Overall Group Performance
During the financial year 2019/20, the Group recorded a revenue of Rs. 54 bn, with a decrease of 1.5% over the previous financial year. Profit before tax for the year stood at 2.5 bn witnessing the Profit after Tax at Rs. 1.3 bn. Numerous factors contributed to the drop in the Group performance including the COVID pandemic.
Revenue Analysis
The Group recorded a decline in its revenue compared to the prior year while sectors indicating mixed results with the influence of the macro environment.
Retail Sector
The Retail sector continued its legacy of contributing more than 50% to the Group revenue, while recording Rs. 27.8 bn for the year under review. Modern trade growth has continued throughout the year, emphasising convenience, range and availability for the lifestyle in the urban areas, while slowly penetrating to suburban areas with the intention of conversion from general trade. Increased competition in the market and the unforeseen negative activities such as terror attacks and the pandemic has caused a sluggish movement in the revenue for the year 2019/20. Premeditated geographical expansion is in the pipeline and it is noteworthy that the sector was successful in opening two large scale outlets during the year amounting to 28 outlets.
Rubber Sector
The Rubber sector of the Group recorded a revenue of Rs. 5.3 bn showcasing promising growth for the Group in the near future. Richard Pieris Natural Foams increased its contribution to the sector revenue recording a revenue of Rs. 3.9 bn for the period under review. Incline in the volumes along with the rupee depreciation induced the revenue during the year 2019/20. The sector continued to penetrate various regions during the financial year and tactical plans are being formulated for aggressive growth, subject to global recessionary symptoms due to the pandemic. Plans are underway for an additional production plant for Richard Pieris Natural Foams to cater to the unwavering demand from our customers around the globe.
Tyre Sector
Revenue of the Tyre sector witnessed a growth of 10.4% during the financial year 2019/20 compared to the corresponding period. The Sector reached Rs. 3 bn while continuing to contribute more than 5% to the Group revenue. The re-trading segment continued to record a dominant position compared to the trading segment, while managing the rising competition posed by imported radial tyres. Trading segment vigorously made efforts to cut across competition through wide coverage and product promotions for its brands such as Nexen and Birla. Investment in the solid tyre business is slowly paving the way for a brighter future for the sector.
Plastics, Furniture and Electronics Sector
The sector recorded a decline of 5.44% while contributing 11.4% to the Group revenue. The sector recorded a revenue of Rs. 6.1 bn while witnessing an arrayed geographical presence in the island with a strong network of distributors and dealers. It is noteworthy that the focus in electronic products has shown a positive response from the market with a steady growth in the sales. The Sector’s main products such as Mattresses, PVC and Water Tanks demonstrated volume growth during the period under review. Product developments are in place to further increase its offer to its customer base around the island.
Plantation Sector
The Plantation sector recorded a revenue of Rs. 7.3 bn while witnessing major challenges in the operating environment. The sector continued to be the second highest revenue contributor to the Group with 13.6%. Tea volumes from the sector witnessed stable volume of 12 mn kg’s, whereas rubber volumes were less than the corresponding period to the year under review. The golden crop of the sector, Palm Oil, recorded an increase of 9.5% in revenue while increasing in its volume to 22.8 mn kg’s.
Financial Services Sector
The sector recorded a revenue of Rs. 4.5 bn during the year under review, contributing 8.4% to the Group revenue. The Finance Company and the Insurance company being the key entities under the sector, witnessed a growth of 7.7% during the year under review. Both entities though young in the industry are poised to grow in the coming years with more geographical presence and varied product assortment.
Group Turnover Composition
No Data Found
Net Finance Cost vs. Interest Cover Ratio
No Data Found
Cost of Sales and Operating Expenses
Cost of Sale of the Group was reported to be Rs. 41.4 bn with a drop of 0.3% during the period under review, absorbing 76% of the Group revenue. As a percentage of the revenue, the Cost of Sales have increased by 0.9% impacting the Group Gross Profit for the year under review, mostly influenced by the increase in the cost of materials, due to the impact of fluctuation in the exchange rate.
The key costs such as administration and distribution costs, along with the cost of sales, constituted 94.5% of the Group’s revenue during the financial year under review. Administration costs of the Group exhibited a decrease of 6.8% from Rs. 6.6 bn to Rs. 6.2 bn for the period under review. Meanwhile, the Group’s distribution costs, which include advertising and promotional costs as well as sales related expenses, commissions paid on sales volumes, increased by 8.8% to reach Rs. 3.6 bn during the year, accounting for 6.7% of the total revenue.
Profit from Operations
The Group recorded a Gross Profit of Rs. 12.8 bn for the financial year 2019/20, which is a decline of 5.2% from the corresponding previous year. Profit from operations for the Group witnessed a decrease of 11.74% from Rs. 4.8 bn to Rs. 4.3 bn, while the other operating income stood at Rs. 1.3 bn for the period.
Retail Sector
The Retail sector of the Group recorded an operating profit of Rs. 2.3 bn for the year under review with a 53.8% contribution to the Group operating profits. It is noteworthy that the sector operating profits have increased by 22% compared to the previous financial year, while simultaneously increasing the Group contribution from 38.9% in the corresponding preceding year. Initiatives taken to mitigate costs at outlet levels have paved the way for the sector to increase its operating profit. Continuous efforts made in Solar, and the store designs which usually enable natural light to spill through the building, eliminating the need for artificial lighting and have contributed immensely towards energy saving. Initiatives are under way to increase the margins through numerous ways in addition to the geographical expansions of the outlets.
Rubber Sector
Being the second highest contributor with 28.8% to the Group operating profit, the sector recorded Rs. 1.2 bn during the period under review. Operating profit margin has increased from 20.9% to 22.6% during the financial period. Continuous improvement in the cost structure is underway, as it is vital to manage and penetrate new markets whilst enjoying a growth in the margins. With the steady widening in the customer base around the globe, the sector is poised for growth through product development, quality and service.
Tyre Sector
The Operating profit margin for the sector witnessed a growth from 7.3% to 11.3% during the year under review by recording an operating profit of Rs. 551 mn. With the increase in revenue, improvement in the trading segment was also witnessed during the period. Stringent cost measures supported the sector to improve its operating profit margin in addition to its product mix.
Plastics, Furniture and Electronics Sector
The Plastics, Electronic and Furniture sector reported an operating profit of Rs. 719 mn with 86% growth from the corresponding previous year. Operating margin of the sector improved from 5.1% to 10%. The sector achieved this tremendous growth through a number of initiatives including the product mix and cost measures, whilst enjoying geographical penetration. Water Tank and Mattress operations were key in contributing to the operating profits and the sector has taken necessary steps to widen its product portfolio to cater to its customer base.
Plantation Sector
The sector performance declined sharply to record a loss of 84 mn for the period under review mainly because of factors emanating externally such as weather, sluggish global prices and escalation in cost of production led by rise in cost of labour which is not coupled with the productivity. Necessary measures are underway to manage the costs while improving productivity for the betterment of the sector
Financial Services Sector
The reporting period has been highly challenging for the sector with an operating loss of Rs. 531.8 mn for the period under review.
Working Capital Investment vs. Current Ratio
No Data Found
Segmental Assets
No Data Found
Group Financial Position and Liquidity
Non-Current Assets
Non-current assets of the Group representing 46% of the total assets, increased to Rs. 31.01 bn from 26.8 bn during the period under review. The property, plant and equipment category, which accounts for 30% of the total assets, reduced to 66% of the Non current assets from 75% during the financial period.
Working Capital
Current assets and liabilities witnessed a drop of 4% and 3% during the period under review, respectively. Effective terms and timely sourcing of inventory strengthened the Working Capital where the Group Stock holding levels reached Rs. 8 bn establishing a 2.6% decline. Strong collections and effective trade contracts have driven the trade receivables of the Group to be at Rs. 8.2 bn, which is a 4.6% decline from the corresponding previous financial year. The total current assets of the Group accounted for 54% of its total assets while total current liabilities accounted for 71% of the same. The Group’s current ratio was reported to be 1.03 and the quick ratio was reported at 0.8 compared to 1.04 and 0.82 times respectively in the corresponding period.
Capital Structure
Equity
The profit attributable to the shareholders for the year was recorded at Rs. 1.1 bn, which in turn induced the reserves to reach Rs. 12.6 bn for the Group.
Borrowing
In terms of borrowings, the net debt including cash balance was
stationed at Rs. 17bn compared to Rs. 19.8 bn in the previous
financial year, a decrease of Rs. 2.8 bn during the year.
Market Capitalization
The market capitalization of the Company was Rs. 15.9 bn at the closing price of the share, down from Rs. 18.7 bn recorded in the previous year. During the year under review, the highest traded price of the Group’s share was Rs. 12.50, while the lowest price was Rs. 7.60. During the period under review 35,606,417 shares were traded and the share price closed for the year at Rs. 7.80.