783,786) 12,969,250 13,478,405 (611,740) (783,786)

Deferred Income Tax Income/(Expense) (9,603,679) 3,359,729

Other Comprehensive Income 2018 2017 Rs. Rs.

Defined Benefit Plans 102,584 1,478,798Revaluation of Lands and Buildings (40,268,952) - (40,166,367) 1,478,798Deferred Tax Liability/(Asset) 59,949,671 10,179,625

22. EARNINGS PER SHARE22.1 Basic Earnings Per Share is calculated by dividing the profit for the year attributable to ordinary shareholders of the Company by

the weighted average number of ordinary shares outstanding during the year.

22.2 The following reflects the income and share data used in the basic Earnings Per Share computation.


Amount Used as the Numerator: Profit attributable to Equity Holders of the Parent 564,484,241 516,716,126 288,081,573 257,430,310

2018 2017 2018 2017 Number Number Number Number

Number of Ordinary Shares Used as Denominator:Weighted Average Number of Ordinary Shares in issueapplicable to Basic Earnings Per Share 7,550,780 7,550,780 7,550,780 7,550,780


23. DIVIDENDS Group Company 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

23.1 Declared and paid during the yearEquity dividends on ordinary shares:Final dividend 2016/17 37,753,900 75,507,800 37,753,900 75,507,800Interim and Final Dividend 2017/18 113,261,700 75,507,800 113,261,700 75,507,800 151,015,600 151,015,600 151,015,600 151,015,600

24. COMMITMENTS AND CONTINGENT LIABILITIESa) Capital Expenditure CommitmentsSubsequent to Board approval, the Company is in the process of constructing a plant focusing on research and manufacturing within the Sri Lanka Institute of Nanotechnology (SLINTEC) Nano Technology Park in Pitipana, Homagama. Accordingly, the following contracts and commitments have been entered into this regard:

Lease Agreement with SLINTEC - The Company has entered into a lease agreement with SLINTEC to lease the premises in Homagama for a period of 27 years.

The Company has also entered into agreements with a design consultant for a total sum of USD 200,000 of which 40% has already been paid.

b) Contingent LiabilitiesThere are no Significant contingent liabilities as at reporting date.

25. ASSETS PLEDGEDAs at the reporting date the following assets have been pledged, as securities for liabilities.

Carrying Amount Carrying Amount Pledged Pledged Group CompanyNature of Assets Nature of Liability 2018 2017 2018 2017 Rs. Rs. Rs. Rs.

Inventory Documents of Title to Goods Shipped 893.0 Mn 796.7 Mn 678.0 Mn 633.1 MnTrade Debtors Charged Over Trade Finance Facilities 588.5 Mn 581.7 Mn 588.5 Mn 581.7 Mn

26. EVENTS OCCURRING AFTER THE REPORTING DATEThere have been no material events occurring after the reporting date that require adjustments to or disclosure in the financial statements.



27. RELATED PARTY DISCLOSURESDetails of significant related party disclosures are as follows:

27.1 Transactions with the related entities M.S.J. Industries (Ceylon) (Private) Limited Hemas Holdings PLC Other Related Parties* Total Subsidiary Ultimate Parent 2018 2017 2018 2017 2018 2017 2018 2017 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Nature of TransactionAs at 1 April (134,532,800) 90,252,392 (20,169,040) 44,438,911 3,175,213 11,745,588 (151,526,626) 146,436,891Sale / (Purchase) of Goods (562,112,530) (581,421,505) - - (9,631,673) 24,842,635 (571,744,202) (556,578,870)Expenses Incurred on Behalf of Others 94,797,785 167,436,314 (40,415,447) (62,071,481) - 6,605,212 54,382,339 111,970,045Settlement of Funds 68,956,624 162,200,000 46,099,575 47,463,530 (907,845) (40,018,222) 114,148,354 169,645,308Non Operational Transactions (274,700,000) - - - - - (274,700,000) -Settlement of Intercompany Loan - - - (50,000,000) - - - (50,000,000)Dividends Paid / (Received) - 27,000,000 - - - - 27,000,000As at 31 March (807,590,920) (134,532,800) (14,484,911) (20,169,040) (7,364,305) 3,175,213 (829,440,136) (151,526,626)

All related party transactions have been conducted on agreed commercial terms with respective parties.

Non-recurrent Related Party TransactionsThe aggregate value of non - recurrent related party transaction entered with M.S.J. Industries (Ceylon) (Private) Limited amounts to Rs.266,000,000 mn which exceeds 10% of the equity or 5% of the total assets whichever is lower of the Company as per 31 March 2018 audited financial statements, which required additional disclosures in the 2017/18 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13(c) of the Security Exchange Commission Act.

Recurrent Related Party TransactionsThere were no other recurrent Related Party Transactions which in aggregate value exceeds 10% of the consolidated revenue of the Group as per 31 March 2018 audited financial statements, which required additional disclosures in the 2017/18 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13(c) of the Security Exchange Commission Act.

*Other Related parties includes Hemas Hospitals (Private) Limited, Vishwa BPO (Private) Limited, Hemas Corporate Services (Private) Limited and other etc.

27.2 Transactions with Key Management Personnel of the CompanyThe key management personnel of the Company are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly including directors (whether executive or otherwise) of the Company. There have been no transactions with key management during the year except below.

Key Management Personnel Compensation 2018 2017 Rs. Rs.

Group/CompanyShort-term employee benefits 19,782,319 22,487,680


28. SEGMENTAL INFORMATION Consumer Agro Chemicals Pharmaceuticals Group Total 2018 2017 2018 2017 2018 2017 2018 2017 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

REVENUETotal Gross Income 1,362,000,356 1,415,026,781 - 148,532,442 2,993,196,403 3,031,951,087 4,355,196,760 4,595,510,311Less: Inter Segment Income (184,846,222) (190,704,364) - - (370,535,401) (386,740,841) (555,381,623) (577,445,205)Segment Revenue 1,177,154,134 1,224,322,417 - 148,532,442 2,622,661,003 2,645,210,246 3,799,815,136 4,018,065,105

RESULTGross Profit 518,374,922 500,685,717 - 35,438,082 965,444,330 953,959,718 1,483,919,252 1,490,083,517Administrative and Selling and Distribution Cost (372,841,815) (329,606,026) - (27,451,400) (520,092,928) (593,073,362) (892,934,744) (950,130,788)Other Operating income 2,235,040 6,323,570 - 767,163 4,979,597 13,662,393 7,214,638 20,753,126Operating Profit/(Loss) 147,768,147 177,403,262 - 8,753,845 450,330,999 374,548,748 598,099,145 560,705,855

Finance Cost (32,584,296) (45,431,198)Finance Income 144,638,277 131,010,224Income Tax Expense (145,668,885) (129,568,754)Profit for the Year 564,484,242 516,716,127

OTHER INFORMATIONSegment Assets 5,129,694,460 4,596,683,200Investment in Equity method Associate 1 1Consolidated Total Assets 5,129,694,461 4,596,683,201

Segment Liabilities 1,641,723,204 1,563,599,516

OTHERSPurchase of Property Plant and Equipment 243,332,714 186,321,101Depreciation 85,636,359 68,243,820

29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Group’s principal financial liabilities, comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group has loans and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations.

The Group is exposed to market risk, credit risk and liquidity risk.

“The Group’s senior management oversees the management of these risks. The senior management is supported by the Board of Directors (BOD) that advises on financial risks and the appropriate financial risk governance framework for the Group. BOD provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite. It is the Group’s policy that all activities for risk management purposes are required to be approved by Board of Directors of Morison PLC”



29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Contd.)The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

Market RiskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits and available-for-sale investments.

The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the entity’s financial performance.

Interest Rate RiskInterest 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 the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with fixed interest rates.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company 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 managing capital during the years ended 31 March 2018 and 31 March 2017.

Foreign Currency RiskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the import of raw materials, finished goods and packing materials.

The major part of the foreign transactions is dealt with US Dollars.

Change in US Dollar Rate 1% increase 1% decrease Rs. Rs.

Effect on Profit of the Group (18,264,671) 18,264,671

Equity Price RiskThe Group’s quoted and unquoted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group’s Board of Directors reviews and approves all equity investment decisions.

Credit RiskCredit risk is the risk that 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 from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.


Trade ReceivablesCustomer credit risk is managed by each company subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on the established credit risk evaluation policy and individual credit limits are defined in accordance with this assessment.

Outstanding customer receivables are regularly monitored.

Minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data.

Cash DepositsCredit risk from balances with banks is managed in accordance with the Group treasury policy. Investments of surplus funds are made only with approved counterparties as per this policy.

Liquidity RiskThe Group monitors its risk to a shortage of funds by setting up a minimum liquidity level. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, and finance leases. 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 sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

The table below summarises the maturity profile of groups financial liabilities based on contractual undiscounted payments.

On Less than AboveGroup Demand 1 year 1 year Total

Bank Overdraft 162,173,864 - - 162,173,864Bank Loans - 275,024,000 - 275,024,000Trade and Other Liabilities - 644,458,997 - 644,458,997 162,173,864 919,482,996 - 1,081,656,860

On Less than AboveCompany Demand 1 year 1 year Total

Bank Overdraft 115,863,880 - - 115,863,880Bank Loans - 275,024,000 - 275,024,000Trade and Other Liabilities - 1,305,409,642 - 1,305,409,642 115,863,880 1,580,433,642 - 1,696,297,521

The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Group’s policy is to maintain an appropriate balance between fixed and variable rate borrowings.

Capital ManagementCapital includes ordinary shares. 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.


ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NUMBER OF SHARES AS AT 31 MARCH 2018

VOTING SHAREHOLDERS

Resident Non Resident TotalShareholdings Number of Percentage Number of Percentage Number of Percentage Shareholders No of Shares (%) Shareholders No of Shares (%) Shareholders No of Shares (%)

1 to 1000 Shares 517 46,229 0.8 7 994 0.02 524 47,223 0.821001 to 10,000 Shares 56 202,107 3.48 4 8,710 0.15 60 210,817 3.6310,001 to 100,000 Shares 7 143,286 2.47 2 25,770 0.44 9 169,056 2.91100,001 to 1000,000 Shares 1 151,555 2.61 - - 0 1 151,555 2.61Over 1,000,000 Shares 1 5,229,639 90.04 - - 0 1 5,229,639 90.04 582 5,772,816 99.39 13 35,474 0.61 595 5,808,290 100

Categories of Shareholders No of Shareholders No of Shares

Individual 567 365598Institutional 28 5,442,692 595 5,808,290

NON-VOTING SHAREHOLDERS

Resident Non Resident TotalShareholdings Number of Percentage Number of Percentage Number of Percentage Shareholders No of Shares (%) Shareholders No of Shares (%) Shareholders No of Shares (%)

1 to 1000 Shares 434 49,889 2.86 4 1,921 0.11 438 51,810 2.971001 to 10,000 Shares 35 95,255 5.47 - - 0 35 95,255 5.4710,001 to 100,000 Shares 1 15,000 0.86 - - 0 1 15,000 0.86100,001 to 1000,000 Shares 1 102,076 5.86 - - 0 1 102,076 5.86Over 1,000,000 Shares 1 1,478,349 84.84 - - 0 1 1,478,349 84.84 472 1,740,569 99.89 4 1,921 0.11 476 1,742,490 100

Categories of Shareholders No of Shareholders No of Shares

Individual 458 149,583Institutional 18 1,592,907 476 1,742,490


OTHER INFORMATION TO SHAREHOLDERS & INVESTORS

MORISON PLC - VOTINGList of 20 Major Shareholders based on their Shareholding as at 31 March 2018 2018 2017 No of Shares (%) No of SharesHEMAS MANUFACTURING (PRIVATE) LIMITED 5,229,639 90.04 5,229,639 CAPITAL ALLIANCE HOLDINGS LTD 151,555 2.61 - MR.UDESHI ANANT HARGOVIND 37,031 0.64 36,048 HEMAS HOLDINGS PLC 32,500 0.56 32,500 MR. C F G PERERA (DECEASED) 20,160 0.35 20,160 MR. Y I JAFFERJEE 15,120 0.26 15,120 MR. H W M WOODWARD (DECEASED) 15,070 0.26 15,070 MS. D PEIRIS 13,820 0.24 13,820 MR. G C GOONETILLEKE 12,420 0.21 12,420 PEOPLE’S LEASING & FINANCE PLC/C.D.KOHOMBANWICKRAMAGE 12,235 0.21 - BNYMSANV RE-MILLVILLE OPPORTUNITIES MASTER FUND, LP 10,700 0.18 10,760 MR. N KATHIRGAMATAMBY (DECEASED) 10,000 0.17 10,000 MRS. H A D WIJESUNDERA 10,000 0.17 - MRS. D KUMARANAYAGAM 10,000 0.17 10,000 MR. R MAHESWARAN 9,047 0.16 9,047 MISS M P RADHAKRISHNAN 9,047 0.16 9,047 MISS A RADHAKRISHNAN 9,046 0.16 9,046 MR M H M SANOON 8,600 0.15 8,600 DR T A WEERASURIYA 8,100 0.14 8,100 MRS L S TUDUGALLE 7,860 0.14 7,860 5,631,950 96.96

MORISON PLC - NON VOTING List of 20 Major Shareholders based on their Shareholding as at 31 March 2018 2018 2017 No of Shares (%) No of SharesHEMAS MANUFACTURING (PRIVATE) LIMITED 1,478,349 84.84 1,478,349HEMAS HOLDINGS PLC 102,076 5.86 102,076MR. G C GOONETILLEKE 15,000 0.86 15,000MS PEOPLES LEASING & FINANCE PLC/C D KOHOMBANWICKRAMAGE 6,901 0.40 -MRS. E E M WOODWARD 6,620 0.38 6,620MR. C F G PERERA (DECEASED) 6,040 0.35 6,040MR. R J G DE MEL 4,860 0.28 4,860MR. Y I JAFFERJEE 4,530 0.26 4,530MISS. D PIERIS 4,140 0.24 4,140DR. H W E TISSERA 3,990 0.23 3,990MR. M H M SANOON 3,420 0.20 3,420MRS. R G ABDULHUSSEIN 3,140 0.18 3,140MRS. H A D WIJESUNDERA 3,000 0.17 3,000MR N KATHIRGAMATAMBY (DECEASED) 3,000 0.17 3,000MRS. D KUMARANAYAGAM 3,000 0.17 3,000MR. R MAHESWARAN 2,714 0.16 2,714MISS M P RADHAKRISHNAN 2,713 0.16 2,713MISS A RADHAKRISHNAN 2,713 0.16 2,713MR. S S B KARUNARATNE 2,700 0.15 2,700MRS.CLARICE MATHEW 2,700 0.15 2,700 1,661,606 95.36


COMPUTATION OF % OF PUBLIC SHAREHOLDING - 31 MARCH 2018 (VOTING)

NUMBER OF SHARES


Hemas Holdings PLC 32,500

32,500

Parent Company

Hemas Manufacturing (Private) Limited 5,229,639

5,229,639

Subsidiaries or Associate Companies

MSJ Industries (Ceylon) (Private) Limited -

-

Directors’ Shareholding

Mr. H.N.Esufally -

Mr. S.M.Enderby -

Prof. P.R.Fernando -

Mr. R.Chakravarti -

Mrs. B.A.I.Rajakarier -

Mr. M.A.H.Esufally -

Ms. K.A.C.Wilson -

-

Spouses and Children under 18 of Directors

Mrs. S.R.A.Esufally -

Mrs. M. Enderby -

Mrs. P.N.S.Fernando -

Mrs. S. Chakravarti -

Mrs. T.J.S.Rajakarier -

Ms. A. Esufally -

-

CEO, Spouse & Children -

-


NUMBER OF SHARES

Over 10% Holding

Hemas Manufacturing (Private) Limited (Refer above) -

-

Issued Share Capital as at 31 March 2018 5,808,290

Less

Ultimate Parent Company 32,500

Parent Company 5,229,639

Subsidiaries or Associate Companies -

Directors shareholding -

Spouses and Children under 18 of Directors -


Over 10% holding -

Public Holding 546,151

Public Holding as a % of Issued Share Capital 9.40%

Number of Shareholders 595

Number of persons holding shares excluded when computing public holding % 2

Number of Shareholders Representing the Public Holding 593

Float Adjusted Market Capitalization (Rs.) 338,507,141.20


COMPUTATION OF % OF PUBLIC SHAREHOLDING - 31 MARCH 2018 (NON-VOTING)

NUMBER OF SHARES


Hemas Holdings PLC 102,076

102,076

Parent Company

Hemas Manufacturing (Private) Limited 1,478,349

1,478,349

Subsidiaries or Associate Companies

MSJ Industries (Ceylon) (Private) Limited -

-

Directors’ Shareholding

Mr. H.N.Esufally 600

Mr. S.M.Enderby -

Prof. P.R.Fernando -

Mr. R.Chakravarti -

Mrs. B.A.I.Rajakarier -

Mr. M.A.H.Esufally -

Ms. K.A.C.Wilson

600

Spouses and Children under 18 of Directors

Mrs. S.R.A.Esufally -

Mrs. M. Enderby -

Mrs. P.N.S.Fernando -

Mrs. S. Chakravarti -

Mrs. T.J.S.Rajakarier -

Ms. A. Esufally -

-

CEO, Spouse & Children

-


NUMBER OF SHARES

Over 10% Holding

Hemas Manufacturing (Private) Limited -

(Refer above) -

-

Issued Share Capital as at 31 March 2018 1,742,490

Less

Ultimate Parent Company 102,076

Parent Company 1,478,349

Subsidiaries Companies or Associate Companies -

Directors shareholding 600

Spouses and Children under 18 of Directors -


Over 10% holding -

Public Holding 161,465

Public Holding as a % of Issued Share Capital 9.27%

Number of Shareholders 476

Number of persons holding shares excluded when computing public holding % 3

Number of Shareholders Representing the Public Holding 473


GROUP FINANCIAL HIGHLIGHTS - 5 YEAR SUMMARY

TRADING RESULTS: 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

Profit Before Tax 279,687,415 352,255,227 500,116,001 646,284,881 710,153,126Taxation (68,930,170) (105,164,380) (148,937,368) (129,568,755) (145,668,885)

Minority (3,032) (666) - -Group 210,754,213 247,090,181 351,178,633 516,716,126 564,484,241

FUNDS EMPLOYED:Stated Capital 7,924,800 7,924,800 7,924,800 7,924,800 7,924,800Revaluation Reserve 736,819,694 736,819,694 805,592,775 805,592,775 845,626,339General Reserve 730,800,000 730,800,000 730,800,000 730,800,000 730,800,000Investment Function Reserve - - - - -Available for Sale Reserve 2,453,323 1,944,467 1,598,217 - -Retained Earnings 653,053,784 860,053,984 1,128,083,136 1,488,766,109 1,903,620,117Shareholders’ Funds 2,131,051,601 2,337,542,945 2,673,998,928 3,033,083,684 3,487,971,256Minority Interest 107,967 107,231 107,231 -Total Equity 2,131,159,568 2,337,650,176 2,674,106,159 3,033,083,684 3,487,971,256Long Term Liabilities 6,979,705 376,050,070 250,016,000 125,024,000 -Deferred Liabilities 113,170,323 136,095,653 160,760,363 179,837,238 381,732,238 2,251,309,596 2,849,795,899 3,084,882,522 3,337,944,922 3,869,703,494

ASSETS EMPLOYED:Current Assets 1,562,288,052 2,420,686,720 2,883,318,754 3,185,386,481 3,324,678,146Current Liabilities 384,253,684 743,095,760 1,113,763,261 1,258,738,278 1,259,990,966Net Current Assets 1,178,034,368 1,677,590,960 1,769,555,493 1,926,648,203 2,064,687,180Investment in Associate/Subsidiary Companies 2 2 2 2 2Long Term Investments 6,054,677 5,545,821 4,616,271 -Property, Plant & Equipment 1,067,220,549 1,151,659,116 1,295,710,756 1,396,296,717 1,790,016,312Intangible Assets - 15,000,000 15,000,000 15,000,000 15,000,000Deferred Tax Assets - - - - 2,251,309,596 2,849,795,899 3,084,882,522 3,337,944,922 3,869,703,494

Return on Equity 9.89% 10.57% 13.13% 17.04% 16.18%Current Ratio 4.07 3.26 2.59 2.53 2.64Gearing Ratio 0.61% 17.82% 15.33% 13.27%Earnings per Share (Rs.) 27.91 32.72 46.50 68.43 74.76Net Assets per Share (Rs.) 282.24 309.59 354.15 401.69 461.94Dividend per Share (Rs.) - Declared & Paid 3.00 - - 10.00 15.00- Proposed - 4.00 10.00 5.00 -Dividend Cover 9.30 8.18 4.65 4.56 4.98Price/Earning Ratio 9.07 8.71 7.31 4.97 8.29Market Value per Share (Voting) Rs. 253.10 285.00 340.00 340.00 620.00Market Value per Share (Non-Voting) Rs. 210.00 230.00 290.10 339.20 509.60Dividend Payout Ratio 0.11 0.12 0.21 0.22 0.27

The following stable market prices were recorded for the year Voting Non-Voting

Highest 700.00 526.20Lowest 350.00 320.00Market 620.00 509.60


NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Seventy Ninth (79th) Annual General Meeting of the Company will be held at 3.00 pm on Tuesday, 26th June 2018, at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No 30A, Malalasekera Mawatha, Colombo 7, for the following purpose:-

AGENDA

1. To receive and consider the Statements of Accounts of the Company and of the Group for the year ended 31 March 2018, together with the Reports of the Directors and Auditors thereon.

2. To re-elect as Director, Mr. Husein Nuruddin Esufally retiring in terms of Article 84 of the Articles of Association of the Company.

3. To re-elect as Director, Mr. Ranjan Chakravarti retiring in terms of Article 84 of the Articles of Association of the Company.

4. To re-elect Mr. Murtaza Abidhusein Hassannally Esufally as director in terms of Article 72 of the Articles of Association.

5. To re-elect Ms. Kasturi Angela Chellaraja Wilson as director in terms of Article 72 of the Articles of Association.

6. To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors for the ensuing year and to authorise the Directors to determine their remuneration.

7. To authorise the Directors to determine and make donations to Charity.

By Order of the Board ofMorison PLC

Hemas Corporate Services (Pvt) LtdSecretaries

31 May 2018

NoteA member entitled to attend and vote at the Meeting may appoint a Proxy to attend and vote in his/her place.A Proxy need not be a Member of the Company.A Form of Proxy accompanies this Notice.Please bring a valid document of identity for registration purposes


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NOTES


FORM OF PROXY - MORISON PLC (VOTING)

I/We .....................................................................................................................................................................................................................

of ............................................................................................................................................. being a member/members of the above named company hereby appoint:

Mr. Husein N. Esufally of Colombo or failing himMr. Murtaza A. H. Esufally of Colombo or failing himMs. B. Arundathi I. Rajakarier of Colombo or failing herMs. Kasturi A.C. Wilson of Colombo or failing herProfessor P. Ravindra Fernando of Colombo or failing himMr. Ranjan Chakravarti of Colombo or failing himMr. Steven M. Enderby of Colombo or failing him

………………………………………………………………………………………………………………………………. of ....................................................................................

………………………………………………………………………………………………………………………………………………………………… as my/our* Proxy to represent me/us* and vote for me/us* on my/our* behalf at the Annual General Meeting of the Company to be held on Tuesday, the 26th day of June, 2018 at 3.00 pm at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No 30A, Malalasekera Mawatha, Colombo -07 and at any adjournment thereof. For Against1. To receive and consider the Statements of Accounts of the Company and of the Group for the year ended

31.03.2018 together with the Reports of the Directors and Auditors thereon.

2. To re-elect as Director, Mr. Husein Nuruddin Esufally retiring in terms of Article 84 of the Articles of Association of the Company.

3. To re-elect as Director, Mr. Ranjan Chakravarti retiring in terms of Article 84 of the Articles of Association of the Company

4. To re-elect Mr. Murtaza Abidhusein Hassannally Esufally as director in terms of Article 72 of the Articles of Association

5. To re-elect Ms. Kasturi Angela Chellaraja Wilson as director in terms of Article 72 of the Articles of Association

6. To re-appoint M/s Ernst & Young, Chartered Accountants, as auditors of the Company and authorize the Directors to determine their remuneration.

7. To authorize the Directors to determine and make donations to Charity.

*The Proxy may vote as he/she thinks fit on any other resolution brought before this meeting

…………………… Date:Signature/sNote:* Please delete the inappropriate words.The proxy holder is kindly requested to bring a valid document of identity.Instructions as to completion are noted on the reverse hereof.


Form of Proxy - Morison PLC(Voting) (Contd.)

Instructions as to Completion of Form of Proxy1. Kindly perfect the Form of Proxy after filling in legibly your full name and

address and by signing in the space provided. Please fill in the date of signature.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/her.

3. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association /Statutes.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

5. The completed Form of Proxy, addressed to the Secretaries should be deposited at Hemas House, No. 75, Braybrooke Place. Colombo 2 not less than Forty Eight (48) hours before the time appointed for the Meeting.


FORM OF PROXY - MORISON PLC (NON-VOTING)

I/We .....................................................................................................................................................................................................................

of .............................................................................................................................................being a member/members of the above named company hereby appoint:

Mr. Husein N. Esufally of Colombo or failing himMr. Murtaza A. H. Esufally of Colombo or failing himMs. B. Arundathi I. Rajakarier of Colombo or failing herMs. Kasturi A.C. Wilson of Colombo or failing herProfessor P. Ravindra Fernando of Colombo or failing himMr. Ranjan Chakravarti of Colombo or failing himMr. Steven M. Enderby of Colombo or failing him

………………………………………………………………………………………………………………………………. of ....................................................................................

………………………………………………………………………………………………………………………………………………………………… as my/our* Proxy to represent me/us* on my/our* behalf at the Annual General Meeting of the Company to be held on Tuesday, the 26th day of June 2018 at 3.00 pm at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No 30A, Malalasekera Mawatha, Colombo -07 and at any adjournment thereof.

…………………… Date:Signature/s

Note:* Please delete the inappropriate words.

The Proxy holder is kindly requested to bring a valid document of identity.Instructions as to completion are noted on the reverse hereof.


Form of Proxy - Morison PLC(Non-Voting) (Contd.)

Instructions as to Completion of Form of Proxy1. Kindly perfect the Form of Proxy after filling in legibly your full name and

address and by signing in the space provided. Please fill in the date of signature.

2. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association/Statutes.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

4. The completed Form of Proxy, addressed to the Secretaries should be deposited at Hemas House, No. 75, Braybrooke Place, Colombo 2 not less than Forty Eight (48) hours before the time appointed for the Meeting.

Legal FormQuoted Public Company with Limited Liability.Listed on the Colombo Stock Exchange on 1st January 1964

Date of Incorporation31st January 1939

Date of Re-registration5th September 2007

New Registration NumberPQ 77

Accounting Year End31st March

Registered Office“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

AuditorsErnst & YoungChartered AccountantsNo. 201, De Saram Place,Colombo 10

DirectorsMr. H.N. Esufally (Chairman)Mr. M.A.H. Esufally (MD)Ms. B.A. I. RajakarierMs. K.A.C. WilsonProfessor P. R. FernandoMr. R. ChakravartiMr. S.M. Enderby

SecretariesHemas Corporate Services (Pvt) Ltd“Hemas House” No. 75 Braybrooke Place,Colombo 2Tel; 0114 731 731 (Hunting)Fax: 0114731777

RegistrarsSSP Corporate Services (Pvt) Ltd101, Inner Flower Road,Colombo 3

Lawyers to the CompanyJulius & CreasyNo. 41, Janadhipathi Mawatha,Colombo 1.

BankersBank of CeylonPeople’s BankStandard Chartered BankNDB BankNations Trust BankHSBC BankSampath BankDeutsche BankCommercial Bank

CORPORATE INFORMATION

Contents

Milestones and Events 2Chairman’s Message 6Managing Director’s Message 8Directors’ Profiles 10Sustainability Report 12Corporate Governance 15Report of the Board of Directors 19Annual Report of the Directors 20The Audit Committee Report 24The Related Party Transactions Review Committee Report 26Statement of Directors’ Responsibility 28Independent Auditors’ Report 29Statement of Financial Position 32Statement of Profit or Loss 33Statement of Comprehensive Income 34Statement of Changes in Equity 35Statement of Cash Flows 36Notes to the Financial Statements 37Analysis of Shareholders According to the Number of Shares As at 31 March 2018 72Other Information to Shareholders & Investors 73Computation of % of Public Shareholding - 31 March 2018 (Voting) 74Computation of % of Public Shareholding - 31 March 2018 (Non-Voting) 76Group Financial Highlights - 5 Year Summary 78Notice of Meeting 79Notes 80Form of Proxy - Morison PLC (Voting) 81Form of Proxy - Morison PLC (Non-Voting) 83Corporate Information Inner Back Cover

Morison PLC | Annual Report 2017/18

MORISON PLCANNUAL REPORT 2017/18“Hemas House” No. 75 Braybrooke Place, Colombo 2

Tel; 0114 731 731 Fax: 0114731777 www.morison.lk