INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020 1INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020
INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/20202 INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020
INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020 3INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020
Corporate Information 04 Notice of Annual General Meeting 05 Executive Director’s Review 06 Annual Report of the Board of Directors 08 Statement of Directors’ Responsibility 12 Board of Directors 13 Report of the Audit Committee 15 Report of the Remuneration Committee 18 Report of the Related Party Transactions Review Committee 19 Corporate Governance 21 Sustainability Reporting 27 Risk Management 32 Independent Auditors’ Statement 38 Statement of Comprehensive Income 42 Statement of Financial Position 43 Statement of Changes in Equity 44 Cash Flow Statement 45 Notes to the Financial Statements 46 Five Year Financial Summary 67 Shareholders Information 68 Notes 70 Form of Proxy 71
TABLE OF CONTENTS
INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/20204 INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020
Legal Form Quoted Public Company with limited liability, listed on the Colombo Stock Exchange
Date of Incorporation 30 June 1964
Date of Re-registration 1 August 2008
Accounting year end 31 March
Company Registration Number PQ 185
Registered Office No.321, Negombo Road, Peliyagoda
Auditors A.I. Macan Markar & Co. Chartered Accountants 46- 2/1, 2nd Floor, Lauries Road, Colombo 04
Directors G. Ramanan (Executive Director) K. Naveenkanth (Managing Director/ CEO) D. Daluwatte (Non-Executive Independent Director) N. K. Dahanayake (Non-Executive Independent Director)
Company Secretaries & Registrars Ninecap Corporate Solutions (Pvt) Ltd No.55, Vinayalankara Mawatha, Colombo 10
Bankers Commercial Bank of Ceylon PLC Bank of Ceylon Hatton National Bank PLC
INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020 5INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 56th Annual General Meeting of Industrial Asphalts (Ceylon) PLC will be held as a Virtual Meeting on 18th January 2021 at 10.30 a.m. to transact the following businesses;
1. To receive the Report of the Board of Directors and the Audited Financial Statements of the Company for the year ended 31st March 2020 together with the Report of the Auditors’ thereon.
2. To re-elect Mr. D. Daluwatte who retires in terms of Article 90 of the Articles of Association of the Company and offers himself for re-election as a Director.
3. To re-appoint Messrs A.I. Macan Markar & Co., Chartered Accountants, as Auditors of the Company for the ensuing year and authorize the Directors to determine their remuneration.
4. To authorize the Directors to determine and make donations.
By order of the Board of Industrial Asphalts (Ceylon) PLC
Ninecap Corporate Solutions (Pvt) Ltd. Secretaries At Colombo, 16th December 2020
NOTES A member entitled to attend and vote at the above Meeting is entitled to appoint a Proxy to attend and vote on behalf of him/ her.
A Proxy need not be a member of the Company.
A Form of Proxy is enclosed for this purpose.
INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/20206 INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020
EXECUTIVE DIRECTOR’S REVIEW
I would like to welcome our shareholders to the 56th Annual General Meeting of Industrial Asphalts (Ceylon) PLC. This would also be the first and hopefully beginning of what will be the future norm, all future shareholder meetings to be virtual meetings. The type of meeting we are having epitomizes the year 2020. The ravaging pandemic forever has changed the business landscape of the world. The dramatic changes we experienced came on the back of changes to economic policies stemming from presidential elections held towards the end of the last year.
Review of Operations for Financial Year 31 March 2020 The Company during the year under review was able to perform commendably by increasing the operating activities reflected in the increased turnover. Whilst we have achieved increase in turnover the credit risk and operational risk were tightly managed to ensure that there was no negative fallout as experienced several years ago. The turnover for the year was Rs.402.4 Mn which is an increase of 166% over the previous financial year. The income statement for the year also reflects the valuation increase from our property at Peliyagoda. This amounted to Rs. 175.4 Mn, after taking into account the increase in investment property valuation, the net profit for the year is Rs. 177.5 Mn.
Investment Property - The Transformation of Peliyagoda into the Hub on the Nation IAC's primary value driver is the investment property situated at Peliyagoda. Over the last five years Peliyagoda has seen significant transformation from an irrelevant crime infested suburb of Colombo to the most important hub in the country with the consolidation of manning market, central fish market and the hardware/building materials businesses in Peliyagoda combined with the planned relocation of part of the public transportation hub of Colombo. The value of the investment property has seen an increase during the year which is reflected in
the accounts. As we are required to value the investment property on annual basis, given the developments in Peliyagoda it is with some confidence that it could be said that most of the value of the property is yet to accrue.
Bitumen Operations Government's initiative to develop the road infrastructure will augment well for IAC's bitumen activities, the ambitious 100,000 km road development projects of the incumbent government has been rolled and we are well positioned to partake in this initiative. Stringent operating risk management measures are taken to avoid the excesses of the credit practices found in the road construction sector.
Paints and Coatings Operations Paints and Coatings business line had generated the highest level of operating risk over the years. The segment is lucrative in the form higher gross profit margin and the fact that the Company's heritage brands are amongst the most well recognized in its various segments has been able to command a premium over the newer entrants. The retail operation locks up and demands ever increasing operating assets and operational infrastructure. From this angle, this business line is undergoing a strategic review, with licensing of the brands being a serious contender for future years. The portfolio of brands & products are well suited for Paints & Coatings ventures who have achieved economies of scale in the building materials and hardware segment.
Operating Environment The operating environment has undergone a significant change over the reporting period, the change in the elected Government along with it the change in economic policy has dramatically improved the operating environment of the Company. This policy change is further strengthened by the political stability due to a clear parliamentary majority enjoyed by the incumbent government. The positive development is dampened to some extend by the COVID19 pandemic.
INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020 7INDUSTRIAL ASPHALTS (CEYLON) PLC - ANNUAL REPORT 2019/2020
EXECUTIVE DIRECTOR’S REVIEW (Contd.)
The counter measures taken to contain the social and economic impact by the political leadership is commendable, giving the required confidence to the private sector to keep going and keep focusing on developing their relevant businesses. The Government's economic policy with focus on building national capability is infusing new life to the local industry. The stable interest rates and exchange rate (specifically USD:LKR) environment has further reinforced a favorable operating environment. The economic policy of the Government is driven by underlying desire to achieve rapid economic development. The counter measures to contain the fall out of COVID19 has centered around monetary policy and currently almost all tools in Central Bank's armory has been exhausted. The fall out has been dented but to ensure that there is a rapid recover and at the same time the general masses benefit more or less immediately from the recovery, Government policy has to shift to Fiscal Policy. Along these lines GOSL has announced several initiatives in the recently concluded budget where Government infrastructure projects have been announced and initiated several projects. These ambitious projects are essential infrastructure developments. One of the key projects announced is the 100,000 km road development project which suits very well for Industrial Asphalts (Ceylon) PLC.
Macro-Economic Environment Sri Lankan economy has been challenged to the core due to the fallout from Covid19, whilst the Government responses have mitigated the social impact by curtailing the spread of the pandemic the economic responses are in the process of being rolled out. The development of the safe travel and importantly the vaccine is giving positive hopes for rapid economic recovery with the projected recovery of the hotel & leisure sector. Irrespective of this development, Government economic policy h