No. 04, Leyden Bastian Road, Colombo 01. 17-Jan-2018 STATEMENT OF PROFIT OR LOSS For the quarter ended For the nine months ended 31st December 31st December Note Change Change 2017 2016 % 2017 2016 % Revenue 660,727 586,960 13 1,984,097 1,649,047 20 Cost of Sales (640,376) (535,869) 20 (1,881,169) (1,550,770) 21 Gross Profit 20,351 51,091 (60) 102,928 98,277 5 Other Operating Income 13,617 8,039 69 41,305 23,790 74 Administrative Expenses (15,353) (14,578) 5 (46,736) (45,430) 3 Management Fees (6,937) (9,175) (24) (24,894) (20,056) 24 Results From Operating Activities 11,678 35,377 (67) 72,603 56,581 28 Finance Cost (531) (373) 42 (1,736) (3,087) (44) Finance Income 1,864 1,130 65 4,982 2,637 89 Net Finance (Cost) / Income 1,333 757 76 3,246 (450) 822 Profit Before Tax 13,011 36,134 (64) 75,849 56,131 35 Tax Expense 5 (3,663) (10,245) (64) (21,300) (16,175) 32 Profit for the period 9,348 25,889 (64) 54,549 39,956 37 Rs. Rs. Rs. Rs. Earnings Per Share - Basic 0.31 0.86 1.82 1.33 Dividend Per Share - - 1.70 0.50 Figures in brackets indicate deductions. Tea Smallholder Factories PLC Interim Financial Statements 1
No. 04, Leyden Bastian Road, Colombo 01. 17-Jan-2018 STATEMENT OF COMPREHENSIVE INCOME Note For the quarter ended For the nine months ended 31st December 31st December Change Change 2017 2016 % 2017 2016 % Profit for the Period 9,348 25,889 (64) 54,549 39,956 37 Other Comprehensive Income Other comprehensive Income not to be reclassified to profit or loss in subsequent periods - - - - - - Tax on Other Comprehensive Income - - - - - - Total Other Comprehensive Income for the year, net of Tax - - - - - - Total Comprehensive Income for the Period, net of Tax 9,348 25,889 (64) 54,549 39,956 37 Figures in brackets indicate deductions. Tea Smallholder Factories PLC Interim Financial Statements 2
No. 04, Leyden Bastian Road, Colombo 01. 17-Jan-2018 STATEMENT OF FINANCIAL POSITION As at As at 31st December 2017 2016 31st March 2017 ASSETS Non-Current Assets Property, Plant and Equipment 766,361 735,546 777,492 Lease Rentals Paid in Advance 2,591 2,677 2,655 Investment Property 176,263 153,000 176,263 Intangible Assets 7,303 7,303 7,303 Other Non-Current Financial Assets 2,242 1,014 942 Other Non-Current Assets 596 138 122 955,356 899,678 964,777 Current Assets Inventories 360,200 334,963 216,443 Trade and Other Receivables 47,324 27,933 76,200 Other Current Assets 10,646 5,872 4,182 Short Term Investments 8,275 35,962 142,355 Cash in Hand and at Bank 33,247 3,008 1,117 459,692 407,738 440,297 Total Assets 1,415,048 1,307,416 1,405,074 EQUITY AND LIABILITIES Capital and Reserves Stated Capital 150,000 150,000 150,000 Revaluation Reserve 403,443 359,597 403,443 Revenue Reserves 472,515 426,173 468,966 Total Equity 1,025,958 935,770 1,022,409 Non-Current Liabilities Deferred Tax Liabilities 175,511 160,224 172,412 Retirement Benefit Obligations 42,857 41,366 42,255 Deferred Grants and Subsidies 643 819 773 219,011 202,409 215,440 Current Liabilities Trade and Other Payables 148,940 161,438 150,977 Amounts due to Related Parties 2,487 2,350 3,079 Bank Overdraft 456 - - Income Tax Payable 15,650 2,930 8,747 Other Current Liabilities 2,546 2,519 4,422 170,079 169,237 167,225 Total Equity and Liabilities 1,415,048 1,307,416 1,405,074 Rs. Rs. Rs. Net Assets Per Share 34.20 31.19 34.08 I certify that the financial statements comply with the requirements of the Companies Act No.7 of 2007. P. A. P. Perera Sector Financial Controller The Board of Directors is responsible for the preparation and presentation of these financial statements. S. C. Ratnayake J. G. A. Cooray Director Director Tea Smallholder Factories PLC Interim Financial Statements 3
CASH FLOW STATEMENT For the nine months ended 31st December 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Profit Before Tax 75,849 56,131 ADJUSTMENTS FOR : Finance Income (4,982) (2,637) Depreciation and Amortisation 45,117 45,198 Gratuity Charge and Related Cost 5,114 8,343 Amortisation of Grants (130) (140) Finance Cost 1,736 3,087 Profit on disposal of Fixed Assets (6,709) (343) Operating Profit before Working Capital changes 115,995 109,639 (Increase) / Decrease in Inventories (143,757) (127,614) (Increase) / Decrease in Trade and Other Receivables 27,576 28,904 (Increase) / Decrease in Other Current Assets (6,465) (1,122) (Increase) / Decrease in Other Non-Current Assets (474) 57 Increase / (Decrease) in Trade and Other Payables (2,629) 39,044 Increase / (Decrease) in Other Current Liabilities (1,877) (1,392) Cash Generated from Operations (11,631) 47,516 Finance Income Received 4,982 2,637 Finance Cost Paid (1,736) (3,087) Gratuity Paid (4,512) (4,508) Tax Paid (11,298) - Net Cash Flow from Operating Activities (24,195) 42,558 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property, Plant and Equipment (34,497) (9,177) Proceeds from Sale of Property, Plant and Equipment 7,285 345 Net Cash Flow from / (used) in Investing Activities (27,212) (8,832) CASH FLOWS FROM FINANCING ACTIVITIES Dividend Paid (51,000) (15,000) Net Cash from / (used) in Financing Activities (51,000) (15,000) Net Increase / (Decrease) in Cash and Cash Equivalents (102,406) 18,726 Cash and Cash Equivalents at the beginning Note A 143,472 20,244 Cash and Cash Equivalents at the end Note B 41,066 38,970 NOTES A. Cash and Cash Equivalents at the beginning Cash and Bank Balances 1,117 367 Short Term Investments 142,355 20,104 Bank Overdraft - (227) 143,472 20,244 B. Cash and Cash Equivalents at the end Cash & Bank Balances 33,247 3,008 Short Term Investments 8,275 35,962 Bank Overdraft (456) - 41,066 38,970 (0) 0.17 Stated Revaluation General Accumulated Total Capital Reserve Reserve Profit As at 1st April 2016 150,000 359,597 255,000 146,217 910,814 Profit for the period - - - 39,956 39,956 Other comprehensive income - - - - - Total comprehensive income - - - 39,956 39,956 First and final dividend paid - 2015 / 2016 - - - (15,000) (15,000) As at 31st December 2016 150,000 359,597 255,000 171,173 935,770 As at 1st April 2017 150,000 403,443 255,000 213,966 1,022,409 Profit for the period - - - 54,549 54,549 Other comprehensive income - - - Total comprehensive income - - - 54,549 54,549 First and final dividend paid - 2016 / 2017 - - - (51,000) (51,000) As at 31st December 2017 150,000 403,443 255,000 217,515 1,025,958 Figures in brackets indicate deductions. STATEMENT OF CHANGES IN EQUITY Tea Smallholder Factories PLC Interim Financial Statements 4
OPERATING SEGMENT INFORMATION For the nine months ended 31st December Geographical Segment Galle Matara Ratnapura N'Eliya Total 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Segment Revenue Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Sale of Produce 1,011,395 863,537 85,981 78,724 527,263 408,493 359,459 298,293 1,984,097 1,649,047 1,984,097 1,649,047 Segment Results Segment Revenue 1,011,395 863,537 85,981 78,724 527,263 408,493 359,459 298,293 1,984,097 1,649,047 Revenue Expenditure (922,379) (771,049) (86,548) (84,096) (506,654) (386,286) (317,853) (259,117) (1,833,435) (1,500,548) Depreciation / Amortisation (22,835) (22,152) (2,423) (2,352) (11,959) (11,194) (6,299) (7,744) (43,516) (43,442) Gratuity Charge and Related Costs (1,670) (2,563) (982) (1,055) (1,122) (2,262) (445) (900) (4,218) (6,780) Segment Gross Profit / (Loss) 64,511 67,773 (3,972) (8,779) 7,528 8,751 34,862 30,532 102,928 98,277 Other Operating Income 41,305 23,790 Finance Income 4,982 2,637 Unallocated Expenses (48,472) (48,517) Management Fees (24,894) (20,056) Profit Before Tax 75,849 56,131 Segment Assets Allocated Assets Non - Current Assets Cost 499,650 470,645 74,652 60,712 272,389 244,350 127,459 132,973 974,150 908,680 Depreciation / Amortisation (100,189) (82,465) (14,702) (13,555) (67,158) (50,271) (33,748) (27,686) (215,797) (173,977) Current Assets 221,141 40,901 9,720 5,234 123,253 12,188 66,699 5,444 420,813 63,767 620,602 429,081 69,670 52,391 328,484 206,267 160,410 110,731 1,179,166 798,470 Unallocated Assets Non - Current Assets Cost 217,523 186,300 Depreciation / Amortisation (20,520) (21,325) Current Assets 38,879 343,971 Total Assets 1,415,048 1,307,416 Segment Liabilities Allocated Liabilities Non Current Liabilities 12,221 11,857 4,262 4,956 9,448 8,886 4,427 4,618 30,357 30,317 Current Liabilities 72,114 24,448 4,702 3,430 26,243 (1,429) 26,124 5,648 129,183 32,097 84,335 36,305 8,964 8,386 35,691 7,457 30,551 10,266 159,540 62,414 Unallocated Liabilities Non Current Liabilities 188,654 172,092 Current Liabilities 40,896 137,140 229,550 309,233 Total Liabilities 389,090 371,646 - Segment Capital Expenditure Allocated Capital Expenditure 20,955 4,116 62-1,998 5,028 2,223-25,237 9,144 Unallocated Capital Expenditure 9,260 532 34,497 9,676 Figures in brackets indicate deductions. 5
OPERATING SEGMENT INFORMATION For the quarter ended 31st December Geographical Segment Galle Matara Ratnapura N'Eliya Total 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Segment Revenue Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Sale of Produce 320,423 300,597 28,074 27,173 194,258 146,881 117,972 112,310 660,727 586,960 660,727 586,960 Segment Results Segment Revenue 320,423 300,597 28,074 27,173 194,258 146,880 117,972 112,310 660,727 586,960 Revenue Expenditure (299,217) (261,956) (29,353) (28,543) (190,107) (135,888) (104,916) (93,495) (623,593) (519,882) Depreciation / Amortisation (7,687) (7,403) (811) (784) (3,995) (3,775) (2,103) (2,573) (14,596) (14,535) Gratuity Charge and Related Costs (633) (409) (823) (252) (582) (491) (149) (300) (2,187) (1,452) Segment Gross Profit / (Loss) 12,886 30,829 (2,913) (2,406) (426) 6,726 10,804 15,942 20,351 51,091 Other Operating Income 13,617 8,039 Finance Income 1,864 1,130 Unallocated Expenses (15,884) (14,951) Management Fees (6,937) (9,175) Profit Before Tax 13,011 36,134 Segment Capital Expenditure Allocated Capital Expenditure 9,751 2,278 - - 1,647 230 - - 11,398 2,508 Unallocated Capital Expenditure - 371 11,398 2,879 Figures in brackets indicate deductions. 6
NOTES TO THE INTERIM FINANCIAL STATEMENTS 1 Corporate Information Tea Smallholder Factories PLC is a public limited company incorporated and domiciled in Sri Lanka listed on the Colombo Stock Exchange. 2 Approval of Financial Statements The interim condensed financial statements of the company for the nine months ended 31st December 2017 were authorised for issue by the Board of Directors on 17th January 2018. 3 Basis of preparation The interim condensed financial statements of the company have been prepared in compliance with Sri Lanka Accounting Standard LKAS 34 - Interim Financial Reporting. These interim condensed financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2017. The interim condensed financial statements are presented in Sri Lankan Rupee and all values are rounded to the nearest thousand except when otherwise indicated. 4 Operating Segments An operating segment is a component of the company that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the company s other components. The segments are determined based on the company's geographical spread of operations. All operating segments operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the company s head office), head office expenses, and income tax liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment. 5 Tax Expenses For the nine months ended 31st December 2017 2016 Current Income Tax Current Tax Charge 18,201 13,112 18,201 13,112 Deferred Income Tax Relating to origination and reversal of temporary differences 3,099 3,064 3,099 3,064 Total Tax Expense 21,300 16,175 7
6 Related Party Transactions For the nine months ended 31st December 2017 2016 Transactions with Related Parties Parent company (Receiving) / rendering of services (1,298) (1,234) Companies under common control of the parent company Interest received / (interest paid) - - (Purchases) / sales of goods (8) (34) (Receiving) / rendering of services (39,326) (32,419) (Purchases) / sale of property, plant and equipment - - Rent (taken) / given (1,689) (1,656) (Guarantees taken) / guarantees given - - Companies which have significant influence (Receiving) / rendering of services (840) (809) Interest received / (interest paid) - - 6.1 Transactions with Key Management Personnel of the Company The company has paid Rs. 2.98 million to their Directors as fees during the period ended 31st December 2017 (End December 2016 - Rs. 2.7 million). Other than that there are no transactions, arrangements and agreements with close family members of Key Management Personnel or with companies controlled / jointly controlled / significantly influenced by Key Management Personnel and their close family members. 6.2 6.3 Terms and Conditions of Transactions with Related Parties Transaction with related parties are carried out in the ordinary course of business. Outstanding current account balances at the period end are unsecured, interest free and settlement occurs in cash. Management Fee The management fee to managing agents, John Keells Teas (Private) Limited was paid at contractual price. 7 Share Information 7.1 Public share holdings As at 31st December 2017 No. of Share No. of Share Holders % Holdings Holders % Holdings The shares held by the Public 1,158 33.05 1,161 33.05 7.2 The number of shares held by the Board of Directors and the Chief Executive Officer are as follows: Names As at 31st December 2017 As at 30th September 2017 Mr. S. C. Ratnayake (Chairman) Nil Nil Mr. A. D. Gunewardene (Resigned with effect from 31st December 2017) Nil Nil Mr. J. R. F. Peiris (Resigned with effect from 31st December 2017) Nil Nil Mr. E. H. Wijenaike 10,000 10,000 Mr. R. E. Rambukwella Nil Nil Mr. A. S. Jayatilleke Nil Nil Mr. J. S. Ratwatte (Resigned with effect from 31st December 2017) 2,000 2,000 Mr. M. H. De Silva Nil Nil Mr. K. N. J. Balendra (Appointed with effect from 1st January 2018) Nil Nil Mr. J. G. A. Cooray (Appointed with effect from 1st January 2018) Nil Nil Mr. S. K. L. Obeyesekere (Appointed with effect from 1st January 2018) Nil Nil Mr. V. A. A. Perera (CEO) Nil Nil As at 30th September 2017 8
7.3 Twenty largest shareholders of the company are as follows: As at 31st December 2017 As at 30th September 2017 Seq.No. Name No. of Shares % Holdings No. of Shares % Holdings 1 John Keells Holdings PLC 11,286,000 37.62 11,286,000 37.62 2 Akbar Brothers Limited 7,318,000 24.39 7,318,000 24.39 3 Central Finance Company PLC 6,854,814 22.85 6,854,814 22.85 4 CF Growth Fund Limited 1,933,678 6.45 1,933,678 6.45 5 Mr. K. D. S. R. Upasena 469,120 1.56 469,120 1.56 6 Anverally & Sons (Private) Limited 392,300 1.31 392,300 1.31 7 Seylan Bank Limited / Govindasamy Ramanan 103,655 0.35 103,677 0.35 8 Mr. D. J. De Silva Wijeyeratne 98,400 0.33 98,400 0.33 9 Mr. N. D. Kurukulasuriya 62,400 0.21 62,400 0.21 10 Dr. D. S. A. Samaraweera 53,000 0.18 53,000 0.18 11 Mrs. R. Z. Wickramanayake 44,963 0.15 44,963 0.15 12 Dr. N. I. Wickramanayake 43,691 0.15 43,691 0.15 13 Mr. C. S. N. Silvapulle 35,776 0.12 38,911 0.13 14 Mr. C. N. Lawrence 24,000 0.08 24,000 0.08 15 Mrs. Jacintha Aloysius 20,000 0.07 20,000 0.07 16 Mrs. S. K. Leelananda 20,000 0.07 20,000 0.07 17 Mr. H. A. S. Madanayake 20,000 0.07 20,000 0.07 18 Mrs. Jeniffer Aloysius 20,000 0.07 20,000 0.07 19 Mr. N. J. H. M. Cooray 20,000 0.07 20,000 0.07 20 Mr. E. Gunatunga 20,000 0.07 20,000 0.07 Total 28,839,797 96.17 28,842,954 96.18 7.4 Stated Capital is represented by number of shares in issue as given below: As at 31st December 2017 As at 30th September 2017 Ordinary Shares (in thousands) 30,000 30,000 7.5 Net Assets per share Net assets per share have been calculated, for all periods, based on the number of shares in issue as at 31st December 2017. 7.6 Market Price per share For the quarter ended 31st December 2017 2016 Highest 46.00 27.30 Lowest 34.00 22.00 Last Traded 40.00 24.00 8 Dividend paid A first and final dividend of Rs. 1.70 per share for the financial year ended 31st March 2017 was paid on 14th June 2017. 9 Capital Commitments The value of contractual commitments for acquisition of property, plant and equipment as at 31st December 2017 is Rs. 11.54 million. 10 Contingencies There is no contingent liability of the company as at 31st December 2017. 11 Events After the Reporting Period There have been no events subsequent to the reporting date, which require disclosure in the interim condensed financial statements. 12 Values All values included in these financial statements are in Rupees '000s, unless otherwise stated. Rs. Rs. 9