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SERENDIB ENGINEERING GROUP PLC PQ 230
ANNUAL REPORT 2012/2013
ANNUAL REPORT 2012/2013
SERENDIB ENGINEERING GROUP PLC
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
Contents
Corporate Information ................................................................................................................. 1
Chairmans Review ....................................................................................................................... 3
Director’s Profile .......................................................................................................................... 4
Corporate Management Team ..................................................................................................... 6
Business Activities ........................................................................................................................ 7
Directors Report ......................................................................................................................... 10
Risk Management Review .......................................................................................................... 14
Shareholder Information ............................................................................................................ 15
Statement Of Directors’ Responsibilities ..................................................................................... 17
Corporate Governance Report .................................................................................................... 18
Audit Committe Report .............................................................................................................. 22
Independent Auditors’ Report .................................................................................................... 24
Statement Of Comprehensve Income .......................................................................................... 26
Statement Of Financial Position .................................................................................................. 27
Statement Of Cash Flows ............................................................................................................ 29
Statement Of Changes In Equity ................................................................................................. 31
Accounting Policies .................................................................................................................... 33
Notes To The Financial Statements ............................................................................................. 46
Financial Highlights .................................................................................................................... 67
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
1
CORPORATE INFORMATION
NAME OF COMPANY
Serendib Engineering Group PLC
FORMER NAME OF THE COMPANY
Infrastructure Developers PLC
LEGAL FORM
A Public Quoted Company with Limited Liability incorporated in Sri Lanka on 7th
September 1992, and re-
registered under the Companies Act 07 of 2007. Listed on the Diri Savi Board of the Colombo Stock Exchange.
REGISTRATION NUMBER
PQ 230
ACCOUNTING YEAR END
31st
March
BOARD OF DIRECTORS
Mr. H. N. De Silva
Mrs. D. L. De Silva
Mr. H. G. S. Kariyawasam
Prof. R. W. T. M. R. Bandara
Dr. A. G. P. A. Gunawansa
Mr. A. C. De Silva
SUBSIDIARIES
Serendib Investment Holdings Limited
Serendib Engineering & Agencies (Pvt) Limited
CCC Plantation Engineering Limited
PARENT COMPANY
Navara Capital Limited
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SECRETARIES
Corporate Arcade Limited
122/37, Kirulapona Avenue
Kirulapona
Tel: 2514420/2514421
Fax: 2513621
Email: [email protected]
REGISTERED OFFICE
No.12 B,
Gregory’s Road, Colombo 7.
Tel: 4422444/4378389
Fax: 112698524
AUDITORS
V. S. & Associates
Chartered Accountants
15/7, Victoria Place
Elvitigala Mawatha,Colombo- 08
BANKERS
Hatton National Bank PLC
National Development Bank PLC
Pan Asia Banking Corporation PLC
Seylan Bank PLC
Nations Trust Bank PLC
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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CHAIRMANS REVIEW
I am pleased to present to you the Audited Financials
and the Annual Report of your company, Serendib
Engineering Group PLC and its subsidiaries in respect
of the financial year 2012/2013.
The year reviewed was the first full year of operation
since the company was acquired and restructured by
Navara Capital Limited. It was an eventful year during
which the company changed its name from
Infrastructure Developers PLC to Serendib
Engineering Group PLC to reflect its operating brand
name and successfully completed a 1 for 3 rights
issue of ordinary shares at Rs.80/- per share to raise
Rs.129Mn to fund its cash flow requirements.
During the Financial year the company recorded a
consolidated net profit of Rs. 47.8 Million from a
turnover of Rs. 339.1 Mn. reflecting a net profit
margin of 14.1%. The profits attributable to equity
holders of the parent were Rs. 25 Mn. These I believe
are commendable achievements compared with the
previous years.
The company is in the process of building a diversified engineering portfolio to add to its core business of Telecom
infrastructure engineering. During the year several important steps were taken in this direction including the
commencement of manufacturing operations in the plantation machinery business and the commissioning of the
precast concrete yard. CCC Plantation Engineering Ltd is involved in the production of Tea industry machinery
such as driers, rotorvanes, leaf elevators etc. as well as the setting up, repair and maintenance of tea factories.
The pre- cast concrete yard has commenced its operation with the manufacture of telecommunication polls and is
being geared to handle a larger volume as well as other precast structures.
I believe our efforts during the last year to reorganize and reposition the company has taken root and put the
company on a good footing to achieve top and bottom line growth in the years to come.
I wish to thank my colleagues on the Board of Directors for their support and guidance during the year and our
management team and staff for their dedication and hard work.
Finally I thank you, our loyal shareholders for your support and the confidence you have placed in us.
Harsha N. De Silva
Chairman
30th
August 2013
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DIRECTOR’S PROFILE
Mr. H. N. De Silva
Mrs. D. L. De Silva
Mr. H. G. S. Kariyawasam
Prof. R. W. T. M. R. Bandara
Dr. A. G. P. A. Gunawansa
Mr. A. C. De Silva
Mr. H. N. De Silva - ACMA, ACIB, FCMA, MBA
Mr. Harsha N. De Silva is the Chairman and Group Managing Director of the Navara Group of Companies,
which has interest in Financial Services, Engineering and Food Industry.
He is a Financial Markets specialist and counts over 20 years management experience in the corporate sphere
Locally and Internationally. His Corporate Management experience covers a range of industries including
Banking and Investment Banking, Housing and Real Estate, FMCG, Logistics and Apparel.
He is an Associate member of the Chartered Institute of Management Accountants (UK) and the Chartered
Institute of Bankers (UK). He is a Fellow of the Institute of Certified Management Accountants (SL) and holds a
MBA from the PIM, University of Sri Jayewardenepura. Mr. De Silva continues to hold Executive and Non
Executive Director positions in many Listed and unlisted companies.
Mrs. D. L. De Silva - MABE, MBA
Ms. Dimanthi L. De Silva is a Group Director of Navara Group of Companies and is the Managing Director of
Alerics Dairy Products Limited.
She counts over 20 years of management experience in Consultancy, Finance, Project Management and
Logistics. Ms. De Silva is a member of the Association of Business Executives (UK) and hold an MBA from the
Edith Cowan University of Western Australia.
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Mr. H. G. S. Kariyawasam - Attorney-at-Law
Mr. Sagara Kariyawasam is an Attorney at Law and served as a State Counsel at the Attorney Generals
Department for over 7 years. He currently serves as a Legal Counsel attached to the Presidential Secretariat of
Sri Lanka. He is also currently the Chairman of Lanka Electricity Company Private Limited (LECO).
Mr. Kariyawasam served as the Chairman of Corporative Wholesale Establishment (CWE) during 2009/2010
and as the Chairman of the Education Employees Corporative and Thrift Society Limited during 2011/2012.
Mr. Kariyawasam is also a Director of Navara Capital Limited.
Prof. R. W. T. M. R. Bandara
Prof. Ranjith Bandara is the Chairman of the Sri Lanka Foundation and serves as a Senior Economic advisor and
a director of the Financial Service cluster at the Strategic Enterprise Management Agency of the President’s
Office. Prof. Bandara is also a senior academic staff member attached to the Department of Economics,
University of Colombo and also serves as a Director in several other reputed companies. Prof. Bandara earned
his B.A in Economics Honours from the University of Peradeniya and subsequently completed two masters
degrees. M. A in Economics from the University of Colombo and Msc. in Management of Natural Resources
and Sustainable Agriculture from the Agricultural University of Norway.
He earned a Phd in Economics in 2003 from the University of Queensland, Australia. Prof. Bandara has
contributed to a number of National and International Journals and also serves as a senior business advisor/
consultant to a number of business organizations in the country.
Dr. A. G. P. A. Gunawansa
Dr. Gunawansa holds a Ph.D. in Law from the National University of Singapore and an LLM in International
Economic Law, from University of Warwick England. He is an Attorney-at-Law of the Supreme Court of Sri
Lanka and has over 19 years of experience as a Legal Counsel.
He is also a member of the Law Reform Sub-Committee for Building and Construction Law in Singapore. In
addition to his legal practice, Dr. Gunawansa is currently attached to the Lee Kuan Yew School of Public Policy
of the National University of Singapore (NUS) as a Senior International Research Associate. He is also attached
to the Centre for Project Management and Construction Law of the School of Design and Environment of NUS
as an Adjunct Professor. He is also an Associate Member of the Executive Committee of the Asia Pacific Centre
of Environmental Law.
Mr. A. C. De Silva - FCMA
Mr. Ajith De Silva is a fellow member of the Chartered Institute of Management Accountants UK and counts
over twenty years of corporate management experience in diverse fields locally and internationally.
Mr. De Silva commenced his career at KPMG and also served as Chief Accountant within the Aitken Spence
Group, as the manager Investment and Research at CKN Fund Management Co. Limited, as the CFO of
Bodyline Pvt Limited and as the General Manager of Growth Lanka Private Limited.
He is currently also the Director/Chief Executive Officer of Kenpark Bangladesh Private Limited and Kenpark
Bangladesh Apparel Private Limited.
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CORPORATE MANAGEMENT TEAM
Mr. S. C. De Silva
Mr. A. N. D. De Silva
Mr. V. J. Alahendra
Mr. S. C. De Silva
Group Chief Executive Officer
Mr. Clive De Silva is a Mechanical Engineer by profession who counts for over 40 years of experience in the
Engineering Industry. He commenced his career at one of the premier Engineering & Trading groups in Sri
Lanka and held various positions including senior Research and Development Engineer, Senior Project
Engineer, Director Business Development, Director Engineering.
In 1991 he ventured in out and set up Serendib Engineering & Agencies Limited and was the founder
Chairman/ Managing Director. Mr. De Silva’s experience covers a range of engineering disciplines including
civil, electronics, mechanical, automobile, marine and plantation machinery. He is skilled in engineering design
and is a member of the Institute of Engineering Designers UK.
Mr. De Silva is the current chairman of Colombo Commercial Company (Engineers) Limited.
Mr. A. N. D. De Silva – ACA, ACMA, MBA
Group Chief Finance Officer
Mr. Naleen De Silva is the Group Chief Finance Officer of the Navara Capital Group of Companies. He counts
for over 22 years of experience in various industries including Housing & Property Development, Engineering,
Manufacturing, Financial services and Media. He also specializes in management consultancy, restructuring
and auditing. He is an Associate member of the Institute of Chartered Accountants of Sri Lanka and the
Institute of Certified Management Accountants of Sri Lanka. Mr. De Silva also holds a MBA from the PIM,
University of Sri Jayewardenepura.
Mr. V. J. Alahendra
Chief Operations Officer
Mr. Jayasankha Alahendra counts for over 20 years of experience in the corporate sphere of which he has
served as a Director/Senior Manager for more than 10 years. Prior to joining Serendib Engineering Group he
has held various positions in Finance, Credit & Leasing, Treasury Management and Real Estate Development.
He is also an experienced corporate trainer in the areas of Human Resource Development and Credit
Evaluation.
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BUSINESS ACTIVITIES
Serendib Engineering Group PLC carries out its business operations via the holding company and its two
operating subsidiaries Serendib Engineering and Agencies Private Limited and CCC Plantation Engineering
Limited. The main areas of business is as given below,
1. TELECOM INFRASTRUCTURE ENGINEERING
Telecommunication services are a core business activity of the group. This includes network development including Outside Plant Engineering (OPE) that involve Optical Fiber Cable Network. Optical Fiber Backbone/ Junction Network Development (Optical fiber metro network development and optical fiber secondary expansions), Copper cable network development, new subscriber connections, site acquisition and tower erection.
2. RAILWAY & MARINE ENGINEERING
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The Railway & Marine Engineering Services provided by the company include refurbishment and re-engineering of locomotives as well as marine propulsion systems and controls. The company represents four prestigious foreign principals in Marine propulsions systems, Diesel engines and Railway locomotive spears. They are Rolls Royce Marine, MAN Diesel & Turbo (UK) ltd, Brush Traction Limited and Romic-ACE International Limited
3. MANUFACTURING OF PLANTATION MACHINERY
The group also specializes in manufacturing and supply of complete tea factories and processing equipment.
Machinery are manufactured and marketed under the CCC brand commands a high reputation and a
substantial market share. Machinery includes dryers, extractors, Rotorvanes etc.
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4. MANUFACTURING OF PRECAST CONCRETE
The pre-cast concrete yard is a new venture of the group and is focus on the manufacture of poles for the telecom industry and power distribution; currently it has the capacity to manufacture up to 1500 poles per month. The operation is currently being geared to increase the capacity and to manufacture other precast structures.
5. GENERAL ENGINEERING
SEG is a provider of general engineering services such as services to the construction industry, water supply
and drainage projects (rehabilitation of water pumping facilities & filtration plants), Power Generation projects
(construction, maintenance and rehabilitation of thermal & hydropower stations), fabrication and
maintenance of food industry machinery etc.
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DIRECTORS REPORT
ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE COMPANY FOR YEAR
2012/2013
The Directors of the Serendib Engineering Group PLC have pleasure in presenting their report together with
the Audited Financial Statements for the year ended 31st
March 2013. The details set out herein provide the
pertinent information in compliance with the Companies Act No. 07 of 2007 and the Colombo Stock Exchange
Listing Rules and are guided by recommended best accounting practices.
PRINCIPAL ACTIVITIES
A holding company involved in diverse engineering activities.
RESULTS AND APPROPRIATIONS
The Financial Statements of the Company are given on Page 26 to 66 of this Annual Report.
REVIEW OF OPERATIONS & PERFORMANCE
The Chairman’s Review provides an overall assessment of the Company’s operations and performance during
the financial year under review on pages 3.
DIRECTORATE
The Members of the Board during the financial year under review as at the date of the report were as follows:-
Mr. H N De Silva
Mrs. D L De Silva
Mr. H G S Kariyawasam
Prof. R W T M R Bandara
Dr. A G P A Gunawansa
Mr. A C De Silva
Mr. C Shangaralingam
Mr. S Selvaraj
-
-
-
-
-
-
-
-
Chairman
Director
Non - Executive Director
Non - Executive/Independent Director
Non - Executive/Independent Director
Non - Executive/Independent Director
Non - Executive/Independent Director (Resigned w.e.f 18-08- 2012)
Non - Executive/Independent Director (Resigned w.e.f 18-08- 2012)
The Profile of the Board of Directors of the Company are given in Page 4 of this report.
NEW APPOINTMENTS
Dr. A G P A Gunawansa and Mr. A C De Silva were appointed to the Board on 28th
November 2012 and 9th
April
2013 respectively.
RESIGNATIONS
Mr. C Shangaralingam and Mr. S Selvaraj resigned from the Board of Directors w.e.f. 18th
August 2012. The
Board of Directors wishes to place on record their appreciation for the valuable contributions made by them.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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EXECUTIVE APPOINTMENTS
Mr. Samuel Clive De Silva was appointed as the CEO of the Company w.e.f. 20th
May 2013.
RETIREMENT OF DIRECTORS AND THEIR RE-ELECTION
In accordance with Article 118 of the Articles of Association of the Company, Mr. H G S Kariyawasam
retires by rotation and is eligible for re-election.
Dr. A G P A Gunawansa and Mr. A C De Silva, retire in terms of Article 100 of the Articles of Association of the
Company, and are eligible for election.
DIRECTORS & CEO’S SHAREHOLDING
31st
March 2013
31st
March 2012
Number
Number
Mr. H. N. De Silva Nil Nil
Mrs. D. L. De Silva Nil Nil
Mr. H. G. S. Kariyawasam Nil Nil
Prof. R. Bandara Nil Nil
Dr. A G P A Gunawansa Nil Nil
Mr. A C De Silva Nil Nil
Mr. S C De Silva 200,000 Nil
DIRECTOR’S REMUNERATION
The Directors were not paid any remuneration during the financial year under review.
DIVIDENDS
The Board of Directors does not recommend the payment of a dividend for the financial year under review.
MAJOR SHAREHOLDINGS
The 20 major Shareholders of the Company as at 31st March 2012 and 2013 are listed on Page 15 under
Shareholder Information.
SHAREHOLDING
As at 31/03/2013 there were 155 Registered Shareholders. The distribution of shareholders is indicated on
page 15 under “Shareholder information”.
STOCK MARKET INFORMATION
Information relating to earnings, dividends, net assets per share are given on page 26, 27 & 67 of this
document.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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STATED CAPITAL
The Stated Capital of the Company as at 31st
March 2013 was Rs.178,107,910/- representing 6,476,650
Ordinary Shares. The structure of the Stated Capital is given in Note 18 to the Accounts
RIGHTS ISSUE OF SHARES
The Company offered 1,619,163 shares at Rs.80/- per share by way of a Rights Issue, to the Registered
Shareholders of the Company as at 15th
August 2012 to raise a sum of Rs.129,533,040/-, which offer was
successfully concluded on 11th
September 2012 and the new securities were listed with the CSE.
GOING CONCERN
The Board of Directors of the Company are satisfied that the Company has adequate resources to continue its
operations in the forceable future. Therefore the Company continues to adopt a going concern concept in
preparing the accounts of the Company.
INTERESTS REGISTER
An Interests Register is maintained, in compliance with the Companies Act No.07 of 2007.
The particulars of the entries made in connection with the General Disclosure in terms of Section 192(2) of the
Companies Act No.07 of 2007 are given in Note 25 under Related Party transactions.
AUDIT COMMITTEE
The Audit Committee comprise of Prof. R W T R Bandara, Mr A C De Silva and Mr H G S Kariyawasam. Prof. R
W T R Bandara, functions as the Chairman of the Committee.
The report of the Audit Committee is given on Page 22.
REMUNERATION COMMITTEE
The Remuneration Committee comprise of Prof. R W T R Bandara, Mrs. D L De Silva and Dr. A G P A
Gunawansa, Mrs D L De Silva functions as the Chairman of the Committee.
The functions of the Remuneration Committee is given on Page 19.
STATUTORY PAYMENTS
The Directors, to the best of their knowledge and belief are satisfied that all statutory payments have been
made up to date or provided for same.
NAME CHANGE OF THE COMPANY
The name of the Company was changed from Infrastructure Developers PLC to Serendib Engineering Group
PLC at an Extraordinary General meeting held on 28th
January 2013.
ENVIRONMENTAL PROTECTION
The Board of Directors has taken adequate precautions when diversifying the business activities to ensure that
the Company does not engage in any activities which could be detrimental to the environment.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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CONTRIBUTIONS TO CHARITIES
The Company has not contributed to charities during the financial year under review.
ACCOUNTING POLICIES
There has been no change in the Accounting Policies adopted by the Company in preparation of Financial
Statements during the Financial Year under review other than what is stated in the Financial Statements.
EVENTS AFTER THE REPORTING PERIOD
Subsequent to the date of the Balance Sheet no circumstance has arisen which require adjustments to the
accounts.
AUDITORS
The accounts for the year have been audited by M/s V S & Associates, Chartered Accountants, who retire and
are eligible for re-appointment. The Directors recommend their re-appointment.
The Auditors were paid a sum of Rs 70,000/- as Audit Fees a by the Company for the financial year under
review. As far as the Board is aware the Auditors do not have any relationship with the Company other than
carrying out the External Audit.
By order of the Board of
Serendib Engineering Group PLC
…………………………………….. H N De Silva Chairman
……………………………………… D L De Silva Director
…………………………………….. Corporate Arcade Limited
Company Secretaries Colombo
30th
August 2013
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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RISK MANAGEMENT REVIEW
Risk management involves identifying potential risk exposure faced by the Group and implementing proper
risk management techniques to mitigate such risks. The group only accepts risks which are adequately
compensated and consider risk management as a vital component in our operations and build upon
management’s risk assessment and mitigation processes, which include standardized reviews of long-term
strategic and operational planning, regulatory and litigation compliance, health and safety, environmental
compliance, financial reporting and controls and information technology and security.
The Company has exposure to the following risks.
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty failing to meet contractual
obligations. Credit risk arises principally from the Company’s receivables from customers and investments
in securities. The group has a specific method to assess the potential of customers in terms of their credit
worthiness. Also the group takes adequate precautionary actions before granting credit facilities.
Investment in securities will also be done after careful evaluation of the expected return and risk
associated. This approach has mitigated the credit risk of the group.
Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations related to its
financial liabilities, through settlement by cash or financial assets. The group seldom utilizes its' borrowing
facilities. The group ensures the availability of sufficient liquidity to meet liabilities when due with proper
cash flow planning. The board regularly reviews liquidity position of the group. This cautious approach
ensures the mitigation of liquidity risk.
Market Risk
Market risk is the risk that changes in market prices, such as raw material prices, foreign exchange rates
and interest rates that would impact Group’s income or the value of investment in financial instruments.
The objective of managing market risk is to manage and control market risk exposures within parameters,
while optimizing returns. The group always keeps a provision for such fluctuations before deciding the
price of the finished good. Also the Company negotiate terms with suppliers for specific future period
aswell. All these steps will lead to mitigate the market risk associated with the Company.
There are no material issues pertaining to employees and industry relations of the Entity.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
15
SHAREHOLDER INFORMATION
STATED CAPITAL
The Stated Capital of the Company as at 31st
March was Rs.178,107,910/- representing 6,476,650 Ordinary
Shares. All shares are issued and fully paid.
MAJOR SHAREHOLDERS DETAILS
31st
March 2013 31st
March 2012
Number of shares held
% Number of shares held
%
1 Navara Capital Limited 4,937,577 76.24 3,924,400 80.79
2 Lankem Ceylon Plc 476,397 7.36 421,900 8.69
3 Pan Asia Banking Corporation Plc/Lankem Ceylon Plc 290,000 4.48 - -
4 PCH Holdings Limited 241,645 3.73 241,645 4.97
5 Flyasia Sdn.Bhd 235,135 3.63 175,880 3.62
6 Mr. S.C. De Silva 200,000 3.09 - -
7 Mr. K.G.D.S.R. Kulatunga 31,167 0.48 32,732 0.67
8 Mr. K.D.R. Kulatunga 12,306 0.19 - -
9 Mr. D. Kotthoff 12,220 0.19 6,500 0.13
10 Miss P.V.S. Priyadarshani 6,390 0.10 5,000 0.10
11 Miss. K.G.A.C. Gurusinghe 4,261 0.07 4,565 0.09
12 Mrs H.P. Gin 2,440 0.04 - -
13 Mr. B.A. Gunathilaka 1,600 0.02 1,600 0.03
14 First Capital Markets Limited/Mr.P.R.B.Perera 1,592 0.02 - -
15 Ms. R. Randeniya 1,322 0.02 - -
16 Mr. V.G.A.C.M. Mubarak 1,300 0.02 300 0.01
17 Miss R. Randeniya 1,280 0.02 - -
18 Miss R.S.M. Mohideen 1,209 0.02 900 0.02
19 Mr. N.J.M. Afrath 1,200 0.02 1,200 0.02
20 Mr. M. Mohamed Mohideen 1,084 0.02 700 0.01
TOTAL 6,460,125 99.76 4,818,322 99.15
SHAREHOLDER ANALYSIS
31st
March 2013 31st
March 2012
Number of Shares Percentage Number of shares Percentage
Shares held by the public 1,539,073 23.76% 933,087 19.21%
Shares held by the others 4,937,577 76.24% 3,924,400 80.79%
Total 6,476,650 100.00% 4,857,487 100.00%
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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DISTRIBUTION OF SHAREHOLDINGS
Size of the shareholding
31st March 2013 31st
March 2012
No of
Share
Holders
No of Shares
Held %
No of Share
Holders
No of Shares Held
%
1 - 1,000 133 14,471 0.22 98 22,245 0.46
1001 - 5,000 12 19,342 0.30 9 21,965 0.45
5,001 - 10,000 1 6,390 0.10 1 6,500 0.13
10,001 - 50,000 3 55,693 0.86 2 42,952 0.88
50,001 - 100,000 - - - - - -
100,001 - 1,000,000 5 1,443,177 22.28 3 839,425 17.28
Over 1,000,000 1 4,937,577 76.24 1 3,924,400 80.79
Total 155 6,476,650 100.00 114 4,857,487 100.00
CATEGORIES OF SHAREHOLDERS
2012 / 2013
Categories of Shareholders
No of Shares No of Shareholders %
Individuals 292,023 136 4.51
Institutions 6,184,627 19 95.49
Total 6,476,650 155 100.00
SHARE PRICE INFORMATION
31st
March 2013
31st
March 2012
Highest Price per share (Rs.) 210.00
204.00
Lowest Price per share (Rs.) 106.00
71.00
Closing Price per share (Rs.) 204.20
144.60
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The following statement sets out the responsibilities of the Directors in relation to the Financial Statements of
the Company. These differ from the responsibilities of the Auditors, which are set out in their report appearing
on pages 24-25.
The Companies Act No.7 of 2007 requires the Directors to prepare Financial Statements for each financial year
giving a true and fair view of the state of affairs of the Company as at the end of the financial year and of the
profit or loss of the company for the financial year. In preparing the financial statements appropriate
accounting policies have been selected and applied consistently, reasonable and prudent judgments and
estimates have been made and applicable accounting standards have been followed.
The Directors are responsible for ensuring that the Company keeps sufficient accounting records to disclose
with reasonable accuracy the financial position of the Company and for ensuring that the financial statements
comply with the Companies Act No. 7 of 2007. They are also responsible for taking reasonable measures to
safeguard the assets of the Company, and in that context to have proper regarded to the establishment of
appropriate systems of internal control to prevent and detect frauds and other irregularities.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
18
CORPORATE GOVERNANCE REPORT
The Board of Directors of Serendib Engineering Group PLC is committed to achieving the highest standards of
corporate governance practices in conducting the entity’s operations.
The Company has applied the Corporate Governance, complying with the Listing Rules of the Colombo Stock
Exchange, Securities and Exchange Commission of Sri Lanka and the Companies Act No.7 of 2007 and has
adopted “Code of Best Practice on Corporate Governance” published by the Institute of the Chartered
Accountants of Sri Lanka.
BOARD OF DIRECTORS
The Company’s Board of Directors comprises of six members and out of which Mr. H. N. De Silva is the
Chairman and five non-executive directors and one alternate director. Two directors on the board are non-
independent directors and three are independent directors. The directors bring with them a wide range of
experience and expertise in the fields of corporate management, finance and law. The Board meets regularly
once in every quarter and also as and when the requirement arises. The names of the Directors and their
classification is as follows,
Mr. H. N. De Silva
Mrs. D. L. De Silva
Mr. H. G. S. Kariyawasam
Dr. R. Bandara
Dr. A. G. P. A. Gunawansa
Mr. A. C. De Silva
Mr. C. Shangaralingam
Mr. S. Selvaraj
-
-
-
-
-
-
-
-
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive/ Independent Director
Non-Executive/ Independent Director
Non-Executive/ Independent Director
Non-Executive/ Independent Director (Resigned w.e.f 18-08- 2012)
Non-Executive/Independent Director (Resigned w.e.f 18-08- 2012)
As per the Article of the company the Directors who retire by rotation are eligible for re-election by the
shareholders at the Annual General Meeting.
RESPONSIBILITIES
The Directors are responsible for the Company’s system of internal control. A sound system of internal is
maintained in order to safeguard the Company’s assets and shareholders investments. As a result proper
records are maintained and reliable financial information is generated. The Statement of Directors’
responsibilities for the Financial Statements is given in page 17 of this report.
APPOINTMENTS TO THE BOARD
The Board as a whole decides on the appointment of Directors.
RE-ELECTION OF DIRECTORS
The provision of the Company’s Article requires a Director appointed by the Board to hold office until the next
Annual General Meeting, and seek re-appointment by the shareholders at that meeting.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
19
INDEPENDENT DIRECTORS
As at the balance sheet date three are Independent Directors.
DIRECTORS’ INTERESTS IN CONTRACTS AND RELATED PARTY TRANSACTIONS
Directors’ interests in contracts have been disclosed under Note 25 of the financial statements.
DISCLOSURE OF INFORMATION AND COMPLIANCE
The Financial Statements of the Company are prepared in accordance with the Sri Lanka Accounting Standards
and in accordance with the requirements of the Colombo Stock Exchange. The Secretaries to the Company
advises the Board on appropriate procedures for the management of its meetings and duties, as well as the
compliance of Corporate Governance in the Company.
REMUNERATION COMMITTEE
The Remuneration Committee consists of two Independent Non-Executive Directors and one Non- Executive
Director of the Board
Mr. Harsha N De Silva, Chairman/ Managing Director attend meetings by invitation, when necessary.
This committee is responsible for setting up the remuneration policy and making recommendations on:
Remuneration framework and levels of the Senior Management
Senior Management performance and performance based incentives/increments
Remuneration of Executive Directors
Formation and implementation of human resource policies.
The main objective of the remuneration policy of the Company is to attract and retain the required human
resource talent to sustain its operations.
The Directors were not paid any remuneration for the financial year 2012/2013.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
20
Statement of Compliance under Section 7.10 of the Rules of the Colombo Stock Exchange (CSE) on Corporate Governance
CSE Rule Compliance
Status Response
7.10 Compliance
a./b./c. Compliance with Corporate Governance Rules
✓ The Group is in compliance with the Corporate Governance Rules and any deviations are explained where applicable.
7.10.1 Non-Executive Directors (NED)
a./b./c. At least 2 members or 1/3 of the Board,whichever is higher should be NEDs
✓ Five out of the six Board members are NEDs.
7.10.2 Independent Directors
a. 2 or 1/3 of NEDs, whichever is higher shall be “independent”
✓ Three out of the five NEDs are Independent
b. Each NED to submit a signed and dated declaration of his/her independence or non-independence
✓
Independence of the Directors has been determined in accordance with CSE Listing Rules.
7.10.3 Disclosures relating to Directors
a./b. Board shall annually determine the independence or otherwise of NEDs
✓ All Independent Non-Executive Directors have submitted declarations as to their independence.
c. A brief resume of each Director should be included in the annual report including the directors’ experience
✓ Refer the Director’s Profile section
d. Provide a resume of new Directors appointed to the Board along with details
✓
Resume of the new Independent Non-Executive Director appointed during the financial year was submitted to the Colombo Stock Exchange.
7.10.4 Criteria for defining independence
a. to h. Requirements for meeting the criteria to be an Independent Director
✓ Please refer Director’s Report
7.10.5 Remuneration Committee
a. Remuneration Committee shall comprise of NEDs, a majority of whom will be independent
✓ The Remuneration Committee comprises of three Non-Executive Directors, of which two are Independent.
One Non-Executive Director shall be appointed as Chairman of the Committee by the board of directors
✓
b. Remuneration Committee shall recommend the remuneration of the CEO and the Executive Directors
✓
c. Names of Remuneration Committee members Statement of Remuneration policy Aggregate remuneration paid to EDs and NEDs
✓ Please refer Page 19 of this Report.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
21
7.10.6 Audit Committee
a. 1. Audit Committee (AC) shall comprise of NEDs, a majority of whom should be independent
a. 2. A NED shall be the Chairman of the Committee
a. 3. CEO and CFO should attend AC meetings
a. 4. The Chairman of the Audit Committee or one member should be a member of a professional accounting body
✓ The Audit Committee comprises of two Independent Non-Executive Directors, and one Non-Executive Director. The Chief Executive Officer, Chief Finance Officer attends Audit Committee meetings by invitation.
✓
✓
✓
b. Functions of the Audit Committee ✓ Please refer Report of the Audit Committee
c. 1 Names of the Audit Committee members shall be disclosed
✓ Please refer Directors Report
c. 2 Audit Committee shall make a determination of the independence of the external auditors
✓ Please refer Report of the Audit Committee
c. 3 Report on the manner in which Audit Committee carried out its functions
✓
Please refer Report of the Audit Committee
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
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AUDIT COMMITTE REPORT
The Audit Committee comprises of two Independent Non-Executive Directors and one Non-Executive Director,
Prof. R. W. T. R. Bandara who is an Independent Non-Executive Director functions as the Chairman of the
committee. The rest of the committee comprises of Mr. A. C. De Silva who is an Independent Non-Executive
Director and also a member of the Chartered Institute of Management Accountants and Mr. H. G. S.
Kariyawasam who is a Non-Executive Director of the company.
The Chief Executive Officer and Chief Finance Officer attend meetings by invitation. Representatives of
external and internal Auditors will be invited when necessary. Proceedings of the Committee meetings are
reported to the Board of Directors.
The Audit Committee has written terms of reference and is empowered to examine any matters relating to the
financial affairs of the Company and its internal and external audits. Its duties include reviews of financial
statements, internal control procedures and risk management, accounting policies and compliance with Sri
Lanka Accounting Standards. It also reviews the adequacy of systems for compliance with the Companies Act
No.7 of 2007, other relevant legal, regulatory and ethical requirements and company policies. The Committee
endeavors to assist the Directors to discharge their duties and responsibilities in respect of regulatory
compliance and risk management.
The following activities were carried out by the Committee
Financial Reporting and Internal Control System
The Committee reviewed the Interim and Annual Financial Statements of the Company and has
recommended same to the Board for approval and publication.
Review of the preparation of the Annual Report to ensure the reliability of the process, consistency of
the accounting policies and methods and compliance with Sri Lanka Accounting Standards.
The Committee is satisfied that the control environment prevailing in the Company provides
reasonable but not absolute assurance that the financial position of the Company is adequately
monitored and that the systems are in place to minimize the impact of identifiable risks.
The Committee also monitors the timely payments of all statutory obligations.
The Committee also monitors the effectiveness of the internal and financial control procedures on the
basis of the reports and findings submitted by the Internal Auditors of the Company, V. S &
Associates; Chartered Accountants.
External Audit
The Committee has reviewed the services provided by the External Auditors to the Company to ensure their
independence as Auditors has not been compromised. As far as the Directors are aware, the Auditor does not
have any relationship (other than that of an Auditor) with the Company other than those disclosed above. The
Auditors also do not have any interest in the Company. For the said reasons the Committee determined that
the Auditors are independent.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
23
The Audit Committee has recommended to the Board of Directors that, V. S. & Associates; Chartered
Accountants be re-appointed as Auditors for the financial year ending 31st
March 2014 at a remuneration to be
determined by the Board, subject to the approval of the Shareholders at the Annual General Meeting.
Prof. R. W. T. R. Bandara
Chairman
Audit Committee
30th
August 2013
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
24
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF
SERENDIB ENGINEERING GROUP PLC
Report on the Financial Statements
We have audited the accompanying financial statements of Serendib Engineering Group PLC, the consolidated
financial statements of the Company and its Subsidiaries as at that date which comprise the Statement of
Financial Position as at 31st March 2013, and the Statement of Comprehensive Income, Statement of Changes
in Equity and Statement of Cash Flows for the year then ended, and notes comprising a summary of significant
accounting policies and other explanatory notes thereon as set out on pages 33 to 66.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and
maintaining internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We have obtained all the information and explanations which to the best of our knowledge and belief were
necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for
our opinion.
Opinion
In our opinion, so far as appears from our examination, the Company maintained proper accounting records
for the year ended 31st March 2013 and the financial statements give a true and fair view of the financial
position of the Company as at 31st March 2013 and its financial performance and its cash flows for the year
then ended in accordance with Sri Lanka Accounting Standards.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
25
In our opinion, the consolidated financial statements give a true and fair view of the financial position as at
31st March 2013 and its financial performance and cash flows for the year then ended, in accordance with Sri
Lanka Accounting Standards, of the Company and its Subsidiaries dealt with thereby, so far as concerns the
shareholders of the Company.
Report on Other Legal and Regulatory Requirements
These financial statements also comply with the requirements of Section 151(2) and 153(2) to 153(7) of the
Companies Act No. 07 of 2007.
V.S. & ASSOCIATES
CHARTERED ACCOUNTANTS
Colombo
30th August 2013
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
26
STATEMENT OF COMPREHENSVE INCOME
SERENDIB ENGINEERING GROUP PLC
NO. 12B, GREGORY'S ROAD, COLOMBO 07.
FOR THE YEAR ENDED 31ST MARCH 2013 NOTES GROUP COMPANY
2013 2012 2013 2012
Rs. Rs. Rs. Rs.
REVENUE 2 339,100,824.52 - - -
Cost of Sales (214,125,825.10) - - -
Gross Profit 124,974,999.42 - - -
Other Income 2 1,467,939.21 4,178,193.45 145,126.15 -
126,442,938.63 4,178,193.45 145,126.15 -
Administrative Expenses (63,296,897.24) (739,802.21) (1,666,069.24) (647,537.33)
Distribution Cost (5,480,080.52) (25,420.00) - -
Profit / (Loss) from Operating Activities 3 57,665,960.87 3,412,971.24 (1,520,943.09) (647,537.33)
Finance Income 4 8,889,745.50 461,666.56 1,557,701.32 425,136.66
Finance Expenses 5 (3,838,688.08) (337,291.60) (2,204,222.64) (336,581.36)
Net Finance Income / (Expense) 5,051,057.42 124,374.96 (646,521.32) 88,555.30
Profit / (Loss) before Income Tax Expenses 62,717,018.29 3,537,346.20 (2,167,464.41) (558,982.03)
Income Tax Expenses 6 (14,945,744.45) (20,895.66) (326,504.00) -
Profit / (Loss) for the year 47,771,273.84 3,516,450.54 (2,493,968.41) (558,982.03)
Other Comprehensive Income - - - -
Total Other Comprehensive Income for the year - - - -
Total Comprehensive Income for the year 47,771,273.84 3,516,450.54 (2,493,968.41) (558,982.03)
Attributable to:
Equity Holders of the parent 25,003,986.83 1,641,848.99 (2,493,968.41) (558,982.03)
Non-Controlling Interest 22,767,287.01 1,874,601.55 - -
47,771,273.84 3,516,450.54 (2,493,968.41) (558,982.03)
Earnings / (Loss) per Ordinary Share 7 4.20 0.31 (0.42) (0.11)
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
27
STATEMENT OF FINANCIAL POSITION
AS AT 31ST
MARCH 2013 NOTES GROUP COMPANY
2013 2012 2013 2012 01.04.2011
Rs. Rs. Rs. Rs. Rs.
ASSETS
NON - CURRENT ASSETS
Plant & Equipment 8 16,143,937.25 6,977,659.47 1,168,233.33 - -
Intangible Assets 9 21,769,593.20 21,669,723.27 - - -
Investments in Subsidiaries 10 - - 103,588,890.00 85,200,000.00 -
Other Non Current Financial Assets 11 2,500,000.00 2,500,000.00 - - -
Deferred Tax Assets 12 1,572,417.85 - - - -
41,985,948.30 31,147,382.74 104,757,123.33 85,200,000.00 -
CURRENT ASSETS
Inventories 20,171,101.79 10,817,002.82 - - -
Work in Progress - 33,553,925.91 - - -
Financial Assets at fair value
through profit or loss 13 5,426,313.00 1,873,500.00 5,426,313.00 1,873,500.00 -
Trade & Other Receivables 14 209,867,756.92 64,341,607.56 76,383.13 - -
Amounts due from Related Parties 15 891,226.55 757,378.00 4,979,550.56 - -
Other Current Financial Assets 16 37,624,166.58 42,844,541.04 2,853,957.26 - -
Cash and Cash Equivalents 17 16,087,659.25 22,753,293.26 7,353,042.11 152,998.55 -
TOTAL ASSETS 332,054,172.39 208,088,631.33 125,446,369.39 87,226,498.55 -
EQUITY & LIABILITIES
Equity Attributable to the Equity Holders
of the Parent
Stated Capital 18 178,107,910.00 48,574,870.00 178,107,910.00 48,574,870.00 48,574,870.00
Retained Earnings (24,091,129.41) (47,324,604.02) (53,132,093.45) (49,525,435.04) (48,966,453.01)
SHAREHOLDERS' FUNDS 154,016,780.59 1,250,265.98 124,975,816.55 (950,565.04) (391,583.01)
Non-Controlling Interest 63,525,679.89 55,727,672.66 - - -
TOTAL EQUITY 217,542,460.48 56,977,938.64 124,975,816.55 (950,565.04) (391,583.01)
NON - CURRENT LIABILITIES
Employee Benefits 19 5,802,229.94 9,958,250.00 - - -
Deferred Tax Liabilities 12 89,815.00 - 89,815.00 - -
Finance Lease Obligations 20 6,722,008.12 1,054,293.10 - - -
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
28
NOTES GROUP COMPANY
2013 2012 2013 2012 01.04.2011
Rs. Rs. Rs. Rs. Rs.
CURRENT LIABILITIES
Trade & Other Payables 21 88,806,367.80 37,679,880.87 254,071.84 222,626.15 236,566.15
Finance Lease Obligations 20 2,595,927.84 538,343.73 - - -
Amounts due to Related Parties 22 4,213,395.50 87,897,294.58 - 87,897,294.58 -
Directors Current Accounts 23 50,000.00 57,142.86 - 57,142.86 57,142.86
Income Tax Liabilities 273,663.77 201,565.00 126,666.00 - 97,874.00
Bank Overdrafts 24 5,958,303.94 13,723,922.55 - - -
TOTAL EQUITY & LIABILITIES 332,054,172.39 208,088,631.33 125,446,369.39 87,226,498.55 -
I certify that these financial statements are in compliance with the requirements of the Companies Act No.07 of 2007.
Finance Officer The Board of Directors is responsible for the preparation and presentation of these financial statements. Approved and signed for and on behalf of the Board by,
Director Director
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
29
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31ST MARCH 2013 GROUP COMPANY
2013 2012 2013 2012
Rs. Rs. Rs. Rs.
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit / (Loss) before Interest & Taxation 55,918,338.20 3,501,526.54 (3,437,315.76) (558,982.03)
Adjustment for
Depreciation 2,106,415.88 4,243.11 102,966.67 -
Provision for Employee Benefits - 10,747.94 - -
Over Provision of Employee Benefits (1,262,020.06) - - -
Profit on Disposal of Financial Assets (139,309.65) (422,636.66) (139,309.65) (422,636.66)
Dividend Received (286,651.83) (2,500.00) (117,901.83) (2,500.00)
Fair Value Changes on Financial Assets 2,107,284.60 272,500.00 2,107,284.60 272,500.00
Current Account Written Back - (4,178,193.45) - -
OPERATING PROFIT / (LOSS) BEFORE
WORKING CAPITAL CHANGES 58,444,057.14 (814,312.52) (1,484,275.97) (711,618.69)
Changes in Working Capital
(Increase) / Decrease in Inventories (9,354,098.97) - - -
(Increase) / Decrease in Work in Progress 33,553,925.91 - - -
(Increase) / Decrease in Trade & Other Receivables (160,403,810.52) 5,581.89 (76,383.13) -
Increase / (Decrease) in Trade & Other Payables 50,693,482.08 (823,661.28) 31,445.69 (13,940.00)
Increase / (Decrease) in Amounts due to Related Parties (81,516,113.71) 87,897,294.58 (92,876,845.14) 87,897,294.58
Increase / (Decrease) in Directors Current Accounts (57,142.86) - (57,142.86) -
Cash Generated from / (used in) Operating Activities (108,639,700.93) 86,264,902.67 (94,463,201.41) 87,171,735.89
Tax Paid (1,107,145.94) (97,976.21) (110,023.00) (97,874.00)
Gratuity Paid (2,894,000.00) - - -
Interest Paid (1,665,103.93) (710.24) (30,638.49) -
Net Cash Flow from / (used in) Operating Activities (114,305,950.80) 86,166,216.22 (94,603,862.90) 87,073,861.89
Cash Flow from / (used in) Investing Activities
Acquisition of Subsidiary (2,289,940.43) (75,660,071.07) (18,388,890.00) (85,200,000.00)
Acquisition of Balance Controlling Interest (15,388,890.00) - - -
Acquisition of Financial Assets (6,342,097.60) (5,712,339.68) (6,342,097.60) (5,712,340.00)
Proceeds from Disposal of Financial Assets 821,309.65 3,988,976.66 821,309.65 3,988,976.66
Purchase of Plant & Equipment (2,433,408.66) - (1,271,200.00) -
Lease Rentals Paid (1,113,985.87) - - -
Dividend Income 286,651.83 2,500.00 117,901.83 2,500.00
Interest Received 8,463,784.02 263,896.62 1,300,489.84 -
Other Current Financial Assets 5,220,374.46 (19,808.04) (2,853,957.26) -
Net Cash Flow from / (used in) Investing Activities (12,776,202.60) (77,136,845.51) (26,616,443.54) (86,920,863.34)
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
30
GROUP COMPANY
2013 2012 2013 2012
Rs. Rs. Rs. Rs.
Cash Flow from / (used in) Financing Activities
Proceeds from Right Issue 129,533,040.00 - 129,533,040.00 -
Right Issue Expenses (1,112,690.00) - (1,112,690.00) -
Subsidiary Dividend to Minority Shareholders (238,212.00) - - -
Net Cash Flow from / (used in) Financing Activities 128,182,138.00 - 128,420,350.00 -
Net Increase / (Decrease) in Cash & Cash Equivalents 1,099,984.60 9,029,370.71 7,200,043.56 152,998.55
Cash & Cash Equivalents at the beginning of the year 9,029,370.71 - 152,998.55 -
Cash & Cash Equivalents at the end of the year (Note: A) 10,129,355.31 9,029,370.71 7,353,042.11 152,998.55
NOTE: A
Cash & Cash Equivalents at the end of the year
Cash in Hand & at Bank 16,087,659.25 22,753,293.26 7,353,042.11 152,998.55
Bank Overdrafts (5,958,303.94) (13,723,922.55) - -
10,129,355.31 9,029,370.71 7,353,042.11 152,998.55
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
31
STATEMENT OF CHANGES IN EQUITY
For the year ended 31st March 2013
Group - Attributable to Equity Shareholders of the Parent
Stated Retained Total Non-Controlling Total
Capital Earnings Interest Equity
Rs. Rs. Rs. Rs. Rs.
Restated balance as at 01st April 2011 48,574,870.00 (48,966,453.01) (391,583.01) - (391,583.01)
Net Assets Acquired on Acquisition - - - 53,853,071.11 53,853,071.11
Profit for the year - 1,641,848.99 1,641,848.99 1,874,601.55 3,516,450.54
Other Comprehensive Income - - - - -
Restated balance as at 31st March 2012 48,574,870.00 (47,324,604.02) 1,250,265.98 55,727,672.66 56,977,938.64
Profit for the year - 25,003,986.83 25,003,986.83 22,767,287.01 47,771,273.84
Other Comprehensive Income - - - - -
Total Comprehensive Income 48,574,870.00 (22,320,617.19) 26,254,252.81 78,494,959.67 104,749,212.48
Transaction with owners of the Company,
recognised directly in equity
Rights issue of Ordinary Shares 129,533,040.00 - 129,533,040.00 - 129,533,040.00
Right issue expenses - (1,112,690.00) (1,112,690.00) - (1,112,690.00)
Acquisition of Balance Controlling Interest - (657,822.22) (657,822.22) (14,731,067.78) (15,388,890.00)
Subsidiary Dividend to Minority Shareholders - - - (238,212.00) (238,212.00)
Total transaction with owners of the Company 129,533,040.00 (1,770,512.22) 127,762,527.78 (14,969,279.78) 112,793,248.00
Balance as at 31st March 2013 178,107,910.00 (24,091,129.41) 154,016,780.59 63,525,679.89 217,542,460.48
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
32
Company
Stated Retained Total
Capital Earnings
Rs. Rs. Rs.
Restated balance as at 01st April 2011 48,574,870.00 (48,966,453.01) (391,583.01)
Loss for the year - (558,982.03) (558,982.03)
Other Comprehensive Income - - -
Restated balance as at 31st March 2012 48,574,870.00 (49,525,435.04) (950,565.04)
Loss for the year - (2,493,968.41) (2,493,968.41)
Other Comprehensive Income - - -
Total Comprehensive Income 48,574,870.00 (52,019,403.45) (3,444,533.45)
Transaction with owners of the Company,
recognised directly in equity
Rights issue of Ordinary Shares 129,533,040.00 - 129,533,040.00
Right issue expenses - (1,112,690.00) (1,112,690.00)
Total transaction with owners of the Company 129,533,040.00 (1,112,690.00) 128,420,350.00
Balance as at 31st March 2013 178,107,910.00 (53,132,093.45) 124,975,816.55
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
33
ACCOUNTING POLICIES
1. REPORTING ENTITY
1.1.1. General
Serendib Engineering Group PLC is a Public Quoted Company with Limited Liability incorporated and
domiciled in Sri Lanka. The registered office of the Company and the principal place of business is
located at No.12B, Gregory's Road, Colombo 07.
The Company’s name was changed from Infrastructure Developers PLC to Serendib Engineering
Group PLC with effect from 18th February 2013.
1.1.2. Principal Activities and Nature of Operations
During the year the principal activity of the Company was acting as a Holding Company for
Subsidiaries engaged in a range of Engineering Services.
The Companies within the Group are engaged in;
a) Serendib Investment Holdings Ltd.
Investment in shares
b) Serendib Engineering & Agencies (Pvt) Ltd.
A multifaceted Engineering Company involved in Telecommunications, Plantation Engineering, Water
Supply and Filtration, Marine and Railway Engineering.
c) CCC Plantation Engineering Ltd.
Manufacturing of machinery items for Plantation Sector and service & repair of machines used in
Plantation Sector.
1.1.3. Approval of Financial Statements by the Board of Directors
The Financial Statements for the year ended 31st March 2013, were authorised for issue by the Board
of Directors in accordance with the resolution passed at the meeting held on 30th
August 2013.
1.2. BASIS OF PREPARATION
1.2.1. Statement of Compliance
The Financial Statements have been prepared in accordance with Sri Lanka Accounting Standards
(herein after referred to as SLFRS / LKAS) issued by The Institute of Chartered Accountants of Sri
Lanka (ICASL) and the requirements of the Companies Act, No. 07 of 2007 and Sri Lanka Accounting
and Auditing Standards Act, No. 15 of 1995.
For all periods up to and including year ended 31st March 2012, the Company and the Group
prepared its Financial Statements in accordance with Sri Lanka Accounting Standards (SLAS) effective
up to 31st March 2012. These Financial Statements for the year ended 31st March 2013 are the first
annual Financial Statements prepared and presented in accordance with Sri Lanka Accounting
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
34
1.2. BASIS OF PREPARATION (CONTD.)
Standards (SLFRS / LKAS) and SLFRS 1, First Time Adoption of Sri Lanka Accounting Standards (SLFRS)
has been applied.
Accordingly, the Company and the Group have prepared Financial Statements which comply with
SLFRS / LKAS applicable for the periods ending 31st March 2013, together with the comparative
periods ending on 31st March 2012, as described in the Accounting Policies.
The effect of the transition to SLFRS / LKAS on the previously reported financial positions and financial
performances of the Company and the Group is given in Note 35 and 36 to the Financial Statements.
1.2.2. Basis of Measurement
The Consolidated Financial Statements have been prepared on the historical cost basis except for the
following material items in the statement of financial position.
a) Financial Assets at fair value through profit or loss measured at fair value.
1.2.3. Functional and Presentation Currency
The financial statements of the Company and the Group are presented in Sri Lankan Rupees, which is
the company’s functional currency.
1.2.4. Use of Estimates and Judgements
The presentation of the Financial Statements in conformity with SLFRS / LKAS requires management
to make judgements, estimates and assumptions that affect the application of Accounting Policies
and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
those estimates and judgemental decisions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are 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.
1.2.5. Materiality and Aggregation
Each material item is presented separately in the Consolidated Financial Statements. Other amounts
are aggregated with amounts of similar nature or function.
1.3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been consistently applied to all periods presented in these
Consolidated Financial Statements and in preparing the opening SLFRS / LKAS Statement of Financial
Position at 01st April 2011 for the purposes of the transition to SLFRS / LKASs, unless otherwise
indicated.
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35
1.3.1. Basis of Consolidation
The Consolidated Financial Statements for the year ended 31 March 2013, comprise “the Company”
referring to Serendib Engineering Group PLC as the holding Company and “the Group” referring to the
companies whose accounts have been consolidated therein.
The Financial Statements of the Subsidiaries are prepared for a common financial year, which ends on
31st March. All intra group balances, income and expenses and profits and losses resulting from intra
group transactions are eliminated in full.
a) Acquisitions and Divestments
Acquisitions of subsidiaries are accounted for using the purchase method of accounting. The results of
subsidiaries have been included from the date of acquisition, or incorporation while results of
subsidiaries disposed will be included up to the date of disposal.
b) Subsidiaries
Subsidiaries are entities controlled by the group. Control exists when the Company has the power,
directly or indirectly to govern the financial and operating activities of an entity so as to obtain
benefits from its activities. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that the control commences until the date control ceases.
c) Non-controlling Interests
Non-controlling interests represent the portion of profit or loss and net assets of subsidiaries not
owned directly or indirectly by the company. The proportionate interest of minority shareholders in
the net assets employed by the group is disclosed separately within the equity in the Consolidated
Statement of Financial Position as “Non-Controlling Interests”. The total profits and losses for the year
of the Company, its subsidiaries are disclosed in the Consolidated Statement of Comprehensive
Income and the allocation of profit and loss for the period attributable to minority and equity holders
are disclosed separately.
d) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if
events or changes in circumstances indicate that the carrying value may be impaired. For the purpose
of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to groups of cash-generating units that are expected to benefit from the synergies of the
combination.
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1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
Impairment is determined by assessing the recoverable amount of the cash-generating unit to which
the goodwill relates. Where the recoverable amount of the cash generating unit is less than the
carrying amount, an impairment loss is recognised. The impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the unit and then to the other assets pro-rata to the
carrying amount of each asset in the unit.
1.3.2. Financial Assets
1.3.2.1. Initial Recognition & Measurement
Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through
profit or loss, loans & receivables, held- to- maturity investments, available- for- sale financial assets
as appropriate and determine the classification of its financial assets at initial recognition.
The financial assets include quoted and unquoted financial instrument and derivative financial
instruments, loans and other receivables, trade and other receivables, cash and short-term deposits.
1.3.2.2. Subsequent Measurement
The subsequent measurement of financial assets depends on their classification as follows.
a) Available-for-sale Financial Assets
Available-for-sale financial assets include equity and debt securities. Equity securities classified as
available-for-sale are those, which are neither classified as held for trading nor designated at fair
value through profit or loss. Debt securities in this category are those which are intended to be held
for an indefinite period of time and which may be sold in response to needs for liquidity or in
response to changes in the market conditions.
After initial measurement, available-for-sale financial assets are subsequently measured at fair value
with unrealised gains or losses recognised in Available-for-sale Reserve through Other Comprehensive
Income until the investment is derecognised, at which time the cumulative gain or loss is recognised
in the Statement of Comprehensive Income, or determined to be impaired, at which time the
cumulative loss is reclassified to the Statement of Comprehensive Income and removed from the
available-for-sale reserve.
If there is an indication of impairment in the unquoted equity securities, it is recognised in the
Statement of Comprehensive Income.
b) Financial Assets at fair value through profit or loss
Financial assets at fair value though profit or loss includes financial assets held for trading and
financial assets designated upon initial recognition at fair value through profit or loss. Financial assets
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1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
1.3.2. Financial Assets (Contd.)
are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the
near term. Financial assets at fair value through profit and loss carried in the statement of financial
position at fair value with changes in fair value recognised in the statement of comprehensive income.
c) Held-to-maturity Investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturities when the company has the positive intention and ability to hold it to maturity.
After initial measurement, held-to-maturity investments are measured at amortised cost using the
effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation is included in finance income in the income statement. The losses arising from
impairment are recognised as finance cost in the income statement.
d) Loans and Receivables
Loan and Receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. After initial measurement, such financial assets are subsequently
measured at amortised cost using the effective interest rate method (EIR), less impairment.
A provision for impairment of trade receivable is established when there is objective evidence that
the company will not be able to collect all amounts due according to the receivables.
Loans and receivables comprise cash and cash equivalents, trade and other receivable.
1.3.2.3. Derecognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a
transaction in which substantially all the risks and rewards of ownership of the financial asset are
transferred.
1.3.2.4. Impairment of Financial Assets
Financial assets other than those measured at fair value are assessed for indicators of impairment at
the end of each reporting period. Financial assets are considered to be impaired when there is
objective evidence that as a result of one or more event that occurred after the initial recognition of
the financial assets, the estimated future cash from the asset have been affected.
1.3.3. Financial Liabilities
1.3.3.1. Initial Recognition and Measurement
Financial liabilities within the scope of LKAS 39 are recognised when and only when the Company
becomes a party to the contractual provisions of the financial instrument. Financial Liabilities are
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1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
1.3.3. Financial Liabilities (Contd.)
recognised initially at fair value plus directly attributable transaction costs, however in the case of
financial liabilities classified as fair value through profit & loss the directly attributable costs are not
considered.
The financial liabilities include trade and other payables, loans and borrowings and bank overdrafts.
1.3.3.2. Subsequent Measurement
The subsequent measurement of financial liabilities depends on their classification as follows.
a) Trade and Other payables
Trade and Other Payables are non-derivative financial liabilities. After initial measurement, such
financial liabilities are subsequently measured at amortised cost using the effective interest rate
method.
b) Loans and Borrowings
After 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.
1.3.3.3. Derecognition
Financial liabilities are derecognised when and only when they are extinguished, that is when the
obligation is discharged, cancelled or expired.
1.3.4. Plant & Equipment and Depreciation
1.3.4.1. Recognition and Measurement
Items of plant & equipment are measured at cost or valuation less accumulated depreciation and
accumulated impairment, if any, provided on the basis stated in 1.3.4.5. below.
1.3.4.2. Owned Assets
The cost of plant & equipment includes expenditure that are directly attributable to the acquisition or
construction together with any expenses incurred in bringing the assets to its working condition for its
intended use.
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1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
1.3.4. Plant & Equipment and Depreciation (Contd.)
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
is treated as capital expenditure.
1.3.4.3. Restoration Cost
Expenditure incurred on repairs or maintenance of Plant and Equipment in order to restore or
maintain the future economic benefits expected from originally assessed standard of performance, is
recognised as an expense when incurred.
1.3.4.4. De-recognition
An Item of Plant & Equipment is derecognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is included in
the Income Statement in the year the asset is derecognised.
1.3.4.5. Depreciation
Depreciation on Plant & Equipment has been provided on the straight line basis so as to write off the
cost of Plant & Equipment over their estimated useful lives.
The annual rates used for this purpose which are consistent with those of previous years are as follows.
Furniture & Fittings Office Equipment Motor Vehicles Tools & Equipment
Over 5 -10 Years Over 5 -10 Years Over 5 Years Over 2 Years
Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that
the asset is classified as held for sale and the date that the asset is derecognised.
1.3.4.6. Finance Leases
Plant and Equipment on finance leases, which effectively transfers to the Company substantially all of
the risk and benefits incidental to ownership of the leased item, are capitalised at their cash price and
disclosed as Plant and Equipment and depreciated over the period the Company is expected to
benefit from the use of the leased assets.
The corresponding principal amount payable to the lessor is shown as a liability, lease payments are
apportioned between the finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. The interest payable over the
period of the lease is transferred to an interest in suspense account. The interest element of the
rental obligations applicable to each financial year is charged to the income statements over the
period of the lease.
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1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
1.3.4. Plant & Equipment and Depreciation (Contd.)
1.3.4. Investments in Subsidiaries
Unquoted Investments in Subsidiaries are treated as Long Term Investments and are valued at cost.
Provision is made for diminution in value of Investments only if such diminution is expected to be
permanent.
1.3.5. Intangible Assets
An intangible asset is an identifiable non monitory asset without physical substance held for use in
the production or supply of goods or services, or for administrative purpose.
1.3.5.1. Basis of Recognition
Intangible assets are recognised if it is probable that the future economic benefits that are
attributable to the asset will flow to the entity and the cost of the assets can be measured reliably.
a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of
the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested
annually for impairment and carried at cost less accumulated impairment losses. Impairment losses
on goodwill are not reversed. The negative goodwill is recognised immediately in the income
statement. Gains and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
1.3.6. Inventories and Work-in-Progress
a) Inventories
Inventories are valued at the lower of cost and net realisable value after making due allowances for
obsolete and slow moving items. Net realisable value is the price at which inventories can be sold in
the ordinary course of business less the estimated cost of completion and the estimated cost
necessary to make the sale.
b) Work-in-Progress
Work in progress is recognised on actual cost incurred in relation to the uncertified work done as at
the reporting date. It includes cost of work performed and direct overhead expense.
1.3.7. Cash and Cash Equivalents
Cash and Cash equivalents are defined as cash in hand, demand deposits and short term highly liquid
investments, readily convertible to known amounts of cash and subject to insignificant risk of changes
in value.
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1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
For the purpose of the statement of cash flows, cash and cash equivalents comprise of savings accounts,
call deposits, cash in hand, cash at banks and bank overdraft.
1.3.8. Impairment of Non-Financial Assets
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to
determine whether there is an indication of impairment. If any such indication exists, or when annual
impairment testing for an asset is required, then the asset's recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its
fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining fair value, less costs to sell, an
appropriate valuation model is used.
An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds
its estimated recoverable amount. Impairment losses are recognised in profit and loss. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
1.3.9. Employee Benefits
a) Defined Benefit Plan - Retirement Gratuity
Company
Provision has not been made for gratuity in the accounts under the payment of Gratuity Act No. 12 of
1983, since the Company does not employ any staff. All operational services are provided by Navara
Capital Ltd.
Group
Serendib Engineering Agencies (Pvt) Ltd.
Provision up to 31st March 2012 had been made on half month salary based on the last month of the
financial year of all employees multiplied by the completed years of services, commencing from the
first year of service.
Commencing from this financial year Serendib Engineering Agencies (Pvt) Ltd had adopted the LKAS
19 - “Employee Benefits” and applied the formula method to make a reliable estimate of the
Company’s retirement benefits using the “Projected Unit Credit Method” in order to determine the
present value of the retirement benefit obligation.
A 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 plan is the present value
of the defined obligation at the reporting date. The defined benefit obligation is calculated annually
using the projected unit credit method.
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1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
The provision has been made for retirement gratuities from the first year of service for all employees,
in conformity with LKAS 19 - “Employee Benefits”. However, under the payment of Gratuity Act No.
12 of 1983, the liability to an employee arises only on completion of 5 years of continued service. The
liability is not externally funded.
b) Defined Contribution Plans - Employees Provident Fund & Employees Trust Fund
Company
Contribution for Employees Provident Fund and Employees Trust Fund have not been made since the
Company does not employ any staff.
Group
Serendib Engineering Agencies (Pvt) Ltd.
Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund
Contributions in line with respective Statutes and Regulations.
1.4. REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured.
The following specific criteria are used for the purpose of recognition of revenue.
1.4.1 Construction Contract
When the outcome of the contract can be measured reliably, contract revenue is recognised by
reference to the stage of completion of the contract activity as at the reporting date. Further, the
company recognise construction revenue only after receiving the work done certification from the
engineer. Any expected losses on specific contracts are recognised immediately by a corresponding
reduction in their revenue.
1.4.2. Rendering of Services
Revenue from rendering of services is recognised in the accounting period in which the services are
rendered or performed.
1.4.3. Finance Income and Finance Expense
Finance income comprises interest income on funds invested, dividend income and gains on the
disposal of financial assets at fair value through profit or loss.
Interest income is recognised on an accrual basis. Dividend Income is recognised on a cash basis.
Profit or Losses on disposal of Financial Assets are accounted for in the Income Statement on the
basis of realised net profit or loss.
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1.4. REVENUE RECOGNITION (CONTD.)
Finance expense comprises of interest expense on borrowings and the changes in the fair value of
financial assets. All borrowing costs are recognised as an expense in the period in which they are
incurred.
1.4.4. Other Income
Other Income is recognised on an Accrual Basis.
Net Gains and losses of a revenue nature on the disposal of Plant & Equipment and other non-current
assets have been accounted for in the Income Statement, having deducted from proceeds on
disposal, the carrying amount of the assets and related selling expenses. On disposal of plant and
equipment the amount remaining in the Revaluation Reserve relating to that asset is transferred
directly to Accumulated Profit.
1.5. EXPENDITURE RECOGNITION
All the expenditure incurred in running of the business has been charged to the Income Statement in
arriving at the profit or loss for the year. Provision has also been made for all known liabilities.
1.5.1. Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised
as part of the cost of the asset. 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.
1.5.2. Income Tax Expenses
Income tax expenses comprise of current and deferred tax.
1.5.2.1. Current Tax
The provision for Income Tax is based on the elements of Income & Expenditure as reported in the
financial statements and computed in accordance with the provisions of the Inland Revenue Act No.
10 of 2006 and the amendments thereto.
1.5.2.2. Deferred Tax
Deferred Tax is provided in full, using the liability method, for all temporary differences arising
between the tax base of assets and liabilities and their carrying amounts in the Financial Statements.
Deferred tax is determined using tax rates that have been enacted or substantially enacted by the
date of the Statement of Financial Position and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability settled.
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1.4. EXPENDITURE RECOGNITION (CONTD.)
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
be available against which the asset can be utilised. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
1.5.2.3. Withholding Tax on Dividend
Tax on Dividend Income from subsidiaries is recognised as an expense in the Consolidated Income
Statement.
1.6. STATEMENT OF CASH FLOWS
The Statement of Cash Flows has been prepared using the “Indirect method”.
1.7. EARNINGS PER SHARE
The Company presents Earnings per Share (EPS) data for its ordinary shares. EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted
average number of ordinary shares outstanding during the period.
1.8. TRANSACTIONS WITH RELATED PARTIES
Disclosures are made in respect of the transactions in which one party has the ability to control or
exercise significant influence over the financial and operating policies of the other, irrespective of
whether a price is charged.
1.9. FIRST TIME ADOPTION OF SLFRS / LKAS
The financial statements, for the year ended 31st March 2013 are the first financial statements
prepared in accordance with SLFRS / LKAS. Previously for period up to 31st March 2012, the Company
prepared its financial statements in accordance with Sri Lanka Accounting Standards which were
effective as at that date.
1.9.1. Exemptions Applied
SLFRS 1 - First Time Adoption of Sri Lanka Financial Reporting Standards allows first time adopters
certain exemptions which are optional and certain exceptions which are mandatory from
retrospective application of certain SLFRS / LKAS.
1.9.2. The Company has applied the following Mandatory Exception
Significant Accounting Judgment, estimates and assumptions
Significant Accounting Judgment, estimates and assumptions at 1st April 2011 and 31st March 2012
are consistent with those made for the same dates in accordance with the previous Sri Lanka
Accounting Standards effective up to 31st March 2012 (after adjustments to reflect any difference in
accounting policies).
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45
The estimates used by the Company to present these amounts in accordance with SLFRS / LKAS
effective from 1st April 2012 reflect conditions at 1st April 2011, the date of transition to SLFRS / LKAS
and as of 31st March 2012.
1.9.3. Explanations for Transition to SLFRS / LKASS
In preparing SLFRS / LKAS Statement of Financial Position for previously reported financial periods,
required adjustments have been made in accordance with the respective SLFRS / LKASs. The effect of
the transition from SLASs to SLFRS / LKASs has been presented in the reconciliation statements and
accompanying notes with regard to material reconciliation items.
1.10. NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
The Institute of Chartered Accountants of Sri Lanka has issued the following standards which become
effective for annual periods beginning after the current financial year. Accordingly, these standards
have not been applied in preparing these financial statements. The Company will be adopting these
standards when they become effective.
SLFRS 9 - Financial Instruments
SLFRS 10 - Consolidated Financial Statements
SLFRS 12 - Disclosure of Interest in Other Entities
SLFRS 13 - Fair Value Measurement
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
46
NOTES TO THE FINANCIAL STATEMENTS
NOTES GROUP
COMPANY
2013
2012
2013
2012
Rs.
Rs.
Rs.
Rs.
2 REVENUE 2.1 Income
Projects Income 331,445,615.52
-
-
-
Foreign Currency Income 7,655,209.00
-
-
-
339,100,824.52
-
-
-
2.2 Other Income
Payable Balances Written Back 160,919.15
-
145,126.15
-
Current Account Written Back -
4,178,193.45
-
-
Over Provision of Employee Benefits 1,262,020.06
-
-
-
Sale of Scraps 45,000.00
-
-
-
1,467,939.21
4,178,193.45
145,126.15
-
3 PROFIT BEFORE TAXATION
Profit before Taxation is stated after charging
all expenses including the following:
Salaries & Wages 24,809,788.97
23,856.75
-
-
Employees Provident Fund 2,154,560.00
2,126.79
-
-
Employees Trust Fund 538,650.00
531.70
-
-
Professional Fees 370,230.23
57,142.86
50,000.00
57,142.86
Auditors Remuneration 226,112.00
55,000.00
70,000.00
55,000.00
Depreciation 2,106,415.88
4,243.11
102,966.67
-
4 FINANCE INCOME
Profit on Disposal of Financial Assets 139,309.65
422,636.66
139,309.65
422,636.66
Dividend Income 286,651.83
2,500.00
117,901.83
2,500.00
Interest on Fixed Deposits 7,635,939.88
19,808.34
518,596.14
-
Interest on Call Deposits -
-
781,893.70
-
Interest on Savings Accounts 794,204.80
16,721.56
-
-
Interest on Debentures 33,639.34
-
-
-
8,889,745.50
461,666.56
1,557,701.32
425,136.66
5 FINANCE EXPENSES
Lease Interest 879,315.00
710.24
-
-
Overdraft Interest 785,788.93
-
30,638.49
-
Transaction Cost 66,299.55
64,081.36
66,299.55
64,081.36
Fair Value Changes on Financial Assets 2,107,284.60
272,500.00
2,107,284.60
272,500.00
3,838,688.08
337,291.60
2,204,222.64
336,581.36
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47
NOTES GROUP
COMPANY
2013
2012
2013
2012
Rs.
Rs.
Rs.
Rs.
6 INCOME TAX EXPENSES
Current Income Tax
Tax Expenses on Ordinary Activities for the year 16,428,347.30
20,895.66
236,689.00
-
Deferred Taxation
Deferred Tax Expense / (Income) (1,482,602.85)
-
89,815.00
-
14,945,744.45
20,895.66
326,504.00
-
6.1
Reconciliation of Accounting Profit / (Loss)
and Taxable Income
Accounting Profit / (Loss) (before Taxation) 62,717,018
3,537,346
(2,167,464)
(558,982)
Aggregate Disallowed Expenses 6,535,462
314,547
2,850,337
336,581
Aggregate Allowable Expenses (15,981,786)
(4,575,182)
(1,981,435)
(425,136)
Profit Exempted from Income Tax (5,762,937)
-
-
-
Adjusted Profit / (Loss) 47,507,757
723,288
(1,298,562)
(647,536)
Adjusted Trading Profit 49,898,376
108,838
-
-
Aggregate Statutory Income 8,463,784
35,757
1,300,490
-
Tax Losses for the year & Utilised (455,171)
-
(455,171)
-
Taxable Income 57,906,989
144,594
845,318
-
Income Tax Expenses for the year is made up
Statutory Tax Rate
- Income Tax @ 10% -
10,884
-
-
- Income Tax @ 28% 16,213,957
10,012
236,689
-
- Dividend Tax 214,390
-
-
-
16,428,347
20,896
236,689
-
6.2 Corporate income taxes of companies in the Group are computed in accordance with the Inland Revenue Act,
No. 10 of 2006 and subsequent amendments thereto. The tax liability of the Company and its Subsidiaries are
computed at 28% as at 31st March 2013.
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48
NOTES
7 EARNINGS / (LOSS) PER ORDINARY SHARE
The calculation of basic earnings / (loss) per share for the Company and the Group as at 31st March 2013 was
based on the profit / (loss) attributable to ordinary shareholders of Rs. (2,493,968.41) and Rs. 25,003,986.83
respectively and a weighted average number of shares outstanding of 5,948,803 calculated as follows.
Number of Ordinary Shares for the year 2012 have been adjusted to reflect the increase in number of shares
consequent to the right issue on 11th September 2012. Accordingly, earnings per share has been adjusted
respectively as per LKAS 33 "Earnings Per Share".
GROUP
COMPANY
2013
2012
2013
2012
Amounts used as the Numerators (Rs.)
Profit / (Loss) attributable to
Ordinary Share Holders 25,003,986.83
1,641,848.99
(2,493,968.41)
(558,982.03)
Number of Ordinary Shares used as Denominators
Weighted average number of Ordinary Shares (I) 5,948,803
5,294,661
5,948,803
5,294,661
Basic earnings / (loss) per share (Rs.) 4.20
0.31
(0.42)
(0.11)
(I) Issued number of Ordinary Shares
as at beginning of the year 4,857,487
4,857,487
4,857,487
4,857,487
Effect of Right Issue 1,091,316
437,174
1,091,316
437,174
Weighted average number of Ordinary Shares 5,948,803
5,294,661
5,948,803
5,294,661
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49
NOTES As at
01.04.2012 Additions Disposals / Discarded
As at 31.03.2013
Rs. Rs. Rs.
Rs.
8 PLANT & EQUIPMENT 8.1 GROUP
Cost
Furniture & Fittings 2,107,276.95 100,137.66 (9,684.00)
2,197,730.61
Office Equipment 8,861,828.65 895,348.00 (618,000.00)
9,139,176.65
Motor Vehicles 21,128,715.74 138,857.80 -
21,267,573.54
Tools & Equipment 4,431,123.91 1,299,065.20 -
5,730,189.11
36,528,945.25 2,433,408.66 (627,684.00)
38,334,669.91
Leased Assets
Motor Vehicles 2,475,000.00 8,839,285.00 -
11,314,285.00
39,003,945.25 11,272,693.66 (627,684.00) 49,648,954.91
Accumulated Depreciation
Furniture & Fittings 1,269,215.14 189,828.53 (9,684.00)
1,449,359.67
Office Equipment 4,606,081.79 687,922.31 (618,000.00)
4,676,004.10
Motor Vehicles 21,128,715.74 12,727.37 -
21,141,443.11
Tools & Equipment 4,032,273.11 131,651.67 -
4,163,924.78
31,036,285.78 1,022,129.88 (627,684.00)
31,430,731.66
Leased Assets
Motor Vehicles 990,000.00 1,084,286.00
2,074,286.00
32,026,285.78 2,106,415.88 (627,684.00) 33,505,017.66
NET BOOK VALUE 6,977,659.47
16,143,937.25
As at 01.04.2012 Additions /
As at 31.03.2013
(Discarded)
8 PLANT & EQUIPMENT
Rs. Rs.
Rs.
8.2 COMPANY
Cost
Furniture & Fittings
9,684.00 (9,684.00)
-
Office Equipment
618,000.00 (618,000.00)
-
Equipment
- 1,271,200.00
1,271,200.00
(627,684.00)
627,684.00 1,271,200.00 1,271,200.00
Accumulated Depreciation
Furniture & Fittings
9,684.00 (9,684.00)
-
Office Equipment
618,000.00 (618,000.00)
-
Equipment
102,966.67
102,966.67
(627,684.00)
627,684.00 102,966.67 102,966.67
NET BOOK VALUE
-
1,168,233.33
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
50
NOTES
GROUP
2013
2012
9 INTANGIBLE ASSETS
Rs.
Rs.
Goodwill
Balance as at the beginning of the year
21,669,723.27
-
Goodwill on Acquisition of Subsidiary
99,869.93
21,669,723.27
Balance as at the end of the year
21,769,593.20
21,669,723.27
This represents the excess of the cost of acquisition of the net Assets of the following companies.
The aggregate carrying amount of Goodwill allocated to each Company is as follows.
Serendib Investment Holdings Ltd.
667,311.09
667,311.09
Serendib Engineering & Agencies (Pvt) Ltd.
21,002,412.18
21,002,412.18
C C C Plantation Engineering Ltd.
99,869.93
-
21,769,593.20
21,669,723.27
The management is of the view that a provision for impairment of goodwill is not required as at the end of the reporting period.
COMPANY
Holding No. of 2013
2012
Shares Rs.
Rs.
10 INVESTMENTS IN SUBSIDIARIES
Unquoted Investments
C C C Plantation Engineering Ltd. 100% 1,800,000 3,000,000.00
-
Serendib Engineering & Agencies (Pvt) Ltd. 10% 52,936 15,388,890.00
-
Serendib Investment Holdings Ltd. 60% 85,200,000 85,200,000.00
85,200,000.00
103,588,890.00
85,200,000.00
10.1 The Company acquired 100% shareholding in CCC Plantation Engineering Ltd which commenced
operations during the year 2013. CCC Plantation Engineering Ltd's principal activity is manufacturing
of machinery items for Plantation Sector and service & repair of machines used in Plantation Sector.
10.2 The Company held 54% indirect shareholding in Serendib Engineering & Agencies (Pvt) Ltd and
further acquired 10% of the issued ordinary share capital during the year. Serendib Engineering &
Agencies (Pvt) Ltd is a multifaceted Engineering Company involved in Telecommunications,
Plantation Engineering, Water Supply and Filtration, Marine and Railway Engineering.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
51
NOTES GROUP
2013
2012
No. of
No. of
Shares
Rs.
Shares
Rs.
11 OTHER NON CURRENT FINANCIAL ASSETS
Available-For-Sale Financial Assets
Un-quoted
Ceylinco Developers Ltd. 250,000
2,500,000.00
250,000
2,500,000.00
2,500,000.00
2,500,000.00
Investment in Ceylinco Developers Ltd, which was previously presented as Long Term Investments now
recognised as a financial asset and classified as Available-for-sale Financial Asset.
GROUP
COMPANY
2013
2012
2013
2012
Rs.
Rs.
Rs.
Rs.
12 DEFERRED TAXATION
Deferred Tax Assets (1,572,417.85)
-
-
-
Deferred Tax Liabilities 89,815.00
-
89,815.00
-
Provision made / (Released) to
Income Statement (1,482,602.85)
-
89,815.00
-
12.1 Deferred Tax Assets
Balance as at beginning of the year -
-
-
-
Accelerated Depreciation for Tax purposes 52,207.00
Employee Benefit Liability 1,520,210.85
-
-
-
Balance as at end of the year 1,572,417.85
-
-
-
12.2 Deferred Tax Liabilities
Balance as at beginning of the year -
-
-
-
Accelerated Depreciation for Tax purposes 89,815.00
-
89,815.00
-
Balance as at end of the year 89,815.00
-
89,815.00
-
12.3 The Deferred Tax Asset is arrived at by applying the effective income Tax rate of 28% applicable for
the year of assessment 2012/13 to the temporary difference as at 31st March 2013.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
52
NOTES GROUP COMPANY
2013 2012 2013 2012
No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value
Shares
Shares
Shares
Shares
13
Rs. Rs.
Rs. Rs.
Rs. Rs.
Rs. Rs.
FINANCIAL ASSETS AT FAIR VALUE
THROUGH PROFIT OR LOSS
Bank, Finance and Insurance
Pan Asia Banking Corporation PLC 50,878 1,071,222.44 966,682.00 - - - 50,878 1,071,222.44 966,682.00 - - -
Beverage, Food and Tobacco
Renuka Shaw Wallace PLC 77,000 2,230,707.20 1,386,000.00 - - - 77,000 2,230,707.20 1,386,000.00 - - -
Diversified Holdings
Expolanka Holdings PLC - - - 110,000 794,823.54 682,000.00 - - - 110,000 794,823.54 682,000.00
Softlogic Holdings PLC 60,000 763,474.51 624,000.00 35,000 490,450.50 392,000.00 60,000 763,474.51 624,000.00 35,000 490,450.50 392,000.00
Manufacturing
Tokyo Cement Company (Lanka) PLC 50,000 1,525,900.80 1,175,000.00 - - - 50,000 1,525,900.80 1,175,000.00 - - -
Motors
Colonial Motors PLC 15,357 2,192,342.70 1,274,631.00 2,500 884,800.00 799,500.00 15,357 2,192,342.70 1,274,631.00 2,500 884,800.00 799,500.00
7,783,647.65 5,426,313.00
2,170,074.04 1,873,500.00
7,783,647.65 5,426,313.00
2,170,074.04 1,873,500.00
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
53
NOTES GROUP
COMPANY
2013
2012
2013
2012
Rs.
Rs.
Rs.
Rs.
14 TRADE & OTHER RECEIVABLES
Debtors & Retentions 199,787,004.61
39,628,256.93
-
-
Deposits, Advances & Prepayments 2,155,784.03
3,333,812.18
2,257.26
-
Other Receivables 2,846,382.64
1,105,616.55
18,296.60
-
Tax Receivables 5,078,585.64
20,273,921.90
55,829.27
-
209,867,756.92
64,341,607.56
76,383.13
-
15 AMOUNTS DUE FROM RELATED PARTIES
C C C Plantation Engineering Ltd. -
72,280.00
-
-
Navara Capital Ltd. -
685,098.00
-
-
Serendib Engineering & Agencies (Pvt) Ltd. -
-
4,979,550.56
-
Mr. S.C. De Silva 891,226.55
-
-
-
891,226.55
757,378.00
4,979,550.56
-
16 OTHER CURRENT FINANCIAL ASSETS
Held-To-Maturity Investments
Fixed Deposits
- National Development Bank PLC 2,853,957.26
-
2,853,957.26
-
- Pan Asia Banking Corporation PLC 457,286.79
392,018.59
-
-
- Seylan Bank PLC 34,312,922.53
42,252,522.45
-
-
Debentures
- Seylan Bank PLC
(2,000 Debenture at Rs. 100/- each) -
200,000.00
-
-
37,624,166.58
42,844,541.04
2,853,957.26
-
17 CASH AND CASH EQUIVALENTS
Savings Accounts
Pan Asia Banking Corporation PLC -
732,441.56
-
-
Seylan Bank PLC -
149,464.68
-
-
Call Deposits
Pan Asia Banking Corporation PLC 600,000.00
-
-
-
Current Accounts
Bank of Ceylon 87,774.72
54,730.92
-
-
Hatton National Bank PLC 787,255.00
-
-
-
National Development Bank PLC 7,340,291.15
-
7,291,041.15
-
Nations Trust Bank PLC 5,039,940.94
20,372,162.06
-
-
Pan Asia Banking Corporation PLC 1,021,136.97
352,583.46
62,000.96
152,998.55
Seylan Bank PLC 255,554.00
100,678.57
-
-
Petty Cash 271,108.47
1,230.01
-
-
Cash in Hand 684,598.00
990,002.00
-
-
16,087,659.25
22,753,293.26
7,353,042.11
152,998.55
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
54
NOTES GROUP
COMPANY
2013
2012
2013
2012
Rs.
Rs.
Rs.
Rs.
18 STATED CAPITAL
Balance as at beginning of the year
4,857,487 Ordinary Shares 48,574,870.00
48,574,870.00
48,574,870.00
48,574,870.00
Issued during the year
1,619,163 Ordinary Shares 129,533,040.00
-
129,533,040.00
-
Balance as at end of the year
6,476,650 Ordinary Shares 178,107,910.00
48,574,870.00
178,107,910.00
48,574,870.00
The Company made a Right Issue of 1,619,163 Ordinary Shares at a price of Rs. 80/- per share to the holders of
the issued Ordinary Shares of the Company as at end of trading on 15th August 2012 in the proportion of one (01)
new Ordinary Share for every three (03) existing issued Ordinary Shares held. This issue closed on 30th August
2012 and was fully subscribed. The Rights shares were allotted on 11th September 2012. The consideration received
was Rs. 129,533,040/-. The proceeds of the Right issue was utilised to overcome the serious loss of capital and also
to capitalise the Company to carry out the business operations.
19 EMPLOYEE BENEFITS
Balance as at beginning of the year 9,958,250.00
9,947,502.06
-
-
Add:
Provision for the year -
10,747.94
-
-
Over Provision of Employee Benefits (1,262,020.06)
-
-
-
8,696,229.94
9,958,250.00
-
-
Less:
Payment made during the year (2,894,000.00)
-
-
-
Balance as at the end of the year 5,802,229.94
9,958,250.00
-
-
Serendib Engineering Agencies (Pvt) Ltd up to 31st March 2012 had been made provision for retirenment gratuity
based on half month salary based on the last month of the financial year of all employees multiplied by the completed
years of services, commencing from the first year of service.
Commencing from this financial year Serendib Engineering Agencies (Pvt) Ltd had adopted the LKAS 19 -
“Employee Benefits” and applied formula method to make a reliable estimate of the Company’s employee benefits
using the “Projected Unit Credit Method” in order to determine the present value of the employee benefits.
The following key assumptions were made in arriving at the retirement benefit obligation as at 31st March 2013.
Retirement Age 55 Years
Salary Increment Rate 7.5%
Discount Rate 11%
Employee Turnover Ratio 5%
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
55
NOTES GROUP COMPANY
2013 2012 2013 2012 01.04.2011
Rs. Rs. Rs. Rs. Rs.
20 FINANCE LEASE OBLIGATIONS
20.1 Payable after one year
Lease Cost 7,787,309.33 1,129,087.47 - - -
Less: Interest in Suspense (1,065,301.21) (74,794.37) - - -
6,722,008.12 1,054,293.10 - - -
20.2 Payable within one year
Lease Cost 4,094,252.88 645,192.84 - - -
Less: Interest in Suspense (1,498,325.04) (106,849.11) - - -
2,595,927.84 538,343.73 - - -
21 TRADE & OTHER PAYABLES
Trade Creditors 22,923,511.41 15,881,030.01 - - -
Accrued Expenses 61,928,729.54 21,653,724.71 101,020.41 77,500.00 91,440.00
Other Payables 3,954,126.85 145,126.15 153,051.43 145,126.15 145,126.15
88,806,367.80 37,679,880.87 254,071.84 222,626.15 236,566.15
22 AMOUNTS DUE TO RELATED PARTY
Navara Capital Ltd. 4,213,395.50 87,897,294.58 - 87,897,294.58 -
4,213,395.50 87,897,294.58 - 87,897,294.58 -
23 DIRECTORS CURRENT ACCOUNTS
Mr. H.N De Silva 50,000.00 - - - -
Mr. Chandramohan Shangaralingam - 57,142.86 - 57,142.86 57,142.86
50,000.00 57,142.86 - 57,142.86 57,142.86
24 BANK OVERDRAFT
Seylan Bank PLC 5,958,303.94 13,723,922.55 - - -
5,958,303.94 13,723,922.55 - - -
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
56
NOTES
25 RELATED PARTY DISCLOSURES
25.1 Parent and Ultimate Controlling Party
The Company’s parent undertaking is Navara Capital Ltd.
25.2 Transaction with Key Management Personnel (KMP)
According to Sri Lanka Accounting Standard (LKAS 24) - “Related Party Disclosures”, Key Management
Personnel (KMP) are those having authority and responsibility for planning and controlling the activities of the
entity. Accordingly, Key Management Personnel include the members of the Board of Serendib Engineering Group
PLC and its Subsidiary Companies.
25.2.1 Loans to Key Management Personnel
No Loans have been given to Key Management Personnel during the year.
25.2.2 Key Management Personnel Compensation
No Compensation have been given to the Directors of the Company and its Subsidiaries.
25.2.3 Other Transactions with Key Management Personnel
There were no other transaction with key management personnel other than those disclosed in Note 25.2 to these
financial statements during the year.
25.3 Identity of the Related Parties
The Company carries out transactions in ordinary course of its business with parties who are defined as related
parties in Sri Lanka Accounting Standard (LKAS 24) - “Related Party Disclosures” the details of which are reported
below.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
57
NOTES
25 RELATED PARTY DISCLOSURES (CONTD.)
25.4
Transaction with Related Parties
The Company had following transactions with related entities during the year under review.
Transaction Value
Name of the Related Party
Name of the Director Relationship
Nature of Transaction 2013 2012
Rs. Rs.
Navara Capital Ltd. Mr. H.N. De Silva Parent
Related Party Balance - (87,897,294.58)
Mrs. D.L. De Silva
Other Expenses 1,765,098.24 -
Mr. Sagara Kariyawasam
Advance Received 1,002,500.00
Settlement of Outstanding
Opening Balance (87,897,294.58)
Settlement of Advance &
Other Expenses (2,767,598.24)
CCC Plantation Engineering Ltd. Mr. H.N. De Silva Subsidiary
Acquisition of Shares 3,000,000.00 -
Mrs. D.L. De Silva
Serendib Engineering & Agencies (Pvt) Ltd. Mr. H.N. De Silva Subsidiary
Acquisition of Shares 15,388,890.00 -
Mr. Sagara Kariyawasam
Related Party Balance 4,979,550.56 -
Other Expenses 1,014,691.90 -
Advance Received 11,800,000.00 -
Advance Paid (7,835,141.34) -
Serendib Investment Holdings Ltd. Mr. H.N. De Silva Subsidiary
Acquisition of Shares - 85,200,000.00
Mrs. D.L. De Silva
All operational services are provided by Navara Capital Ltd.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
58
NOTES
25 RELATED PARTY DISCLOSURES (CONTD.)
25.4 Transaction with Related Parties
Serendib Engineering Group PLC has given a Corporate Guarantee of Rs. 44Mn to Seylan Bank PLC
on behalf of Serendib Engineering & Agencies (Pvt) Ltd.
The above transactions were carried out on commercial terms and conditions and at a price agreed
upon by the management.
No interest have been received or paid on the above Related Party balances.
26 CAPITAL EXPENDITURE COMMITMENTS
There are no Capital Commitments outstanding as at 31st March 2013.
27 CONTINGENT LIABILITIES
There were no material Contingent Liabilities outstanding as at 31st March 2013.
28 RESTATEMENT OF COMPARATIVE FIGURES
Comparative information including quantitative, narrative and descriptive information is disclosed
in respect of the previous period for all amounts reported in the Financial Statements in order to
enhance the understanding of the current period's Financial Statements and to enhance the inter
period comparability.
29 EVENTS AFTER THE REPORTING PERIOD
There have been no material events after the reporting date that require disclosure in the financial
statements.
30 DIRECTORS RESPONSIBILITIES
The Board of Directors take responsibility for the preparation and presentation of these financial
statements as per the provisions of the Companies Act No. 7 of 2007.
31 ASSETS PLEDGED
Serendib Engineering & Agencies (Pvt) Ltd.
The following assets have been pledged as security for liabilities.
Nature of Assets
Nature of Liability
Seylan Bank PLC
a) Lien over Fixed Deposits of Seylan Bank PLC
Letter of Guarantee
Rs. 75.0 Mn
b) Serendib Engineering Group PLC has given a Corporate Guarantee of Rs. 44Mn to Seylan Bank PLC on behalf of Serendib Engineering & Agencies (Pvt) Ltd.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
59
NOTES
32 CHANGE IN FINANCIAL PERIOD OF SUBSIDIARY
CCC Plantation Engineering Ltd..
CCC Plantation Engineering Ltd in has prepared its first audited financial statements for the 15 months period from 1st
January 2012 to 31st March 2013. The Company has used the same in the consolidated financial statements prepared
for the financial year ended 31st
March 2013.
33 GROUP COMPANIES
Proportion of Proportion of
Ownership Ownership
Interest as at Interest as at
Subsidiaries 31.03.2013 31.03.2012 Principal Activities
Serendib Investment Holdings Ltd. 60% 60% Investment in Shares
Serendib Engineering & Agencies (Pvt) Ltd. 64% 54% A multifaceted Engineering Company
(Serendib Investment Holdings Ltd holds
involved in Telecommunications,
90% shares and Serendib Engineering Group
Plantation Engineering, Water Supply
PLC holds 10% shares of Serendib Engineering
and Filtration, Marine and Railway
& Agencies (Pvt) Ltd.)
Engineering.
C C C Plantation Engineering Ltd. 100% - Manufacturing of machinery items for
Plantation Sector and service & repair
of machines used in Plantation Sector.
34 RISK MANAGEMENT OBJECTIVES AND POLICIES
34.1 Financial Risk Management
The Group has exposure to the following risks arising from financial instruments.
a) Credit Risk
b) Liquidity Risk
c) Market Risk
The note presents information on the Group's exposure to each of the above risk categories, Group’s
objective, policies and processes for measuring and managing risk and the Group’s management of
capital.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
60
NOTES
a) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty failing to meet contractual obligations. Credit risk arises principally from the Group’s receivables from customers and investments in securities.
The Group has a specific method to assess the potential of customers in terms of their credit worthiness.
Also Group takes adequate precautionary actions before granting credit facilities. Investment in securities
will also be done after careful evaluation of the expected return and risk associated. This approach has
mitigated the credit risk of the Group.
b) Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations related to its
financial liabilities, through settlement by cash or financial assets.
The Group seldom utilizes its' borrowing facilities. The Group ensures the availability of sufficient
liquidity to meet liabilities when due with proper cash flow planning. The board regularly reviews
liquidity position of the Group. This cautious approach ensures the mitigation of liquidity risk.
c) Market Risk
Market risk is the risk that changes in market prices, such as raw material prices, foreign exchange rates
and interest rates that would impact Group’s income or the value of investment in financial instruments.
The objective of managing market risk is to manage and control market risk
exposures within parameters, while optimizing returns.
The Group always keep a provision for such fluctuations before deciding the price of the finished good.
Also the Group negotiate terms with suppliers for specific future period aswell. All these steps will lead
to mitigate the market risk associated with the Group.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC 61
NOTES
35 RECONCILIATIONS OF SLAS TO SLFRS / LKAS 35.1 RECONCILIATION OF COMPREHENSIVE INCOME
GROUP
COMPANY
As at 31st March 2012
As at 31st March 2012
As per Effect of As per
As per Effect of As per
Sub SLAS Transition SLFRS / LKAS
SLAS Transition SLFRS / LKAS
Notes Rs. Rs. Rs.
Rs. Rs. Rs.
Revenue
- - -
- - -
Other Income 36.1 4,599,852.69 (421,659.24) 4,178,193.45
385,129.34 (385,129.34) -
4,599,852.69 (421,659.24) 4,178,193.45
385,129.34 (385,129.34) -
Administrative Expenses
(739,552.39) (249.82) (739,802.21)
(647,287.51) (249.82) (647,537.33)
Distribution Cost
(25,420.00) - (25,420.00)
- - -
Other Operating Expenses
(296,574.04) 296,574.04 -
(296,574.04) 296,574.04 -
Profit / (Loss) from Operating Activities
3,538,306.26 (125,335.02) 3,412,971.24
(558,732.21) (88,805.12) (647,537.33)
Finance Income 36.2 - 461,666.56 461,666.56
- 425,136.66 425,136.66
Finance Expenses 36.3 (960.06) (336,331.54) (337,291.60)
(249.82) (336,331.54) (336,581.36)
Net Finance Income
(960.06) 125,335.02 124,374.96
(249.82) 88,805.12 88,555.30
Profit / (Loss) before Income Tax Expenses
3,537,346.20 - 3,537,346.20
(558,982.03) - (558,982.03)
Income Tax Expenses
(20,895.66) - (20,895.66)
- - -
Profit / (Loss) for the year
3,516,450.54 - 3,516,450.54
(558,982.03) - (558,982.03)
Other Comprehensive Income
- - -
- - -
Total Other Comprehensive Income for the year - - -
- - -
Total Comprehensive Income for the year
3,516,450.54 - 3,516,450.54
(558,982.03) - (558,982.03)
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
62
NOTES
35 RECONCILIATIONS OF SLAS TO SLFRS / LKAS
35.2 RECONCILIATION OF FINANCIAL POSITION - GROUP
As at 31st March 2012
As per Effect of As per
Sub SLAS Transition SLFRS / LKAS
ASSETS Notes Rs. Rs. Rs.
NON - CURRENT ASSETS
Plant & Equipment
6,977,659.47 - 6,977,659.47
Intangible Assets
21,669,723.27 - 21,669,723.27
Investments in Equity Securities
1,873,500.00 (1,873,500.00) -
Other Non Current Financial Assets 36.4 2,700,000.00 (200,000.00) 2,500,000.00
33,220,882.74 (2,073,500.00) 31,147,382.74
CURRENT ASSETS
Inventories
10,817,002.82 - 10,817,002.82
Work in Progress
33,553,925.91 - 33,553,925.91
Financial Assets at fair value through profit or loss 36.5 - 1,873,500.00 1,873,500.00
Trade & Other Receivables
64,341,607.56 - 64,341,607.56
Amounts due from Related Parties
757,378.00 - 757,378.00
Other Current Financial Assets 36.6 43,526,447.28 (681,906.24) 42,844,541.04
Cash and Cash Equivalents
21,871,387.02 881,906.24 22,753,293.26
TOTAL ASSETS
208,088,631.33 - 208,088,631.33
EQUITY & LIABILITIES
Equity Attributable to the Equity Holders of the Parent
Stated Capital
48,574,870.00 - 48,574,870.00
Retained Earnings
(47,324,604.02) - (47,324,604.02)
SHAREHOLDERS' FUNDS
1,250,265.98 - 1,250,265.98
Non-Controlling Interest
55,727,672.66 - 55,727,672.66
TOTAL EQUITY
56,977,938.64 - 56,977,938.64
NON - CURRENT LIABILITIES
Employee Benefits
9,958,250.00 - 9,958,250.00
Finance Lease Obligations
1,054,293.10 - 1,054,293.10
CURRENT LIABILITIES
Trade & Other Payables
37,679,880.87 - 37,679,880.87
Finance Lease Obligations
538,343.73 - 538,343.73
Amounts due to Related Parties
87,897,294.58 - 87,897,294.58
Directors Current Account
57,142.86 - 57,142.86
Income Tax Liabilities
201,565.00 - 201,565.00
Bank Overdrafts
13,723,922.55 - 13,723,922.55
TOTAL EQUITY & LIABILITIES
208,088,631.33 - 208,088,631.33
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
63
NOTES
35 RECONCILIATIONS OF SLAS TO SLFRS / LKAS
35.2 RECONCILIATION OF FINANCIAL POSITION - COMPANY
As at 01st April 2011
As at 31st March 2012
(date of transition to SLFRS / LKAS)
As per Effect of As per
As per Effect of As per
Sub SLAS Transition SLFRS / LKAS
SLAS Transition SLFRS / LKAS
Notes Rs. Rs. Rs.
Rs. Rs. Rs.
ASSETS
NON - CURRENT ASSETS
Plant & Equipment
- - -
- - -
Investments in Subsidiaries
85,200,000.00 - 85,200,000.00
- - -
Investments in Equity Securities
1,873,500.00 (1,873,500.00) -
- - -
87,073,500.00 - 85,200,000.00
- - -
CURRENT ASSETS
Financial Assets at fair value through profit or loss 36.4 - 1,873,500.00 1,873,500.00
- - -
Cash and Cash Equivalents
152,998.55 - 152,998.55
- - -
TOTAL ASSETS
87,226,498.55 - 87,226,498.55
- - -
EQUITY & LIABILITIES
Equity
Stated Capital
48,574,870.00 - 48,574,870.00
48,574,870.00 - 48,574,870.00
Retained Earnings
(49,525,435.04) - (49,525,435.04)
(48,966,453.01) - (48,966,453.01)
TOTAL EQUITY
(950,565.04) - (950,565.04)
(391,583.01) - (391,583.01)
NON - CURRENT LIABILITIES
- - -
- - -
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
64
CURRENT LIABILITIES
Trade and Other Payables
222,626.15 - 222,626.15
236,566.15 - 236,566.15
Amounts Due to Related Party
87,897,294.58 - 87,897,294.58
- - -
Directors Current Account
57,142.86 - 57,142.86
57,142.86 - 57,142.86
Income Tax Liabilities
- - -
97,874.00 - 97,874.00
TOTAL EQUITY & LIABILITIES
87,226,498.55 - 87,226,498.55
- - -
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC 65
NOTES
GROUP
COMPANY
31.03.2012
01.04.2011
Rs.
Rs.
36 EXPLANATION OF TRANSITION TO SLFRS / LKAS
36.1 OTHER OPERATING INCOME
As per previous SLAS interest income, dividend income and profit on disposal of investments
have been classified under other operating income. Under SLFRS / LKAS these were classified
in finance income.
Reclassification from - Other Operating Income 421,659.24
385,129.34
Reclassification to - Finance Income 421,659.24
385,129.34
This reclassification had no impact on the Statement of Financial Position or Statement of
Changes in Equity.
36.2 FINANCE INCOME
Reclassification from - Other Operating Income 421,659.24
385,129.34
Impact from Transaction cost on purchases of
Financial Assets 40,007.32
40,007.32
461,666.56
425,136.66
36.3 FINANCE EXPENSES
Under SLFRS / LKAS Bank Charges has been reclassified to administrative expenses.
Reclassification from - Finance Expenses 249.82
249.82
Reclassification to - Administrative Expenses 249.82
249.82
These reclassifications had no impact on the Statement of Financial Position or Statement of
Changes in Equity.
Under SLFRS / LKAS Financial Assets at Fair Value through profit or loss should be measured
at fair value. Difference between the fair value under SLFRS / LKAS and carrying value under
previous SLAS has been recognised in the Statement of Comprehensive Income as Fair Value
changes on Financial Assets.
Finance Expenses reported under previous SLAS 960.06
249.82
Reclassification to - Administrative Expenses (249.82)
(249.82)
Impact from Transaction cost on purchases of
Financial Assets 64,081.36
64,081.36
Fair Value Changes on Financial Assets 272,500.00
272,500.00
337,291.60
336,581.36
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC 66
NOTES
GROUP
31.03.2012
36 EXPLANATION OF TRANSITION TO SLFRS / LKAS (CONTD.)
Rs.
36.4 OTHER NON CURRENT FINANCIAL ASSETS
As per SLFRS / LKAS Long Term Investments reclassified to Other Non Current Financial Assets.
Debentures are disclosed under Other Current Financial Assets whereas previously disclosed
under Long Term Investments.
Reclassification from - Long Term Investments
2,700,000.00
Reclassification to - Other Non Current Financial Assets
2,500,000.00
Reclassification to - Other Current Financial Assets
200,000.00
This reclassification had no impact on the Statement of Comprehensive Income or Statement of
Changes in Equity.
36.5 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Under the previous SLAS, Non Current Investments were stated at cost or market value which ever
is lower. As per the SLFRS / LKAS these are considered as financial assets under the category of
Fair Value through profit or loss and subsequently measured at fair value.
These fair value adjustments were adjusted in the Statement of Comprehensive Income.
36.6 OTHER CURRENT FINANCIAL ASSETS
As per SLFRS / LKAS Short Term Investments reclassified to Other Current Financial Assets.
Savings Accounts are disclosed under Cash and Cash Equivalents whereas previously disclosed
under Short Term Investments.
Reclassification from - Short Term Investments
43,526,447.28
Reclassification to - Other Current Financial Assets
44,408,353.52
Reclassification to - Cash and Cash Equivalents
881,906.24
This reclassification had no impact on the Statement of Comprehensive Income or Statement of
Changes in Equity.
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
67
FINANCIAL HIGHLIGHTS
Group Company
2013 2012 2013 2012 2011 2010 2009
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Revenue 339,100,825 - - - - - -
Net Profit/Loss before tax 62,717,018 3,537,346 (2,167,464) (558,982) 38,605,342 (85,650) (110,385)
Profit/ Loss for the year 47,771,274 3,516,451 (2,493,968) (558,982) 38,507,468 (85,650) (110,385)
Property, Plant & Equipment 16,143,937 6,977,659 1,168,233 - - - -
Current Assets 290,068,224 176,941,249 20,689,246 2,026,499 - 50,267,518 50,316,167
Total Assets 332,054,172 208,088,631 125,446,369 87,226,499 - 50,342,628 50,391,277
Shareholder’s Funds 154,016,781 1,250,266 124,975,817 (950,565) (391,583) (38,899,051) (38,813,402)
Current Liabilities 101,897,659 140,098,150 380,738 88,177,064 391,583 89,241,679 89,204,679
Earnings Per Share (Rs.) 4.20 0.31 (0.42) (0.11) 7.93 (0.02) (0.02)
Net Assets Per Share (Rs.) 23.78 0.26 19.30 (0.20) (0.08) (8.01) (7.99)
Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC
68
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