SERENDIB ENGINEERING GROUP PLC€¦ · · 2015-03-30Annual Report 2012/2013 | SERENDIB...

SERENDIB ENGINEERING GROUP PLC PQ 230

ANNUAL REPORT 2012/2013

ANNUAL REPORT 2012/2013

SERENDIB ENGINEERING GROUP PLC

Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC

Contents

Corporate Information ................................................................................................................. 1

Chairmans Review ....................................................................................................................... 3

Director’s Profile .......................................................................................................................... 4

Corporate Management Team ..................................................................................................... 6

Business Activities ........................................................................................................................ 7

Directors Report ......................................................................................................................... 10

Risk Management Review .......................................................................................................... 14

Shareholder Information ............................................................................................................ 15

Statement Of Directors’ Responsibilities ..................................................................................... 17

Corporate Governance Report .................................................................................................... 18

Audit Committe Report .............................................................................................................. 22

Independent Auditors’ Report .................................................................................................... 24

Statement Of Comprehensve Income .......................................................................................... 26

Statement Of Financial Position .................................................................................................. 27

Statement Of Cash Flows ............................................................................................................ 29

Statement Of Changes In Equity ................................................................................................. 31

Accounting Policies .................................................................................................................... 33

Notes To The Financial Statements ............................................................................................. 46

Financial Highlights .................................................................................................................... 67


1

CORPORATE INFORMATION

NAME OF COMPANY

Serendib Engineering Group PLC

FORMER NAME OF THE COMPANY

Infrastructure Developers PLC

LEGAL FORM

A Public Quoted Company with Limited Liability incorporated in Sri Lanka on 7th

September 1992, and re-

registered under the Companies Act 07 of 2007. Listed on the Diri Savi Board of the Colombo Stock Exchange.

REGISTRATION NUMBER

PQ 230

ACCOUNTING YEAR END

31st

March

BOARD OF DIRECTORS

Mr. H. N. De Silva

Mrs. D. L. De Silva

Mr. H. G. S. Kariyawasam

Prof. R. W. T. M. R. Bandara

Dr. A. G. P. A. Gunawansa

Mr. A. C. De Silva

SUBSIDIARIES

Serendib Investment Holdings Limited

Serendib Engineering & Agencies (Pvt) Limited

CCC Plantation Engineering Limited

PARENT COMPANY

Navara Capital Limited


2

SECRETARIES

Corporate Arcade Limited

122/37, Kirulapona Avenue

Kirulapona

Tel: 2514420/2514421

Fax: 2513621

Email: [email protected]

REGISTERED OFFICE

No.12 B,

Gregory’s Road, Colombo 7.

Tel: 4422444/4378389

Fax: 112698524

AUDITORS

V. S. & Associates

Chartered Accountants

15/7, Victoria Place

Elvitigala Mawatha,Colombo- 08

BANKERS

Hatton National Bank PLC

National Development Bank PLC

Pan Asia Banking Corporation PLC

Seylan Bank PLC

Nations Trust Bank PLC


3

CHAIRMANS REVIEW

I am pleased to present to you the Audited Financials

and the Annual Report of your company, Serendib

Engineering Group PLC and its subsidiaries in respect

of the financial year 2012/2013.

The year reviewed was the first full year of operation

since the company was acquired and restructured by

Navara Capital Limited. It was an eventful year during

which the company changed its name from

Infrastructure Developers PLC to Serendib

Engineering Group PLC to reflect its operating brand

name and successfully completed a 1 for 3 rights

issue of ordinary shares at Rs.80/- per share to raise

Rs.129Mn to fund its cash flow requirements.

During the Financial year the company recorded a

consolidated net profit of Rs. 47.8 Million from a

turnover of Rs. 339.1 Mn. reflecting a net profit

margin of 14.1%. The profits attributable to equity

holders of the parent were Rs. 25 Mn. These I believe

are commendable achievements compared with the

previous years.

The company is in the process of building a diversified engineering portfolio to add to its core business of Telecom

infrastructure engineering. During the year several important steps were taken in this direction including the

commencement of manufacturing operations in the plantation machinery business and the commissioning of the

precast concrete yard. CCC Plantation Engineering Ltd is involved in the production of Tea industry machinery

such as driers, rotorvanes, leaf elevators etc. as well as the setting up, repair and maintenance of tea factories.

The precast concrete yard has commenced its operation with the manufacture of telecommunication polls and is

being geared to handle a larger volume as well as other precast structures.

I believe our efforts during the last year to reorganize and reposition the company has taken root and put the

company on a good footing to achieve top and bottom line growth in the years to come.

I wish to thank my colleagues on the Board of Directors for their support and guidance during the year and our

management team and staff for their dedication and hard work.

Finally I thank you, our loyal shareholders for your support and the confidence you have placed in us.

Harsha N. De Silva

Chairman

30th

August 2013


4

DIRECTOR’S PROFILE

Mr. H. N. De Silva

Mrs. D. L. De Silva




Mr. A. C. De Silva

Mr. H. N. De Silva - ACMA, ACIB, FCMA, MBA

Mr. Harsha N. De Silva is the Chairman and Group Managing Director of the Navara Group of Companies,

which has interest in Financial Services, Engineering and Food Industry.

He is a Financial Markets specialist and counts over 20 years management experience in the corporate sphere

Locally and Internationally. His Corporate Management experience covers a range of industries including

Banking and Investment Banking, Housing and Real Estate, FMCG, Logistics and Apparel.

He is an Associate member of the Chartered Institute of Management Accountants (UK) and the Chartered

Institute of Bankers (UK). He is a Fellow of the Institute of Certified Management Accountants (SL) and holds a

MBA from the PIM, University of Sri Jayewardenepura. Mr. De Silva continues to hold Executive and Non

Executive Director positions in many Listed and unlisted companies.

Mrs. D. L. De Silva - MABE, MBA

Ms. Dimanthi L. De Silva is a Group Director of Navara Group of Companies and is the Managing Director of

Alerics Dairy Products Limited.

She counts over 20 years of management experience in Consultancy, Finance, Project Management and

Logistics. Ms. De Silva is a member of the Association of Business Executives (UK) and hold an MBA from the

Edith Cowan University of Western Australia.


5

Mr. H. G. S. Kariyawasam - Attorney-at-Law

Mr. Sagara Kariyawasam is an Attorney at Law and served as a State Counsel at the Attorney Generals

Department for over 7 years. He currently serves as a Legal Counsel attached to the Presidential Secretariat of

Sri Lanka. He is also currently the Chairman of Lanka Electricity Company Private Limited (LECO).

Mr. Kariyawasam served as the Chairman of Corporative Wholesale Establishment (CWE) during 2009/2010

and as the Chairman of the Education Employees Corporative and Thrift Society Limited during 2011/2012.

Mr. Kariyawasam is also a Director of Navara Capital Limited.


Prof. Ranjith Bandara is the Chairman of the Sri Lanka Foundation and serves as a Senior Economic advisor and

a director of the Financial Service cluster at the Strategic Enterprise Management Agency of the President’s

Office. Prof. Bandara is also a senior academic staff member attached to the Department of Economics,

University of Colombo and also serves as a Director in several other reputed companies. Prof. Bandara earned

his B.A in Economics Honours from the University of Peradeniya and subsequently completed two masters

degrees. M. A in Economics from the University of Colombo and Msc. in Management of Natural Resources

and Sustainable Agriculture from the Agricultural University of Norway.

He earned a Phd in Economics in 2003 from the University of Queensland, Australia. Prof. Bandara has

contributed to a number of National and International Journals and also serves as a senior business advisor/

consultant to a number of business organizations in the country.


Dr. Gunawansa holds a Ph.D. in Law from the National University of Singapore and an LLM in International

Economic Law, from University of Warwick England. He is an Attorney-at-Law of the Supreme Court of Sri

Lanka and has over 19 years of experience as a Legal Counsel.

He is also a member of the Law Reform Sub-Committee for Building and Construction Law in Singapore. In

addition to his legal practice, Dr. Gunawansa is currently attached to the Lee Kuan Yew School of Public Policy

of the National University of Singapore (NUS) as a Senior International Research Associate. He is also attached

to the Centre for Project Management and Construction Law of the School of Design and Environment of NUS

as an Adjunct Professor. He is also an Associate Member of the Executive Committee of the Asia Pacific Centre

of Environmental Law.

Mr. A. C. De Silva - FCMA

Mr. Ajith De Silva is a fellow member of the Chartered Institute of Management Accountants UK and counts

over twenty years of corporate management experience in diverse fields locally and internationally.

Mr. De Silva commenced his career at KPMG and also served as Chief Accountant within the Aitken Spence

Group, as the manager Investment and Research at CKN Fund Management Co. Limited, as the CFO of

Bodyline Pvt Limited and as the General Manager of Growth Lanka Private Limited.

He is currently also the Director/Chief Executive Officer of Kenpark Bangladesh Private Limited and Kenpark

Bangladesh Apparel Private Limited.


6

CORPORATE MANAGEMENT TEAM

Mr. S. C. De Silva

Mr. A. N. D. De Silva

Mr. V. J. Alahendra

Mr. S. C. De Silva

Group Chief Executive Officer

Mr. Clive De Silva is a Mechanical Engineer by profession who counts for over 40 years of experience in the

Engineering Industry. He commenced his career at one of the premier Engineering & Trading groups in Sri

Lanka and held various positions including senior Research and Development Engineer, Senior Project

Engineer, Director Business Development, Director Engineering.

In 1991 he ventured in out and set up Serendib Engineering & Agencies Limited and was the founder

Chairman/ Managing Director. Mr. De Silva’s experience covers a range of engineering disciplines including

civil, electronics, mechanical, automobile, marine and plantation machinery. He is skilled in engineering design

and is a member of the Institute of Engineering Designers UK.

Mr. De Silva is the current chairman of Colombo Commercial Company (Engineers) Limited.

Mr. A. N. D. De Silva – ACA, ACMA, MBA

Group Chief Finance Officer

Mr. Naleen De Silva is the Group Chief Finance Officer of the Navara Capital Group of Companies. He counts

for over 22 years of experience in various industries including Housing & Property Development, Engineering,

Manufacturing, Financial services and Media. He also specializes in management consultancy, restructuring

and auditing. He is an Associate member of the Institute of Chartered Accountants of Sri Lanka and the

Institute of Certified Management Accountants of Sri Lanka. Mr. De Silva also holds a MBA from the PIM,

University of Sri Jayewardenepura.

Mr. V. J. Alahendra

Chief Operations Officer

Mr. Jayasankha Alahendra counts for over 20 years of experience in the corporate sphere of which he has

served as a Director/Senior Manager for more than 10 years. Prior to joining Serendib Engineering Group he

has held various positions in Finance, Credit & Leasing, Treasury Management and Real Estate Development.

He is also an experienced corporate trainer in the areas of Human Resource Development and Credit

Evaluation.


7

BUSINESS ACTIVITIES

Serendib Engineering Group PLC carries out its business operations via the holding company and its two

operating subsidiaries Serendib Engineering and Agencies Private Limited and CCC Plantation Engineering

Limited. The main areas of business is as given below,

1. TELECOM INFRASTRUCTURE ENGINEERING

Telecommunication services are a core business activity of the group. This includes network development including Outside Plant Engineering (OPE) that involve Optical Fiber Cable Network. Optical Fiber Backbone/ Junction Network Development (Optical fiber metro network development and optical fiber secondary expansions), Copper cable network development, new subscriber connections, site acquisition and tower erection.

2. RAILWAY & MARINE ENGINEERING


8

The Railway & Marine Engineering Services provided by the company include refurbishment and re-engineering of locomotives as well as marine propulsion systems and controls. The company represents four prestigious foreign principals in Marine propulsions systems, Diesel engines and Railway locomotive spears. They are Rolls Royce Marine, MAN Diesel & Turbo (UK) ltd, Brush Traction Limited and Romic-ACE International Limited

3. MANUFACTURING OF PLANTATION MACHINERY

The group also specializes in manufacturing and supply of complete tea factories and processing equipment.

Machinery are manufactured and marketed under the CCC brand commands a high reputation and a

substantial market share. Machinery includes dryers, extractors, Rotorvanes etc.


9

4. MANUFACTURING OF PRECAST CONCRETE

The pre-cast concrete yard is a new venture of the group and is focus on the manufacture of poles for the telecom industry and power distribution; currently it has the capacity to manufacture up to 1500 poles per month. The operation is currently being geared to increase the capacity and to manufacture other precast structures.

5. GENERAL ENGINEERING

SEG is a provider of general engineering services such as services to the construction industry, water supply

and drainage projects (rehabilitation of water pumping facilities & filtration plants), Power Generation projects

(construction, maintenance and rehabilitation of thermal & hydropower stations), fabrication and

maintenance of food industry machinery etc.


10

DIRECTORS REPORT

ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE COMPANY FOR YEAR

2012/2013

The Directors of the Serendib Engineering Group PLC have pleasure in presenting their report together with

the Audited Financial Statements for the year ended 31st

March 2013. The details set out herein provide the

pertinent information in compliance with the Companies Act No. 07 of 2007 and the Colombo Stock Exchange

Listing Rules and are guided by recommended best accounting practices.

PRINCIPAL ACTIVITIES

A holding company involved in diverse engineering activities.

RESULTS AND APPROPRIATIONS

The Financial Statements of the Company are given on Page 26 to 66 of this Annual Report.

REVIEW OF OPERATIONS & PERFORMANCE

The Chairman’s Review provides an overall assessment of the Company’s operations and performance during

the financial year under review on pages 3.

DIRECTORATE

The Members of the Board during the financial year under review as at the date of the report were as follows:-

Mr. H N De Silva

Mrs. D L De Silva

Mr. H G S Kariyawasam

Prof. R W T M R Bandara

Dr. A G P A Gunawansa

Mr. A C De Silva

Mr. C Shangaralingam

Mr. S Selvaraj

-

-

-

-

-

-

-

-

Chairman

Director

Non - Executive Director

Non - Executive/Independent Director



Non - Executive/Independent Director (Resigned w.e.f 18-08- 2012)

Non - Executive/Independent Director (Resigned w.e.f 18-08- 2012)

The Profile of the Board of Directors of the Company are given in Page 4 of this report.

NEW APPOINTMENTS

Dr. A G P A Gunawansa and Mr. A C De Silva were appointed to the Board on 28th

November 2012 and 9th

April

2013 respectively.

RESIGNATIONS

Mr. C Shangaralingam and Mr. S Selvaraj resigned from the Board of Directors w.e.f. 18th

August 2012. The

Board of Directors wishes to place on record their appreciation for the valuable contributions made by them.


11

EXECUTIVE APPOINTMENTS

Mr. Samuel Clive De Silva was appointed as the CEO of the Company w.e.f. 20th

May 2013.

RETIREMENT OF DIRECTORS AND THEIR RE-ELECTION

In accordance with Article 118 of the Articles of Association of the Company, Mr. H G S Kariyawasam

retires by rotation and is eligible for re-election.

Dr. A G P A Gunawansa and Mr. A C De Silva, retire in terms of Article 100 of the Articles of Association of the

Company, and are eligible for election.

DIRECTORS & CEO’S SHAREHOLDING

31st

March 2013

31st

March 2012

Number

Number

Mr. H. N. De Silva Nil Nil

Mrs. D. L. De Silva Nil Nil

Mr. H. G. S. Kariyawasam Nil Nil

Prof. R. Bandara Nil Nil

Dr. A G P A Gunawansa Nil Nil

Mr. A C De Silva Nil Nil

Mr. S C De Silva 200,000 Nil

DIRECTOR’S REMUNERATION

The Directors were not paid any remuneration during the financial year under review.

DIVIDENDS

The Board of Directors does not recommend the payment of a dividend for the financial year under review.

MAJOR SHAREHOLDINGS

The 20 major Shareholders of the Company as at 31st March 2012 and 2013 are listed on Page 15 under

Shareholder Information.

SHAREHOLDING

As at 31/03/2013 there were 155 Registered Shareholders. The distribution of shareholders is indicated on

page 15 under “Shareholder information”.

STOCK MARKET INFORMATION

Information relating to earnings, dividends, net assets per share are given on page 26, 27 & 67 of this

document.


12

STATED CAPITAL

The Stated Capital of the Company as at 31st

March 2013 was Rs.178,107,910/- representing 6,476,650

Ordinary Shares. The structure of the Stated Capital is given in Note 18 to the Accounts

RIGHTS ISSUE OF SHARES

The Company offered 1,619,163 shares at Rs.80/- per share by way of a Rights Issue, to the Registered

Shareholders of the Company as at 15th

August 2012 to raise a sum of Rs.129,533,040/-, which offer was

successfully concluded on 11th

September 2012 and the new securities were listed with the CSE.

GOING CONCERN

The Board of Directors of the Company are satisfied that the Company has adequate resources to continue its

operations in the forceable future. Therefore the Company continues to adopt a going concern concept in

preparing the accounts of the Company.

INTERESTS REGISTER

An Interests Register is maintained, in compliance with the Companies Act No.07 of 2007.

The particulars of the entries made in connection with the General Disclosure in terms of Section 192(2) of the

Companies Act No.07 of 2007 are given in Note 25 under Related Party transactions.

AUDIT COMMITTEE

The Audit Committee comprise of Prof. R W T R Bandara, Mr A C De Silva and Mr H G S Kariyawasam. Prof. R

W T R Bandara, functions as the Chairman of the Committee.

The report of the Audit Committee is given on Page 22.

REMUNERATION COMMITTEE

The Remuneration Committee comprise of Prof. R W T R Bandara, Mrs. D L De Silva and Dr. A G P A

Gunawansa, Mrs D L De Silva functions as the Chairman of the Committee.

The functions of the Remuneration Committee is given on Page 19.

STATUTORY PAYMENTS

The Directors, to the best of their knowledge and belief are satisfied that all statutory payments have been

made up to date or provided for same.

NAME CHANGE OF THE COMPANY

The name of the Company was changed from Infrastructure Developers PLC to Serendib Engineering Group

PLC at an Extraordinary General meeting held on 28th

January 2013.

ENVIRONMENTAL PROTECTION

The Board of Directors has taken adequate precautions when diversifying the business activities to ensure that

the Company does not engage in any activities which could be detrimental to the environment.


13

CONTRIBUTIONS TO CHARITIES

The Company has not contributed to charities during the financial year under review.

ACCOUNTING POLICIES

There has been no change in the Accounting Policies adopted by the Company in preparation of Financial

Statements during the Financial Year under review other than what is stated in the Financial Statements.

EVENTS AFTER THE REPORTING PERIOD

Subsequent to the date of the Balance Sheet no circumstance has arisen which require adjustments to the

accounts.

AUDITORS

The accounts for the year have been audited by M/s V S & Associates, Chartered Accountants, who retire and

are eligible for re-appointment. The Directors recommend their re-appointment.

The Auditors were paid a sum of Rs 70,000/- as Audit Fees a by the Company for the financial year under

review. As far as the Board is aware the Auditors do not have any relationship with the Company other than

carrying out the External Audit.

By order of the Board of

Serendib Engineering Group PLC

…………………………………….. H N De Silva Chairman

……………………………………… D L De Silva Director

…………………………………….. Corporate Arcade Limited

Company Secretaries Colombo

30th

August 2013


14

RISK MANAGEMENT REVIEW

Risk management involves identifying potential risk exposure faced by the Group and implementing proper

risk management techniques to mitigate such risks. The group only accepts risks which are adequately

compensated and consider risk management as a vital component in our operations and build upon

management’s risk assessment and mitigation processes, which include standardized reviews of long-term

strategic and operational planning, regulatory and litigation compliance, health and safety, environmental

compliance, financial reporting and controls and information technology and security.

The Company has exposure to the following risks.

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty failing to meet contractual

obligations. Credit risk arises principally from the Company’s receivables from customers and investments

in securities. The group has a specific method to assess the potential of customers in terms of their credit

worthiness. Also the group takes adequate precautionary actions before granting credit facilities.

Investment in securities will also be done after careful evaluation of the expected return and risk

associated. This approach has mitigated the credit risk of the group.

Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations related to its

financial liabilities, through settlement by cash or financial assets. The group seldom utilizes its' borrowing

facilities. The group ensures the availability of sufficient liquidity to meet liabilities when due with proper

cash flow planning. The board regularly reviews liquidity position of the group. This cautious approach

ensures the mitigation of liquidity risk.

Market Risk

Market risk is the risk that changes in market prices, such as raw material prices, foreign exchange rates

and interest rates that would impact Group’s income or the value of investment in financial instruments.

The objective of managing market risk is to manage and control market risk exposures within parameters,

while optimizing returns. The group always keeps a provision for such fluctuations before deciding the

price of the finished good. Also the Company negotiate terms with suppliers for specific future period

aswell. All these steps will lead to mitigate the market risk associated with the Company.

There are no material issues pertaining to employees and industry relations of the Entity.


15

SHAREHOLDER INFORMATION

STATED CAPITAL

The Stated Capital of the Company as at 31st

March was Rs.178,107,910/- representing 6,476,650 Ordinary

Shares. All shares are issued and fully paid.

MAJOR SHAREHOLDERS DETAILS

31st

March 2013 31st

March 2012

Number of shares held

% Number of shares held

%

1 Navara Capital Limited 4,937,577 76.24 3,924,400 80.79

2 Lankem Ceylon Plc 476,397 7.36 421,900 8.69

3 Pan Asia Banking Corporation Plc/Lankem Ceylon Plc 290,000 4.48 - -

4 PCH Holdings Limited 241,645 3.73 241,645 4.97

5 Flyasia Sdn.Bhd 235,135 3.63 175,880 3.62

6 Mr. S.C. De Silva 200,000 3.09 - -

7 Mr. K.G.D.S.R. Kulatunga 31,167 0.48 32,732 0.67

8 Mr. K.D.R. Kulatunga 12,306 0.19 - -

9 Mr. D. Kotthoff 12,220 0.19 6,500 0.13

10 Miss P.V.S. Priyadarshani 6,390 0.10 5,000 0.10

11 Miss. K.G.A.C. Gurusinghe 4,261 0.07 4,565 0.09

12 Mrs H.P. Gin 2,440 0.04 - -

13 Mr. B.A. Gunathilaka 1,600 0.02 1,600 0.03

14 First Capital Markets Limited/Mr.P.R.B.Perera 1,592 0.02 - -

15 Ms. R. Randeniya 1,322 0.02 - -

16 Mr. V.G.A.C.M. Mubarak 1,300 0.02 300 0.01

17 Miss R. Randeniya 1,280 0.02 - -

18 Miss R.S.M. Mohideen 1,209 0.02 900 0.02

19 Mr. N.J.M. Afrath 1,200 0.02 1,200 0.02

20 Mr. M. Mohamed Mohideen 1,084 0.02 700 0.01

TOTAL 6,460,125 99.76 4,818,322 99.15

SHAREHOLDER ANALYSIS

31st

March 2013 31st

March 2012

Number of Shares Percentage Number of shares Percentage

Shares held by the public 1,539,073 23.76% 933,087 19.21%

Shares held by the others 4,937,577 76.24% 3,924,400 80.79%

Total 6,476,650 100.00% 4,857,487 100.00%


16

DISTRIBUTION OF SHAREHOLDINGS

Size of the shareholding

31st March 2013 31st

March 2012

No of

Share

Holders

No of Shares

Held %

No of Share

Holders

No of Shares Held

%

1 - 1,000 133 14,471 0.22 98 22,245 0.46

1001 - 5,000 12 19,342 0.30 9 21,965 0.45

5,001 - 10,000 1 6,390 0.10 1 6,500 0.13

10,001 - 50,000 3 55,693 0.86 2 42,952 0.88

50,001 - 100,000 - - - - - -

100,001 - 1,000,000 5 1,443,177 22.28 3 839,425 17.28

Over 1,000,000 1 4,937,577 76.24 1 3,924,400 80.79

Total 155 6,476,650 100.00 114 4,857,487 100.00

CATEGORIES OF SHAREHOLDERS

2012 / 2013

Categories of Shareholders

No of Shares No of Shareholders %

Individuals 292,023 136 4.51

Institutions 6,184,627 19 95.49

Total 6,476,650 155 100.00

SHARE PRICE INFORMATION

31st

March 2013

31st

March 2012

Highest Price per share (Rs.) 210.00

204.00

Lowest Price per share (Rs.) 106.00

71.00

Closing Price per share (Rs.) 204.20

144.60


17

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The following statement sets out the responsibilities of the Directors in relation to the Financial Statements of

the Company. These differ from the responsibilities of the Auditors, which are set out in their report appearing

on pages 24-25.

The Companies Act No.7 of 2007 requires the Directors to prepare Financial Statements for each financial year

giving a true and fair view of the state of affairs of the Company as at the end of the financial year and of the

profit or loss of the company for the financial year. In preparing the financial statements appropriate

accounting policies have been selected and applied consistently, reasonable and prudent judgments and

estimates have been made and applicable accounting standards have been followed.

The Directors are responsible for ensuring that the Company keeps sufficient accounting records to disclose

with reasonable accuracy the financial position of the Company and for ensuring that the financial statements

comply with the Companies Act No. 7 of 2007. They are also responsible for taking reasonable measures to

safeguard the assets of the Company, and in that context to have proper regarded to the establishment of

appropriate systems of internal control to prevent and detect frauds and other irregularities.


18

CORPORATE GOVERNANCE REPORT

The Board of Directors of Serendib Engineering Group PLC is committed to achieving the highest standards of

corporate governance practices in conducting the entity’s operations.

The Company has applied the Corporate Governance, complying with the Listing Rules of the Colombo Stock

Exchange, Securities and Exchange Commission of Sri Lanka and the Companies Act No.7 of 2007 and has

adopted “Code of Best Practice on Corporate Governance” published by the Institute of the Chartered

Accountants of Sri Lanka.

BOARD OF DIRECTORS

The Company’s Board of Directors comprises of six members and out of which Mr. H. N. De Silva is the

Chairman and five non-executive directors and one alternate director. Two directors on the board are non-

independent directors and three are independent directors. The directors bring with them a wide range of

experience and expertise in the fields of corporate management, finance and law. The Board meets regularly

once in every quarter and also as and when the requirement arises. The names of the Directors and their

classification is as follows,

Mr. H. N. De Silva

Mrs. D. L. De Silva


Dr. R. Bandara


Mr. A. C. De Silva

Mr. C. Shangaralingam

Mr. S. Selvaraj

-

-

-

-

-

-

-

-

Chairman

Non-Executive Director

Non-Executive Director

Non-Executive/ Independent Director



Non-Executive/ Independent Director (Resigned w.e.f 18-08- 2012)

Non-Executive/Independent Director (Resigned w.e.f 18-08- 2012)

As per the Article of the company the Directors who retire by rotation are eligible for re-election by the

shareholders at the Annual General Meeting.

RESPONSIBILITIES

The Directors are responsible for the Company’s system of internal control. A sound system of internal is

maintained in order to safeguard the Company’s assets and shareholders investments. As a result proper

records are maintained and reliable financial information is generated. The Statement of Directors’

responsibilities for the Financial Statements is given in page 17 of this report.

APPOINTMENTS TO THE BOARD

The Board as a whole decides on the appointment of Directors.

RE-ELECTION OF DIRECTORS

The provision of the Company’s Article requires a Director appointed by the Board to hold office until the next

Annual General Meeting, and seek re-appointment by the shareholders at that meeting.


19

INDEPENDENT DIRECTORS

As at the balance sheet date three are Independent Directors.

DIRECTORS’ INTERESTS IN CONTRACTS AND RELATED PARTY TRANSACTIONS

Directors’ interests in contracts have been disclosed under Note 25 of the financial statements.

DISCLOSURE OF INFORMATION AND COMPLIANCE

The Financial Statements of the Company are prepared in accordance with the Sri Lanka Accounting Standards

and in accordance with the requirements of the Colombo Stock Exchange. The Secretaries to the Company

advises the Board on appropriate procedures for the management of its meetings and duties, as well as the

compliance of Corporate Governance in the Company.

REMUNERATION COMMITTEE

The Remuneration Committee consists of two Independent Non-Executive Directors and one Non- Executive

Director of the Board

Mr. Harsha N De Silva, Chairman/ Managing Director attend meetings by invitation, when necessary.

This committee is responsible for setting up the remuneration policy and making recommendations on:

Remuneration framework and levels of the Senior Management

Senior Management performance and performance based incentives/increments

Remuneration of Executive Directors

Formation and implementation of human resource policies.

The main objective of the remuneration policy of the Company is to attract and retain the required human

resource talent to sustain its operations.

The Directors were not paid any remuneration for the financial year 2012/2013.


20

Statement of Compliance under Section 7.10 of the Rules of the Colombo Stock Exchange (CSE) on Corporate Governance

CSE Rule Compliance

Status Response

7.10 Compliance

a./b./c. Compliance with Corporate Governance Rules

✓ The Group is in compliance with the Corporate Governance Rules and any deviations are explained where applicable.

7.10.1 Non-Executive Directors (NED)

a./b./c. At least 2 members or 1/3 of the Board,whichever is higher should be NEDs

✓ Five out of the six Board members are NEDs.

7.10.2 Independent Directors

a. 2 or 1/3 of NEDs, whichever is higher shall be “independent”

✓ Three out of the five NEDs are Independent

b. Each NED to submit a signed and dated declaration of his/her independence or non-independence

✓

Independence of the Directors has been determined in accordance with CSE Listing Rules.

7.10.3 Disclosures relating to Directors

a./b. Board shall annually determine the independence or otherwise of NEDs

✓ All Independent Non-Executive Directors have submitted declarations as to their independence.

c. A brief resume of each Director should be included in the annual report including the directors’ experience

✓ Refer the Director’s Profile section

d. Provide a resume of new Directors appointed to the Board along with details

✓

Resume of the new Independent Non-Executive Director appointed during the financial year was submitted to the Colombo Stock Exchange.

7.10.4 Criteria for defining independence

a. to h. Requirements for meeting the criteria to be an Independent Director

✓ Please refer Director’s Report

7.10.5 Remuneration Committee

a. Remuneration Committee shall comprise of NEDs, a majority of whom will be independent

✓ The Remuneration Committee comprises of three Non-Executive Directors, of which two are Independent.

One Non-Executive Director shall be appointed as Chairman of the Committee by the board of directors

✓

b. Remuneration Committee shall recommend the remuneration of the CEO and the Executive Directors

✓

c. Names of Remuneration Committee members Statement of Remuneration policy Aggregate remuneration paid to EDs and NEDs

✓ Please refer Page 19 of this Report.


21

7.10.6 Audit Committee

a. 1. Audit Committee (AC) shall comprise of NEDs, a majority of whom should be independent

a. 2. A NED shall be the Chairman of the Committee

a. 3. CEO and CFO should attend AC meetings

a. 4. The Chairman of the Audit Committee or one member should be a member of a professional accounting body

✓ The Audit Committee comprises of two Independent Non-Executive Directors, and one Non-Executive Director. The Chief Executive Officer, Chief Finance Officer attends Audit Committee meetings by invitation.

✓

✓

✓

b. Functions of the Audit Committee ✓ Please refer Report of the Audit Committee

c. 1 Names of the Audit Committee members shall be disclosed

✓ Please refer Directors Report

c. 2 Audit Committee shall make a determination of the independence of the external auditors

✓ Please refer Report of the Audit Committee

c. 3 Report on the manner in which Audit Committee carried out its functions

✓

Please refer Report of the Audit Committee


22

AUDIT COMMITTE REPORT

The Audit Committee comprises of two Independent Non-Executive Directors and one Non-Executive Director,

Prof. R. W. T. R. Bandara who is an Independent Non-Executive Director functions as the Chairman of the

committee. The rest of the committee comprises of Mr. A. C. De Silva who is an Independent Non-Executive

Director and also a member of the Chartered Institute of Management Accountants and Mr. H. G. S.

Kariyawasam who is a Non-Executive Director of the company.

The Chief Executive Officer and Chief Finance Officer attend meetings by invitation. Representatives of

external and internal Auditors will be invited when necessary. Proceedings of the Committee meetings are

reported to the Board of Directors.

The Audit Committee has written terms of reference and is empowered to examine any matters relating to the

financial affairs of the Company and its internal and external audits. Its duties include reviews of financial

statements, internal control procedures and risk management, accounting policies and compliance with Sri

Lanka Accounting Standards. It also reviews the adequacy of systems for compliance with the Companies Act

No.7 of 2007, other relevant legal, regulatory and ethical requirements and company policies. The Committee

endeavors to assist the Directors to discharge their duties and responsibilities in respect of regulatory

compliance and risk management.

The following activities were carried out by the Committee

Financial Reporting and Internal Control System

The Committee reviewed the Interim and Annual Financial Statements of the Company and has

recommended same to the Board for approval and publication.

Review of the preparation of the Annual Report to ensure the reliability of the process, consistency of

the accounting policies and methods and compliance with Sri Lanka Accounting Standards.

The Committee is satisfied that the control environment prevailing in the Company provides

reasonable but not absolute assurance that the financial position of the Company is adequately

monitored and that the systems are in place to minimize the impact of identifiable risks.

The Committee also monitors the timely payments of all statutory obligations.

The Committee also monitors the effectiveness of the internal and financial control procedures on the

basis of the reports and findings submitted by the Internal Auditors of the Company, V. S &

Associates; Chartered Accountants.

External Audit

The Committee has reviewed the services provided by the External Auditors to the Company to ensure their

independence as Auditors has not been compromised. As far as the Directors are aware, the Auditor does not

have any relationship (other than that of an Auditor) with the Company other than those disclosed above. The

Auditors also do not have any interest in the Company. For the said reasons the Committee determined that

the Auditors are independent.


23

The Audit Committee has recommended to the Board of Directors that, V. S. & Associates; Chartered

Accountants be re-appointed as Auditors for the financial year ending 31st

March 2014 at a remuneration to be

determined by the Board, subject to the approval of the Shareholders at the Annual General Meeting.

Prof. R. W. T. R. Bandara

Chairman

Audit Committee

30th

August 2013


24

INDEPENDENT AUDITORS’ REPORT

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF


Report on the Financial Statements

We have audited the accompanying financial statements of Serendib Engineering Group PLC, the consolidated

financial statements of the Company and its Subsidiaries as at that date which comprise the Statement of

Financial Position as at 31st March 2013, and the Statement of Comprehensive Income, Statement of Changes

in Equity and Statement of Cash Flows for the year then ended, and notes comprising a summary of significant

accounting policies and other explanatory notes thereon as set out on pages 33 to 66.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and

maintaining internal control relevant to the preparation and fair presentation of financial statements that are

free from material misstatement, whether due to fraud or error; selecting and applying appropriate

accounting policies; and making accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our

audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the

audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were

necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for

our opinion.

Opinion

In our opinion, so far as appears from our examination, the Company maintained proper accounting records

for the year ended 31st March 2013 and the financial statements give a true and fair view of the financial

position of the Company as at 31st March 2013 and its financial performance and its cash flows for the year

then ended in accordance with Sri Lanka Accounting Standards.


25

In our opinion, the consolidated financial statements give a true and fair view of the financial position as at

31st March 2013 and its financial performance and cash flows for the year then ended, in accordance with Sri

Lanka Accounting Standards, of the Company and its Subsidiaries dealt with thereby, so far as concerns the

shareholders of the Company.

Report on Other Legal and Regulatory Requirements

These financial statements also comply with the requirements of Section 151(2) and 153(2) to 153(7) of the

Companies Act No. 07 of 2007.

V.S. & ASSOCIATES

CHARTERED ACCOUNTANTS

Colombo

30th August 2013


26

STATEMENT OF COMPREHENSVE INCOME


NO. 12B, GREGORY'S ROAD, COLOMBO 07.

FOR THE YEAR ENDED 31ST MARCH 2013 NOTES GROUP COMPANY

2013 2012 2013 2012

Rs. Rs. Rs. Rs.

REVENUE 2 339,100,824.52 - - -

Cost of Sales (214,125,825.10) - - -

Gross Profit 124,974,999.42 - - -

Other Income 2 1,467,939.21 4,178,193.45 145,126.15 -

126,442,938.63 4,178,193.45 145,126.15 -

Administrative Expenses (63,296,897.24) (739,802.21) (1,666,069.24) (647,537.33)

Distribution Cost (5,480,080.52) (25,420.00) - -

Profit / (Loss) from Operating Activities 3 57,665,960.87 3,412,971.24 (1,520,943.09) (647,537.33)

Finance Income 4 8,889,745.50 461,666.56 1,557,701.32 425,136.66

Finance Expenses 5 (3,838,688.08) (337,291.60) (2,204,222.64) (336,581.36)

Net Finance Income / (Expense) 5,051,057.42 124,374.96 (646,521.32) 88,555.30

Profit / (Loss) before Income Tax Expenses 62,717,018.29 3,537,346.20 (2,167,464.41) (558,982.03)

Income Tax Expenses 6 (14,945,744.45) (20,895.66) (326,504.00) -

Profit / (Loss) for the year 47,771,273.84 3,516,450.54 (2,493,968.41) (558,982.03)

Other Comprehensive Income - - - -

Total Other Comprehensive Income for the year - - - -

Total Comprehensive Income for the year 47,771,273.84 3,516,450.54 (2,493,968.41) (558,982.03)

Attributable to:

Equity Holders of the parent 25,003,986.83 1,641,848.99 (2,493,968.41) (558,982.03)

Non-Controlling Interest 22,767,287.01 1,874,601.55 - -

47,771,273.84 3,516,450.54 (2,493,968.41) (558,982.03)

Earnings / (Loss) per Ordinary Share 7 4.20 0.31 (0.42) (0.11)


27

STATEMENT OF FINANCIAL POSITION

AS AT 31ST

MARCH 2013 NOTES GROUP COMPANY

2013 2012 2013 2012 01.04.2011

Rs. Rs. Rs. Rs. Rs.

ASSETS

NON - CURRENT ASSETS

Plant & Equipment 8 16,143,937.25 6,977,659.47 1,168,233.33 - -

Intangible Assets 9 21,769,593.20 21,669,723.27 - - -

Investments in Subsidiaries 10 - - 103,588,890.00 85,200,000.00 -

Other Non Current Financial Assets 11 2,500,000.00 2,500,000.00 - - -

Deferred Tax Assets 12 1,572,417.85 - - - -

41,985,948.30 31,147,382.74 104,757,123.33 85,200,000.00 -

CURRENT ASSETS

Inventories 20,171,101.79 10,817,002.82 - - -

Work in Progress - 33,553,925.91 - - -

Financial Assets at fair value

through profit or loss 13 5,426,313.00 1,873,500.00 5,426,313.00 1,873,500.00 -

Trade & Other Receivables 14 209,867,756.92 64,341,607.56 76,383.13 - -

Amounts due from Related Parties 15 891,226.55 757,378.00 4,979,550.56 - -

Other Current Financial Assets 16 37,624,166.58 42,844,541.04 2,853,957.26 - -

Cash and Cash Equivalents 17 16,087,659.25 22,753,293.26 7,353,042.11 152,998.55 -

TOTAL ASSETS 332,054,172.39 208,088,631.33 125,446,369.39 87,226,498.55 -

EQUITY & LIABILITIES

Equity Attributable to the Equity Holders

of the Parent

Stated Capital 18 178,107,910.00 48,574,870.00 178,107,910.00 48,574,870.00 48,574,870.00

Retained Earnings (24,091,129.41) (47,324,604.02) (53,132,093.45) (49,525,435.04) (48,966,453.01)

SHAREHOLDERS' FUNDS 154,016,780.59 1,250,265.98 124,975,816.55 (950,565.04) (391,583.01)

Non-Controlling Interest 63,525,679.89 55,727,672.66 - - -

TOTAL EQUITY 217,542,460.48 56,977,938.64 124,975,816.55 (950,565.04) (391,583.01)

NON - CURRENT LIABILITIES

Employee Benefits 19 5,802,229.94 9,958,250.00 - - -

Deferred Tax Liabilities 12 89,815.00 - 89,815.00 - -

Finance Lease Obligations 20 6,722,008.12 1,054,293.10 - - -


28

NOTES GROUP COMPANY

2013 2012 2013 2012 01.04.2011

Rs. Rs. Rs. Rs. Rs.

CURRENT LIABILITIES

Trade & Other Payables 21 88,806,367.80 37,679,880.87 254,071.84 222,626.15 236,566.15

Finance Lease Obligations 20 2,595,927.84 538,343.73 - - -

Amounts due to Related Parties 22 4,213,395.50 87,897,294.58 - 87,897,294.58 -

Directors Current Accounts 23 50,000.00 57,142.86 - 57,142.86 57,142.86

Income Tax Liabilities 273,663.77 201,565.00 126,666.00 - 97,874.00

Bank Overdrafts 24 5,958,303.94 13,723,922.55 - - -

TOTAL EQUITY & LIABILITIES 332,054,172.39 208,088,631.33 125,446,369.39 87,226,498.55 -

I certify that these financial statements are in compliance with the requirements of the Companies Act No.07 of 2007.

Finance Officer The Board of Directors is responsible for the preparation and presentation of these financial statements. Approved and signed for and on behalf of the Board by,

Director Director


29

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST MARCH 2013 GROUP COMPANY

2013 2012 2013 2012

Rs. Rs. Rs. Rs.

CASH FLOW FROM OPERATING ACTIVITIES

Net Profit / (Loss) before Interest & Taxation 55,918,338.20 3,501,526.54 (3,437,315.76) (558,982.03)

Adjustment for

Depreciation 2,106,415.88 4,243.11 102,966.67 -

Provision for Employee Benefits - 10,747.94 - -

Over Provision of Employee Benefits (1,262,020.06) - - -

Profit on Disposal of Financial Assets (139,309.65) (422,636.66) (139,309.65) (422,636.66)

Dividend Received (286,651.83) (2,500.00) (117,901.83) (2,500.00)

Fair Value Changes on Financial Assets 2,107,284.60 272,500.00 2,107,284.60 272,500.00

Current Account Written Back - (4,178,193.45) - -

OPERATING PROFIT / (LOSS) BEFORE

WORKING CAPITAL CHANGES 58,444,057.14 (814,312.52) (1,484,275.97) (711,618.69)

Changes in Working Capital

(Increase) / Decrease in Inventories (9,354,098.97) - - -

(Increase) / Decrease in Work in Progress 33,553,925.91 - - -

(Increase) / Decrease in Trade & Other Receivables (160,403,810.52) 5,581.89 (76,383.13) -

Increase / (Decrease) in Trade & Other Payables 50,693,482.08 (823,661.28) 31,445.69 (13,940.00)

Increase / (Decrease) in Amounts due to Related Parties (81,516,113.71) 87,897,294.58 (92,876,845.14) 87,897,294.58

Increase / (Decrease) in Directors Current Accounts (57,142.86) - (57,142.86) -

Cash Generated from / (used in) Operating Activities (108,639,700.93) 86,264,902.67 (94,463,201.41) 87,171,735.89

Tax Paid (1,107,145.94) (97,976.21) (110,023.00) (97,874.00)

Gratuity Paid (2,894,000.00) - - -

Interest Paid (1,665,103.93) (710.24) (30,638.49) -

Net Cash Flow from / (used in) Operating Activities (114,305,950.80) 86,166,216.22 (94,603,862.90) 87,073,861.89

Cash Flow from / (used in) Investing Activities

Acquisition of Subsidiary (2,289,940.43) (75,660,071.07) (18,388,890.00) (85,200,000.00)

Acquisition of Balance Controlling Interest (15,388,890.00) - - -

Acquisition of Financial Assets (6,342,097.60) (5,712,339.68) (6,342,097.60) (5,712,340.00)

Proceeds from Disposal of Financial Assets 821,309.65 3,988,976.66 821,309.65 3,988,976.66

Purchase of Plant & Equipment (2,433,408.66) - (1,271,200.00) -

Lease Rentals Paid (1,113,985.87) - - -

Dividend Income 286,651.83 2,500.00 117,901.83 2,500.00

Interest Received 8,463,784.02 263,896.62 1,300,489.84 -

Other Current Financial Assets 5,220,374.46 (19,808.04) (2,853,957.26) -

Net Cash Flow from / (used in) Investing Activities (12,776,202.60) (77,136,845.51) (26,616,443.54) (86,920,863.34)


30

GROUP COMPANY

2013 2012 2013 2012

Rs. Rs. Rs. Rs.

Cash Flow from / (used in) Financing Activities

Proceeds from Right Issue 129,533,040.00 - 129,533,040.00 -

Right Issue Expenses (1,112,690.00) - (1,112,690.00) -

Subsidiary Dividend to Minority Shareholders (238,212.00) - - -

Net Cash Flow from / (used in) Financing Activities 128,182,138.00 - 128,420,350.00 -

Net Increase / (Decrease) in Cash & Cash Equivalents 1,099,984.60 9,029,370.71 7,200,043.56 152,998.55

Cash & Cash Equivalents at the beginning of the year 9,029,370.71 - 152,998.55 -

Cash & Cash Equivalents at the end of the year (Note: A) 10,129,355.31 9,029,370.71 7,353,042.11 152,998.55

NOTE: A

Cash & Cash Equivalents at the end of the year

Cash in Hand & at Bank 16,087,659.25 22,753,293.26 7,353,042.11 152,998.55

Bank Overdrafts (5,958,303.94) (13,723,922.55) - -

10,129,355.31 9,029,370.71 7,353,042.11 152,998.55


31

STATEMENT OF CHANGES IN EQUITY

For the year ended 31st March 2013

Group - Attributable to Equity Shareholders of the Parent

Stated Retained Total Non-Controlling Total

Capital Earnings Interest Equity

Rs. Rs. Rs. Rs. Rs.

Restated balance as at 01st April 2011 48,574,870.00 (48,966,453.01) (391,583.01) - (391,583.01)

Net Assets Acquired on Acquisition - - - 53,853,071.11 53,853,071.11

Profit for the year - 1,641,848.99 1,641,848.99 1,874,601.55 3,516,450.54

Other Comprehensive Income - - - - -

Restated balance as at 31st March 2012 48,574,870.00 (47,324,604.02) 1,250,265.98 55,727,672.66 56,977,938.64

Profit for the year - 25,003,986.83 25,003,986.83 22,767,287.01 47,771,273.84

Other Comprehensive Income - - - - -

Total Comprehensive Income 48,574,870.00 (22,320,617.19) 26,254,252.81 78,494,959.67 104,749,212.48

Transaction with owners of the Company,

recognised directly in equity

Rights issue of Ordinary Shares 129,533,040.00 - 129,533,040.00 - 129,533,040.00

Right issue expenses - (1,112,690.00) (1,112,690.00) - (1,112,690.00)

Acquisition of Balance Controlling Interest - (657,822.22) (657,822.22) (14,731,067.78) (15,388,890.00)

Subsidiary Dividend to Minority Shareholders - - - (238,212.00) (238,212.00)

Total transaction with owners of the Company 129,533,040.00 (1,770,512.22) 127,762,527.78 (14,969,279.78) 112,793,248.00

Balance as at 31st March 2013 178,107,910.00 (24,091,129.41) 154,016,780.59 63,525,679.89 217,542,460.48


32

Company

Stated Retained Total

Capital Earnings

Rs. Rs. Rs.

Restated balance as at 01st April 2011 48,574,870.00 (48,966,453.01) (391,583.01)

Loss for the year - (558,982.03) (558,982.03)

Other Comprehensive Income - - -

Restated balance as at 31st March 2012 48,574,870.00 (49,525,435.04) (950,565.04)

Loss for the year - (2,493,968.41) (2,493,968.41)

Other Comprehensive Income - - -

Total Comprehensive Income 48,574,870.00 (52,019,403.45) (3,444,533.45)

Transaction with owners of the Company,

recognised directly in equity

Rights issue of Ordinary Shares 129,533,040.00 - 129,533,040.00

Right issue expenses - (1,112,690.00) (1,112,690.00)

Total transaction with owners of the Company 129,533,040.00 (1,112,690.00) 128,420,350.00

Balance as at 31st March 2013 178,107,910.00 (53,132,093.45) 124,975,816.55


33

ACCOUNTING POLICIES

1. REPORTING ENTITY

1.1.1. General

Serendib Engineering Group PLC is a Public Quoted Company with Limited Liability incorporated and

domiciled in Sri Lanka. The registered office of the Company and the principal place of business is

located at No.12B, Gregory's Road, Colombo 07.

The Company’s name was changed from Infrastructure Developers PLC to Serendib Engineering

Group PLC with effect from 18th February 2013.

1.1.2. Principal Activities and Nature of Operations

During the year the principal activity of the Company was acting as a Holding Company for

Subsidiaries engaged in a range of Engineering Services.

The Companies within the Group are engaged in;

a) Serendib Investment Holdings Ltd.

Investment in shares

b) Serendib Engineering & Agencies (Pvt) Ltd.

A multifaceted Engineering Company involved in Telecommunications, Plantation Engineering, Water

Supply and Filtration, Marine and Railway Engineering.

c) CCC Plantation Engineering Ltd.

Manufacturing of machinery items for Plantation Sector and service & repair of machines used in

Plantation Sector.

1.1.3. Approval of Financial Statements by the Board of Directors

The Financial Statements for the year ended 31st March 2013, were authorised for issue by the Board

of Directors in accordance with the resolution passed at the meeting held on 30th

August 2013.

1.2. BASIS OF PREPARATION

1.2.1. Statement of Compliance

The Financial Statements have been prepared in accordance with Sri Lanka Accounting Standards

(herein after referred to as SLFRS / LKAS) issued by The Institute of Chartered Accountants of Sri

Lanka (ICASL) and the requirements of the Companies Act, No. 07 of 2007 and Sri Lanka Accounting

and Auditing Standards Act, No. 15 of 1995.

For all periods up to and including year ended 31st March 2012, the Company and the Group

prepared its Financial Statements in accordance with Sri Lanka Accounting Standards (SLAS) effective

up to 31st March 2012. These Financial Statements for the year ended 31st March 2013 are the first

annual Financial Statements prepared and presented in accordance with Sri Lanka Accounting


34

1.2. BASIS OF PREPARATION (CONTD.)

Standards (SLFRS / LKAS) and SLFRS 1, First Time Adoption of Sri Lanka Accounting Standards (SLFRS)

has been applied.

Accordingly, the Company and the Group have prepared Financial Statements which comply with

SLFRS / LKAS applicable for the periods ending 31st March 2013, together with the comparative

periods ending on 31st March 2012, as described in the Accounting Policies.

The effect of the transition to SLFRS / LKAS on the previously reported financial positions and financial

performances of the Company and the Group is given in Note 35 and 36 to the Financial Statements.

1.2.2. Basis of Measurement

The Consolidated Financial Statements have been prepared on the historical cost basis except for the

following material items in the statement of financial position.

a) Financial Assets at fair value through profit or loss measured at fair value.

1.2.3. Functional and Presentation Currency

The financial statements of the Company and the Group are presented in Sri Lankan Rupees, which is

the company’s functional currency.

1.2.4. Use of Estimates and Judgements

The presentation of the Financial Statements in conformity with SLFRS / LKAS requires management

to make judgements, estimates and assumptions that affect the application of Accounting Policies

and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from

those estimates and judgemental decisions.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimates are revised if the revision affects only

that period or in the period of the revision and future periods if the revision affects both current and

future periods.

1.2.5. Materiality and Aggregation

Each material item is presented separately in the Consolidated Financial Statements. Other amounts

are aggregated with amounts of similar nature or function.

1.3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been consistently applied to all periods presented in these

Consolidated Financial Statements and in preparing the opening SLFRS / LKAS Statement of Financial

Position at 01st April 2011 for the purposes of the transition to SLFRS / LKASs, unless otherwise

indicated.


35

1.3.1. Basis of Consolidation

The Consolidated Financial Statements for the year ended 31 March 2013, comprise “the Company”

referring to Serendib Engineering Group PLC as the holding Company and “the Group” referring to the

companies whose accounts have been consolidated therein.

The Financial Statements of the Subsidiaries are prepared for a common financial year, which ends on

31st March. All intra group balances, income and expenses and profits and losses resulting from intra

group transactions are eliminated in full.

a) Acquisitions and Divestments

Acquisitions of subsidiaries are accounted for using the purchase method of accounting. The results of

subsidiaries have been included from the date of acquisition, or incorporation while results of

subsidiaries disposed will be included up to the date of disposal.

b) Subsidiaries

Subsidiaries are entities controlled by the group. Control exists when the Company has the power,

directly or indirectly to govern the financial and operating activities of an entity so as to obtain

benefits from its activities. The financial statements of subsidiaries are included in the consolidated

financial statements from the date that the control commences until the date control ceases.

c) Non-controlling Interests

Non-controlling interests represent the portion of profit or loss and net assets of subsidiaries not

owned directly or indirectly by the company. The proportionate interest of minority shareholders in

the net assets employed by the group is disclosed separately within the equity in the Consolidated

Statement of Financial Position as “Non-Controlling Interests”. The total profits and losses for the year

of the Company, its subsidiaries are disclosed in the Consolidated Statement of Comprehensive

Income and the allocation of profit and loss for the period attributable to minority and equity holders

are disclosed separately.

d) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost

of the business combination over the Group’s interest in the net fair value of the identifiable assets,

liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any

accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if

events or changes in circumstances indicate that the carrying value may be impaired. For the purpose

of impairment testing, goodwill acquired in a business combination is, from the acquisition date,

allocated to groups of cash-generating units that are expected to benefit from the synergies of the

combination.


36

1.3. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which

the goodwill relates. Where the recoverable amount of the cash generating unit is less than the

carrying amount, an impairment loss is recognised. The impairment loss is allocated first to reduce

the carrying amount of any goodwill allocated to the unit and then to the other assets pro-rata to the

carrying amount of each asset in the unit.

1.3.2. Financial Assets

1.3.2.1. Initial Recognition & Measurement

Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through

profit or loss, loans & receivables, held- to- maturity investments, available- for- sale financial assets

as appropriate and determine the classification of its financial assets at initial recognition.

The financial assets include quoted and unquoted financial instrument and derivative financial

instruments, loans and other receivables, trade and other receivables, cash and short-term deposits.

1.3.2.2. Subsequent Measurement

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

a) Available-for-sale Financial Assets

Available-for-sale financial assets include equity and debt securities. Equity securities classified as

available-for-sale are those, which are neither classified as held for trading nor designated at fair

value through profit or loss. Debt securities in this category are those which are intended to be held

for an indefinite period of time and which may be sold in response to needs for liquidity or in

response to changes in the market conditions.

After initial measurement, available-for-sale financial assets are subsequently measured at fair value

with unrealised gains or losses recognised in Available-for-sale Reserve through Other Comprehensive

Income until the investment is derecognised, at which time the cumulative gain or loss is recognised

in the Statement of Comprehensive Income, or determined to be impaired, at which time the

cumulative loss is reclassified to the Statement of Comprehensive Income and removed from the

available-for-sale reserve.

If there is an indication of impairment in the unquoted equity securities, it is recognised in the

Statement of Comprehensive Income.

b) Financial Assets at fair value through profit or loss

Financial assets at fair value though profit or loss includes financial assets held for trading and

financial assets designated upon initial recognition at fair value through profit or loss. Financial assets


37


1.3.2. Financial Assets (Contd.)

are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the

near term. Financial assets at fair value through profit and loss carried in the statement of financial

position at fair value with changes in fair value recognised in the statement of comprehensive income.

c) Held-to-maturity Investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments

and fixed maturities when the company has the positive intention and ability to hold it to maturity.

After initial measurement, held-to-maturity investments are measured at amortised cost using the

effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into

account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.

The EIR amortisation is included in finance income in the income statement. The losses arising from

impairment are recognised as finance cost in the income statement.

d) Loans and Receivables

Loan and Receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. After initial measurement, such financial assets are subsequently

measured at amortised cost using the effective interest rate method (EIR), less impairment.

A provision for impairment of trade receivable is established when there is objective evidence that

the company will not be able to collect all amounts due according to the receivables.

Loans and receivables comprise cash and cash equivalents, trade and other receivable.

1.3.2.3. Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the

asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a

transaction in which substantially all the risks and rewards of ownership of the financial asset are

transferred.

1.3.2.4. Impairment of Financial Assets

Financial assets other than those measured at fair value are assessed for indicators of impairment at

the end of each reporting period. Financial assets are considered to be impaired when there is

objective evidence that as a result of one or more event that occurred after the initial recognition of

the financial assets, the estimated future cash from the asset have been affected.

1.3.3. Financial Liabilities

1.3.3.1. Initial Recognition and Measurement

Financial liabilities within the scope of LKAS 39 are recognised when and only when the Company

becomes a party to the contractual provisions of the financial instrument. Financial Liabilities are


38


1.3.3. Financial Liabilities (Contd.)

recognised initially at fair value plus directly attributable transaction costs, however in the case of

financial liabilities classified as fair value through profit & loss the directly attributable costs are not

considered.

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

1.3.3.2. Subsequent Measurement

The subsequent measurement of financial liabilities depends on their classification as follows.

a) Trade and Other payables

Trade and Other Payables are non-derivative financial liabilities. After initial measurement, such

financial liabilities are subsequently measured at amortised cost using the effective interest rate

method.

b) Loans and Borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at

amortised cost using the EIR method. Gains and losses are recognised in the income statement when

the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees

or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the

income statement.

1.3.3.3. Derecognition

Financial liabilities are derecognised when and only when they are extinguished, that is when the

obligation is discharged, cancelled or expired.

1.3.4. Plant & Equipment and Depreciation

1.3.4.1. Recognition and Measurement

Items of plant & equipment are measured at cost or valuation less accumulated depreciation and

accumulated impairment, if any, provided on the basis stated in 1.3.4.5. below.

1.3.4.2. Owned Assets

The cost of plant & equipment includes expenditure that are directly attributable to the acquisition or

construction together with any expenses incurred in bringing the assets to its working condition for its

intended use.


39


1.3.4. Plant & Equipment and Depreciation (Contd.)

Expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent

nature by means of which to carry on the business or to increase the earning capacity of the business

is treated as capital expenditure.

1.3.4.3. Restoration Cost

Expenditure incurred on repairs or maintenance of Plant and Equipment in order to restore or

maintain the future economic benefits expected from originally assessed standard of performance, is

recognised as an expense when incurred.

1.3.4.4. De-recognition

An Item of Plant & Equipment is derecognised upon disposal or when no future economic benefits are

expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as

the difference between the net disposal proceeds and the carrying amount of the asset) is included in

the Income Statement in the year the asset is derecognised.

1.3.4.5. Depreciation

Depreciation on Plant & Equipment has been provided on the straight line basis so as to write off the

cost of Plant & Equipment over their estimated useful lives.

The annual rates used for this purpose which are consistent with those of previous years are as follows.

Furniture & Fittings Office Equipment Motor Vehicles Tools & Equipment

Over 5 -10 Years Over 5 -10 Years Over 5 Years Over 2 Years

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that

the asset is classified as held for sale and the date that the asset is derecognised.

1.3.4.6. Finance Leases

Plant and Equipment on finance leases, which effectively transfers to the Company substantially all of

the risk and benefits incidental to ownership of the leased item, are capitalised at their cash price and

disclosed as Plant and Equipment and depreciated over the period the Company is expected to

benefit from the use of the leased assets.

The corresponding principal amount payable to the lessor is shown as a liability, lease payments are

apportioned between the finance charges and reduction of the lease liability so as to achieve a

constant rate of interest on the remaining balance of the liability. The interest payable over the

period of the lease is transferred to an interest in suspense account. The interest element of the

rental obligations applicable to each financial year is charged to the income statements over the

period of the lease.


40


1.3.4. Plant & Equipment and Depreciation (Contd.)

1.3.4. Investments in Subsidiaries

Unquoted Investments in Subsidiaries are treated as Long Term Investments and are valued at cost.

Provision is made for diminution in value of Investments only if such diminution is expected to be

permanent.

1.3.5. Intangible Assets

An intangible asset is an identifiable non monitory asset without physical substance held for use in

the production or supply of goods or services, or for administrative purpose.

1.3.5.1. Basis of Recognition

Intangible assets are recognised if it is probable that the future economic benefits that are

attributable to the asset will flow to the entity and the cost of the assets can be measured reliably.

a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of

the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested

annually for impairment and carried at cost less accumulated impairment losses. Impairment losses

on goodwill are not reversed. The negative goodwill is recognised immediately in the income

statement. Gains and losses on the disposal of an entity include the carrying amount of goodwill

relating to the entity sold.

1.3.6. Inventories and Work-in-Progress

a) Inventories

Inventories are valued at the lower of cost and net realisable value after making due allowances for

obsolete and slow moving items. Net realisable value is the price at which inventories can be sold in

the ordinary course of business less the estimated cost of completion and the estimated cost

necessary to make the sale.

b) Work-in-Progress

Work in progress is recognised on actual cost incurred in relation to the uncertified work done as at

the reporting date. It includes cost of work performed and direct overhead expense.

1.3.7. Cash and Cash Equivalents

Cash and Cash equivalents are defined as cash in hand, demand deposits and short term highly liquid

investments, readily convertible to known amounts of cash and subject to insignificant risk of changes

in value.


41


For the purpose of the statement of cash flows, cash and cash equivalents comprise of savings accounts,

call deposits, cash in hand, cash at banks and bank overdraft.

1.3.8. Impairment of Non-Financial Assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to

determine whether there is an indication of impairment. If any such indication exists, or when annual

impairment testing for an asset is required, then the asset's recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its

fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to

their present value using a pre-tax discount rate that reflects current market assessments of the time

value of money and the risks specific to the asset. In determining fair value, less costs to sell, an

appropriate valuation model is used.

An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds

its estimated recoverable amount. Impairment losses are recognised in profit and loss. An impairment

loss is reversed if there has been a change in the estimates used to determine the recoverable

amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not

exceed the carrying amount that would have been determined, net of depreciation or amortisation, if

no impairment loss had been recognised.

1.3.9. Employee Benefits

a) Defined Benefit Plan - Retirement Gratuity

Company

Provision has not been made for gratuity in the accounts under the payment of Gratuity Act No. 12 of

1983, since the Company does not employ any staff. All operational services are provided by Navara

Capital Ltd.

Group

Serendib Engineering Agencies (Pvt) Ltd.

Provision up to 31st March 2012 had been made on half month salary based on the last month of the

financial year of all employees multiplied by the completed years of services, commencing from the

first year of service.

Commencing from this financial year Serendib Engineering Agencies (Pvt) Ltd had adopted the LKAS

19 - “Employee Benefits” and applied the formula method to make a reliable estimate of the

Company’s retirement benefits using the “Projected Unit Credit Method” in order to determine the

present value of the retirement benefit obligation.

A defined benefit plan is a post employment benefit plan other than a defined contribution plan. The

liability recognised in the financial statements in respect of defined benefit plan is the present value

of the defined obligation at the reporting date. The defined benefit obligation is calculated annually

using the projected unit credit method.


42


The provision has been made for retirement gratuities from the first year of service for all employees,

in conformity with LKAS 19 - “Employee Benefits”. However, under the payment of Gratuity Act No.

12 of 1983, the liability to an employee arises only on completion of 5 years of continued service. The

liability is not externally funded.

b) Defined Contribution Plans - Employees Provident Fund & Employees Trust Fund

Company

Contribution for Employees Provident Fund and Employees Trust Fund have not been made since the

Company does not employ any staff.

Group

Serendib Engineering Agencies (Pvt) Ltd.

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund

Contributions in line with respective Statutes and Regulations.

1.4. REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the

Company and the revenue can be reliably measured.

The following specific criteria are used for the purpose of recognition of revenue.

1.4.1 Construction Contract

When the outcome of the contract can be measured reliably, contract revenue is recognised by

reference to the stage of completion of the contract activity as at the reporting date. Further, the

company recognise construction revenue only after receiving the work done certification from the

engineer. Any expected losses on specific contracts are recognised immediately by a corresponding

reduction in their revenue.

1.4.2. Rendering of Services

Revenue from rendering of services is recognised in the accounting period in which the services are

rendered or performed.

1.4.3. Finance Income and Finance Expense

Finance income comprises interest income on funds invested, dividend income and gains on the

disposal of financial assets at fair value through profit or loss.

Interest income is recognised on an accrual basis. Dividend Income is recognised on a cash basis.

Profit or Losses on disposal of Financial Assets are accounted for in the Income Statement on the

basis of realised net profit or loss.


43

1.4. REVENUE RECOGNITION (CONTD.)

Finance expense comprises of interest expense on borrowings and the changes in the fair value of

financial assets. All borrowing costs are recognised as an expense in the period in which they are

incurred.

1.4.4. Other Income

Other Income is recognised on an Accrual Basis.

Net Gains and losses of a revenue nature on the disposal of Plant & Equipment and other non-current

assets have been accounted for in the Income Statement, having deducted from proceeds on

disposal, the carrying amount of the assets and related selling expenses. On disposal of plant and

equipment the amount remaining in the Revaluation Reserve relating to that asset is transferred

directly to Accumulated Profit.

1.5. EXPENDITURE RECOGNITION

All the expenditure incurred in running of the business has been charged to the Income Statement in

arriving at the profit or loss for the year. Provision has also been made for all known liabilities.

1.5.1. Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that

necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised

as part of the cost of the asset. All other borrowing costs are expensed in the period they occur.

Borrowing costs consist of interest and other costs that an entity incurs in connection with the

borrowing of funds.

1.5.2. Income Tax Expenses

Income tax expenses comprise of current and deferred tax.

1.5.2.1. Current Tax

The provision for Income Tax is based on the elements of Income & Expenditure as reported in the

financial statements and computed in accordance with the provisions of the Inland Revenue Act No.

10 of 2006 and the amendments thereto.

1.5.2.2. Deferred Tax

Deferred Tax is provided in full, using the liability method, for all temporary differences arising

between the tax base of assets and liabilities and their carrying amounts in the Financial Statements.

Deferred tax is determined using tax rates that have been enacted or substantially enacted by the

date of the Statement of Financial Position and are expected to apply when the related deferred

income tax asset is realised or the deferred income tax liability settled.


44

1.4. EXPENDITURE RECOGNITION (CONTD.)

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will

be available against which the asset can be utilised. Deferred tax assets are reviewed at each

reporting date and are reduced to the extent that it is no longer probable that the related tax benefit

will be realised.

1.5.2.3. Withholding Tax on Dividend

Tax on Dividend Income from subsidiaries is recognised as an expense in the Consolidated Income

Statement.

1.6. STATEMENT OF CASH FLOWS

The Statement of Cash Flows has been prepared using the “Indirect method”.

1.7. EARNINGS PER SHARE

The Company presents Earnings per Share (EPS) data for its ordinary shares. EPS is calculated by

dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted

average number of ordinary shares outstanding during the period.

1.8. TRANSACTIONS WITH RELATED PARTIES

Disclosures are made in respect of the transactions in which one party has the ability to control or

exercise significant influence over the financial and operating policies of the other, irrespective of

whether a price is charged.

1.9. FIRST TIME ADOPTION OF SLFRS / LKAS

The financial statements, for the year ended 31st March 2013 are the first financial statements

prepared in accordance with SLFRS / LKAS. Previously for period up to 31st March 2012, the Company

prepared its financial statements in accordance with Sri Lanka Accounting Standards which were

effective as at that date.

1.9.1. Exemptions Applied

SLFRS 1 - First Time Adoption of Sri Lanka Financial Reporting Standards allows first time adopters

certain exemptions which are optional and certain exceptions which are mandatory from

retrospective application of certain SLFRS / LKAS.

1.9.2. The Company has applied the following Mandatory Exception

Significant Accounting Judgment, estimates and assumptions

Significant Accounting Judgment, estimates and assumptions at 1st April 2011 and 31st March 2012

are consistent with those made for the same dates in accordance with the previous Sri Lanka

Accounting Standards effective up to 31st March 2012 (after adjustments to reflect any difference in

accounting policies).


45

The estimates used by the Company to present these amounts in accordance with SLFRS / LKAS

effective from 1st April 2012 reflect conditions at 1st April 2011, the date of transition to SLFRS / LKAS

and as of 31st March 2012.

1.9.3. Explanations for Transition to SLFRS / LKASS

In preparing SLFRS / LKAS Statement of Financial Position for previously reported financial periods,

required adjustments have been made in accordance with the respective SLFRS / LKASs. The effect of

the transition from SLASs to SLFRS / LKASs has been presented in the reconciliation statements and

accompanying notes with regard to material reconciliation items.

1.10. NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

The Institute of Chartered Accountants of Sri Lanka has issued the following standards which become

effective for annual periods beginning after the current financial year. Accordingly, these standards

have not been applied in preparing these financial statements. The Company will be adopting these

standards when they become effective.

SLFRS 9 - Financial Instruments

SLFRS 10 - Consolidated Financial Statements

SLFRS 12 - Disclosure of Interest in Other Entities

SLFRS 13 - Fair Value Measurement


46

NOTES TO THE FINANCIAL STATEMENTS

NOTES GROUP

COMPANY

2013

2012

2013

2012

Rs.

Rs.

Rs.

Rs.

2 REVENUE 2.1 Income

Projects Income 331,445,615.52

-

-

-

Foreign Currency Income 7,655,209.00

-

-

-

339,100,824.52

-

-

-

2.2 Other Income

Payable Balances Written Back 160,919.15

-

145,126.15

-

Current Account Written Back -

4,178,193.45

-

-

Over Provision of Employee Benefits 1,262,020.06

-

-

-

Sale of Scraps 45,000.00

-

-

-

1,467,939.21

4,178,193.45

145,126.15

-

3 PROFIT BEFORE TAXATION

Profit before Taxation is stated after charging

all expenses including the following:

Salaries & Wages 24,809,788.97

23,856.75

-

-

Employees Provident Fund 2,154,560.00

2,126.79

-

-

Employees Trust Fund 538,650.00

531.70

-

-

Professional Fees 370,230.23

57,142.86

50,000.00

57,142.86

Auditors Remuneration 226,112.00

55,000.00

70,000.00

55,000.00

Depreciation 2,106,415.88

4,243.11

102,966.67

-

4 FINANCE INCOME

Profit on Disposal of Financial Assets 139,309.65

422,636.66

139,309.65

422,636.66

Dividend Income 286,651.83

2,500.00

117,901.83

2,500.00

Interest on Fixed Deposits 7,635,939.88

19,808.34

518,596.14

-

Interest on Call Deposits -

-

781,893.70

-

Interest on Savings Accounts 794,204.80

16,721.56

-

-

Interest on Debentures 33,639.34

-

-

-

8,889,745.50

461,666.56

1,557,701.32

425,136.66

5 FINANCE EXPENSES

Lease Interest 879,315.00

710.24

-

-

Overdraft Interest 785,788.93

-

30,638.49

-

Transaction Cost 66,299.55

64,081.36

66,299.55

64,081.36

Fair Value Changes on Financial Assets 2,107,284.60

272,500.00

2,107,284.60

272,500.00

3,838,688.08

337,291.60

2,204,222.64

336,581.36


47

NOTES GROUP

COMPANY

2013

2012

2013

2012

Rs.

Rs.

Rs.

Rs.

6 INCOME TAX EXPENSES

Current Income Tax

Tax Expenses on Ordinary Activities for the year 16,428,347.30

20,895.66

236,689.00

-

Deferred Taxation

Deferred Tax Expense / (Income) (1,482,602.85)

-

89,815.00

-

14,945,744.45

20,895.66

326,504.00

-

6.1

Reconciliation of Accounting Profit / (Loss)

and Taxable Income

Accounting Profit / (Loss) (before Taxation) 62,717,018

3,537,346

(2,167,464)

(558,982)

Aggregate Disallowed Expenses 6,535,462

314,547

2,850,337

336,581

Aggregate Allowable Expenses (15,981,786)

(4,575,182)

(1,981,435)

(425,136)

Profit Exempted from Income Tax (5,762,937)

-

-

-

Adjusted Profit / (Loss) 47,507,757

723,288

(1,298,562)

(647,536)

Adjusted Trading Profit 49,898,376

108,838

-

-

Aggregate Statutory Income 8,463,784

35,757

1,300,490

-

Tax Losses for the year & Utilised (455,171)

-

(455,171)

-

Taxable Income 57,906,989

144,594

845,318

-

Income Tax Expenses for the year is made up

Statutory Tax Rate

- Income Tax @ 10% -

10,884

-

-

- Income Tax @ 28% 16,213,957

10,012

236,689

-

- Dividend Tax 214,390

-

-

-

16,428,347

20,896

236,689

-

6.2 Corporate income taxes of companies in the Group are computed in accordance with the Inland Revenue Act,

No. 10 of 2006 and subsequent amendments thereto. The tax liability of the Company and its Subsidiaries are

computed at 28% as at 31st March 2013.


48

NOTES

7 EARNINGS / (LOSS) PER ORDINARY SHARE

The calculation of basic earnings / (loss) per share for the Company and the Group as at 31st March 2013 was

based on the profit / (loss) attributable to ordinary shareholders of Rs. (2,493,968.41) and Rs. 25,003,986.83

respectively and a weighted average number of shares outstanding of 5,948,803 calculated as follows.

Number of Ordinary Shares for the year 2012 have been adjusted to reflect the increase in number of shares

consequent to the right issue on 11th September 2012. Accordingly, earnings per share has been adjusted

respectively as per LKAS 33 "Earnings Per Share".

GROUP

COMPANY

2013

2012

2013

2012

Amounts used as the Numerators (Rs.)

Profit / (Loss) attributable to

Ordinary Share Holders 25,003,986.83

1,641,848.99

(2,493,968.41)

(558,982.03)

Number of Ordinary Shares used as Denominators

Weighted average number of Ordinary Shares (I) 5,948,803

5,294,661

5,948,803

5,294,661

Basic earnings / (loss) per share (Rs.) 4.20

0.31

(0.42)

(0.11)

(I) Issued number of Ordinary Shares

as at beginning of the year 4,857,487

4,857,487

4,857,487

4,857,487

Effect of Right Issue 1,091,316

437,174

1,091,316

437,174

Weighted average number of Ordinary Shares 5,948,803

5,294,661

5,948,803

5,294,661


49

NOTES As at

01.04.2012 Additions Disposals / Discarded

As at 31.03.2013

Rs. Rs. Rs.

Rs.

8 PLANT & EQUIPMENT 8.1 GROUP

Cost

Furniture & Fittings 2,107,276.95 100,137.66 (9,684.00)

2,197,730.61

Office Equipment 8,861,828.65 895,348.00 (618,000.00)

9,139,176.65

Motor Vehicles 21,128,715.74 138,857.80 -

21,267,573.54

Tools & Equipment 4,431,123.91 1,299,065.20 -

5,730,189.11

36,528,945.25 2,433,408.66 (627,684.00)

38,334,669.91

Leased Assets

Motor Vehicles 2,475,000.00 8,839,285.00 -

11,314,285.00

39,003,945.25 11,272,693.66 (627,684.00) 49,648,954.91

Accumulated Depreciation

Furniture & Fittings 1,269,215.14 189,828.53 (9,684.00)

1,449,359.67

Office Equipment 4,606,081.79 687,922.31 (618,000.00)

4,676,004.10

Motor Vehicles 21,128,715.74 12,727.37 -

21,141,443.11

Tools & Equipment 4,032,273.11 131,651.67 -

4,163,924.78

31,036,285.78 1,022,129.88 (627,684.00)

31,430,731.66

Leased Assets

Motor Vehicles 990,000.00 1,084,286.00

2,074,286.00

32,026,285.78 2,106,415.88 (627,684.00) 33,505,017.66

NET BOOK VALUE 6,977,659.47

16,143,937.25

As at 01.04.2012 Additions /

As at 31.03.2013

(Discarded)

8 PLANT & EQUIPMENT

Rs. Rs.

Rs.

8.2 COMPANY

Cost

Furniture & Fittings

9,684.00 (9,684.00)

-

Office Equipment

618,000.00 (618,000.00)

-

Equipment

- 1,271,200.00

1,271,200.00

(627,684.00)

627,684.00 1,271,200.00 1,271,200.00

Accumulated Depreciation

Furniture & Fittings

9,684.00 (9,684.00)

-

Office Equipment

618,000.00 (618,000.00)

-

Equipment

102,966.67

102,966.67

(627,684.00)

627,684.00 102,966.67 102,966.67

NET BOOK VALUE

-

1,168,233.33


50

NOTES

GROUP

2013

2012

9 INTANGIBLE ASSETS

Rs.

Rs.

Goodwill

Balance as at the beginning of the year

21,669,723.27

-

Goodwill on Acquisition of Subsidiary

99,869.93

21,669,723.27

Balance as at the end of the year

21,769,593.20

21,669,723.27

This represents the excess of the cost of acquisition of the net Assets of the following companies.

The aggregate carrying amount of Goodwill allocated to each Company is as follows.

Serendib Investment Holdings Ltd.

667,311.09

667,311.09

Serendib Engineering & Agencies (Pvt) Ltd.

21,002,412.18

21,002,412.18

C C C Plantation Engineering Ltd.

99,869.93

-

21,769,593.20

21,669,723.27

The management is of the view that a provision for impairment of goodwill is not required as at the end of the reporting period.

COMPANY

Holding No. of 2013

2012

Shares Rs.

Rs.

10 INVESTMENTS IN SUBSIDIARIES

Unquoted Investments

C C C Plantation Engineering Ltd. 100% 1,800,000 3,000,000.00

-

Serendib Engineering & Agencies (Pvt) Ltd. 10% 52,936 15,388,890.00

-

Serendib Investment Holdings Ltd. 60% 85,200,000 85,200,000.00

85,200,000.00

103,588,890.00

85,200,000.00

10.1 The Company acquired 100% shareholding in CCC Plantation Engineering Ltd which commenced

operations during the year 2013. CCC Plantation Engineering Ltd's principal activity is manufacturing

of machinery items for Plantation Sector and service & repair of machines used in Plantation Sector.

10.2 The Company held 54% indirect shareholding in Serendib Engineering & Agencies (Pvt) Ltd and

further acquired 10% of the issued ordinary share capital during the year. Serendib Engineering &

Agencies (Pvt) Ltd is a multifaceted Engineering Company involved in Telecommunications,

Plantation Engineering, Water Supply and Filtration, Marine and Railway Engineering.


51

NOTES GROUP

2013

2012

No. of

No. of

Shares

Rs.

Shares

Rs.

11 OTHER NON CURRENT FINANCIAL ASSETS

Available-For-Sale Financial Assets

Un-quoted

Ceylinco Developers Ltd. 250,000

2,500,000.00

250,000

2,500,000.00

2,500,000.00

2,500,000.00

Investment in Ceylinco Developers Ltd, which was previously presented as Long Term Investments now

recognised as a financial asset and classified as Available-for-sale Financial Asset.

GROUP

COMPANY

2013

2012

2013

2012

Rs.

Rs.

Rs.

Rs.

12 DEFERRED TAXATION

Deferred Tax Assets (1,572,417.85)

-

-

-

Deferred Tax Liabilities 89,815.00

-

89,815.00

-

Provision made / (Released) to

Income Statement (1,482,602.85)

-

89,815.00

-

12.1 Deferred Tax Assets

Balance as at beginning of the year -

-

-

-

Accelerated Depreciation for Tax purposes 52,207.00

Employee Benefit Liability 1,520,210.85

-

-

-

Balance as at end of the year 1,572,417.85

-

-

-

12.2 Deferred Tax Liabilities

Balance as at beginning of the year -

-

-

-

Accelerated Depreciation for Tax purposes 89,815.00

-

89,815.00

-

Balance as at end of the year 89,815.00

-

89,815.00

-

12.3 The Deferred Tax Asset is arrived at by applying the effective income Tax rate of 28% applicable for

the year of assessment 2012/13 to the temporary difference as at 31st March 2013.


52

NOTES GROUP COMPANY

2013 2012 2013 2012

No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value

Shares

Shares

Shares

Shares

13

Rs. Rs.

Rs. Rs.

Rs. Rs.

Rs. Rs.

FINANCIAL ASSETS AT FAIR VALUE

THROUGH PROFIT OR LOSS

Bank, Finance and Insurance

Pan Asia Banking Corporation PLC 50,878 1,071,222.44 966,682.00 - - - 50,878 1,071,222.44 966,682.00 - - -

Beverage, Food and Tobacco

Renuka Shaw Wallace PLC 77,000 2,230,707.20 1,386,000.00 - - - 77,000 2,230,707.20 1,386,000.00 - - -

Diversified Holdings

Expolanka Holdings PLC - - - 110,000 794,823.54 682,000.00 - - - 110,000 794,823.54 682,000.00

Softlogic Holdings PLC 60,000 763,474.51 624,000.00 35,000 490,450.50 392,000.00 60,000 763,474.51 624,000.00 35,000 490,450.50 392,000.00

Manufacturing

Tokyo Cement Company (Lanka) PLC 50,000 1,525,900.80 1,175,000.00 - - - 50,000 1,525,900.80 1,175,000.00 - - -

Motors

Colonial Motors PLC 15,357 2,192,342.70 1,274,631.00 2,500 884,800.00 799,500.00 15,357 2,192,342.70 1,274,631.00 2,500 884,800.00 799,500.00

7,783,647.65 5,426,313.00

2,170,074.04 1,873,500.00

7,783,647.65 5,426,313.00

2,170,074.04 1,873,500.00


53

NOTES GROUP

COMPANY

2013

2012

2013

2012

Rs.

Rs.

Rs.

Rs.

14 TRADE & OTHER RECEIVABLES

Debtors & Retentions 199,787,004.61

39,628,256.93

-

-

Deposits, Advances & Prepayments 2,155,784.03

3,333,812.18

2,257.26

-

Other Receivables 2,846,382.64

1,105,616.55

18,296.60

-

Tax Receivables 5,078,585.64

20,273,921.90

55,829.27

-

209,867,756.92

64,341,607.56

76,383.13

-

15 AMOUNTS DUE FROM RELATED PARTIES

C C C Plantation Engineering Ltd. -

72,280.00

-

-

Navara Capital Ltd. -

685,098.00

-

-

Serendib Engineering & Agencies (Pvt) Ltd. -

-

4,979,550.56

-

Mr. S.C. De Silva 891,226.55

-

-

-

891,226.55

757,378.00

4,979,550.56

-

16 OTHER CURRENT FINANCIAL ASSETS

Held-To-Maturity Investments

Fixed Deposits

- National Development Bank PLC 2,853,957.26

-

2,853,957.26

-

- Pan Asia Banking Corporation PLC 457,286.79

392,018.59

-

-

- Seylan Bank PLC 34,312,922.53

42,252,522.45

-

-

Debentures

- Seylan Bank PLC

(2,000 Debenture at Rs. 100/- each) -

200,000.00

-

-

37,624,166.58

42,844,541.04

2,853,957.26

-

17 CASH AND CASH EQUIVALENTS

Savings Accounts

Pan Asia Banking Corporation PLC -

732,441.56

-

-

Seylan Bank PLC -

149,464.68

-

-

Call Deposits

Pan Asia Banking Corporation PLC 600,000.00

-

-

-

Current Accounts

Bank of Ceylon 87,774.72

54,730.92

-

-

Hatton National Bank PLC 787,255.00

-

-

-

National Development Bank PLC 7,340,291.15

-

7,291,041.15

-

Nations Trust Bank PLC 5,039,940.94

20,372,162.06

-

-

Pan Asia Banking Corporation PLC 1,021,136.97

352,583.46

62,000.96

152,998.55

Seylan Bank PLC 255,554.00

100,678.57

-

-

Petty Cash 271,108.47

1,230.01

-

-

Cash in Hand 684,598.00

990,002.00

-

-

16,087,659.25

22,753,293.26

7,353,042.11

152,998.55


54

NOTES GROUP

COMPANY

2013

2012

2013

2012

Rs.

Rs.

Rs.

Rs.

18 STATED CAPITAL

Balance as at beginning of the year

4,857,487 Ordinary Shares 48,574,870.00

48,574,870.00

48,574,870.00

48,574,870.00

Issued during the year

1,619,163 Ordinary Shares 129,533,040.00

-

129,533,040.00

-

Balance as at end of the year

6,476,650 Ordinary Shares 178,107,910.00

48,574,870.00

178,107,910.00

48,574,870.00

The Company made a Right Issue of 1,619,163 Ordinary Shares at a price of Rs. 80/- per share to the holders of

the issued Ordinary Shares of the Company as at end of trading on 15th August 2012 in the proportion of one (01)

new Ordinary Share for every three (03) existing issued Ordinary Shares held. This issue closed on 30th August

2012 and was fully subscribed. The Rights shares were allotted on 11th September 2012. The consideration received

was Rs. 129,533,040/-. The proceeds of the Right issue was utilised to overcome the serious loss of capital and also

to capitalise the Company to carry out the business operations.

19 EMPLOYEE BENEFITS

Balance as at beginning of the year 9,958,250.00

9,947,502.06

-

-

Add:

Provision for the year -

10,747.94

-

-

Over Provision of Employee Benefits (1,262,020.06)

-

-

-

8,696,229.94

9,958,250.00

-

-

Less:

Payment made during the year (2,894,000.00)

-

-

-

Balance as at the end of the year 5,802,229.94

9,958,250.00

-

-

Serendib Engineering Agencies (Pvt) Ltd up to 31st March 2012 had been made provision for retirenment gratuity

based on half month salary based on the last month of the financial year of all employees multiplied by the completed

years of services, commencing from the first year of service.

Commencing from this financial year Serendib Engineering Agencies (Pvt) Ltd had adopted the LKAS 19 -

“Employee Benefits” and applied formula method to make a reliable estimate of the Company’s employee benefits

using the “Projected Unit Credit Method” in order to determine the present value of the employee benefits.

The following key assumptions were made in arriving at the retirement benefit obligation as at 31st March 2013.

Retirement Age 55 Years

Salary Increment Rate 7.5%

Discount Rate 11%

Employee Turnover Ratio 5%


55

NOTES GROUP COMPANY

2013 2012 2013 2012 01.04.2011

Rs. Rs. Rs. Rs. Rs.

20 FINANCE LEASE OBLIGATIONS

20.1 Payable after one year

Lease Cost 7,787,309.33 1,129,087.47 - - -

Less: Interest in Suspense (1,065,301.21) (74,794.37) - - -

6,722,008.12 1,054,293.10 - - -

20.2 Payable within one year

Lease Cost 4,094,252.88 645,192.84 - - -

Less: Interest in Suspense (1,498,325.04) (106,849.11) - - -

2,595,927.84 538,343.73 - - -

21 TRADE & OTHER PAYABLES

Trade Creditors 22,923,511.41 15,881,030.01 - - -

Accrued Expenses 61,928,729.54 21,653,724.71 101,020.41 77,500.00 91,440.00

Other Payables 3,954,126.85 145,126.15 153,051.43 145,126.15 145,126.15

88,806,367.80 37,679,880.87 254,071.84 222,626.15 236,566.15

22 AMOUNTS DUE TO RELATED PARTY

Navara Capital Ltd. 4,213,395.50 87,897,294.58 - 87,897,294.58 -

4,213,395.50 87,897,294.58 - 87,897,294.58 -

23 DIRECTORS CURRENT ACCOUNTS

Mr. H.N De Silva 50,000.00 - - - -

Mr. Chandramohan Shangaralingam - 57,142.86 - 57,142.86 57,142.86

50,000.00 57,142.86 - 57,142.86 57,142.86

24 BANK OVERDRAFT

Seylan Bank PLC 5,958,303.94 13,723,922.55 - - -

5,958,303.94 13,723,922.55 - - -


56

NOTES

25 RELATED PARTY DISCLOSURES

25.1 Parent and Ultimate Controlling Party

The Company’s parent undertaking is Navara Capital Ltd.

25.2 Transaction with Key Management Personnel (KMP)

According to Sri Lanka Accounting Standard (LKAS 24) - “Related Party Disclosures”, Key Management

Personnel (KMP) are those having authority and responsibility for planning and controlling the activities of the

entity. Accordingly, Key Management Personnel include the members of the Board of Serendib Engineering Group

PLC and its Subsidiary Companies.

25.2.1 Loans to Key Management Personnel

No Loans have been given to Key Management Personnel during the year.

25.2.2 Key Management Personnel Compensation

No Compensation have been given to the Directors of the Company and its Subsidiaries.

25.2.3 Other Transactions with Key Management Personnel

There were no other transaction with key management personnel other than those disclosed in Note 25.2 to these

financial statements during the year.

25.3 Identity of the Related Parties

The Company carries out transactions in ordinary course of its business with parties who are defined as related

parties in Sri Lanka Accounting Standard (LKAS 24) - “Related Party Disclosures” the details of which are reported

below.


57

NOTES

25 RELATED PARTY DISCLOSURES (CONTD.)

25.4

Transaction with Related Parties

The Company had following transactions with related entities during the year under review.

Transaction Value

Name of the Related Party

Name of the Director Relationship

Nature of Transaction 2013 2012

Rs. Rs.

Navara Capital Ltd. Mr. H.N. De Silva Parent

Related Party Balance - (87,897,294.58)

Mrs. D.L. De Silva

Other Expenses 1,765,098.24 -

Mr. Sagara Kariyawasam

Advance Received 1,002,500.00

Settlement of Outstanding

Opening Balance (87,897,294.58)

Settlement of Advance &

Other Expenses (2,767,598.24)

CCC Plantation Engineering Ltd. Mr. H.N. De Silva Subsidiary

Acquisition of Shares 3,000,000.00 -

Mrs. D.L. De Silva

Serendib Engineering & Agencies (Pvt) Ltd. Mr. H.N. De Silva Subsidiary

Acquisition of Shares 15,388,890.00 -

Mr. Sagara Kariyawasam

Related Party Balance 4,979,550.56 -

Other Expenses 1,014,691.90 -

Advance Received 11,800,000.00 -

Advance Paid (7,835,141.34) -

Serendib Investment Holdings Ltd. Mr. H.N. De Silva Subsidiary

Acquisition of Shares - 85,200,000.00

Mrs. D.L. De Silva

All operational services are provided by Navara Capital Ltd.


58

NOTES

25 RELATED PARTY DISCLOSURES (CONTD.)

25.4 Transaction with Related Parties

Serendib Engineering Group PLC has given a Corporate Guarantee of Rs. 44Mn to Seylan Bank PLC

on behalf of Serendib Engineering & Agencies (Pvt) Ltd.

The above transactions were carried out on commercial terms and conditions and at a price agreed

upon by the management.

No interest have been received or paid on the above Related Party balances.

26 CAPITAL EXPENDITURE COMMITMENTS

There are no Capital Commitments outstanding as at 31st March 2013.

27 CONTINGENT LIABILITIES

There were no material Contingent Liabilities outstanding as at 31st March 2013.

28 RESTATEMENT OF COMPARATIVE FIGURES

Comparative information including quantitative, narrative and descriptive information is disclosed

in respect of the previous period for all amounts reported in the Financial Statements in order to

enhance the understanding of the current period's Financial Statements and to enhance the inter

period comparability.

29 EVENTS AFTER THE REPORTING PERIOD

There have been no material events after the reporting date that require disclosure in the financial

statements.

30 DIRECTORS RESPONSIBILITIES

The Board of Directors take responsibility for the preparation and presentation of these financial

statements as per the provisions of the Companies Act No. 7 of 2007.

31 ASSETS PLEDGED

Serendib Engineering & Agencies (Pvt) Ltd.

The following assets have been pledged as security for liabilities.

Nature of Assets

Nature of Liability

Seylan Bank PLC

a) Lien over Fixed Deposits of Seylan Bank PLC

Letter of Guarantee

Rs. 75.0 Mn

b) Serendib Engineering Group PLC has given a Corporate Guarantee of Rs. 44Mn to Seylan Bank PLC on behalf of Serendib Engineering & Agencies (Pvt) Ltd.


59

NOTES

32 CHANGE IN FINANCIAL PERIOD OF SUBSIDIARY

CCC Plantation Engineering Ltd..

CCC Plantation Engineering Ltd in has prepared its first audited financial statements for the 15 months period from 1st

January 2012 to 31st March 2013. The Company has used the same in the consolidated financial statements prepared

for the financial year ended 31st

March 2013.

33 GROUP COMPANIES

Proportion of Proportion of

Ownership Ownership

Interest as at Interest as at

Subsidiaries 31.03.2013 31.03.2012 Principal Activities

Serendib Investment Holdings Ltd. 60% 60% Investment in Shares

Serendib Engineering & Agencies (Pvt) Ltd. 64% 54% A multifaceted Engineering Company

(Serendib Investment Holdings Ltd holds

involved in Telecommunications,

90% shares and Serendib Engineering Group

Plantation Engineering, Water Supply

PLC holds 10% shares of Serendib Engineering

and Filtration, Marine and Railway

& Agencies (Pvt) Ltd.)

Engineering.

C C C Plantation Engineering Ltd. 100% - Manufacturing of machinery items for

Plantation Sector and service & repair

of machines used in Plantation Sector.

34 RISK MANAGEMENT OBJECTIVES AND POLICIES

34.1 Financial Risk Management

The Group has exposure to the following risks arising from financial instruments.

a) Credit Risk

b) Liquidity Risk

c) Market Risk

The note presents information on the Group's exposure to each of the above risk categories, Group’s

objective, policies and processes for measuring and managing risk and the Group’s management of

capital.


60

NOTES

a) Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty failing to meet contractual obligations. Credit risk arises principally from the Group’s receivables from customers and investments in securities.

The Group has a specific method to assess the potential of customers in terms of their credit worthiness.

Also Group takes adequate precautionary actions before granting credit facilities. Investment in securities

will also be done after careful evaluation of the expected return and risk associated. This approach has

mitigated the credit risk of the Group.

b) Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations related to its

financial liabilities, through settlement by cash or financial assets.

The Group seldom utilizes its' borrowing facilities. The Group ensures the availability of sufficient

liquidity to meet liabilities when due with proper cash flow planning. The board regularly reviews

liquidity position of the Group. This cautious approach ensures the mitigation of liquidity risk.

c) Market Risk

Market risk is the risk that changes in market prices, such as raw material prices, foreign exchange rates

and interest rates that would impact Group’s income or the value of investment in financial instruments.

The objective of managing market risk is to manage and control market risk

exposures within parameters, while optimizing returns.

The Group always keep a provision for such fluctuations before deciding the price of the finished good.

Also the Group negotiate terms with suppliers for specific future period aswell. All these steps will lead

to mitigate the market risk associated with the Group.

Annual Report 2012/2013 | SERENDIB ENGINEERING GROUP PLC 61

NOTES

35 RECONCILIATIONS OF SLAS TO SLFRS / LKAS 35.1 RECONCILIATION OF COMPREHENSIVE INCOME

GROUP

COMPANY

As at 31st March 2012


As per Effect of As per


Sub SLAS Transition SLFRS / LKAS

SLAS Transition SLFRS / LKAS

Notes Rs. Rs. Rs.

Rs. Rs. Rs.

Revenue

- - -

- - -

Other Income 36.1 4,599,852.69 (421,659.24) 4,178,193.45

385,129.34 (385,129.34) -

4,599,852.69 (421,659.24) 4,178,193.45

385,129.34 (385,129.34) -

Administrative Expenses

(739,552.39) (249.82) (739,802.21)

(647,287.51) (249.82) (647,537.33)

Distribution Cost

(25,420.00) - (25,420.00)

- - -

Other Operating Expenses

(296,574.04) 296,574.04 -

(296,574.04) 296,574.04 -

Profit / (Loss) from Operating Activities

3,538,306.26 (125,335.02) 3,412,971.24

(558,732.21) (88,805.12) (647,537.33)

Finance Income 36.2 - 461,666.56 461,666.56

- 425,136.66 425,136.66

Finance Expenses 36.3 (960.06) (336,331.54) (337,291.60)

(249.82) (336,331.54) (336,581.36)

Net Finance Income

(960.06) 125,335.02 124,374.96

(249.82) 88,805.12 88,555.30

Profit / (Loss) before Income Tax Expenses

3,537,346.20 - 3,537,346.20

(558,982.03) - (558,982.03)

Income Tax Expenses

(20,895.66) - (20,895.66)

- - -

Profit / (Loss) for the year

3,516,450.54 - 3,516,450.54

(558,982.03) - (558,982.03)

Other Comprehensive Income

- - -

- - -

Total Other Comprehensive Income for the year - - -

- - -

Total Comprehensive Income for the year

3,516,450.54 - 3,516,450.54

(558,982.03) - (558,982.03)


62

NOTES

35 RECONCILIATIONS OF SLAS TO SLFRS / LKAS

35.2 RECONCILIATION OF FINANCIAL POSITION - GROUP




ASSETS Notes Rs. Rs. Rs.


Plant & Equipment

6,977,659.47 - 6,977,659.47

Intangible Assets

21,669,723.27 - 21,669,723.27

Investments in Equity Securities

1,873,500.00 (1,873,500.00) -

Other Non Current Financial Assets 36.4 2,700,000.00 (200,000.00) 2,500,000.00

33,220,882.74 (2,073,500.00) 31,147,382.74

CURRENT ASSETS

Inventories

10,817,002.82 - 10,817,002.82

Work in Progress

33,553,925.91 - 33,553,925.91

Financial Assets at fair value through profit or loss 36.5 - 1,873,500.00 1,873,500.00

Trade & Other Receivables

64,341,607.56 - 64,341,607.56

Amounts due from Related Parties

757,378.00 - 757,378.00

Other Current Financial Assets 36.6 43,526,447.28 (681,906.24) 42,844,541.04

Cash and Cash Equivalents

21,871,387.02 881,906.24 22,753,293.26

TOTAL ASSETS

208,088,631.33 - 208,088,631.33


Equity Attributable to the Equity Holders of the Parent

Stated Capital

48,574,870.00 - 48,574,870.00

Retained Earnings

(47,324,604.02) - (47,324,604.02)

SHAREHOLDERS' FUNDS

1,250,265.98 - 1,250,265.98

Non-Controlling Interest

55,727,672.66 - 55,727,672.66

TOTAL EQUITY

56,977,938.64 - 56,977,938.64


Employee Benefits

9,958,250.00 - 9,958,250.00

Finance Lease Obligations

1,054,293.10 - 1,054,293.10

CURRENT LIABILITIES

Trade & Other Payables

37,679,880.87 - 37,679,880.87

Finance Lease Obligations

538,343.73 - 538,343.73

Amounts due to Related Parties

87,897,294.58 - 87,897,294.58

Directors Current Account

57,142.86 - 57,142.86

Income Tax Liabilities

201,565.00 - 201,565.00

Bank Overdrafts

13,723,922.55 - 13,723,922.55

TOTAL EQUITY & LIABILITIES

208,088,631.33 - 208,088,631.33


63

NOTES

35 RECONCILIATIONS OF SLAS TO SLFRS / LKAS

35.2 RECONCILIATION OF FINANCIAL POSITION - COMPANY

As at 01st April 2011


(date of transition to SLFRS / LKAS)




SLAS Transition SLFRS / LKAS

Notes Rs. Rs. Rs.

Rs. Rs. Rs.

ASSETS


Plant & Equipment

- - -

- - -

Investments in Subsidiaries

85,200,000.00 - 85,200,000.00

- - -

Investments in Equity Securities

1,873,500.00 (1,873,500.00) -

- - -

87,073,500.00 - 85,200,000.00

- - -

CURRENT ASSETS

Financial Assets at fair value through profit or loss 36.4 - 1,873,500.00 1,873,500.00

- - -

Cash and Cash Equivalents

152,998.55 - 152,998.55

- - -

TOTAL ASSETS

87,226,498.55 - 87,226,498.55

- - -


Equity

Stated Capital

48,574,870.00 - 48,574,870.00

48,574,870.00 - 48,574,870.00

Retained Earnings

(49,525,435.04) - (49,525,435.04)

(48,966,453.01) - (48,966,453.01)

TOTAL EQUITY

(950,565.04) - (950,565.04)

(391,583.01) - (391,583.01)


- - -

- - -


64

CURRENT LIABILITIES

Trade and Other Payables

222,626.15 - 222,626.15

236,566.15 - 236,566.15

Amounts Due to Related Party

87,897,294.58 - 87,897,294.58

- - -

Directors Current Account

57,142.86 - 57,142.86

57,142.86 - 57,142.86

Income Tax Liabilities

- - -

97,874.00 - 97,874.00

TOTAL EQUITY & LIABILITIES

87,226,498.55 - 87,226,498.55

- - -


NOTES

GROUP

COMPANY

31.03.2012

01.04.2011

Rs.

Rs.

36 EXPLANATION OF TRANSITION TO SLFRS / LKAS

36.1 OTHER OPERATING INCOME

As per previous SLAS interest income, dividend income and profit on disposal of investments

have been classified under other operating income. Under SLFRS / LKAS these were classified

in finance income.

Reclassification from - Other Operating Income 421,659.24

385,129.34

Reclassification to - Finance Income 421,659.24

385,129.34

This reclassification had no impact on the Statement of Financial Position or Statement of

Changes in Equity.

36.2 FINANCE INCOME

Reclassification from - Other Operating Income 421,659.24

385,129.34

Impact from Transaction cost on purchases of

Financial Assets 40,007.32

40,007.32

461,666.56

425,136.66

36.3 FINANCE EXPENSES

Under SLFRS / LKAS Bank Charges has been reclassified to administrative expenses.

Reclassification from - Finance Expenses 249.82

249.82

Reclassification to - Administrative Expenses 249.82

249.82

These reclassifications had no impact on the Statement of Financial Position or Statement of

Changes in Equity.

Under SLFRS / LKAS Financial Assets at Fair Value through profit or loss should be measured

at fair value. Difference between the fair value under SLFRS / LKAS and carrying value under

previous SLAS has been recognised in the Statement of Comprehensive Income as Fair Value

changes on Financial Assets.

Finance Expenses reported under previous SLAS 960.06

249.82

Reclassification to - Administrative Expenses (249.82)

(249.82)

Impact from Transaction cost on purchases of

Financial Assets 64,081.36

64,081.36

Fair Value Changes on Financial Assets 272,500.00

272,500.00

337,291.60

336,581.36


NOTES

GROUP

31.03.2012

36 EXPLANATION OF TRANSITION TO SLFRS / LKAS (CONTD.)

Rs.

36.4 OTHER NON CURRENT FINANCIAL ASSETS

As per SLFRS / LKAS Long Term Investments reclassified to Other Non Current Financial Assets.

Debentures are disclosed under Other Current Financial Assets whereas previously disclosed

under Long Term Investments.

Reclassification from - Long Term Investments

2,700,000.00

Reclassification to - Other Non Current Financial Assets

2,500,000.00

Reclassification to - Other Current Financial Assets

200,000.00

This reclassification had no impact on the Statement of Comprehensive Income or Statement of

Changes in Equity.

36.5 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Under the previous SLAS, Non Current Investments were stated at cost or market value which ever

is lower. As per the SLFRS / LKAS these are considered as financial assets under the category of

Fair Value through profit or loss and subsequently measured at fair value.

These fair value adjustments were adjusted in the Statement of Comprehensive Income.

36.6 OTHER CURRENT FINANCIAL ASSETS

As per SLFRS / LKAS Short Term Investments reclassified to Other Current Financial Assets.

Savings Accounts are disclosed under Cash and Cash Equivalents whereas previously disclosed

under Short Term Investments.

Reclassification from - Short Term Investments

43,526,447.28

Reclassification to - Other Current Financial Assets

44,408,353.52

Reclassification to - Cash and Cash Equivalents

881,906.24

This reclassification had no impact on the Statement of Comprehensive Income or Statement of

Changes in Equity.


67

FINANCIAL HIGHLIGHTS

Group Company

2013 2012 2013 2012 2011 2010 2009

Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Revenue 339,100,825 - - - - - -

Net Profit/Loss before tax 62,717,018 3,537,346 (2,167,464) (558,982) 38,605,342 (85,650) (110,385)

Profit/ Loss for the year 47,771,274 3,516,451 (2,493,968) (558,982) 38,507,468 (85,650) (110,385)

Property, Plant & Equipment 16,143,937 6,977,659 1,168,233 - - - -

Current Assets 290,068,224 176,941,249 20,689,246 2,026,499 - 50,267,518 50,316,167

Total Assets 332,054,172 208,088,631 125,446,369 87,226,499 - 50,342,628 50,391,277

Shareholder’s Funds 154,016,781 1,250,266 124,975,817 (950,565) (391,583) (38,899,051) (38,813,402)

Current Liabilities 101,897,659 140,098,150 380,738 88,177,064 391,583 89,241,679 89,204,679

Earnings Per Share (Rs.) 4.20 0.31 (0.42) (0.11) 7.93 (0.02) (0.02)

Net Assets Per Share (Rs.) 23.78 0.26 19.30 (0.20) (0.08) (8.01) (7.99)


68

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