ANNUAL REPORT 2015/16 - Colombo Stock Exchange · PDF file8 ODEL PLC | Annual Report 2015/16...

ANNUAL REPORT 2015/16

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The effervescence of Odel invigorates the spirit and

reinvents life. We are never still, never stagnant.

We combine spirit and soul, colour and contrast. That is the ineffable essence of the Odel brand. We are poised for an explosion of activity

that can propel us to greater heights than ever imagined,

guided by our vision of innovation and excellence.

ODEL PLC | Annual Report 2015/162

FINANCIAL HIGHLIGHTS

2016

2015

2014

2013

2012

2011

6,455

4,864

4,595

4,533

3,912

3,405

Revenue Rs. Mn

2016

2015

2014

2013

2012

2011

6,428

5,284

5,219

5,094

1,753

1,623

Total Equity Rs. Mn

VISIONTo inspire the world.

MISSIONTo provide a complete Mind, Body and Soul experience with an unparalleled selection of fashion right and lifestyle products in an environment that is enjoyable and welcoming.

OUR VALUESWe love, we serve, we style, we innovate, we give,we save, we enjoy and we inspire.

Revenue Rs. Mn

Total Assets Rs. Mn

Total Equity Rs. Mn

Net Profit Rs. Mn

6,4559,4836,428

256

2016

2015

2014

2013

2012

2011

9,483

7,599

6,971

6,414

3,498

3,133

Total Assets Rs. Mn

2016

2015

2014

2013

2012

2011

256

161

192

157

202

209

Net Pro�t Rs. Mn


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CHAIRMAN’S REVIEW

I am pleased to present the Annual Report for the financial year 2015/16. It has been yet another strong year of performance at Odel. We achieved revenue of Rs. 6.5 Bn, reflecting a 32.7% increase, while Operating Profit experienced a strong 86% growth to reach Rs. 526.6 Mn. Profitability increased by 59% to Rs. 255.8 Mn during the year as a direct consequence of a focused strategy combined with Group synergies.

Brief on the Economy

Given the economic and political uncertainties, Sri Lanka’s economy grew 4.8% in 2015. Services, the prime contributor to the economy, grew by 5.3% in gross value added terms in 2015, accounting for 56.6% of the GDP. Retail and wholesale activity emerged to be an active contributor with a 4.7% growth in 2015 (4.5% in 2014). Tourism recorded an arrival data of 1.8 Mn, a 17.8% increase, during 2015 and 721,185 during 1Q2016. Favourable duty revision during late FY2015/ 16 relating to apparel and footwear imports were passed on to the customers through price reductions, while the surge in Value Added Tax to 15% from 11% in May 2016 nullifies this gain.

Strategic Review

We carried out a strategic review of Odel during the year to ensure a stronger leadership position in the market. Since its acquisition, we have taken into account all internal and external factors of our operations and de-constructed the processes to achieve optimal efficiency. The aim was to create new platforms for growth and I am happy to state that this in fact yielded much reward. We are witnessing the fruits of our actions: having leaner staff strength combined with enhanced productivity and better returns to employees. It has been a win-win journey thus far for the Company and all its stakeholders.

Today, our fashion retail business boasts an industry-best team, which is helping us achieve new milestones. We have substantially increased employee benefits and reinvested in sales staff training with a view to enhancing their knowledge and awareness of brands and to elevate skill levels to foster a culture of exceptional sales and service. In fact, we have witnessed a high financial performance as a direct result of bringing in a performance-driven culture.

Art of Branding

At Odel, we have taken a conscious decision to move up the value chain with synergy benefits from Softlogic brands to deliver international branded apparel and accessories to both local and foreign consumers. Moreover, the boom in tourism has ensured a steady business growth from this segment. Almost 40% of our revenues are derived from tourists and we are proud to see that our offerings find appeal amongst foreign tourists from across the globe.

We realize that we can’t be everything for everyone and that pleasing all market segments will diffuse our brand identity. Therefore, Odel has taken a bold step into the branded arena, whilst also offering a vast range under the Odel brand name. Today, any customer walking into our flagship store or other Odel outlets is assured that they buy genuine articles.

Our strategy has fuelled the demand for brands in Sri Lanka - offering customers a wider choice and encouraging them to invest in brand defining status and style. Admittedly, our journey of bringing international brands into the country was initially a challenge, but I believe that the Sri Lankan market is now mature enough for branded retail.

“Since its acquisition, we have taken into account all internal and external factors of our operations and de-constructed the processes to achieve optimal efficiency.”

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8 ODEL PLC | Annual Report 2015/16

It has been a learning curve for us at Odel and for our customers too. Odel now follows the international seasonal calendar that comprises of winter, spring, summer and autumn collections. Our end of season sales, as seen in developed markets, is a new concept for local shoppers, and they are now also keenly aware of the dynamics of international seasonal trends.

Odel unveils the latest styles and brands simultaneously with other shopping capitals across the globe. Odel closely follows international trends on fashion runways of the world, ensuring that customers are upto-date in clothing and accessories trends. We believe that this evolution of the local shoppers has given them supreme confidence in identifying brands and in demanding a superior shopping experience, which Odel offers.

Advancing Fashion Retail Sector

Throughout the year, we pursued a strategy to elevate the look and feel of Odel outlets by refurbishing and relocating brands as necessary, injecting stocks and housing new brands which gave a new look to the store. Our endeavour was to create a shopping experience with an international flavour and this is being progressively achieved.

We recently launched the Fossil brand in Sri Lanka, sales of which have been fantastic from the outset. The launch of The Body Shop, a renowned beauty brand from the United Kingdom augmented our cosmetics and toiletries range. The opening of Pepe Jeans at the beginning of the financial year, further added to Odel’s brand offerings in

Sri Lanka. Mango, a premier women’s brand was added to Odel’s clothing range during the year, giving increased visibility to these international brands. Starved of big brands for decades, Sri Lanka’s shoppers are now empowered by Odel.

Penetrating further into the outskirts of Colombo suburbs, Odel was opened in Thalawathugoda and Wattala. Luv SL, tourists’ favourite shopping spot for Sri Lankan souvenirs, was opened in Centara Resorts – another Softlogic subsidiary. The year also witnessed the opening of an exclusive Odel Home in Kalubowila.

Our Luv SL brand has become a success with tourists and the brand outperformed expectations during the year. We believe this home-grown brand has huge potential for organic growth as well as to become a local brand success story. We are focused on expanding the collection and opening more Luv SL stores.

Odel, along with its sub brands Luv SL and Softlogic brands, makes a valuable contribution to the nation by getting tourists to spend their foreign currency in Sri Lanka and we hope to work closely with the government and tourism authorities to leverage Odel as the must-visit shopping destination in Sri Lanka. In order to achieve the aim of making Sri Lanka a premier tourist destination, incentives such as duty free prices need to be made a reality.

Exciting Future Prospects

We have simplified our systems and processes to ensure flexibility and faster response time to customer needs. Our operating costs have declined, enabling us to offer better incentives to employees, and this has sharpened our competitive edge.

CHAIRMAN’S REVIEW

“Our end of season sales, as seen in developed markets, is a new concept for local shoppers, and they are now also keenly aware of the dynamics of international seasonal trends.”

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Odel remains committed to sustainable operations and driving social initiatives which are uplifting the livelihood of craftsmen supplying to Luv SL. We also create awareness of the island’s rich biodiversity in this product range. We want our customers to be assured that our products are produced with social responsibility.

We have our sights set on the completion of the well-designed Odel Mall by end 2019, by which time we will have an exhaustive collection of international high-end brands and Odel products for a one-of-a-kind shopping experience. Families in Sri Lanka have scant entertainment options and we are looking to craft an exciting experience for the entire family to spend enjoyable hours at Odel when our new Mall commences.

Appreciation

I take this opportunity to thank my colleagues on the Board and the teams at Odel and Softlogic Brands for joining hands to make this a memorable year for Odel in terms of financial performance and operational excellence. Our success would not be possible without the ‘can-do’ approach of our staff and stakeholders. I would also like to thank our shareholders for their continued support as we continue to build a stronger Odel.

Sgd.

Ashok PathirageChairman

BOARD OFDIRECTORS

Mr. Ashok Pathirage - Chairman

Mr.Ashok Pathirage is one of the co-founders of Softlogic and was appointed as Chairman of Softlogic in 2000. He is also Chairman/Managing Director of Asiri Hospital chain, Softlogic Capital PLC, Softlogic Finance PLC, Asian Alliance Insurance PLC, Odel PLC which are listed in addition to the private companies of the Group operating in Leisure & Restaurants, Retail, Automobile and ICT industries. He is also Deputy Chairman of the National Development Bank PLC and Chairman of NDB Capital Holdings PLC. Due to his business acumen and corporate leadership he is one of the top business leaders in the country.

Dr. Ruanthi De Silva - Non Executive Independent Director

Director and Consultant of SCM- Plus, providing consultancy services on Finance, Logistics, Best Practices in Procurement and process restructuring, in international markets. She was the Group Director of Supply Chan Management (SCM ) at Bernhard Schulte Ship Management (BSM) Group which manages over 650 ships operating from over 23 offices around the world.

She carries over 40 years of local and international experience with blue-chip companies and have been in senior management positions covering strategic planning, finance, business process re-engineering and operations.

Dr. De Silva holds a Doctorate from the University of Newcastle in Australia and an MBA from the University of Hull in UK. She is a Fellow of the Chartered Institute of Management Accountants of UK. She is also an Associate Member of the Chartered Institute of Logistics and Transport in Australia.

Dr. De Silva was the recipient of the 2015 Personality of the Year for Service in the International Arena of the Maritime Industry, awarded by The Women in International Shipping and Trading Association (WISTA) Sri Lanka Branch.

Mr. Haresh Kaimal Non-Executive Director

Mr. Haresh Kaimal is a co-founder of Softlogic and a Director since its inception. With over 25 years of experience in IT and operations, he currently heads the IT division of the Group to drive advancements in Information Technology and Enterprise Resource Management within Softlogic. He is also a Director of Softlogic BPO Services (Pvt) Ltd.

Dr. Sivakumar Selliah - Non-Executive Independent Director

Dr.Selliah holds a MBBS degree and a Masters Degree (M.Phil). He was appointed to the board of Odel PLC in 2014. He has over two decades of experience in varied fields. He currently is the Deputy Chairman of Asiri Hospitals Holdings PLC, Asiri Surgical Hospital PLC and Central Hospital Ltd. He is a Director of Softlogic Holdings PLC, HNB Assurance PLC, Lanka Walltiles PLC, Lanka Tiles PLC, Horana Plantations PLC, ACL Cables PLC and Lanka Ceramics PLC. He is also the Chairman of JAT Holdings (Pvt) Ltd and Cleanco Lanka (Pvt) Ltd. Dr. Selliah serves on the Remuneration committee, Audit Committee, Investment committee, strategic planning committee and related party transaction committee of some of the companies on whose Board he serves.

Mr. Ranil Prasad Pathirana Non-Executive Independent Director

Mr. Pathirana is the Finance Director of the Hirdaramani Group and is a Director of Hirdaramani Apparel Holdings (Private) Limited, Hirdaramani Leisure Holdings (Private) Limited and Hirdaramani Investments Holding (Private) Limited which are the holding companies of the Hirdaramani Group. He is a Non-Executive Director of Sampath Bank PLC, Alumex PLC , Taprobane Holdings PLC , Ceylon Hotels Corporation PLC.

Mr. Pathirana is a Fellow Member of the Chartered Institute of Management Accountants, UK (FCMA - UK) and holds a Bachelor of Commerce Degree from the University of Sri Jayewardenepura.


SENIOR MANAGEMENT TEAM

Desiree Karunaratne

Group Director - Marketing

Romesh Jayewardene

Head of Projects &Mall Development

G. Natarajan

Head - Retail Operation& Business Development

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Aldrin Gamage

General Manager-Visual Merchandizing

& Retail Design

Gopika Mageswaran

Business Controller

Ruwan Wijeratne

Chief Finance Officer


SENIOR MANAGEMENT TEAM

Vishaka TennakoonHead of Internal Audit

- Retail Sector

Thilina Dassanayake

Head of BuyingNatasha Fonseka

Head - Group HumanCapital & Taxation

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Foo Haw Li

General Manager - IT

Nalaka Rambukpota

General Manager-Corporate Operations

Meneka Galgamuwa

Head - Corporate Planning


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Odel’s vibrant and earthy ‘Rainforest’ themed summer 2016 collection showcased the lushness of the forest with bold nature motifs. The dramatic prints and psychedelic colours brought alive a veritable tropical rainforest within Odel stores.


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MANAGEMENT DISCUSSION AND ANALYSIS

A steady increase in consumer confidence was witnessed during 2015/16 as consumption-led growth stimulated the economy over the course of the year, with shoppers displaying openness to purchasing branded goods, as the market for retail fashion visibly expanded. The influx of tourists helped drive sales further as inbound tourists crossed the 1.8 million mark in the period under consideration. The upsurge in consumption trends supported our strategy of introducing a variety of international brands into Odel. The year under review witnessed the launch of an impressive line-up of international branded clothing and accessories into Odel stores, coupled with a new collection of local brands. This dual mix of strong local and international trends drove higher footfalls and created hype around the Odel brand, resulting in a highly profitable year during which we surpassed the previous year’s financial performance. The consolidation of both branded and unbranded lines has helped improve our cost margins and deliver an excellent increase in topline growth by 33% over the previous year.

Flagship Store

During the year, the flagship Odel store strengthened its reputation as a must-visit lifestyle destination, judging by the strong profitability it recorded in 2015/16. It has become a veritable icon and attracts both local and foreign visitors. The entry of high-end international brands into the flagship Odel store reflects multi brand retail at its finest. Our product offering increased considerably which required us to ensure effective inventory management while keeping a close eye on margins. These two aspects have helped drive higher profitability during the year, supported by better cost management skills.

We have effectively zoned the store to provide more crisp and clean spaces in the store in accordance with

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guidelines from the international brands being displayed in the store. The women’s brand, Mango, was introduced into the store and now occupies pride of place in the women’s section. Bodyshop, the first international cosmetics company to introduce fair trade to the cosmetics and toiletries industry was opened at the flagship store. Pepe Jeans, Van Heusen, Peter England, Allen Solly and Louis Phillip were introduced into the men’s categories. The children’s section expanded to include international brands such Allen Solly and United Colors of Benetton. The entire ambience of the retail space at the flagship store has been revamped and spruced up and now exudes a fresh appeal.

Visual Merchandising

Our visual merchandising operation had an eventful year as many international brands were brought into Odel stores. The introduction of these brands required an overhaul of retail display and necessitated the adoption of a new visual merchandising approach. We have high-impact zones highlighting the latest trends thus inspiring our customers from the moment they enter. The joint synergy between the international brands has injected a new spark into Odel. The Visual Merchandising team has had to understand and replicate international brands’ in-store display specifications, backed by numerous hours of training by the respective brands at their overseas locations.

All branded display is monitored regularly by international brand representatives and we have to remain at the cutting edge of visual merchandising to meet their expectations. However, our long years of building the Odel brand have stood us in good stead, which reflects the strength in the visual merchandising area. Odel stores received a facelift during the year and now sport a much trendier outlook.


The visual merchandising team worked closely with the Marketing team for implementing in-store design and promotions through the year. We have now fallen into the rhythm of the seasons as in the international calendar. Each brand has a unique display design and this infuses excitement and freshness into the Odel brand.

International Brand Collection

Brands:

These reputed international brands span a wide choice of trends and offer Sri Lankans the convenience of shopping for genuine international brands at their doorstep. One of the highlights of the year was the entry of the Mango brand into Odel. Nike, Levis and Charles & Keith performed impressively during the year as did Mothercare. In order to consolidate the Mothercare brand, only 1 Mothercare main outlet now operates as the hub for quality mom and baby related range of clothing and accessories. The brand is also showcased at 3 other Odel stores. Odel introduced branded Michael Kors, Armani, Diesel, Adidas and DKNY watches into its stores. Branded sunglasses were also added to its portfolio of designer accessories.

During the year, we stringently ensured shorter shelf life by aligning to international seasonal collections, undertook aggressive promotions, and conducted end of season sales - all of which helped to achieve and surpass our targets. End-of-season sales have helped boost the topline further.

Inventory management too was greatly improved during the year to minimize overstock by managing new buys based on sell through. Further, internal processes were streamlined so as to enhance bottomline and help cash inflows.

Private Brands

The private labels were streamlined along with the international branded range during the year to ensure that, the two combine well to offer a wide choice for customers. These were strengthened during the year by infusing new designs and concepts. We ensured a greater focus on private labels to exercise greater control over the supply chain process, which resulted in faster sell through and increased sales during the year. This thereby provides customers locally produced quality products.


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BICONIC- Odel’s private brand launched a range of youthful collections and vibrant themes throughout the year, including Skater Girl, Acid Dancer and Sugar Rush.

Liberation – The latest addition, to the Menswear private label portfolio, where all products are designed in-house. Liberation is positioned as the value range, catering to the basic casualwear requirements in a man’s wardrobe.

Luv SL did phenomenally well during the year and the addition of two new stores at Crescat and Centara Ceysands Resort and Spa, Bentota contributed to the performance. Next year, we plan to open 3-4 new Luv SL stores in key tourist destinations. We are infusing the brand with technical and design nuances to ensure the brand retains international appeal as it is mainly targeted at tourists.

Meanwhile, our tenants, Spa Ceylon, Exclusive Lines, Colombo Jewelry Stores, Avirate, Embark, Noritake and Tea Brands also did well during the year. Tenant income improved by 100% during the year, with the introduction of new tenants.

During the period under review, the apparel factory was moved from Rajagiriya to Boralesgamuwa. This operation posted a strong performance, reflecting a growth of 14% over the previous year. This factory is operated purely for local Odel brands and we are considering expanding its capacity in the near future.

Learning from retailing international brands, the local brand team is instilling adequate lead times in production so as to pre-empt trends and understand marketing of the products. We will also carry over the international brand ethos to local brands as well, thereby uplifting and upgrading the local brands along the same lines.

Our Store Network

Currently, there are 22 Odel stores and 20 Softlogic branded stores which spearhead international branded retail in Sri Lanka. The Softlogic stores include 3 multi brand outlets (Galleria) and 15 exclusive branded outlets along with 2 international watch stations as part of the store network.

Penetrating further into the outskirts of Colombo surburbs, Odel was opened in Thalawathagoda and Kalubowila which has become a shopping destination. The highly residential suburb of Thalawathugoda now has the benefit of the wide-spectrum shopping experience that only Odel can offer. This area is fast expanding and attracting expats and professionals who are relocating to the area. The new, large format Odel

store is located at Capital Mall and extends over an area of 10,000 square feet.

Luv SL, tourists’ favourite shopping spot for Sri Lankan souvenirs, was opened in Centara Ceysands Resort and Spa, Bentota – another Softlogic Lesuire Property, in the same period.

At the Odel flagship store, we created new space for men’s shoes and luggage, so that they have a better visual display in the store. During the year, Softlogic brands opened five exclusive branded stores at the Liberty Plaza Arcade for Nike, Levi’s, Pepe Jeans, Giordano and International Watches. Going ahead, we will look to add strategically located outlets and increase our international brand portfolio to offer a wider choice.

Meanwhile, operations were streamlined and cost savings accrued by rationalizing rentals and taking advantage of reduced energy costs. Tenant income improved by 100% during the year, with the introduction of four new tenants.

Marketing

New Collections

During 2015/16, Odel mirrored global fashion trends through its eclectic collections which were as distinctive as the changing seasons:

Think Big- Pre Fall 2015

Combining the latest trends with the store’s own aspirations for the future, Odel chose the catchphrase ‘Think Big’ - for its Pre-Fall theme reflecting the impetus it has gained from new owner Softlogic Holdings, under whose stewardship the brand has


big plans for expansion. Inspired by the creations of iconic fashion designers such as the London-based Serbian fashion designer RoksandaIlincic, Topshop and Marques’Almeida, Odel’s new pre-Fall collection was dominated by the Color Block.

Into the Woods - Fall 2015

The collection introduced ‘forest couture’ that dominated Fall’15 runways in the fashion capitals of the world. Odel launched two new collections featuring dark and brooding designs, rich with earthy tones that took style lovers back to nature. The collection was heavily emphasized and accentuated further with store décor and in all avenues of communication and marketing. It debuted with a stunning fashion show featuring the flagship looks of the collection, the runway itself featured autumn leaves and a unique color palette that brought out the ambiance of a forest during fall.

Do you believe in Magic ? - Christmas 2015

‘Do you believe in Magic?’ – a question guaranteed to spark anticipation in young and old alike – was the theme for last year’s festive makeover, fittingly brought alive by décor changes, exciting new products,

seasonal features, special bank promotions and extended shopping hours as the countdown to Christmas began.

Seasonal décor that embodied the traditional symbols of Christmas transformed Odel shopping areas into an enchanting and elegant personification of the warmth and cheer of the festive season, as the retail chain prepared for yet another grand celebration of Yuletide 2015. Evocative traditional décor such as Christmas trees, wreaths and stars dominated the flagship store at Alexandra Place, but were tweaked with metallic and diamanté materials to enhance their magical aura. A standout feature of the décor was the creation of chandeliers of varying sizes with wreaths and metallic star curtains that created a magical atmosphere, enhancing the golden arches and gold trimmed windows. The themes of the season were carried through the principal departments within the store, with each getting its own colour combination, in which Green, Blue, Gold and Black were featured.

Wanderlust - Spring 2016

The advent of spring brought with it a theme that has gained an immense amount of popularity in pop culture: Wanderlust. The collection was inspired by traits of bohemia and the spirit of nomads. Rustic environments with earthy tones were heavily featured in the campaign with visuals of explorers and the free-spirited.

• Closet-Odel’swork-wearrangealsointroducedseveralthemesand collections focusing on polished and pastel pinks and stylishly professional microprints.

• ODELLinen-Focusingonislandwearandthecomfortoftropicalclothing, ODEL introduced the linen range which allowed for fashion in chic and comfortable styles.


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Promotions

Our aim this year was to reinforce Odel’s position as a multi brand retail fashion leader and to showcase our innovative approach. As a result, Odel now offers a holistic brand experience that spans our products, our in-store environment and our marketing and promotions. In the recent years, the company has built up a strong reputation for its dynamic marketing and promotional activities that stand apart in terms of elegance and execution. Every year, Odel celebrates hallmark occasions which are rich with meaning for all our customers. Some of the main events during the year:

Easter’15 was celebrated with fanfare using a catchy theme, ‘Eggciting Fundays’. A carnival was organized for kids over the course of the Easter weekend, with egg painting, an egg hunt, cupcake decoration and other fun activities. This drew tremendous crowds of kids while parents were overjoyed with the prospect of seeing their kids enjoying themselves and experiencing Easter traditions.

The Sinhala and Tamil New Year ‘15 was a grand affair and garnered a lot of attention from locals and tourists alike. “Avurudu Gama”, a quintessentially Sri Lankan village was created housing avurudu related products from LUV SL, along with traditional sweets. The ambience was enhanced by a flutist and traditional games and activities that took place throughout the Avurudu week.

Mother’s Day ’15 - ‘Queen of Hearts’- Customers had the opportunity to stand a chance to win makeovers for their mom worth Rs 20,000 by shopping at Odel. In this promotion, 3 mothers were eventually selected as winners. Additionally, a gift collection was also introduced.

Father’s Day ’15 An Arts and crafts station was set up in-store along with a lot of in-store branding and public communication – ‘My Dad, My Hero’. Additionally, gift giving was also highlighted and promoted through all avenues of communication.

World Animal Day ’15 A range of products along with instore communication and décor was launched in commemoration of Animal Day and part of the proceeds went towards the ‘Value Life-Preserve Yala’ initiative focused on educating people on the importance of animal life and the need to safeguarding our wild life.

Children’s Day ’15 ‘Super Kids’ - A carnival with a host of fun games and activities took place at the flagship Odel store.

Independence Day ’16 Campaign launched along with products promoting and showcasing various aspects of Sri Lanka

Valentine’s Day ‘16 was celebrated with a campaign titled “Ignite the Love Bomb!” A range of products featuring quirky and fun Valentine’s Collection was made available for romantics. Various promotions were also carried out during the season; customers had the opportunity to participate in a raffle draw to win Return Air Tickets to Maldives and Weekend Getaways to Centara Ceysands Resort and Spa.

International Women’s day Women were the center of attention during Women’s Day’16 at ODEL. With an empowering ad campaign, female customers were given a special 20% discount.

You Shop, We Pay- Customers were given gift vouchers over a two month period that equaled their bill when they spent Rs. 4,000 or more, essentially giving back what they spent. They were then allowed to redeem these vouchers on their next transaction. This promotion was widely accepted by ODEL customers who enjoyed the promo and returned several times over to redeem their vouchers.


Fashion Shows –The Softlogic Golf Tournament held by Softlogic Holdings PLC, the parent company of Odel at the Royal Colombo Gold Club on 26thSeptember 2015, saw a lively and captivating display of the Odel Fall collection at the fashion show that was held. The event catered to an exclusive audience of golf enthusiasts who form our high-end clientele. As a special segment, the Odel Fashion show was held in the evening with a stunning array of models walking the ramp.

Promotions for Loyalty Card Customers

• Doublehappiness-Loyaltycustomerswereawarded with double loyalty points for a special promotional period.

• PointsRedemption-Attheendoftheyear,customers were encouraged to spend the points they have accumulated over the course of the year.

• Carrythecard-Abrandbuildingcampaign that gave loyalty customers the opportunity to redeem their points throughout the store, thereby instilling the value and use of the ODEL loyalty card.

• BirthdayDiscount-Loyaltycustomersreceive a 10% discount when they shop on their birthday.

• EndofSeasonforloyaltyonly-Asaspecial privilege for being a loyalty member, loyalty customers got first access to the End of Season Sale at Odel.

Future Outlook

In 2015/16, we experienced huge improvements in cost margins through forcussed management of the cost structure and these gains are evident in the results. We are committed to investing further to enhance in-store appeal, merchandising and the overall look and feel for an enhanced shopping experience. We will achieve gradual refurbishment of all our stores to

bring them to the same standard so as to do justice to the stature of the international brands in our portfolio.

The proposed Odel Mall has completed the design stage and is in the stage of garnering approvals. We plan to commence construction in 2016 and planned for completion of the project over three years. The Odel Mall, once completed, will have four basement parking levels. A BOI company will be set up to handle the development of the mall. The entire projects costs will exceed USD100 Mn and will have a gross square feet area of over 600,000.

The Odel Mall is envisioned as a recreational destination and the first tenant, a multiplex with seven screens, has already come onboard.

Creating shareholder value relies on having a clear plan for growth. Our strategy thus far has put us in a strong position for the future.

Human ResourcesOur Employees

At Odel, we have deliberately set the bar high for ourselves. We strive for excellence in managing our employees. We understand that a sustainable business is a profitable business and towards this end we have sustained our focus on the well-being of our employees. No doubt, having the right team in place is crucial to delivering our goals and objectives. And we are proud of the cutting edge team that is now in place from the senior management to our sales staff all of whom are committed to build a stronger Odel. Our commitment to being an equal opportunity employer has inspired us to recruit a diverse employee base that is resourceful and talented.

During the year under review, our change management skills came to the fore, as we implemented a paradigm shift in our human resource management approach. The acquisition of Odel and the subsequent merger with Softlogic required strategic planning. The year proved to be a challenging one as we had to assess new employee strengths and harness the joint synergies to benefit Odel. It was a learning curve for the management and employees alike but the result has been nothing short of exemplary.

The transition was managed smoothly. There was some attrition which was a natural corollary of the acquisition, which brought down staff numbers. However, no staff was laid off. The 20% natural reduction in staff and streamlined processes served us well as we were able to offer higher incentives to existing staff while establishing a performance-based culture. We have also come out with a new policy document that aligns the company’s HR policies with that of the group. Odel employees have recently participated in the Great Place to Work survey and we are


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awaiting the results which will be analyzed to assess our strengths and weaknesses as an employer as perceived by our employees and find solutions to fill any identified gaps.

Training & Development

As customers are exposed to global retail trends, it becomes evident that they will appreciate knowledgeable sales staff when they shop with us, which is why we have ramped up our training and development efforts. Odel offers a distinctive ambience and interaction for shoppers and our employees are at the heart of this. Empowered and engaged, our employees are dedicated to providing exceptional levels of customer service. During the year, we empowered frontline sales employees with intensive sales training and familiarization with the brands and brands history and specifics so that they could better present the brands to shoppers. Brand representatives are also flown down to train staff in brand sales. Our employees are given product knowledge brief and expected to follow regular training programmes.

Back-office training was also provided and a substantial budget was allocated throughout the year for training purposes. As a result of the extensive training programmes, there was a marked improvement in customer services and employees’ approach to customers. We have also introduced a personal grooming module so that staff is able to cater to the highest echelons of customers.

During the year, we established new KPIs for employees and revised the set of performance management tools. Further, employees were apprised of the fact that they would have to meet standards set for international brands. We also sent employees abroad to visit the brands stores in various countries during the year under review to experience first-hand how these valuable brands are to be presented. We believe that encouraging innovation among our employees makes us stand apart.

Our senior staff from the various divisions participated in IGDS (International Group of Department Stores) conferences and workshops held in the various countries and was able to bring back the learning and implement same at ODEL.

Appraisals

Performance appraisals are carried out in an ongoing manner in order to review employee performance and to assess skills gap and training needs in keeping with Key Performance Indicators. Odel fosters a culture of meritocracy and the appraisal results provide a transparent account of individual contribution to the company during the year. These appraisals also help to identify future leaders. The company puts great emphasis on satisfied workforce and managers work closely with their subordinates

MaleFemale

46%54%

Gender %

18 to 2526 to 3536 to 4546 to 5556 and above

44%

17%4%

1%

34%

Age %

62%

13%

4% 3% 1%

17%

Service Period (%)

Less than 34 to 56 to 1011 to 1516 to 20above 21


to understand and help fulfil their career progression objectives. The Performance Appraisal Program is done between Supervisor and subordinate having a quality conversation and is not just a form filling exercise.

Grievance Handling

The company offers strong support for grievance handling for employees. Employees are encouraged to be open and frank with their immediate supervisors and to be unafraid to express their displeasure on any policies or practices. An open door culture encourages regular interaction between managers and staff so that the management is able to address grievances at an early stage to find mutually acceptable solutions. The Head of Human Resources (HR) and the entire team is accessible at all times for employees to voice their concerns to. An ‘Employee Open day programme’ is held annually to promote greater bonds between management and staff. There is a Grievance Handling Process and a Policy in place which is informed to all employees.

Reward & Remuneration

Celebrating employees’ achievements constitutes an exciting part of the company’s operations. By recognizing and rewarding employee achievements, we foster a dynamic culture where employees work hard to achieve company goals and objectives, which keeps them highly motivated.

We reward and recognize our employees regularly in the presence of their peers so that they feel a sense of pride in their achievements.

Some of the awards presented at the Annual Award Night included facilitation of staff who have served long years. These employees have been with the company for different number of years and are categorized accordingly and are considered partners in our success. Awards were also handed out to the Best Sales Personality of the Year and the Sales Supervisor of the Year, which are transparent and awarded only to the most deserving. It is carried out by identifying these employees as Best Sales Personality of the Month and Best Sales Supervisor of the month and they are nominated for the Best Sales Personality of the Year and Best Sales Supervisor of the Year after going through various criteria and actions they need to fulfill to be selected.

Employee Welfare

The work culture at Odel highlights a positive and vibrant energy which is a result of a happy workforce. We have cultivated a balanced approach to work in the company where our employees have a passion for the job they have been assigned. Moreover, our 360 degree approach to nurturing their personal and professional lives has resulted in high productivity levels. Apart from numerous cultural and recreational gatherings, Odel encourages its employees to participate and excel in sports. As a result, we have many staff who are talented sportspersons. The Odel cricket team performed well at the Mercantile Cricket Challenge and has built up formidable basketball, hockey and teams in tandem with Softlogic employees.

Employees are eligible for personal and medical insurance, which provides a safety net for their families and them. The company strives to provide competitive salaries and remuneration coupled with training opportunities to enable career progression and career growth.


29

FINANCIAL REVIEW

Real economic growth in Sri Lanka in 2015 registered 4.8 per cent, compared with 4.9 per cent in 2014. The per capita GDP reached USD 3,924 from USD 3,854 year ago. The tourist arrivals reached 1.79 million in 2015 a growth of 17.8 % from the preceding year. Earnings from tourism substantially increased during 2015 registering a growth rate of 22.6 per cent to US dollars 2,980.7 million. These positive developments in macro environment had a salutary effect on the topline of Odel.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2011 2012 2013 2014 2015 2016

Revenue and Margin (Rs Mn)

RevenueMargin %

333435363738394041424344

0200400600800

1,0001,2001,4001,6001,8002,000

2011 2012 2013 2014 2015 2016

BorrowingsFinance Cost

0

20

40

60

80

100

120

140

160

180

Interest costs and Borrowings (Rs Mn)

Revenue

The revenue reached Rs 6.45 bn which is a growth of 33% from previous year. The broadening of the product range through acquisition of Softlogic Brands (Pvt) Ltd which engaged in international branded products as well as reorganization of retail space and improved visual merchandizing contributed to improving the revenue.

Gross Margin

Over the past years there has been an improvement in gross margin despite the effect of retail VAT. The overall Gross Profit margin in 2016 improved to 43.4% from 39.7% in previous year. Pricing strategy, improved sourcing of products and efficient management of supply chain contributed to the improvement in margin.

Overheads

Distribution expenses reflects the investment made in brand building and other payments linked to the topline.

The inflation rate indicated by CCPI annual average change was 0.9% in 2015 decreased from 3.3% in 2014. The main components of overhead costs are staff costs, rent and electricity. Current year Administration costs includes the costs of the newly acquired subsidiary. Like to like cost were contained at the same level as previous year despite the increase in the business volumes by rationalization and reorganization of retail space and resource utilization. This effort and focus will continue in the forthcoming years.


0

2

4

6

8

10

12

14

16

2011 2012 2013 2014 2015 2016

AWPLRIn�ation

Movement of AWPR and in�ation Net Finance cost

During 2015 the interest costs increased appreciably in line with increase in lending rates and business volumes. The 364 day Treasury Bills rate increase from 6.01% to 7.3% at the end of the calendar year and Average Weighted Prime Rate too increase from 6.26% to 7.53%. The finance costs recorded a 34% increase as a result of these conditions. The overall borrowing levels increased due to capital investments made.

The rates of interest have steadily declined until the previous year and displayed an increase in this financial year. This trend is expected to continue in the short term.

Taxes

Odel is liable for income tax at 28%. The effective tax rate has been increased to 36% from 15% mainly due to disposal of the short term investment and reduction of tax savings made on income earned from the same.

Comprehensive Income

The profit after tax for the year at Rs 256 mn is an increase of 59% from the previous financial year. This remarkable improvement is derived purely from operational effeciencies and improved margins on consolidated revenues.

Earnings per Share

The EPS increased to cents 94 from cents 59 in 2014/15 due to improved results.

Dividends

A 30 cents interim dividend per share was paid for 2015/16 which compares with the

total dividend of 12 cents per share paid for 2014/15 financial year. This translated to a payout of 32% of the after tax profit in 2015/16. The solvency position was examined prior to such distribution by the Directors and confirmed by the Auditors as per the applicable statutory requirements.

Total Equity and Return

Total Equity increased to Rs 6,427 bn from Rs 5.283 bn through the retention of earnings and revaluation of Property Plant and Equipment.

The return on equity increased to 3.98% from 3.04% in the previous year. The efficient utilization of funds and improved operating results will boost the returns in the forthcoming years.

Non Current Assets

Rs 860 mn was invested in acquiring property plant and equipment during the year. This includes purchase cost of land situated adjacent to currently held properties at Ward Place and the purchase of land and building situated at Boralesgamuwa.

In year 2015 Rs 600 mn was invested in Softlogic Brands Pvt Limited in acquiring its shares in full. Further Rs 1,119 mn was invested in the equity shares of the same company during the year.

FINANCIAL REVIEW

31

Cash Flow

The cash flow from operation improved due to the profits earned and better management of the investment in working capital.

Despite the fact that the investment in subsidiary and the acquisition of properties were partly financed from borrowings gearing ratio at year end remained static at 21.4% compared to previous year.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2011 2012 2013 2014 2015 2016

Equity base and Return on Equity

EquityReturn on equity

0

2

4

6

8

10

12

14

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2011 2012 2013 2014 2015 2016

Share Price Net Assets EPS

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Movement in Market price, net assets and earnings per share


33

Odel’s ‘Jungle Luxe’ collection unveiled iridescent colours and summer fashion liberally painted with tropical prints of palm trees, monstera leaves, banana leaves in Martinique design and tropical flowers, all inspired by the rainforest.


Odel’s eight core values: Serve, Inspire, Style, Love, Enjoy, Save, Give and Innovate, help us act as good ambassadors for our customers, our employees, the communities and environment in which we offer our services. These values reflect who we are and the drive and initiative for our CSR activities. Our core values are well established and well-known throughout Odel because they define our identity and our culture.

Environment

As a brand, Odel is universally recognized as an environmentally conscious citizen. Our products give us a platform to communicate messages about preservation of the environment and we have leveraged strongly on that tool to relay messages about preserving flora and fauna that are being threatened by indiscriminate use. Odel has historically been a catalyst in changing attitudes about the environment and persists in doing so through various means. During the year under review, Odel focused on the wildlife at Yala and how overuse of the park is threatening the existence of the rich biodiversity that exists in the park.

Wildlife

The tragic deaths of several magnificent specimens of wildlife in the Yala National Park spurred Odel to launch ‘Value LIFE – Preserve YALA’ – a high profile campaign to remind visitors about the dictates of responsible behaviour and etiquette within the reserve’s boundaries in a bid to save lives and minimise adverse impacts on fauna and flora. Odel produced and installed more than 50 signboards along the routes frequently used by sightseers with key messages covering the dos and dont’s of visiting a nature reserve. It supported the initiative with a mass media awareness campaign on the importance of respecting the habitat and its rightful inhabitants. This initiative had afar-reaching impact on visitors to Yala, some of whom were forced into adhering to responsible practices due to the all-pervasive presence of the signboards.

SUSTAINABILITY REPORT

35

Community Initiatives

In its engagement with the community, Odel is committed to bringing about empowerment and inclusivity by extending its support to the communities in which it operates. Apart from encouraging employee volunteerism, we ensure that our operations have a positive impact on the lesser privileged section of society.

Elevating Livelihoods

Odel has leveraged on its status as a market leader in fashion retail to harness the skills of local craftsmen such that not only are their skills sustained for future generations, but the store is able to showcase the beautiful objects to the world. Luv SL in particular, engages many local artists in small scale businesses to produce souvenirs made with locally sourced raw materials for Odel which offers them a fair market price. The company elevates the quality of the products they manufacture by infusing technical knowledge. This project has helped to upgrade the standard of living in these communities. The company hopes to expand the number of craftsmen it employs in time to come.

Project Ray of Hope

The project “Ray of Hope” focused on thousands of Cancer patients in Sri Lanka. The project comprised of three stages; a Blood Donation Campaign, an Almsgiving for residential cancer patients and Donation of Medicine, Medical Equipment, and other essentials to the National Cancer


SUSTAINABILITY REPORT

Hospital, Maharagama. The primary objective of this CSR initiative was to be a “Ray of Hope” for these patients.

Complete expenses for the project was funded by the employees of the organization through their voluntary donations coupled with invaluable contributions from the organization. Through this project the employees, not only contributed monetarily but availed their valuable time and energy, by way of donating blood for the patients and by taking part in the preparation of a meal for them. It was a sincere gesture of hope and the satisfaction and contentment the employees gained by engaging in this worthy cause is indescribable and immeasurable.

The final outcome and the impact of the project was incredible.

• Fundsdonated-Rs.1.7Mn

• 230pintsofBloodwasdonated,outof which approximately 100 pints were from Odel staff members

• Medicalequipmentsuchaswheelschairs, beds, saline stands and drug trolleys etc. were donated together with other essentials and medicine required by the patients

The “Ray of Hope” CSR initiative was short-listed as one of the top 6 in the award

category “World’s Best Sustainability/CSR Initiative by a Department Store” at the Global Department Store Summit 2016 Awards organized by the International Group of Department Stores (IGDS) held in Zurich, Switzerland.

This achievement impressively showcases the Company’s efforts to improve the environment and the communities surrounding ODEL.

Global Department Store Summit 2016 (GDSS) is the world’s leading discussion platform for department store CEOs and senior executives and their stakeholders including brands, suppliers and service companies to meet, to network and to exchange ideas.

The award was created by IGDS to foster greater corporate social responsibility leadership among department stores and reward best-in-class practices. The award has been judged on three criteria: the main idea including its originality and pertinence to the wider context of corporate social responsibility; execution, and resulting audience impact. 126 Department Stores were invited to submit their most outstanding projects.

IGDS is the largest Association for Department Stores worldwide, providing support to 40 leading department stores around the world.

ODEL Kids’ play area donated to the Lady Ridgeway Children’s Hospital

The play area in the Kids’ section at the Odel flagship store at Alexandra Place was donated to the country’s premier paediatric hospital. The Lady Ridgeway Children’s Hospital is now a brighter and happier place for its little patients and young visitors as many of these afflicted children can put aside their suffering for a short-while as they enjoy the play time.

The entire play area with its slides, chutes and toys was recreated in a designated area in Ward 1 of the hospital.

37

Other Donations

Odel also reaches out to other social causes that need solutions and also volunteers its help in projects where it sees that it can play a positive role. During the year, Odel donated generously for various causes to the institutions listed here:

• TheDeafWelfareAssociation

• TheDepartmentofSocialServices,forpersonswithdisabilitiesunder-going Vocational Training

• RajagiriyaChildren’sandElder’sHomemanagedbytheSalvationArmy of Sri Lanka

• PrithipuraCommunitiesofSriLanka,anorganisationdedicatedtothecare and assistance of children and adults with disabilities

• SriLankaWelfareOrganizationoftheVisuallyImpairedWomen

• SriLankaFederationoftheVisuallyHandicapped

• CeylonSchoolfortheDeafandBlind

• Nest–forskilldevelopmentactivitiesattheHalf-wayHomeinMulleriyawa


CORPORATE GOVERNANCE

Independence of the Directors

Dr. S Selliah, Mr. R P Pathirana and Dr. I C R De Silva function as independent directors of the Company.

As per the Rules issued by the Colombo Stock Exchange, Mr. R P Pathirana and Dr. I C R De Silva meet all the criteria of independence. Dr. S Selliah meets all the criteria of independence except one.

Dr. S Selliah is a Director of Softlogic Holdings PLC which has a significant shareholding in the Company.

The Board having evaluated all the factors concluded that Dr. Selliah’s

independence has not been impaired due to him serving on the Board of another company which has a significant shareholding in the Company.

Compliance with Corporate Governance Rules of the CSE

The following disclosures are made in conformity with Section 7 of the Listing Rules and section 9.3.2 (b) of the related party transaction rules of the Colombo Stock Exchange.

Section Criteria Has the Company met the Criteria

7.10.1 Non-executive directors Complied with.

Out of 5 directors 4 are non-executive directors.

7.10.2 Independent directors Complied with.

There are three independent directors on the Board.

7.10.3 Disclosures relating to directors Mr. R P Pathirana and Dr. I C R De Silva meet all the criteria of independence. Dr. S Selliah meets all the criteria except one.

7.10.5 Remuneration Committee Complied with.

Comprises of two independent non-executive directors.

The report of the committee and the names of the members of the committee are given in the page 48 of the Annual Report.

7.10.6 Audit Committee Complied with.

Comprises of two independent non-executive directors and one non-executive director

The report of the committee and the names of the members of the committee are given in the page 49 of the Annual Report.

The Chief Finance Officer attends all the meetings.

39

Name of the Related Party Relationship Nature of the transaction

Agreegate value of related party transaction entered in to during the financial year

Agreegate value of related party transaction as a % of net group revenue

Terms and condition of therelated party transaction

Softlogic Brands (Pvt) Ltd Subsiidiary

Loan Granted 288,034,275 4%All trading transactions were at arms length and interest has been charged monthly on the outstanding balance at the rate of AWPLR+1%

Purchase of Goods/Services

381,295,556 6%

Investment in equity shares 1,119,288,000 17%

Settlement of Liabilities on behalf of the Company 59,199,260 1%

Realated Party Transaction


RISK MANAGEMENT

The Board of Directors has the overall responsibility to manage risks effectively to ensure the business developments are consistent with the risk appetite and goals of the group. The Board Audit Committee (BAC) monitors the effectiveness of internal controls with the Odel management, the Head of Internal Audit and the external auditor. The BAC also monitors and reviews the effectiveness of the external auditors and the Internal Audit.

The Board Remuneration Committee liaises with the Board Audit Committee to ensure there is a properly integrated approach to remuneration that appropriately reflects risk.

Though there are many risks to which a business is exposed some of the key risks impacting Odel PLC are discussed below.

Changes in Macroeconomic conditions impact Odel. The increase in per capita income and tourist arrivals are catalysts for growth of the target market segment of Odel. The changes in the economic projections and performance are closely monitored to understand the impact to Odel. The product offer and communication of the value are tailored to recognize the change of customer needs and aspirations.

Business may be affected by events that have a negative effect on the geopolitical environment in the country. These changed macroeconomic or geopolitical circumstances, such as political instability and sudden negative events within the country may result in rapid changes in the business environment and in economic downturn, which is likely to change consumer purchasing behavior and thus negatively impact the group’s sales.

It is of the utmost importance that the Odel group lives according to the high aims set out in its policies and guidelines on business ethics. Should Odel fail in this respect, there is a risk that the company’s reputation and brand could be damaged. Accurate, transparent and

reliable communication can prevent occurrences of reputational risk, and can also help alleviate the consequences of any incidents.

The ability to fund the business at competitive rates is crucial. The changes in fundamentals which drive interest rates in the market are closely monitored. Also Odel actively develops the relationship with a multitude of lenders and potential sources to broaden the funding options.

Foreign purchasing costs is largely affected by the changes in customs duties and the exchange rate fluctuations.

The quality of service provided by employees and their work ethics and integrity are also important aspect of risk management. The staff are recruited through a screening process and provided with regular training and development opportunities to hone their skills. The environment is created to encourage communication, commitment and participation. The orientation towards defined systems and procedures to be followed in most areas of work and the checks and balances in place to ensure compliance are regularly reviewed and improved where necessary.

The ability to source the products efficiently and be able to broaden the range which appeals to the Odel customer is an important aspect of managing product risks. Maintenance of highest quality standards is synonymous with Odel brand. Odel has a diverse and broad base of suppliers and continuously monitors the changes in fashion to ensure the range carried mirrors the latest trends.

A consistent formula is applied to manage and mitigate the risk of fashion throughout the product life cycle, harnessing the intellectual capital of the Group’s highly experienced merchandise team

This process has been developed over many years and is constantly reviewed and updated to ensure it remains current and competitive in a changing market. Comprehensive forecasting of fashion trends based on ongoing international research informs the buying teams throughout the season and this drives the merchandise strategy.

The assets are safeguarded physically where relevant and also insured as appropriate to mitigate risks of damage and unintended use. These measures too are reviewed by the internal audit and a comprehensive assessment is made annually of the coverage of risks through insurance. Also the ability of the underlying ICT systems to scale with expanding business requirements is closely monitored. The continuing business growth requires support of latest ICT to ensure efficiency and effectiveness of delivery and significant investment is made to upgrade the systems to modern standards of retail.

41

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

The Directors of Odel PLC have pleasure in presenting to the members their Annual Report together with the Audited Financial Statements of the Company and the Group for the year ended 31 March 2016.

Principal Activity

The principal activity of the Company during the year was fashion retailing offering its customers a total shopping experience. There have been no significant changes in the activities of the company during the year under review.

Future Developments

An indication of likely future developments is set out in the Chairman’s Review on Pages 6 to 9.

Performance Review

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

Financial Statements

Section 168 (b) of the Companies Act require that the Annual Report of the Directors include financial statements of the Company, in accordance with Section 151 of the Act and Group financial statements for the accounting period, in accordance with section 152 of the Act. The requisite financial statements of the Company are given on Pages 52 to 112 of the Annual Report.

Directors’ Responsibility for Financial Reporting

The Directors are responsible for the preparation of the Financial Statements of the Company to reflect a true and fair view of the state of affairs. The Directors are of the view that these financial statements have been prepared in conformity with the requirements of the Companies Act No. 07 of 2007 and the Sri Lanka Financial Reporting Standards. A statement in this regard is given on Page 46.

Auditor’s Report

The Auditor’s Report on the financial statements is given on Page 51 of the Annual Report.

Significant Accounting Policies

The significant accounting policies adopted in the preparation of the financial statements are given on Pages 60 to 75 of the Annual Report. There was no change in the accounting policies adopted from the previous year.

Property, Plant & Equipment

The details and movement of property, plant and equipment during the year under review is set out in Note 10 to the Financial Statements on Pages 80 to 89.

Capital Expenditure

The total capital expenditure incurred on the acquisition of property, plant and equipment for the Company and the Group amounted to Rs. 720 Mn (2015 – Rs858 Mn) and Rs. 861 Mn (2015 – Rs. 872 Mn) respectively. Details of capital expenditure and their movements are given in Note 10 to the Financial Statements on Pages 80 to 89 of the Annual Report.

Reserves

The reserves for the Company and Group amounted to Rs. 2,958 Mn (2015 Rs.1,882 Mn) and Rs. 3,632 Mn (2015 – Rs.2,488 Mn) respectively.

The movement and composition of the Capital and Revenue reserves is disclosed in the Statement of Changes in Equity.

Donations

During the year, donations made by the Company and the Group amounted to Rs. 2,131,341 (2015 - Rs.1,795,900 ).


Stated Capital

The stated capital of the Company as at 31 March 2016 was Rs. 2,795,513,620.00 There was no change in the stated capital of the Company during the year under review.

Taxation

The information relating to income tax and deferred taxation is given in Note 8 & 9 to the Financial Statements.

Dividends

Interim dividend of Rs. 0.30 (cents 30) per share was paid on 8th March 2016.

Statutory Payments

The Directors, to the best of their knowledge and belief are satisfied that all statutory payments in relation to the government and the employees have been either duly paid or appropriately provided for in the Financial Statements.

Events after the date of the Statement of Financial Position

No circumstances have arisen and no material events have occurred after the date of Statement of Financial Position, which would require adjustments to, or disclosure in the accounts other than those disclosed in Note 34 to the Financial Statements.

Directorate

The following Directors held Office during the year under review. The biographical details of the Board members are set out on Pages 10 and 11.

Mr. A K Pathirage

Dr. S Selliah

Mr. H K Kaimal

Mr. R P Pathirana

Dr. I C R De Silva

Directors’ Shareholding

No director directly held shares of the Company as at 31st March 2016.

Directors’ Remuneration

Directors’ remuneration in respect of the Company for the financial year ended 31 March 2016 was Rs.3,675,000 (2015 – Rs. 4,725,000). The remuneration of the Directors is determined by the Board.

Directors’ interests in contracts and proposed contracts with the Company

Directors’ interests in contracts, both direct and indirect are referred to in Note 29. to the Financial Statements. The Directors have no direct or indirect interest in any other contract or proposed contract with the Company.

Interests Register

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

Shareholders’ Information

The distribution of shareholders is indicated on Page 113 and 114 of the Annual Report. There were 5,858 registered shareholders as at 31 March 2016 (31 March 2015 – 5,970).

Share Information

Information on share trading is given on Page 113 of the Annual Report.

Internal Control

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

Risk Management

The Group’s risk management objectives and policies and the exposure to risks, are set out in Page 40 of the Annual Report.

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

43

Corporate Governance

The report on Corporate Governance is given on Page 38 and 39 of the Annual Report.

The Auditors

The Board Audit Committee reviews the appointment of the external auditors, as well as their relationship with the Group, including monitoring the Group’s use of the auditors for non-audit services and the balance of audit and non-audit fees paid to the auditors.

The Auditors of the Company, Messrs Ernst & Young, Chartered Accountants were paid Rs. 1,457,856 as audit fees for the financial year ended 31 March 2016 (2015 – Rs. 1,040,000 ) by the Company. Details of which are given in Note 7 to the Financial Statements.

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

Having reviewed the independence and effectiveness of the external auditors, the Audit Committee has recommended to the Board that the existing auditors, Messrs Ernst & Young, Chartered Accountants be reappointed. Ernst & Young have expressed their willingness to continue in office and ordinary resolution reappointing them as auditors and authorising the Directors to determine their remuneration will be proposed at the forthcoming AGM.

Going Concern

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

Annual General Meeting

The Annual General Meeting of the Company will be held at the “Committee Room C” of Bandaranaike Memorial International Conference Hall (BMICH), Bauddhaloka Mawatha, Colombo 07 on Thursday the 25th day of August 2016 at 10.30 a.m. The Notice of the Annual General Meeting is on Page 115 of the Annual Report.

For and on behalf of the Board

Sgd.

A K Pathirage Chairman/Managing Director

Sgd. H K Kaimal Director

Sgd. Softlogic Corporate Services (Pvt) LtdSecretaries

13th June 2016

Colombo


45

Financial Reports

Financial Calendar

Results

Interim report for 1st Quarter 2016 12th August 2015

Interim report for 2nd Quarter 2016 11th November 2015

Interim report for 3rd Quarter 2016 29th January 2016

Interim report for 4th Quarter 2016 26th May 2016

Dividends Paid

Interim Dividend 2015/2016 08th March 2016


STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The responsibilities of the Directors, in relation to the financial statements of the Company differ from the responsibilities of the Auditors, which are set out in the Report of the Auditors on Page 51.

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

The Directors consider that, in preparing financial statements set out on Pages 52 to 112 of the Annual Report, appropriate accounting policies have been selected and applied in a consistent manner and supported by reasonable and prudent judgments and estimates, and that all applicable accounting standards have been followed. The Directors confirm that they have justified adopting the going concern basis in preparing the financial statements since adequate resources are available to continue operations in the foreseeable future.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Company and to enable them to ensure the financial statements comply with the Companies Act No. 07 of 2007.

They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. In this regard the Directors have instituted an effective and comprehensive system of internal control. The Directors are required to prepare financial statements and to provide the external auditors with every opportunity to take whatever

steps and undertake whatever inspections they may consider to be appropriate to enable them to give their independent audit opinion.

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

Compliance Report

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

For and on behalf of the Board of

ODEL PLC

Sgd.

Softlogic Corporate Services (Pvt) LtdSecretaries

13th June 2016

Colombo

47

Purpose

Related Party Transactions Review Committee was established by the Board during the financial year under review in order to comply with the Listing Rules of the Colombo Stock Exchange governing related party transactions in respect of listed companies as per the Codes of Best Practices on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka (SEC) (the “Code”) and Section 9 of the Listing Rules of the Colombo Stock Exchange (the “Rules”).

The Board Related Party Transactions Review Committee (the “Committee”) assists the Board in reviewing all related party transactions carried out by the Company and its listed companies in the Group by early adopting of the Codes of Best Practice on Related Party Transactions as issued by the Securities and Exchange Commission of Sri Lanka.

Composition

The Related Party Transactions Review Committee is appointed by the Board of Directors of the Company and the following directors served on the Committee as at 31st March 2016.

Dr. I C R De Silva – Independent Non-executive Director (Chairperson)

Mr. R P Pathirana - Independent Non-executive Director

Mr. H K Kaimal – Non-executive Director

The Chief Finance Officer attended all meetings by invitation.

Softlogic Corporate Services (Pvt) Ltd, Secretaries of the Company function as the Secretary to the Related Party Transactions Review Committee.

Roles and Responsibilities

1. Reviewing in advance all proposed related party transactions of the Company in compliance with the Code.

2. Adopting policies and procedures to review related party transactions and overseeing existing policies and procedures.

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

4. If related party transactions are ongoing (recurrent related party transactions) the Committee establishes guidelines for senior management to follow in its ongoing dealings with the relevant related party.

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

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

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

The related party transactions of the Company for the period from 1st January 2016 to 31st March 2016 have been reviewed by the Committee and the activities and comments of the Committee have been communicated to the Board of Directors of the Company.

Sgd.

Dr. I C R De Silva Chairperson

Related party Transactions Review Committee

13th June 2016

Colombo

REPORT OF THE RELATED PARTY TRANSACTIONSREVIEW COMMITTEE


REPORT OF THE REMUNERATION COMMITTEE

The Remuneration Committee comprises the following Non- Executive independent Directors at the year-end.

• Mr.RanilPathirana

• Dr.SSelliah

The responsibilities of the Remuneration Committee include,

• Ensuringtheremunerationpolicyofthecompanyprovides a competitive, attractive and reasonable remuneration package for employees at all levels on par with industry standards giving due consideration to business performance and long term shareholder returns.

• Ensuringtheremunerationpackageofemployeeislinked to performance, responsibility, expertise and contribution.

• Ensuringformalandtransparentprocedureinimplementing the remuneration policy of the Company.

Remuneration Committee Meetings

No meerings were held during the year under review.

The aggregate remuneration paid to Directors is disclosed in Note 7 to the financial statements.

Sgd.

Ranil PathiranaRemuneration Committee

13th June 2016

49

Composition of the Audit Committee

The Audit Committee, appointed by and responsible to the Board of Directors, comprises of three members. The Committee is made up of members who bring their varied expertise and knowledge to effectively carry out their duties. Members of the Committee at year end are;

Mr. Ranil Pathirana –Chairman- Non-Executive Independent Director

Dr. S Selliah- Non-Executive Independent Director

Dr I.C.R De Silva-Non-Executive Independent Director

The functions of the Audit Committee are governed by an Audit Committee Charter, which is reviewed annually.

Objectives and Role of the Audit Committee

The main objective of the Audit Committee is to assist the Board of Directors to perform its duties effectively and efficiently. Accordingly, the objectives of the Audit Committee can be described in detail as follows:

• Oversee the financial reporting process and determine that the financial reports present accurate, complete and timely financial information.

• Monitor the effectiveness of the Company’s risk management processes and the internal control system.

• To assess the independence of the External Auditor and monitor the performance of Internal and External Auditors.

• To recommend to the Board the appointment of External Auditors.

Meetings

The Committee held three meetings during the year under review. The Chief Finance Officer attended these meetings by invitation.

The attendance of the members at these meetings is given below.

Name Meeting Attended

Mr. Ranil Pathirana 2

Dr. S Selliah 3

Dr I.C.R De Silva 1

Financial Reporting

The Committee reviewed the Financial Reporting System to determine the accuracy and timeliness of the Financial Statements published. The Committee also reviewed the interim and year-end Financial Statements prior to publication, in order to determine that the statutory requirements have been complied with and the Company’s Accounting Policies have been consistently applied.

Internal Audit

The Committee monitored the effectiveness of the Internal Audit Function and the implementation of the recommendations made by the Internal Audit.

External Audit

The Committee reviewed the status of their independence.

REPORT OF THE AUDIT COMMITTEE


CONCLUSION

Based on the review of reports submitted by the External and Internal Auditors, the information obtained from management the Committee having examined the adequacy and effectiveness of the internal controls which have been designed to provide a reasonable but not absolute assurance to Directors that the assets of the company are safeguarded, is satisfied that the financial position of the company is regularly monitored and that steps are being taken to continuously improve the control environment maintained within the Company.

The Audit Committee determined that Messrs Ernst & Young are independent on the basis that they do not participate in any management activity of the company and do not provide any non-audit services to the company and recommended to the Board of Directors that Messrs Ernst & Young be reappointed as statutory Auditors for the financial year ending 31st March, 2017, subject to approval by the Shareholders at the forthcoming Annual General Meeting.

Sgd.

Ranil PathiranaChairman – Audit Committee

13th June 2016

REPORT OF THE AUDIT COMMITTEE

51

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF ODEL PLC

Report on the Financial Statements

We have audited the accompanying financial statements of Odel PLC, (“the Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of financial position as at 31 March 2016, and the income statement, statement of comprehensive income, statement of changes in equity and, cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Board’s Responsibility for the Financial Statements

The Board of Directors (“Board”) is responsible for the preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements

As required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion, scope and limitations of the audit are as stated above.

b) In our opinion:

- we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company,

- the financial statements of the Company give a true and fair view of its financial position as at 31 March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, and

- the financial statements of the Company and the Group comply with the requirements of sections 151 and 153 of the Companies Act No. 07 of 2007.

14 June 2016Colombo

52

Year ended 31 March 2016


COMPANY GROUP For the Year ended 31 March For the Year ended 31 March

2016 2015 2016 2015Note LKR LKR LKR LKR

Revenue 3 5,230,665,337 4,864,055,962 6,454,643,024 4,864,193,976 Cost of sales (2,951,201,976) (2,939,743,442) (3,653,512,327) (2,930,821,865)Gross profit 2,279,463,361 1,924,312,520 2,801,130,697 1,933,372,111 Other income 4 1,933,681 112,498,290 25,865,654 107,641,962 Distribution expenses (305,530,951) (253,736,016) (395,787,966) (253,736,016)Administrative expenses (1,543,166,894) (1,540,956,260) (1,904,587,680) (1,503,911,726)Operating profit 432,699,197 242,118,534 526,620,705 283,366,331 Finance costs 5 (134,646,083) (99,638,233) (133,684,144) (99,638,233)Finance income 6 33,804,329 5,256,834 7,352,478 5,256,834 Profit before tax 7 331,857,443 147,737,135 400,289,039 188,984,932 Income tax expense 8 (106,475,733) (19,302,801) (144,460,581) (28,122,698)Profit for the year 225,381,710 128,434,334 255,828,458 160,862,234

Attributable to:Owners of the parent 255,828,458 160,862,234 Non controlling interest - -

255,828,458 160,862,234

Earning per shareBasic, profit for the year attributable to ordinary equity holders of the parent 25 0.83 0.47 0.94 0.59

The accounting policies and notes on page 60 through 112 form an integral part of the financial statements.

STATEMENT OF INCOME

53

STATEMENT OF COMPREHENSIVE INCOME

COMPANY GROUP For the Year ended 31 March For the Year ended 31 March

2016 2015 2016 2015Note LKR LKR LKR LKR

Profit for the year 225,381,710 128,434,334 255,828,458 160,862,234

Other comprehensive income

Actuarial loss on defined benefit plans 19 19,663,669 (4,774,881) 25,835,558 (7,101,478)Income tax effect (5,505,827) 1,336,967 (7,233,956) 1,988,414

14,157,842 (3,437,914) 18,601,602 (5,113,064)

Revaluation of land and buildings 10 920,352,238 (71,244,656) 969,974,642 (3,672,883)Income tax effect (1,820,347) (5,274,387) (19,205,095) (22,050,809)

918,531,891 (76,519,043) 950,769,547 (25,723,692)

Other comprehensive profit/(loss) for the year, net of tax 932,689,733 (79,956,957) 969,371,149 (30,836,756)

Total comprehensive income for the year, net of tax 1,158,071,443 48,477,377 1,225,199,607 130,025,478

Attributable to:Equity holders of the parent 1,225,199,607 130,025,478 Non-controlling interests - -

1,225,199,607 130,025,478




COMPANY GROUP2016 2015 2016 2015

Note LKR LKR LKR LKR

ASSETS

Non-Current Assets Property, plant & equipment 10 4,410,147,811 2,881,555,726 5,285,233,493 4,272,784,361 Investment property 11 - - 599,480,000 - Intangible assets 12 - - 693,454,272 744,783,445 Investment in subsidiaries 13 2,097,389,040 978,101,040 - - Other financial assets 28 42,469,730 52,500,437 51,561,850 80,983,837 Goodwill - - 104,680,409 104,680,409 Deferred tax asset 9 - - 14,412,800 56,527,456

6,550,006,581 3,912,157,203 6,748,822,824 5,259,759,508

Current Assets Inventories 14 1,406,470,145 1,361,026,059 1,936,047,379 1,897,867,560 Trade and other receivables 15 524,665,025 204,304,311 603,703,037 298,966,558 Amounts due from related parties 17 317,039,316 1,197,580,072 87,056,813 370,262 Income tax refund Due - 22,786,094 - 24,183,546 Other financial assets 28 17,655,709 7,515,463 23,793,709 7,515,463 Cash and bank balances 22 61,972,516 99,952,941 83,208,435 110,614,424

2,327,802,711 2,893,164,940 2,733,809,373 2,339,517,813

Total Assets 8,877,809,292 6,805,322,143 9,482,632,197 7,599,277,321

EQUITY AND LIABILITIES Equity Stated capital 23 2,795,513,620 2,795,513,620 2,795,513,620 2,795,513,620 Revaluation surplus 1,786,936,542 875,770,994 2,227,598,126 1,284,834,010 Retained earnings 1,171,477,913 1,006,210,847 1,404,424,801 1,203,628,138 Total Equity 5,753,928,075 4,677,495,461 6,427,536,546 5,283,975,768

Non-Current Liabilities Interest bearing borrowings 18 395,950,210 165,633,625 395,950,210 165,633,625 Deferred tax liabilities 9 45,997,810 33,936,718 - - Retirement benefit liability 19 33,096,316 47,579,299 41,658,733 59,510,336

475,044,336 247,149,642 437,608,943 225,143,961

STATEMENT OF FINANCIAL POSITIONAs at 31 March 2016

55

COMPANY GROUP2016 2015 2016 2015

Note LKR LKR LKR LKR

Current Liabilities Trade and other payables 20 725,077,238 515,005,141 799,495,952 509,632,234 Amounts due to related parties 21 468,712,605 116,399,968 327,561,704 251,488,937 Income tax payable 67,400,069 - 82,947,091 - Interest bearing borrowings 18 1,340,215,452 1,201,797,863 1,352,246,519 1,270,038,495 Deferred liability 16 47,431,517 47,474,068 55,235,442 58,997,926

2,648,836,881 1,880,677,040 2,617,486,708 2,090,157,592

Total Equity and Liabilities 8,877,809,292 6,805,322,143 9,482,632,197 7,599,277,321

Net asset per share 21.14 17.19 23.62 19.42

These financial statements are in compliance with the requirements of the Companies Act No 7 of 2007.

Sgd.Chief Finance Officer

The board of directors is responsible for the preparation and presentation of these financial statements.Signed for and on behalf of the board by

Sgd. Sgd.Chairman Director


13th June 2016Colombo

56



Company Revaluation Stated Retained TotalReserve Capital Earnings Equity

LKR LKR LKR LKR

As at 31 March 2014 952,290,037 2,795,513,620 946,525,490 4,694,329,147

Net profit for the year - - 128,434,334 128,434,334 Other comprehensive income (76,519,043) - (3,437,914) (79,956,957)

875,770,994 2,795,513,620 1,071,521,910 4,742,806,524

Dividends - - (65,311,063) (65,311,063)As at 31 March 2015 875,770,994 2,795,513,620 1,006,210,847 4,677,495,461

Net profit for the year - - 225,381,710 225,381,710 Other comprehensive income 918,531,891 - 14,157,842 932,689,733

1,794,302,885 2,795,513,620 1,245,750,399 5,835,566,904 Dividends (81,638,829) (81,638,829)Revaluation surplus transferred to retained earnings (7,366,343) 7,366,343 - As at 31 March 2016 1,786,936,542 2,795,513,620 1,171,477,913 5,753,928,075

STATEMENT OF CHANGES IN EQUITY

57

Group Attributable to equity holders of the parentRevaluation Stated Retained Total

Reserve Capital Earnings EquityLKR LKR LKR LKR

As at 31 March 2014 1,310,557,702 2,795,513,620 1,113,190,031 5,219,261,353

Net profit for the year - - 160,862,234 160,862,234 Other comprehensive income (25,723,692) - (5,113,064) (30,836,756)

1,284,834,010 2,795,513,620 1,268,939,201 5,349,286,831

Dividends - - (65,311,063) (65,311,063)As at 31 March 2015 1,284,834,010 2,795,513,620 1,203,628,138 5,283,975,768

Net profit for the year - - 255,828,458 255,828,458 Other comprehensive income 950,769,547 - 18,601,602 969,371,149

2,235,603,557 2,795,513,620 1,478,058,198 6,509,175,375

Dividends (81,638,829) (81,638,829)Revaluation surplus transferred to retained earnings (8,005,431) 8,005,431 - As at 31 March 2016 2,227,598,126 2,795,513,620 1,404,424,801 6,427,536,546


58



COMPANY GROUP Note 2016 2015 2016 2015

LKR LKR LKR LKR

CASH FLOWS FROM / (USED IN) OPERATING ACTIVITIESNet profit before Income tax expense 331,857,443 147,737,135 400,289,039 188,984,932 Adjustments forDepreciation 10.1.3/10.2.3 109,703,633 123,042,992 211,996,121 148,495,142 Intangible assets amortization 12.1.2 - - 48,283,407 17,088,812 Finance costs 5 134,646,083 99,580,756 133,684,144 99,580,756 Finance income 6 (33,804,329) (5,256,834) (7,352,478) (5,256,834)Fair value (gain)/loss on investment property 4 - - (24,980,000) - Impairment reversal of property plant and equipment - (10,913,123) - (10,913,123)Scrapping of property plant and equipment - 6,393,256 - 6,393,256 (Profit)/loss on disposal of property, plant & equipment 4 947,585 (2,878,550) 913,955 (2,628,077)Income from investment (15,999) (98,919,103) (15,999) (98,919,103)Lease interest 6 - 57,477 - 57,477 Dividend income 4 (1,845,000) (4,050,000) - - Provision for defined benefit plans 19.1 11,799,226 11,895,869 15,338,600 13,966,197 Operating profit before working capital changes 553,288,642 266,689,875 778,156,789 356,849,435

Decrease/(Increase) in inventories (45,444,086) (18,170,995) (38,179,819) 40,796,727 Decrease/(Increase) in trade and other receivables (320,360,714) 47,016,919 (304,736,479) 66,974,473 Decrease/(Increase) in dues from related parties 880,716,195

(1,117,316,935) (86,686,551)

(1,118,836,355)

Decrease/(Increase) in other current financial assets (93,540) (16,805,717) 13,159,740 (17,048,117)(Decrease)/Increase in dues to related parties 352,312,637 38,799,889 76,072,767 - (Decrease)/Increase in trade and other payables 210,072,097 (9,341,551) 292,909,484 (92,076,515)(Decrease)/Increase in deferred liability (42,551) (3,042,532) (3,762,484) (3,042,531)

Cash generated from operations

1,630,448,680 (812,171,047) 726,933,447 (766,382,883)

Finance costs paid 5 (134,646,083) (99,580,756) (133,684,144) (99,580,756)

CASH FLOW STATEMENT

59

COMPANY GROUP Note 2016 2015 2016 2015

LKR LKR LKR LKR

Defined benefit plan costs paid 19 (6,618,537) (17,983,710) (7,354,643) (18,015,377)Income tax paid/Dividend tax paid (11,554,655) (9,502,797) (21,654,341) (23,934,005)

Net cash from/(used in) operating activities

1,477,629,405 (939,238,310) 564,240,319 (907,913,021)

CASH FLOWS FROM / (USED IN) INVESTING ACTIVITIESAcquisition of property, plant & equipment 10 (719,617,488) (858,156,069) (860,721,962) (871,720,996)

Investment in equity shares of subsidiaries 13 (1,119,288,000) (600,000,000) - (624,160,790)Acquisition of intangible assets 12 - - - (12,758,264)Dividend received 4 1,845,000 4,050,000 - - Finance income 6 33,804,329 5,256,834 7,352,478 5,256,834 Investment in unit trust - (150,000,000) - (150,000,000)

Proceeds from disposal of investment -

2,321,128,529 -

2,321,128,529 Proceed from disposal of fixed assets 550,984 19,299,987 30,837,396 19,299,989 Net cash flows from/(used in) investing activities

(1,802,705,175) 741,579,281 (822,532,088) 687,045,302

CASH FLOWS FROM / (USED IN) FINANCING ACTIVITIES

Repayment of interest bearing borrowings 18

(4,351,263,850)

(5,268,426,852)

(4,534,744,400)

(5,268,426,852)

Proceeds from interest bearing borrowings 18

4,477,668,230

5,676,008,042

4,624,233,460

5,676,008,042 Lease rental paid - (997,858) - (997,858)Dividends paid (81,638,829) (65,311,063) (81,638,829) (65,311,063)Net cash flows from/(used in) financing activities 44,765,551 341,272,269 7,850,231 341,272,269

Net increase/(decrease) in cash and cash equivalents (280,310,219) 143,613,240 (250,441,538) 120,404,550

Cash and cash equivalents at the beginning of the year 91,589,579 (52,023,661) 70,925,750 (49,478,800)Cash and cash equivalents at the end of the year 22 (188,720,640) 91,589,579 (179,515,788) 70,925,750


60



NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

1.1 General

Odel PLC is a limited liability company incorporated and domiciled in Sri Lanka whose shares are publicly traded in the Colombo Stock Exchange. The registered office of Odel PLC is located at No 475/32, Kotte Road, Rajagiriya. Odel PLC is a subsidiary of Softlogic Retail (Pvt) Limited and Softlogic Holding PLC is the ultimate parent. The details of subsidiary companies are as follows.

Subsidiaries

Odel Apparels (Pvt) Ltd.

Odel Apparels (Pvt) Ltd is a limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No.475/32, Kotte Road, Rajagiriya and the principal place of business is situated at No.18 & 20, Sama Mawatha, Boralesgamuwa.

Odel Properties (Pvt) Ltd.

Odel Properties (Pvt) Limited is a limited liability company incorporated and domiciled in Sri Lanka. The registered office and principle place of business of the Company is located at No. 475/32, Kotte Road Rajagiriya.

Odel Lanka (Pvt) Ltd.

Odel Lanka (Pvt) Limited is a limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No.475/32, Kotte Road, Rajagiriya and the principal place of business is situated at 271, Kaduwela Road, Thalangama, Battaramulla.

Odel Information Technology Services (Pvt) Ltd.

Odel Information Technology Services (Pvt) Ltd is a limited liability company incorporated and domiciled in Sri Lanka. The registered office and principle place of business of the Company is located at No.475/32, Kotte Road Rajagiriya.

BSL International (Pvt) Ltd.

BSL International (Pvt) Ltd is a limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No.475/32,Kotte Road, Rajagiriya and the principal place of business is situated at P.O.Box 5, Export Processing Zone, Katunayake.

Greenfield Trading (Pvt) Ltd.

Greenfield Trading (Pvt) Ltd is a limited liability company incorporated and domiciled in Sri Lanka. The registered office and the principle place of business is situated at No.475/32, Kotte Road, Rajagiriya.

Softlogic Brands (Pvt) Ltd.

Softlogic Brands (Pvt) Ltd is a limited liability Company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No. 14, De Fonseka Place, Colombo 05.

1.2 Principal Activities and Nature of Operations

During the year, the principal activities of the group were as follows;

Parent Company

During the year, the principal activities of the Company were to carry out fashion retail activities and to earn rental income from letting retail space.

Subsidiaries

Odel Apparels (Pvt) Ltd.

During the year, the principal activities of the Company were to manufacture and supply of the Garments to the group.

Odel Properties (Pvt) Ltd.

During the year, the principal activities of the Company were to carry out real estate activities in relation to retail business

61

Odel Lanka (Pvt) Ltd

During the year principal activities of the Company were to operate a shopping complex/ retail mall and the operations have not yet commenced.

Odel Information Technology Services (Pvt) Ltd

During the year, the principal activities of the Company were to provide information technology infrastructure and maintenance services for the group companies.

BSL International (Pvt) Ltd

During the year, the principal activities of the Company were to import and export of fashion accessories.

Greenfield Trading (Pvt) Ltd

During the year, principal activity of the Company was to trade retail fashion items, and the operations have not yet commenced.

Softlogic Brands (Pvt) Ltd

During the year principal activities of the Company were importing and retailing branded apparel.

1.3 Date of Authorization for issue

The consolidated financial statements of Odel PLC and Its Subsidiaries for the year ended 31 March 2016 were authorized for issue in accordance with the resolution of the directors on 13 June 2016.

2. STATEMENT OF COMPLIANCE

The Consolidated Financial Statements of the Group (Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows together with Accounting Policies and Notes) as at 31 March 2016 are prepared in accordance with Sri Lanka Accounting Standards (SLFRSs) as laid down by the Institute of Chartered Accountants of Sri Lanka.

2.1 Basis of Preparation and Measurement

The consolidated financial statements have been prepared on a historical cost basis, except for land and buildings and Financial Instruments that have been measured at fair value. The preparation and presentation of these financial statements are in compliance with the Companies Act No.07 of 2007.

Consolidated financial statements are presented in Sri Lankan Rupees except when otherwise indicated.

2.2 Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March 2016. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

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

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

• The ability to use its power over the investee to affect its returns

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

• The contractual arrangement with the other vote holders of the investee

• Rights arising from other contractual arrangements

• The Group’s voting rights and potential voting rights

62

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2016


The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

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

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

2.3 Significant Judgements, Estimates and Assumptions

The preparation of the Group consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty exists at the date of preparation, about these assumptions and estimates and hence,

may result in outcomes that require a material adjustment to the recorded carrying amount of the asset or liability as at the reporting date or in future periods.

Judgments

In the process of applying the Group’s accounting policies, management has made following judgments which have the most significant effect on the amounts recognized in the consolidated financial statements:

Tax on SLFRS Financial Statements

The Group is subject to income tax. The Group recognized assets and liabilities for current and deferred taxes based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax amounts in the period in which the determination is made.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates, on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group such changes are reflected in the assumptions when they occur.

Impairment of investments in subsidiaries or financial assets

The Group and the Company follow the guidance of LKAS 36 and LKAS 39 on determining whether an investment or a financial asset is impaired. This determination requires significant judgement. The Group and the Company evaluate, among

63

other factors, the duration and extent to which the fair value of an investment or a financial asset is less than its cost and the financial health of the near-term business outlook for the investment or a financial asset, including factors such as industry and sector performance, changes in technology and operational and financing cash flows.

Revaluation of property, plant and equipment

The Group measures land and buildings at revalued amounts with changes in fair value being recognized in other comprehensive income. The Group engaged an independent valuation specialist to assess fair value of such assets as at 31 March 2016. Land and buildings were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property.

Defined Benefit Plans – Gratuity

The cost of gratuity is determined using actuarial valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, staff withdrawals, and mortality rates. Due to the complexity of the valuation; the underlying assumptions and its long-term nature, the defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Fair value of financial instruments

When the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Useful life for Property, Plant & Equipment and Intangible Assets

The Group depreciates the property, plant & equipment and intangible assets, using the straight-line method, over their estimated useful lives after taking into account of their estimated residual values. The estimated useful life reflects management’s estimate of the period that the Group intends to derive future economic benefits from the use of the Group’s property, plant & equipment and intangible assets. The residual value reflects management’s estimated amount that the Group would currently obtain from the disposal of the asset, after deducting the estimated costs of disposal, as if the asset were already of the age and in the condition expected at the end of its useful life. Changes in the expected level of usage and technological developments could affect the economics, useful lives and the residual values of these assets which could then consequentially impact future depreciation charges. Principal depreciation and amortization rates used are discussed under Note 2.4.7 and 2.4.11 respectively.

2.4 Summary of Significant Accounting Policies

The following are the significant accounting policies applied by the Group in preparing its consolidated financial statements:

2.4.1 Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree at the fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

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When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration which is deemed to be an asset or liability that is a financial instrument and within the scope of LKAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value either in profit or loss or as a change to other comprehensive income (OCI). If the contingent consideration is not within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS.

Contingent consideration that is classified as equity is not remeasured and subsequent settlement is measured at fair value with changes in fair value either in a profit or loss or as a change to the other comprehensive income (OCI). If the contingent consideration is not within the scope of LKAS 39,it is measured in accordance with the appropriate SLFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

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

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

2.4.2 Foreign currency translation

The Group’s consolidated financial statements are presented in Sri Lankan Rupees, which is also the parent company’s and its subsidiary companies functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rate at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary measured at fair value

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is treated in line with the recognition of gain or loss on change in fair value in the item (i.e., the translation differences on items whose fair value gain or loss is recognised in other comprehensive income (OCI) or profit or loss are also recognised in OCI or profit or loss, respectively).

2.4.3 Revenue recognition

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

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.

Loyalty Points Scheme

The Group operates a loyalty points programme, which allows customers to accumulate points when they purchase products in the Group’s retail stores. The points can then be redeemed for free products. Consideration received is allocated between the products sold and the points issued, with the consideration allocated to the points equal to their fair value.

Fair value of the points is determined by applying a statistical analysis. The fair value of the points issued is deferred and recognised as revenue when the points are redeemed or at the expiry of points awarded.

Interest income

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

Dividends

Revenue is recognised when the Group’s right to receive the payment is established.

Rental income

Rental income arising from operating leases on shop space provided to tenants is accounted for on a straight-line basis over the lease terms.

2.4.4 Expenditure recognition

a) Expenses are recognized in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant & equipment in a state of efficiency has been charged to income in arriving at the profit for the year.

b) For the purpose of presentation of the Consolidated Income Statement the Directors are of the opinion that the function of expenses method presents fairly the elements of the Company’s performance, and hence such presentation method is adopted.

2.4.5 Taxes

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws

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used to compute the amount are those that are enacted or substantively enacted, at the reporting date.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• When the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• When the deferred tax asset relating to the deductible temporary difference arises from the

initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

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

2.4.6 Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax, except:

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• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.

• Receivables and payables are stated with the amount of sales tax included the net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

2.4.7 Property, plant and equipment

Property, plant and equipment is stated at cost except for land and buildings, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.

When significant parts of property, plant and equipment are required to be replaced at intervals, the Group derecognises the replaced part, and recognises the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statement as incurred.

The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.

Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations are performed with sufficient frequency to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

A revaluation surplus is recognised in other comprehensive income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

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Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings Over 40 Years

Lease hold buildings Over the lease period

Equipment Over 10 Years

Fixtures-air condition Over 10 Years

Fixtures-other Over 10 Years

Furniture Over 10 Years

Office Equipment computer Over 05 Years

Office Equipment other Over 20 Years

Shop fittings fixtures Over 10 Years

Shop fittings mobiles Over 10 Years

Motor vehicles Over 05 Years

Motor vehicles finance lease Over the lease period

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition 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 when the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

2.4.8 Leases

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

Group as a lessee

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

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

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

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income.

2.4.9 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 respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

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2.4.10 Investment Properties

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise. Fair values are evaluated annually by an accredited external, independent valuer, applying a valuation model recommended by the International Valuation Standards Committee.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change.

2.4.11 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

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

Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible assets.

Amortization is calculated on a straight-line basis over the estimated useful lives of the asset as follows:

• ComputerSoftware3-5Years

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

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2.4.12 Financial instruments — initial recognition and subsequent measurement

i) Financial assets

Initial recognition and measurement

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

All financial assets are recognised initially at fair value plus transaction cost, except in the case of assets recorded at fair value through profit or loss, directly attributable transaction costs.

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

The Group’s financial assets include cash and short-term deposits, trade and other receivables, quoted and unquoted financial instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by LKAS 39.

Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in fair value recognised in finance income or finance costs in the income statement.

The Group evaluates its financial assets held for trading, other than derivatives, to determine whether the intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intention to sell them in the foreseeable future significantly changes, the Group may elect to reclassify these financial assets in rare circumstances. The reclassification to loans and receivables, available-for-sale or held to maturity depends on the nature of the asset. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the IR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs.

Derecognition

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• Therightstoreceivecashflowsfromtheassethaveexpired

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• TheGrouphastransferreditsrightstoreceivecash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

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

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

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

ii) Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or

principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

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

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect

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of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the income statement

iii) Financial liabilities

Initial recognition and measurement

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

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, carried at amortised cost. This includes directly attributable transaction costs.

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

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by

LKAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the income statement. The Group has not designated any financial liabilities upon initial recognition as at fair value through profit or loss.

Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (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.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

iv) Offsetting of financial instruments

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

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v) Fair value of financial instruments

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

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include;

Using recent arm’s length market transactions;

reference to the current fair value of another instrument that is substantially the same;

a discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 24.

2.4.13 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account,

if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous evaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. The following criteria are also applied in assessing impairment of specific assets:

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2.4.14 Inventories

Inventories are stated at the lower of cost and net realizable value. The management primarily determines cost of inventories using the weighted average method. The management estimates the net realizable value of inventories based on assessment of receipt of committed sales prices and provide for excess and obsolete inventories based on historical usage, estimated future demand and related pricing. In determining excess quantities, the management considers recent sales activities, related margin and market positioning of its products. However, factors beyond its contract, such as demand levels, technological advances and pricing competition, could change from period to period. Such factors may require the Group to reduce the value of its inventories.

Costs incurred in bringing each product to its present location and condition is accounted for as follows:

• Purchasecostonanactualbasis

• Closingbalanceoftheinventoryonweightedaverage cost

2.4.15 Cash and short-term deposits

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less.

For the purpose of the consolidated statement cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

2.4.16 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

2.4.17 Post-employment benefits

Defined Benefit Plan - Gratuity:

Gratuity is a post-employment benefit plan. Provisions have been made for retirement gratuities from the first year of service for all employees in conformity with LKAS 19. However under the Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five years of continued service, The Company is liable to pay gratuity in terms of relevant statute. In order to meet this liability the Group uses an actuarial valuation method in accordance with LKAS 19.

The cost of providing benefits under gratuity is determined using the projected unit credit method. Actuarial gains and losses are recognised in full in the period in which they occur in the statement of comprehensive income. The defined benefit liability comprises the present value of the defined benefit obligation using a discount rate based on market yields at the end of reporting period on government bonds of a similar tenure as the estimated term of the gratuity obligation.

The gratuity benefit of the Group in unfunded.

Defined Contribution Plans

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

75

Employees’ Provident Fund and Employees’ Trust Fund respectively.

2.5 Sri Lanka Accounting Standards not yet Effective

Certain new accounting standards and amendments / improvements to existing standards have been published, that are not mandatory for 31 March 2016 reporting periods. None of those have been early adopted by the group/Company.

SLFRS 9 Financial Instruments

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

SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

SLFRS 14 Regulatory Deferral Accounts

SLFRS 14 is an interim standard which provides relief for first time -adopters of SLFRS in relation to the accounting for certain balances that arise from rate-regulated activities (‘regulatory deferral accounts’). The standard permits these entities to continue to apply their previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts.

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

SLFRS 15 Revenue from Contracts with Customers

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

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

76



COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

3. REVENUE Sale of goods Sales - local 5,017,458,252 4,777,181,573 6,248,360,475 4,777,272,859

Sales - exports - 271,429 - 318,157

5,017,458,252 4,777,453,002 6,248,360,475 4,777,591,016

Less: Sales tax (47,527,961) (45,174,512) (64,385,812) (45,174,512)

Sales of goods total 4,969,930,291 4,732,278,490 6,183,974,663 4,732,416,504

Rental income 252,538,005 116,012,957 257,299,100 116,012,957

Advertising income 6,266,075 7,120,765 6,266,075 7,120,765

Commission income 3,498 1,189 5,175,718 1,189

Service income 1,927,468 8,642,561 1,927,468 8,642,561

5,230,665,337 4,864,055,962 6,454,643,024 4,864,193,976

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

4. OTHER OPERATING INCOMEFair value gain/(loss) on investment property - - 24,980,000 -

Profit on disposal of property, plant & equipment (947,585) 2,878,550 (913,955) 2,628,077

Sundry income 1,163,218 2,592,097 1,926,561 2,036,242

Unclaimed creditors written back (142,951) 4,058,540 (142,951) 4,058,540

Income on investment in unit trust 15,999 98,919,103 15,999 98,919,103

Dividend income 1,845,000 4,050,000 - -

1,933,681 112,498,290 25,865,654 107,641,962

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

5. FINANCE COSTSInterest expense on overdrafts 5,406,141 5,075,090 5,406,141 5,075,090

Interest expense on loans & Borrowings 129,239,942 94,505,666 128,278,003 94,505,666

Lease interest - 57,477 - 57,477

134,646,083 99,638,233 133,684,144 99,638,233

77

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

6. FINANCE INCOMEInterest income 33,804,329 5,256,834 7,352,478 5,256,834

33,804,329 5,256,834 7,352,478 5,256,834

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

7. PROFIT BEFORE TAXAdministration expensesDirectors’ emoluments 3,675,000 4,725,000 3,675,000 4,725,000

Depreciation 109,705,127 123,042,990 211,777,244 148,243,941

Amortisation of intangible assets - - 48,283,407 17,088,813

Personnel costs includes - - Gratuity 11,799,226 11,895,869 15,338,600 13,966,197

- EPF & ETF 49,966,962 55,009,801 64,122,777 59,278,038

- Other staff costs 475,221,121 492,812,275 594,679,587 528,752,310

Donations 2,131,341 1,795,900 2,131,341 1,795,900

Audit fees 1,457,856 1,040,000 2,548,290 1,700,000

Selling and distribution expensesMarketing & promotions 176,113,650 144,149,888 229,921,578 144,149,888

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

8. INCOME TAX EXPENSECurrent income taxCurrent tax expense 100,850,763 18,474,419 127,689,923 25,923,703

Under/(over) provision 890,053 707,887 890,053 390,771

Dividend tax - - 205,000 450,000

Deferred income taxDeferred taxation charge /(reversal) 4,734,917 120,495 15,675,605 1,358,224

Income tax expense/(income) reported 106,475,733 19,302,801 144,460,581 28,122,698

78



8. INCOME TAX EXPENSE (CONTD..)COMPANY GROUP

2016 2015 2016 2015

LKR LKR LKR LKR

Statement of other Comprehensive IncomeDeferred income tax related to items charged or credited directly to equity during the yearNet gain on revaluation of building 1,820,347 5,274,387 19,205,095 22,050,809

Actuarial losses on defined benefit plans 5,505,827 (1,336,967) 7,233,956 (1,988,414)

Income tax charged/(reversed) directly to OCI 7,326,174 3,937,420 26,439,051 20,062,395

8.1 Reconciliation between tax expenses and the product of accounting profit multiplied by the statutory tax rate is as follows;

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

Accounting profit before tax 331,857,443 147,737,135 400,289,039 188,984,932

331,857,443 147,737,135 400,289,039 188,984,932

Income tax rate of 28% (2015 : 28%) 92,920,084 41,365,348 112,080,931 28,324,246

Income tax rate of 15% (2015 : 15%) - - - 1,510,062

Under/(over) provision for previous year 890,053 707,887 2,502,163 390,771

Tax on export sales @ 12% (2015 : 12%) - 450 - 450

Allowable expenses (27,327,762) (40,000,630) (74,038,216) (47,151,788)

Income exempt from tax (521,080) (28,831,349) (6,998,880) (28,883,269)

Non deductible expenses 42,434,513 57,063,391 104,293,530 83,246,793

Tax loss claimed (6,654,992) (11,122,791) (9,259,552) (11,122,791)

Dividend tax - - 205,000 450,000

Effect on deferred tax 4,734,917 120,495 15,675,605 1,358,224

106,475,733 19,302,801 144,460,581 28,122,698

The effective income tax rate 32.08% 13.07% 36.09% 14.88%

Income tax expense reported 106,475,733 19,302,801 144,460,581 28,122,698

79

9. DEFERRED TAX ASSETS ,LIABILITIES AND INCOME TAX RELATES TO THE FOLLOWING;

Company COMPANYBalance Sheet

GROUPBalance Sheet

2016 2015 2016 2015

LKR LKR LKR LKR

Deferred Tax LiabilityCapital allowances for tax purposes 52,571,401 53,052,798 95,753,138 86,411,005

Revaluation of property, plant and equipment 15,974,203 14,153,856 50,135,373 30,930,278

68,545,604 67,206,654 145,888,510 117,341,283

Deferred Tax Assets Defined benefit plans (9,266,968) (13,322,204) (11,176,187) (15,837,737)

Deferred revenue (2,121,397) (1,649,696) (2,121,397) (1,649,695)

Tax losses - (6,654,992) (133,659,199) (144,738,263)

Operating lease (Straight line) (11,159,428) (11,643,044) (13,344,527) (11,643,044)

(22,547,793) (33,269,936) (160,301,310) (173,868,739)

Net deferred tax liability/ (assets) 45,997,810 33,936,718 (14,412,800) (56,527,456)

COMPANY GROUPIncome Statement Income Statement

2016 2015 2016 2015

LKR LKR LKR LKR

Deferred Tax LiabilityCapital allowances for tax purposes (481,397) 1,272,325 9,432,133 236,862

Revaluation of property, plant and equipment 1,820,347 7,957,739 19,205,095 25,066,815

1,338,950 9,230,064 28,547,227 25,303,677

Deferred tax assets Defined benefit plans 4,055,236 367,629 4,661,550 (313,059)

Lease rent - 263,306 - 263,306

Deferred revenue (471,701) (233,386) (471,702) (233,386)

Tax losses 6,654,992 (6,654,992) 110,791,064 (4,685,213)

Operating lease (Straight line) 483,616 1,085,294 (1,701,483) 1,085,294

10,722,143 (5,172,149) 13,567,429 (3,883,058)

Deferred income tax charge / (reverse) 12,061,093 4,057,915 42,114,656 21,420,619

Reported in the statement of income 4,734,917 120,495 15,675,605 1,358,224

Reported in the statement of comprehensive income 7,326,176 3,937,420 26,439,051 20,062,395

80



10. PROPERTY, PLANT & EQUIPMENT 10.1 Company10.1.1 Gross carrying amounts

Balance as at Acquisitions/ Reclassified/ Disposals/ Write-offs/ Balance as at

1-Apr-15 Transfers Revaluation Transfers Discarded 31-Mar-16

LKR LKR LKR LKR LKR LKR

At costLandscaping 884,560 - - - - 884,560

Building - leasehold 86,858,730 - - - - 86,858,730

Office equipment 190,271,444 19,800,669 - - - 210,072,113

Fixtures - other 38,078,784 - - - - 38,078,784

Fixtures - air conditions 12,558,168 - - - - 12,558,168

Furniture 66,515,505 237,736 - (3,417,790) - 63,335,451

Office equipment- other 5,518,879 - - - - 5,518,879

Shop fittings - fixtures 319,544,731 44,404,325 - (273,750) - 363,675,306

Shop fittings - mobiles 21,271,738 - - - - 21,271,738

Motor vehicles 14,517,123 4,528,400 - (197,490) - 18,848,033

Motor vehicles -lease 4,718,750 - - - - 4,718,750

760,738,412 68,971,130 - (3,889,030) - 825,820,512

At valuationLand 2,403,800,000 565,999,000 913,851,000 - - 3,883,650,000

Building 157,400,000 13,504,719 1,056,031 - - 171,960,750

2,561,200,000 579,503,719 914,907,031 - - 4,055,610,750

10.1.2 In the Course of Constructions

Balance as at Incurred during Reclassified/ Disposals/ Write-offs/ Balance as at

1-Apr-15 the year Revaluation Transfers Discarded 31-Mar-16


Capital work in progress 2,528,965 724,779,807 (648,474,848) (5,162,320) 73,671,604

Total gross carrying amount 2,528,965 724,779,807 - (648,474,848) (5,162,320) 73,671,604

Total 3,324,467,377 1,373,254,656 914,907,031 (652,363,878) (5,162,320) 4,955,102,866

81

10.1.3 Depreciation

Balance as at Acquisitions/ Charge for Disposals/ Write-offs/ Balance as at

1-Apr-15 Transfers the year Transfers Discarded 31-Mar-16



Building - leasehold 62,956,398 - 10,584,736 - - 73,541,134

Office equipment 100,591,434 - 18,491,111 - - 119,082,545

Fixtures - other 35,411,152 - 1,167,726 - - 36,578,878

Fixtures - air conditions 12,466,689 - 91,479 - - 12,558,168

Furniture 32,036,149 - 5,941,250 (1,962,951) - 36,014,448

Office equipment- other 2,299,964 - 338,183 - - 2,638,147

Shop fittings - fixtures 166,032,710 - 63,974,532 (189,533) - 229,817,709

Shop fittings - mobiles 15,341,151 - 1,122,206 - - 16,463,357

Motor vehicles 10,172,694 - 1,696,958 (62,538) - 11,807,114


442,911,651 - 103,408,181 (2,215,022) - 544,104,810

At valuationBuilding - - 6,295,452 (5,445,207) - 850,245

- - 6,295,452 (5,445,207) - 850,245

Total 442,911,651 - 109,703,633 (7,660,229) - 544,955,055

82



10. PROPERTY, PLANT & EQUIPMENT (CONTD..)

Company

2016 2015LKR LKR

10.1.4 Net Book Value

At CostBuilding - lease hold 13,317,596 23,902,332

Office equipment 90,989,568 89,680,010

Fixtures - other 1,499,906 2,667,632

Fixtures - air conditions - 91,479

Furniture 27,321,003 34,479,356

Office equipment- other 2,880,732 3,218,915

Shop fittings - fixtures 133,857,597 153,512,021

Shop fittings - mobiles 4,808,381 5,930,587

Motor vehicles 7,040,919 4,344,429

281,715,702 317,826,761

At valuationLand 3,883,650,000 2,403,800,000

Building 171,110,505 157,400,000

4,054,760,505 2,561,200,000

10.1.5 In the course of constructionsCapital work in progress 73,671,604 2,528,965

Total gross carrying amount 73,671,604 2,528,965

Total 4,410,147,811 2,881,555,726

10.1.6 The company uses the revaluation model of measurement of land and buildings. The company engaged chartered valuer M/S P.B Kalugalagedara & Associates an accredited independent valuer, to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence. Valuations are based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. Details of the property revaluation are given in the note 10.1.9 to the financial statements.

83

Cumulative

depreciation Net carrying Net carrying

If assets were amount amount

Class of asset Cost carried at cost 2016 2015

LKR LKR LKR LKR

Building 151,516,248 30,053,942 121,462,306 111,442,637

Land 2,130,423,636 - 2,130,423,636 1,564,424,636

10.1.7 Land and buildings with a carrying value of LKR 4,020,358,692/- (2015 - 2,561,200,000/- ) have been pledged as security for term loans obtained, details of which are disclosed in Note 26.

10.1.8 The extent and the location of the entity’s land and buildings (Company) are shown below.

Address Land/ Building Valuation Extent

No. 10, Ward Place, Colombo 07.

Land & Building Revalued A 1,R 3, P 28.58

No. 15, C.W.W. Kannangara Mawatha, Colombo 07. No. 21/5, C.W.W.Kannangara Mawatha, Colombo 07. No.25/2 ,3,5,6 & 6B,C.W.W. Kannangara Mawatha, Colombo 07. No.17,17/1,17/1A,19 & 19A, C.W.W. Kannangara Mawatha, Colombo 07. No. 25, C.W.W. Kannangara Mawatha, Colombo 07. No 18 & 20, Sama Mawatha, Borelesgamuwa Land & Building Revalued P 20.00 No 29A, Jayathilaka Mawatha, Panadura Land & Building Revalued R 1, P 2.16

84




10.1.9 Company

Property ExtentMethod of valuation

Effective date of valuation Property valuer

Significant unobservable inputs

Sensitivity of fair value to unobservable inputs

Land and BuildingsNo.10, Ward Place, Colombo 07. No.15, C.W.W. Kannangara Mawatha, Colombo 07. No.21/5, C.W.W.Kannangara Mawatha, Colombo 07.

A 1, R 3,P 28.58

Open market value method

1st March 2016 P.B. Kalugalagedara, Chartered Valuation Surveyor

Estimated price per perch LKR 12 to 12.5 Mn & estimated price per Square foot- LKR 2,000 to LKR 3,750

Positively correlated

No.25/2 ,3,5,6 & 6B,C.W.W. Kannangara Mawatha, Colombo 07. No.17,17/1,17/1A,19 & 19A, C.W.W. Kannangara Mawatha, Colombo 07. No.25, C.W.W. Kannangara Mawatha, Colombo 07. No.29A, Jayathilaka Mawatha, Panadura

R.1 -P 2.16 Open market value method


Estimated price per perch LKR 1.1 Mn & estimated price per Square foot- LKR 500 to LKR 4,000


No.18 & 20, Sama Mawatha, Boralesgamuwa

P 20 Open market value method


Estimated price per perch LKR 1 Mn & estimated price per Square foot- LKR 2500 to LKR 2,750


85

10.2 Group10.2.1 Gross carrying amounts

Balance as at Acquisitions/ Reclassified/ Disposals/ Write-offs/ Balance as at 1-Apr-15 Transfers Revaluation Transfers Discarded 31-Mar-16



Building - leasehold 268,879,383 48,374,996 - - - 317,254,379

Office equipment 191,817,898 28,221,071 - - - 220,038,969

Fixtures - other 40,052,952 854,701 - - - 40,907,653

Fixtures - air conditions 12,558,168 6,237,013 - - - 18,795,181

Furniture 251,657,631 59,387,024 - (3,417,790) - 307,626,865

Computer equipments 95,672,338 5,213,938 - - - 100,886,276

Office equipment- other 63,972,675 9,660,669 - - - 73,633,344

Shop fittings - fixtures 382,384,482 66,892,808 - (273,750) - 449,003,540

Shop fittings - mobiles 21,271,738 - - - - 21,271,738

Motor vehicles 16,269,331 4,528,399 - (197,490) - 20,600,240


1,350,139,906 229,370,619 - (3,889,030) - 1,575,621,495

At valuationLand 3,079,800,000 565,999,000 1,020,428,343 (604,577,343) - 4,061,650,000

Building 300,200,000 13,504,719 (2,743,969) - - 310,960,750

3,380,000,000 579,503,719 1,017,684,374 (604,577,343) - 4,372,610,750

10.2.2 In the Course of Constructions

Balance as at Incurred during Reclassified/ Disposals/ Write-offs/ Balance as at 1-Apr-15 the year Revaluation Transfers Discarded 31-Mar-16


Building work in progress 45,507,494 - (45,507,494) - - -

Capital work in progress 96,491,277 786,699,659 - (728,683,274) (18,916,206) 135,591,456 Total gross carrying amount 141,998,771 786,699,659 (45,507,494) (728,683,274) (18,916,206) 135,591,456

Total 4,872,138,677 1,595,573,997 972,176,880 (1,337,149,647) (18,916,206) 6,083,823,701

86




10.2.3 Depreciation

Balance as at Acquisitions/ Charge for Disposals/ Write-offs/ Balance as at 1-Apr-15 Transfers the year Transfers Discarded 31-Mar-16


At costLandscaping 884,560 - - - - 884,560 Building - leasehold 93,833,184 - 43,997,030 - - 137,830,214 Office equipment 100,824,419 - 18,854,585 - - 119,679,004 Fixtures - other 37,043,501 - 1,373,022 - - 38,416,523 Fixtures - air conditions 12,466,689 - 400,343 - - 12,867,032 Furniture 86,455,600 - 31,711,323 (1,962,951) - 116,203,972 Computer equipments 43,082,808 - 15,567,280 - - 58,650,088 Office equipment- other 13,274,771 - 7,135,520 - - 20,410,291 Shop fittings - fixtures 179,503,978 - 78,742,406 (189,533) - 258,056,851 Shop fittings - mobiles 15,341,154 - 1,122,203 - - 16,463,357 Motor vehicles 11,924,902 - 1,696,957 (62,538) - 13,559,321 Motor vehicles -lease 4,718,750 - - - - 4,718,750

599,354,316 - 200,600,669 (2,215,022) - 797,739,963

At valuationBuilding - - 11,395,452 (10,545,207) - 850,245

- - 11,395,452 (10,545,207) 850,245

Total 599,354,316 - 211,996,121 (12,760,229) - 798,590,208

87

10.2.4 Net book value at cost

Group 2016 2015LKR LKR

10.2.4 Net Book Value

At costBuilding - leasehold 179,424,165 175,046,199

Office equipment 100,359,965 90,993,479

Fixtures - other 2,491,130 3,009,451

Fixtures - air conditions 5,928,149 91,479

Furniture 191,422,893 165,202,031

Computer equipments 42,236,188 52,589,530

Office equipment- other 53,223,053 50,697,904

Shop fittings - fixtures 190,946,689 202,880,504

Shop fittings - mobiles 4,808,381 5,930,584

Motor vehicles 7,040,919 4,344,429

777,881,532 750,785,590

At valuationLand 4,061,650,000 3,079,800,000

Building 310,110,505 300,200,000

4,371,760,505 3,380,000,000

10.2.5 In the course of constructionsBuilding work in progress - 45,507,494

Capital work in progress 135,591,456 96,491,277

Total gross carrying amount 135,591,456 141,998,771

Total 5,285,233,493 4,272,784,361

88




10.2.6 The company uses the revaluation model of measurement of land and buildings. The company engaged chartered valuer M/S P.B Kalugalagedara & Associates an accredited independent valuer, to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence. Valuations are based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. Details of the property revaluation are given in the note 10.2.9 to the financial statements.

Cumulative

depreciation Net carrying Net carrying

If assets were amount amount

Class of asset Cost carried at cost 2016 2015

LKR LKR LKR LKR

Building 215,941,682 51,126,428 164,815,254 156,406,221

Land 1,938,425,223 - 1,938,425,223 1,918,268,618

10.2.7 Land and buildings with a carrying value of LKR 4,936,358,692 (2015 - LKR 3,380,000,000/= ) have been pledged as security for term loans obtained, details of which are disclosed in Note 26.

10.2.8 The extent and the location of the entity’s land and buildings (Group)

Address Land/ Building Valuation Extent

No. 10, Ward Place, Colombo 07.

Land & Building Revalued A 1, R 3, P 28.58

No. 15, C.W.W. Kannangara Mawatha, Colombo 07.

No. 21/5, C.W.W.Kannangara Mawatha, Colombo 07.

No.25/2 ,3,5,6 & 6B,C.W.W. Kannangara Mawatha, Colombo 07.

No.17,17/1,17/1A,19 & 19A, C.W.W. Kannangara Mawatha, Colombo 07.

No. 25, C.W.W. Kannangara Mawatha, Colombo 07.

No 18 & 20, Sama Mawatha, Borelesgamuwa Land & Building Revalued P 20.00

No 29A, Jayathilaka Mawatha, Panadura Land & Building Revalued R 1, P 2.16

No. 475/32, Kotte Road, Rajagiriya Land & Building Revalued P 29.54

89

10.2.9 Group

Property Extent Method of valuation

Effective date of valuation

Property Valuer Significantunobservableinputs


Land and BuildingsNo.10, Ward Place, Colombo 07. No. 15, C.W.W. Kannangara Mawatha, Colombo 07. No. 21/5, C.W.W.Kannangara Mawatha, Colombo 07.

A 1, R 3, P 28.58


1stMarch2016

P.B. Kalugalagedara, Chartered Valuation Surveyor

Estimated price per perch LKR 12 to 12.5 Mn & estimated price per Square foot- LKR 2,000 to LKR 3,750


No.25/2 ,3,5,6 & 6B,C.W.W. Kannangara Mawatha, Colombo 07. No.17,17/1,17/1A,19 & 19A, C.W.W. Kannangara Mawatha, Colombo 07.

No. 25, C.W.W. Kannangara Mawatha, Colombo 07. No 29A, Jayathilaka Mawatha, Panadura

R.1 P 2.16


31stMarch2016


Estimated price per perch LKR 1.1 Mn & estimated price per Square foot- LKR 500 to LKR 4,000


No 18 & 20, Sama Mawatha, Boralesgamuwa

P 20 Open market value method

1st March2016


Estimated price per perch LKR 1 Mn & estimated price per Square foot- LKR 2500 to LKR 2,750


No. 475/32, Kotte Road, Rajagiriya

P.47.52 Open market value method

31stMarch2015


Estimated price per perch LKR 3.75 Mn & estmated price per Square foot- LKR 500 to LKR 4,500


90



11. INVESTMENT PROPERTY (Group)

Gross carrying amounts

Balance Balance

As at Acquisitions/ Adjustment for Disposals/ Write-offs/ As at

1-Apr-15 Transfers fair value Transfers Impairment 31-Mar-16


Land - 574,500,000 24,980,000 - - 599,480,000

Total cost of investment property - 574,500,000 24,980,000 - - 599,480,000

Net book value 2016 2015

At revaluation LKR LKR

Land 599,480,000 - Total carrying amount of investment property 599,480,000 -

11.1 The extent and the location of the entity’s land and buildings (Group)

Property Extent Method of valuation

Effective date of valuation

Property valuer Significant unobservable inputs


No. 271A - 271F, Kaduwela Road, Battaramulla

A 1, R 2,P 9.74


31st March 2016


Estimated price per perch LKR 2 Mn to 3 Mn


91

12. INTANGIBLE ASSETS

12.1 Group

Balance Balance

As at Acquisitions/ Reclassified / Disposals / Write-offs / As at

1-Apr-15 Transfers Revaluation Transfers Discarded 31-Mar-16


12.1.1 Gross carrying amountsAt costComputer software 137,327,068 524,412 - - (4,557,673) 133,293,807

Brands 672,974,584 - - - - 672,974,584

810,301,652 524,412 - - (4,557,673) 806,268,391

Balance BalanceAs at Acquisitions/ Charge for Disposals / Write-offs / As at

1-Apr-15 Transfers the year Transfers Discarded 31-Mar-16LKR LKR LKR LKR LKR LKR

12.1.2 AmortizationAt costComputer software 65,518,207 - 18,066,831 - (987,493) 82,597,545

Brand names - - 30,216,574 - - 30,216,574

65,518,207 - 48,283,405 - (987,493) 82,597,545

2016 2015

12.1.3 Net book valueComputer software 50,696,262 71,808,861

Brand names 642,758,010 672,974,584

Total 693,454,272 744,783,445

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13. INVESTMENT IN SUBSIDIARIES

COMPANY GROUP% 2016 2015 2016 2015

Holding LKR LKR LKR LKR

Odel Properties (Pvt) Ltd. 100% 108,100,000 108,100,000 - -


100% 10 10 - -

Odel Lanka (Pvt) Ltd 100% 270,000,020 270,000,020 - -

Odel Apparels (Pvt) Ltd 100% 1,000 1,000 - -

BSL International (Pvt) Ltd 100% 1,000,000 1,000,000 - -

Greenfield Trading (Pvt) Ltd 100% 10 10 - -

Softlogic Brands (Pvt) Ltd 100% 1,719,288,000 600,000,000 - -

2,098,389,040 979,101,040 - -

Impairment of investment (1,000,000) (1,000,000) - -

2,097,389,040 978,101,040 - -

14. INVENTORIES

COMPANY GROUP 2016 2015 2016 2015

LKR LKR LKR LKR

Finished goods 1,435,211,271 1,421,696,593 1,954,970,532 1,969,002,679

Goods in transit 28,492,697 11,468,318 42,604,743 5,665,840

Provision for obsolete and slow moving items

(57,233,823) (72,138,852) (61,527,896) (76,800,959)

Total inventories at the lower of cost and NRV

1,406,470,145 1,361,026,059 1,936,047,379 1,897,867,560

15. TRADE AND OTHER RECEIVABLES

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

Financial Assets - Loans & ReceivablesTrade Debtors (15.1) 35,872,528 14,656,060 35,225,100 49,651,084

Other debtors 54,176,447 26,532,953 61,547,222 28,906,318

90,048,975 41,189,013 96,772,322 78,557,402

Non Financial AssetsDeposits & prepayments 434,616,050 163,115,298 506,930,715 220,409,156

524,665,025 204,304,311 603,703,037 298,966,558

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COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

15.1 Trade debtors aging analysisAging brackets (Days)

0-30 27,469,926 13,455,821 26,662,524 48,404,300

31-60 4,391,203 - 4,391,203 -

61-90 1,088,237 634,883 1,088,237 634,883

91-120 1,060,757 565,356 1,174,286 611,901

Over 120 1,862,406 - 1,908,851 -

Total 35,872,528 14,656,060 35,225,100 49,651,084

16. DEFERRED LIABILITY

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

16.1 Deferred revenueLoyalty programeAt 1 April 5,891,768 5,058,249 5,891,768 5,058,249

Deferred during the period 14,360,727 10,543,330 14,360,727 10,543,330

Released to the income statement (12,676,077) (9,709,811) (12,676,077) (9,709,811)

At 31 March 7,576,418 5,891,768 7,576,418 5,891,768

16.2 Deferred expenditureOperating leaseAt 1 April 41,582,300 45,458,351 41,582,300 45,458,351

Charged to the income statement (1,727,201) (3,876,051) 6,076,724 (3,876,051)

Balance acquired - restatement - - - 11,523,858

At 31 March 39,855,099 41,582,300 47,659,024 53,106,158

Total deferred liability 47,431,517 47,474,068 55,235,442 58,997,926

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17. AMOUNTS DUE FROM RELATED PARTIES

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

Amount due from subsidiary companiesOdel Apparels (Pvt) Ltd 16,979,921 10,061,114 - -

Odel Lanka (Pvt) Ltd 121,354,388 132,521,701 - -

Greenfield Trading (Pvt) Ltd 442,716 287,233 - -

BSL International (Pvt) Ltd 6,337,657 4,912,954 - -

Softlogic Brands (Pvt) Ltd 198,346,433 1,119,538,831 - -

343,461,115 1,267,321,833 - -

Less: Provision for doubtful debt - Odel Lanka

(65,532,013) (65,532,013) - -

Less: Provision for doubtful debt - BSL (4,209,748) (4,209,748) - -

273,719,354 1,197,580,072 - -

Amount due from Other companies - - -

Softlogic Communications (Pvt) Ltd 350,480 - 350,480 (19,600)

Softlogic Retail (Pvt) Ltd 3,969,482 - 46,288,142 -

Softlogic Mobile Distribution (Pvt) Ltd - - 1,418,191 389,862

Softlogic BPO Services (Pvt) Ltd 39,000,000 - 39,000,000 -

43,319,962 - 87,056,813 370,262

317,039,316 1,197,580,072 87,056,813 370,262

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18. INTEREST BEARING LOANS AND BORROWINGS

18.1 Company

2016 2016 2015 2015Repayable Repayable 2016 Repayable Repayable 2015

within 1 year after 1 year Total within 1 year after 1 year Total LKR LKR LKR LKR LKR LKR

Bank loan 18.1.1 1,089,522,296 395,950,210 1,485,472,506 1,193,434,501 165,633,625 1,359,068,126 Bank overdraft 22.2 250,693,156 - 250,693,156 8,363,362 - 8,363,362

1,340,215,452 395,950,210 1,736,165,662 1,201,797,863 165,633,625 1,367,431,488

18.1.1 Bank Loans

1-Apr-15 Obtained Repayment 31-Mar-16LKR LKR LKR LKR

Short term working capital loans 1,084,520,205 3,977,668,230 (4,167,188,435) 895,000,000 Medium term project loans 274,547,921 500,000,000 (184,075,415) 590,472,506

1,359,068,126 4,477,668,230 (4,351,263,850) 1,485,472,506

18.2 Group

2016 2016 2015 2015Repayable Repayable 2016 Repayable Repayable 2015

within 1 year after 1 year Total within 1 year after 1 year Total LKR LKR LKR LKR LKR LKR

Bank loan (18.2.1) 1,089,522,296 395,950,210 1,485,472,506 1,230,349,821 165,633,625 1,395,983,446 Bank overdraft 22.1 262,724,223 - 262,724,223 39,688,674 - 39,688,674

1,352,246,519 395,950,210 1,748,196,729 1,270,038,495 165,633,625 1,435,672,120

18.2.1 Bank Loans

1-Apr-15 Obtained Repayment 31-Mar-16LKR LKR LKR LKR

Short term working capital loans 1,121,435,525 4,124,233,460 (4,350,668,985) 895,000,000 Medium term project loans 274,547,921 500,000,000 (184,075,415) 590,472,506

1,395,983,446 4,624,233,460 (4,534,744,400) 1,485,472,506

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18. INTEREST BEARING LOANS AND BORROWINGS

18.3 Terms of the loan

Lending institution Year Loan amount

Nature of facility

Security Repayment term Loan Balance as at 31st

March 2016

Loan Balance as at 31st March

2015

BOC 2012/2013 275Mn Medium term loan

Property at 475/32, Kotte Road, Rajagiriya

6 Years 96,249,974 151,405,093

HNB 2011/2012 200Mn Medium term loan

Property at 271-271F,Kaduwala Road, Thalangama, Battaramulla owned by Odel Lanka (Pvt) Ltd

Over a period of 06 years in 59 equal monthly instalments

25,800,000 66,000,000

DFCC Bank 2012/2013 96Mn Medium term loan

Property at 15, C.W.W Kannangara Mw. Colombo 07 and 29 A,Jayathilaka Mawatha Panadura

84 equal monthly instalments (capital) after a grace period of 12 months

43,428,532 57,142,828

Commercial Bank 2015 / 2016 500Mn Medium term loan

Credit card & debit card sales except for BIA

5 Years 424,994,000 -

HNB 2014 / 2015 450Mn Short term Loan

Stock in trade Maximum of 90 days subject to roll over

450,000,000 395,000,000

Seylan Bank 2015 / 2016 500Mn Short term Loan

None Maximum of 90 days subject to roll over

445,000,000 -

Union Bank 2014/2015 450Mn Short term Loan

Property at No 10, Ward Place, Colombo 7.

Monthly - 450,000,000

DFCC Bank 2014/2015 239Mn Short term Loan

Stock in trade Monthly - 239,520,205

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19. RETIREMENT BENEFIT LIABILITY

COMPANY GROUP 2016 2015 2016 2015

LKR LKR LKR LKR

Defined benefit plan costs - gratuity

As at the beginning of the year 47,579,299 48,892,259 59,510,336 55,131,740

Balance transferred from new subsidiaries - - 1,326,299

Charge for the year 19.1 11,799,226 11,895,869 15,338,600 13,966,197

Payment made during the year (6,618,537) (17,983,710) (7,354,643) (18,015,377)

Actuarial loss/ (gain) on obligation (19,663,669) 4,774,881 (25,835,558) 7,101,478

Defined benefit obligation as at the end of the year

33,096,316 47,579,299 41,658,733 59,510,336

19.1 Charge for the yearCurrent service cost 7,707,407 7,006,644 10,215,409 8,353,052

Interest cost 4,091,819 4,889,225 5,123,191 5,613,145

11,799,226 11,895,869 15,338,600 13,966,197

19.2 The Retirement benefit liability of Odel PLC is valued by Mr. Piyal Goonatilleke, who is a fellow member of the society of actuaries (USA) and a member of the American Academy of Actuaries. Defined liability is valued as at 31st March 2016 and the principal actuarial assumptions used are as follows.

Principal actuarial assumptions

COMPANY GROUP 2016 2015 2016 2015

Discount rate 11.0% 8.6% 11.0% 8.6%Salary increases 7.5% 10.0% 7.5% 10.0%Staff turnover

Age Turnover Turnover Turnover Turnover20 30% 30% 30% 30%25 30% 30% 30% 30%30 20% 20% 20% 20%35 10% 10% 10% 10%40 5% 5% 5% 5%45 2% 2% 2% 2%

Retirement age 55 Years 55 Years 55 Years 55 Years

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19.3 Sensitivity of assumptions employed in actuarial valuation

The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement.

The sensitivity of the Comprehensive Income Statement and the Statement of Financial Position is the effect of the assumed changes in discount rate and salary increment rate on the profit & loss and employment benefit obligation for the year.

Assumptions Discount rate Salary increment rate 1% Increase 1% Decrease 1% Increase 1% Decrease

Impact on defined benefit obligation - Company (2,857,414) 3,271,653 3,565,041 (3,149,198)Impact on defined benefit obligation - Group (3,787,906) 4,351,412 4,722,803 (4,157,164)

19.4 Maturity Analysis

Year Retirement Term Death Disability Total

2016/2017 3,079,280 4,079,059 75,977 134,852 7,369,168

2017/2018 1,729,067 4,558,773 87,130 147,582 6,522,552

2018/2019 40,361 5,018,118 105,571 180,186 5,344,236

2019/2020 2,677,883 5,304,131 135,349 235,269 8,352,632

2020/2021 2,448,805 5,434,087 172,543 293,472 8,348,907

2021/2022 5,462,930 4,874,760 206,864 345,164 10,889,718

2022/2023 6,567,817 4,396,661 231,541 382,496 11,578,515

2023/2024 8,434,994 3,949,414 252,400 419,119 13,055,927

2024/2025 6,830,629 3,532,564 262,373 448,791 11,074,357

2025/2026 8,563,652 3,082,327 441,368 786,163 12,873,510

2015/2016 Actual Benefit Payout 6,618,537

The expected benefits are estimated based on the same assumptions used to measure the company’s benefit obligation at the end of the year and include benefits attributable to estimated future employee service.

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20. TRADE AND OTHER PAYABLES

COMPANY GROUP 2016 2015 2016 2015

LKR LKR LKR LKR

Financial liabilitiesTrade payables 345,258,042 315,706,002 367,264,279 307,315,017 Sundry creditors 249,251,521 77,260,831 302,877,867 110,767,891 Deposits & advances 1,867,051 2,513,020 1,867,051 2,513,020

596,376,614 395,479,853 672,009,197 420,595,928

Non financial liabilitiesTax & accrued expenses 128,700,624 119,525,288 127,486,755 89,036,306

725,077,238 515,005,141 799,495,952 509,632,234

21. AMOUNTS DUE TO RELATED PARTIES

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

Amount due to subsidiary companies

Odel Properties (Pvt) Ltd 3,119,545 80,256,508 - -


106,867,991 36,143,460 - -

Softlogic Brands (Pvt) Ltd 350,556,144 - - -

460,543,680 116,399,968 - -

Amount due to other companiesSoftlogic Retail (Pvt) Ltd - - 308,734,798 220,804,538 Softlogic BPO Service (Pvt) Ltd - - - 1,013,004 Softlogic Corporate Service (Pvt) Ltd 333,000 - 440,691 19,425 Softlogic Destination Management Ltd - - - 37,900 Softlogic Holdings PLC 7,128,915 - 16,399,919 29,324,669 Softlogic Information Technologies Ltd - - 1,181,097 274,286 Softlogic Restaurants (Pvt) Ltd - - 26,791 34,195 Uni Walker Ltd - - - (19,080)Softlogic Communications (Pvt) Ltd 627,010 - 645,914 - Softlogic International (Pvt) Ltd 80,000 - 80,000 - Softlogic Retail One (Pvt) Ltd - - 52,494 -

8,168,925 - 327,561,704 251,488,937

468,712,605 116,399,968 327,561,704 251,488,937

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22. CASH AND CASH EQUIVALENTS

Components of cash and cash equivalents

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

22.1 Favorable cash & cash equivalents balance Cash & bank balances 61,972,516 99,952,941 83,208,435 110,614,424

22.2 Unfavorable cash & cash equivalents balance Bank overdraft (250,693,156) (8,363,362) (262,724,223) (39,688,674)

(188,720,640) 91,589,579 (179,515,788) 70,925,750

23. STATED CAPITAL

2016 2015

Number LKR Number LKR

Fully paid ordinary shares 272,129,431 2,795,513,620 272,129,431 2,795,513,620

272,129,431 2,795,513,620 272,129,431 2,795,513,620

24. FINANCIAL ASSETS & LIABILITIES - FAIR VALUES

24.1 The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Investment in unit trust, cash and short-term deposits, staff loans, refundable deposits, trade receivables, trade payables, amount due to/from related party and other current liabilities approximate their carrying amounts.

The fair value of, obligations under finance leases, is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities

The fair value of loans from bank approximate the carrying value as loans have been obtained on floating rates.

Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are carried in the financial statements.

101

COMPANY Carrying Amount Fair value

2016 2015 2016 2015LKR LKR LKR LKR

Interest bearing loans and borrowingsFloating rate borrowings 1,485,472,506 1,359,068,126 1,485,472,506 1,359,068,126

1,485,472,506 1,359,068,126 1,485,472,506 1,359,068,126

GROUP Carrying Amount Fair value

2016 2015 2016 2015LKR LKR LKR LKR

Interest bearing loans and borrowingsFloating rate borrowings 1,485,472,506 1,395,983,446 1,485,472,506 1,395,983,446

1,485,472,506 1,395,983,446 1,485,472,506 1,395,983,446

COMPANY Carrying Amount Fair value

2016 2015 2016 2015LKR LKR LKR LKR

Loans and receivablesStaff loan 2,779,318 4,376,506 2,779,318 4,381,449 Refundable deposit 57,121,823 55,431,094 57,121,823 55,431,094

59,901,141 59,807,600 59,901,141 59,812,543

GROUP Carrying Amount Fair value

2016 2015 2016 2015LKR LKR LKR LKR

Loans and receivablesStaff loan 2,779,318 4,376,507 2,779,318 4,381,449 Refundable deposit 72,351,943 83,914,494 72,351,943 80,090,317

75,131,261 88,291,001 75,131,261 84,471,766

24.2 Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data

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24. FINANCIAL ASSETS & LIABILITIES - FAIR VALUES (CONTD..)

As at 31 March 2016, the Group held the following financial instruments carried at fair value in the statement of financial position:

Assets measured at fair value Level 1 Level 2 Level 3LKR LKR LKR LKR

Financial assets at fair value through profit and lossInvestment in unit trust 2016 224,298 224,298 - -

Investment in unit trust 2015 208,300 208,300 - -

25. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net profit / (loss) for the year attributable to equity holders of parent by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year and the previous year are adjusted for events, that have changed the number of ordinary shares outstanding, without a corresponding change in the resources.

The following reflects the income and share data used in the basic earning per share computations

2016 2015LKR LKR

Amounts used as the numerators:Net profit 255,828,458 160,862,234 Net profit attributable to ordinary shareholders for basic earnings per share 255,828,458 160,862,234

Number of ordinary shares used as denominators:Weighted average number of ordinary shares in issue applicable tobasic earnings per share 272,129,431 272,129,431 Adjusted weighted average number of ordinary shares applicable tobasic earnings per share 272,129,431 272,129,431

103

26. ASSETS PLEDGED - ( Company/Group) The following assets have been pledged as security for liabilities.

Nature of asset Mortgage type Bank 2016 2015 Address

Land & building Primary Union 460Mn 460Mn No. 10, Ward Place, Colombo 7Land & building Primary DFCC 81Mn 281Mn No. 15, C.W.W. Kannangara

Mawatha, Colombo 7Land & building Primary DFCC 55Mn 55Mn No 29A, Jayathilaka Mawatha,

PanaduraLand & building Primary BOC 275Mn 275Mn No. 475/32, Kotte Road, Rajagiriya.

Owned by Odel Properties (Pvt) LtdLand & building Primary HNB 200Mn 200Mn No 271-271F, Kaduwala Road,

Thalangama, Battaramulla. owned by Odel Lanka (Pvt) Ltd

Stock & debts Primary Concurrent Sampath 150Mn 150Mn Stock & debts Primary Concurrent HNB 400Mn 400Mn Stock & debts Primary Concurrent DFCC 210Mn 210Mn Stock & debts Primary Concurrent NTB 100Mn 100Mn Credit card sales Primary Concurrent Commercial 500Mn - Credit/ Debit card sales from all

location except for BIA

27. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

There were no significant capital commitments and contingent liabilities as of the Balance sheet date except for the operating lease commitments stated in the note 16.2 to this financial statements and the letter of credits executed for LKR 76,923,178/= (USD 526,315) for foreign purchases and LKR 31,808,716/= for local purchases.

Contingent Liabilities

i Odel Properties (Pvt) Ltd, a fully owned subsidiary of Odel PLC received an income tax assessment from the department of Inland Revenue for an additional income tax liability of Rs 10.5mn (including penalty) for the years of assessments 2011/12 and 2012/13. Company has lodged an appeal against the said assessments and the outcome of the appeal is pending.

ii Odel PLC received an income tax assessment from the department of Inland Revenue for an additional income tax liability of Rs 16.02mn (including penalty) for the years of assessment 2009/10. Company has lodged an appeal against the said assessment and the Department of Inland Revenue has issued their determination on 14 January 2015, confirming the assessment. The Company has lodged an appeal with Tax Appeal Commission and the determination of the same is pending.

iii An appeal was filed in the Civil Appellate High Court of Western Province ‘in September 2015 under the case number HCA/LT /99/2014 against the Order delivered by the Labour Tribunal of Colombo in favor of the Applicant- Respondent who was an ex-employee of the company allowing him a compensation in the application filed by the applicant - Respondent at the Labour Tribunal of Colombo alleging the unlawful termination of his employment by the Respondent - Appellant claiming reinstatement in employment with back wages or in the alternative pay compensation for unlawful termination.

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28. OTHER FINANCIAL ASSETS

Financial assets at fair value through profit and loss

COMPANY GROUP2016 2015 2016 2015

LKR LKR LKR LKR

Investment in unit trust 224,298 208,300 224,298 208,300

Loans and receivablesStaff loan 2,779,318 4,376,506 2,779,318 4,376,506

Refundable deposit 57,121,823 55,431,094 72,351,943 83,914,494

60,125,439 60,015,900 75,355,559 88,499,300

Total current 17,655,709 7,515,463 23,793,709 7,515,463

Total Non current 42,469,730 52,500,437 51,561,850 80,983,837

29. RELATED PARTY DISCLOSURES

The financial statements include the financial statements of the Group and the Subsidiaries listed in the following table:

% of equity interest 2016 2015

LKR LKR

Name Odel Apparels (Pvt) Ltd 100% 100%Odel Information Technology Services ( Pvt) Ltd 100% 100%Odel Properties ( Pvt) Ltd 100% 100%Odel Lanka ( Pvt) Ltd 100% 100%BSL International (Pvt) Ltd 100% 100%Softlogic Brands (Pvt) Ltd 100% 100%Greenfield trading (Pvt) Ltd 100% 100%

The following table provides the total amount of transactions that have been entered into with the above related parties for the relevant financial year and the information regarding outstanding balances as at 31 March 2016 and 2015.

105

29.1 Transaction with the parent and related entities

Fellow Subsidiaries 2016 2015

LKR LKR

Nature of TransactionBalance as at 1 April ( Before Provision) 1,150,921,860 72,404,819 Loan Granted 288,034,275 1,119,228,433 Purchase of Goods/Services (651,425,073) (171,035,090)Investment in equity shares (1,119,288,000) -

Settlement of Liabilities on behalf of the Company 214,674,373 130,323,698

Balance as at 31 March ( Before Provision) (117,082,565) 1,150,921,860

Other Related Party 2016 2015

LKR LKR

Nature of TransactionBalance as at 1 April (Before Provision) - -

Loan Granted/Advance Paid 42,326,689 - Purchase of Goods/Services (89,390,180) -

Settlements 82,214,528 -

Balance as at 31 March (Before Provision) 35,151,037 -

Transactions with ultimate holding company- Softlogic Holdings PLC

Rs.34,207,032/= worth of service obtained and settlement of Rs27,078,117/= has been included in the above transactions.

Above balances are included in the amount due to / due from related parties. Balance outstanding at the year end is disclosed in the Note 17 and 21 to the financial statements

All trading transactions are at the arms length and interest has been charged on the outstanding balance at the beginning at the rate of AWPLR +1%. All other amounts are due to/from on demand

29.2 Transactions with Key Management Personnel of the Company or its parent

The key management personnel of the Company/Group are the members of its Board of Directors and that of its parent.

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a) Key Management Personnel Compensation

2016 2015LKR LKR

Short-term employee benefits 3,675,000 4,725,000

Post-employment benefits - -

Other long term benefits - -

Termination benefit - -

Share based payments - -

3,675,000 4,725,000

30. OPERATING LEASE COMMITMENTS - GROUP AS LESSEE

The Group has entered into commercial leases for properties to operate its outlet network. These leases have an average life of 7 years. There are no restrictions placed upon the Group by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases are as follows:

2016 2015LKR LKR

Within one year 177,208,804 156,543,056 After one year but not more than five years 460,001,833 367,969,439 More than five years 247,340,130 244,535,929

884,550,767 769,048,424

31. DIVIDENDS PAID AND PROPOSED

2016 2015LKR LKR

Declared and paid during the year:Dividends on ordinary shares:Final dividend for 2016: 0 cents per share (2015: 12 cents per share) - 32,655,532 Interim dividend for 2016: 30 cents per share (2015: 12 cents per share) 81,638,829 32,655,532

81,638,829 65,311,063

32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations.

The Group has loan and receivables, trade and other receivables, and cash and short-term deposits that are derived directly from its operations.

The Group’s senior management oversees the management of the financial risks. The Board of Directors reviews and agrees policies for managing each of these risks which are summarized below.

107

32.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interestrates arise due to the borrowings with floating interest rates. The movement of rates are closely monitored and refinancing options are available to manage this risk.

32.1.1 Interest Rate Sensivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:

Increase/decrease in basis points

Effect on profit before tax

2016Loan interest +100 (15,919,344)Loan interest -100 15,919,344

2015Loan interest +100 (11,882,822)Loan interest -100 11,882,822

The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

32.2 Credit risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group has minimal exposure to credit risk from operating activities due to nature of business. The risk from its financing activities, including deposits with banks and financial institutions is managed by dealing with institutions carrying high credit rating.

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32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD..)

32.3 Liquidity Risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled with existing lenders.

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted gross payments.

32.3.1 Company

Year ended 31 March 2016 On demand

Less than 3months 3 to 12 months 1 to 5 years > 5 years Total

Interest-bearing loans and borrowings - 968,961,024 182,762,803 463,756,733 -

1,615,480,560

Bank Overdrafts 250,693,156 - - - - 250,693,156 Trade and other payables - 725,077,238 - - - 725,077,238

250,693,156 1,694,038,262 182,762,803 463,756,733 - 2,591,250,954 Year ended 31 March 2015 On demand

Less than 3months 3 to 12 months 1 to 5 years > 5 years Total

Interest-bearing loans and borrowings - 1,137,995,558 92,275,025 177,012,854 - 1,407,283,438 Bank Overdrafts 8,363,362 - - - - 8,363,362 Trade and other payables - 395,479,853 - - - 395,479,853

8,363,362 1,533,475,411 92,275,025 177,012,854 - 1,811,126,653

111

32.3.2 Group


Less than 3 onths 3 to 12 months 1 to 5 years > 5 years Total

Interest-bearing loans and borrowings - 990,691,572 182,762,803 463,756,733 -

1,637,211,108


262,724,223 1,790,187,524 182,762,803 463,756,733 - 2,699,431,283


Less than 3 onths 3 to 12 months 1 to 5 years > 5 years Total

Interest-bearing loans and borrowings -

1,175,649,185 92,275,025 177,012,854 - 1,444,937,064


39,688,674 1,596,245,113 92,275,025 177,012,854 - 1,905,221,666

33. COMPARATIVE INFORMATION

As reported previously

COMPANY GROUP2015 2015

Note LKR LKR

Balance sheetGoodwill 33.1 - 78,516,196 Deferred tax asset 33.1 - 71,167,811 Deferred liability 33.1 47,474,068 47,474,068

Current presentation

COMPANY GROUP2015 2015

Note LKR LKR

Balance sheetGoodwill 33.1 - 104,680,409

Deferred tax asset 33.1 - 56,527,456 Deferred liability 33.1 47,474,068 58,997,926


33. COMPARATIVE INFORMATION (CONTD..)

33.1 Reasons for change in the presentation

Over statement of 14,640,355/= on deferred tax asset and an understatement of Rs.11,523,858/- on deferred liability as at 31st March 2105 due to the straight-line adjustment on operating lease have been rectified in Softlogic Brands (Pvt) Ltd, which resulted in the increase in goodwill by the respective amounts.

The date of acquisition of Softlogic Brands (Pvt) Ltd was 31st March 2015.

34. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

There have been no material events occurring after the balance sheet date that require adjustments to or disclosure in the financial statements.


113

INVESTOR INFORMATION

The percentage of shares held by the public as at 31st March 2016 was 5.86% (2015 - 6.60%). The number of public shareholders as at 31st March 2016 was 5,855

Distribution of Shareholding as at 31st March 2016

There were 5,858 Registered shareholders as at 31st March 2015.

No. of Shares held No. of % of Total % of Total Shareholders Shareholders Holding Holding

1 1,000 5,102 87.09 1,355,986 0.50 1,001 10,000 643 10.98 2,102,699 0.77

10,001 100,000 97 1.66 3,151,136 1.16 100,001 1,000,000 12 0.20 3,253,244 1.20

Over 1,000,000 4 0.07 262,266,366 96.38 Total 5,858 100.00 272,129,431 100.00

Analysis report of Shareholders as at 31st March 2016

Category No. of % of Total % of Total Shareholders Shareholders Holding Holding

Individual 5,719 97.63 6,785,754 2.49 Institutional 139 2.37 265,343,677 97.51 Total 5,858 100.00 272,129,431 100.00

Resident 5,827 99.47 271,772,855 99.87 Non-resident 31 0.53 356,576 0.13 Total 5,858 100.00 272,129,431 100.00

Share Trading Information

2015/2016 2014/2015Highest (Rs.) 23.80 28.00Lowest (Rs.) 16.10 20.00Closing (Rs.) 21.70 22.00

Dividend Information

2015/2016 2014/2015Dividend per share (cents) 30 12Dividend pay out (%) 32 20


Twenty largest shareholders of the company as at 31st March 2016 are as follows.

No Name No of Shares Percentage %

1 Softlogic Retail (Pvt) Limited 169,956,278 62.45

2 Softlogic Holdings PLC 61,231,769 22.50

3 Commercial bank of Ceylon PLC/ Softlogic Retail (Pvt) Ltd 25,000,000 9.19

4 Sampath bank PLC/ Dr. T. Senthilverl 6,078,319 2.23

5 Mr. M. Mohamed Fuad 722,806 0.27

6 Mrs. E.B Helga Anil Perera 527,000 0.19

7 First Capital Markets Limited / Mr. I.P. Galhenage 308,350 0.11

8 Mercantile Investments and Finance PLC 300,000 0.11

9 Tangerine Tours (Pvt) Limited 225,600 0.08

10 Bank of Ceylon No.1 Account 222,295 0.08

11 Dee Investments (Pvt) Limited 190,400 0.07

12 Bansei Securities Capital (Pvt) Ltd/S.M.T.B Samarakoon 187,002 0.07

13 Askold (Pvt) Ltd 186,349 0.07

14 Asha Financial Services Limited/ Mr. C.N Pakianathan 142,241 0.05

15 Pan Asia Banking Corporation PLC/ Mr. R. Erle Rambukwelle 135,000 0.05

16 Mr. W.V Jagath Pushpa Kumara 106,201 0.04

17 Mr. N. Arjuna Samarakoon 100,000 0.04

18 First Capital Markets Limited / Mr. S.W.U Arunashantha 100,000 0.04

19 DFCC Bank PLC/ Mr S.V.A. Perera 100,000 0.04

20 Miss. P.G Nirosha Dilrukshi 99,999 0.04

INVESTOR INFORMATION

115

NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Odel PLC will be held at the “Committee Room C” of Bandaranaike Memorial International Conference Hall (BMICH), Bauddhaolka Mawatha, Colombo 07 on Thurday the 25th day of August 2016 at 10.30 a.m. for the following purposes:

1) To receive and consider the Annual Report of the Board of Directors and Financial Statements of the Company and of the Group for the year ended 31st March 2016 together with the Report of the Auditors thereon.

2) To ratify the Interim Dividend of Rs. 0.11 per share paid on 5th July 2016 as the Final Dividend for the year ended 31st March 2016.

3) To re-appoint the retiring Auditors, Messrs Ernst & Young as Auditors of the Company for the ensuing year and to authorize the Directors to determine their remuneration.

4) To authorize the Directors to determine and make donations for the year ending 31st March 2017 and up to the date of the next Annual General Meeting.

By Order of the Board

SOFTLOGIC CORPORATE SERVICES (PVT) LTD

Sgd.

Secretaries

20th July 2016

Colombo

Note:

A member entitled to attend and vote at the Meeting is entitled to appoint

a Proxy who need not be a member, to attend on behalf of him/her.

The Form of Proxy is enclosed in this Report.

The completed Form of Proxy should be deposited at the Registered

Office of the Company, No. 475/32, Kotte Road, Rajagiriya not later

than forty eight (48) hours before the time appointed for the holding of

the meeting.


NOTES

117


NOTES

FORM OF PROXY

*I/We……………….......……………………………………………………………………………………..…………of……

……………………………………………………………………………………………………… being *a member/ members

of ODEL PLC, do hereby appoint ………………………………………………………………………………………....……….

......................................................................................(holder of N.I.C. No. ………………………………………)

of ……………………………………………………………………………or (whom failing)

Mr A K Pathirage of Colombo (whom failing)

Dr S Selliah of Colombo (whom failing)

Mr H K Kaimal of Colombo (whom failing)

Mr R P Pathirana of Colombo (whom failing)

Dr I C R De Silv of Colombo

as *my/our Proxy to represent *me/us and to speak and vote for *me/us on *my/our behalf at the ANNUAL GENERAL MEETING OF THE COMPANY to be held at the “Committee Room C” of Bandaranaike Memorial International Conference Hall (BMICH), Bauddhaolka Mawatha, Colombo 07 at 10.30 a.m. on the 25th day of August 2016 and at any adjournment thereof, and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

FOR AGAINST

1) To receive and consider the Annual Report of the Board of Directors and the Financial Statements of the Company and of the Group for the year ended 31st March 2016 together with the Report of the Auditors thereon.

2) To ratify the Interim Dividend of Rs. 0.11 per share paid on 5th July 2016 as the Final Dividend for the year ended 31st March 2016.

3) To re-appoint Messrs Ernst & Young, as Auditors and to authorize the Directors to determine their remuneration.

4) To authorize the Directors to determine and make Donations

…..............………………… ......…………………………

*Signature/s Date

Note:

1) *Please delete the inappropriate words.

2) Instructions as to completion are noted on the reverse hereof.

INSTRUCTIONS AS TO COMPLETION

1. Kindly perfect the Form of Proxy after filling in legibly your full name, address and the National Identity Card number and signing in the space provided and filling in the date of signature.

2. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy who need not be a member, to attend and vote on behalf of him. Please indicate with an “X” in the boxes provided how your Proxy is to vote on each resolution. If no indication is given, the Proxy in his discretion will vote as he thinks fit.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

4. In the case of a Corporate Member, the Form of Proxy must be executed in the manner prescribed by the Articles of Association/Statute.

5. The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 475/32, Kotte Road, Rajagiriya not later than forty eight (48) hours before the time appointed for the holding of the meeting.

Please provide the following details:

Shareholder’s N.I.C./ Passport/ Company Registration No.

Shareholder’s Folio No.

Number of shares held Proxy Holder’s N.I.C. No. (if not a Director)

Name of company Odel PLC Legal form Public Limited Liability Company Incorporated in Sri Lanka in 1990 Registered of�ce of the company 475/32, Kotte Road, Rajagiriya. Company registration No. PV 7206 PQ Directors Mr. A K Pathirage - Chairman/Executive Director Mr. H.K Kaimal - Non Executive Director Dr. S Selliah - Independent Non Executive Director Mr. R.P Pathirana - Independent Non Executive Director Dr. I.C.R De Silva - Independent Non Executive Director

Audit Committee Mr. R.P Pathirana - Chairman Dr. S Selliah Dr. I.C.R De Silva Remuneration Committee Mr. R.P Pathirana Dr. S Selliah Related Party Transactions Review Committee Dr. I.C.R De Silva - Chairperson Mr. R.P Pathirana Mr. H.K Kaimal Secretaries and registrars Softlogic Corporate Services (Pvt) Ltd No 14, De Fonseka Place, Colombo 5.

AuditorsErnst & YoungChartered Accountants,201 De Saram Place,P.O. Box 101,Colombo.

BankersBank of CeylonCommercial BankDeutsche BankDFCC BankDFCC Vardhana BankHabib BankHatton National BankHongkong and Shanghai Banking CorporationNation Trust BankNational Development BankSampath BankSeylan BankUnion Bank

Investor RelationsOdel PLC475/32, Kotte Road,Rajagiriya.Tel: 0115885000web: www.odel.lk

CORPORATE INFORMATION

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Digital plates & Printed by Printel (Pvt) Ltd

www.odel.lk

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