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SATHOSA MOTORS PLC ANNUAL REPORT 2020/21
Transcript of SATHOSA MOTORS PLC ANNUAL REPORT 2020/21
SATHOSA MOTORS PLCANNUAL REPORT
2020/21
SATH
OS
A M
OTO
RS
PLC
| AN
NU
AL R
EPO
RT 2020/21
SATHOSA MOTORS PLCANNUAL REPORT
2020/21
SATH
OS
A M
OTO
RS
PLC
| AN
NU
AL R
EPO
RT 2020/21
Sathosa Motors PLC Annual Report 2020/211
RealignedNo matter the status, the career or the need, every successful journey is a confident one when you are firmly in the driver’s seat. While the year under review did not bring about the results we anticipated due to the pandemic, we chose to keep our hands firmly on the wheel in order to convert challenges into unlimited possibility. This year we mark as one of adaptability, resilience and being more outgoing in our brand presence. And as we venture into diversifying our offerings, we hope to be steered in the right direction realigned towards comprehensiveness and in complete control of our growth.
Sathosa Motors PLC Annual Report 2020/212
Contents
overview
About this Integrated Report 3
About Us 4
Group Profile & Group Structure 4
Our Vision, Our Mission & Key Corporate Values 5
Company History 6
Financial Overview 7
Management Reviews
Chairman’s Message 10
Management Review 12
Board of Directors 16
Senior Management 20
Business Model 24
Corporate Governance 26
Enterprise Risk Management 45
Operating Landscape 59
Financial Capital 62
Human Capital 67
Intellectual Capital 71
Manufactured Capital 74
Natural Capital 76
Social and Relationship Capital 80
Financial statements
Audit Committee Report 91
Remuneration Committee Report 93
Related Party Transactions Review Committee Report 94
Strategic Planning Committee Report 96
Annual Report of the Board of Directors on the Affairs
of the Company 97
The Statement of Directors Responsibility 102
Directors Statement on Internal Control Introduction 103
Financial Calendar 104
Independent Auditor’s Report 105
Statement of Profit or Loss and Other
Comprehensive Income 110
Statement of Financial Position 111
Statement of Changes in Equity 112
Statement of Cash Flows 113
Notes to the Financial Statements 114
supplementary Information
SML Branch Network / Locations 178
Decade at a Glance 179
Abbreviations 180
GRI Content Index 181
Notice of Annual General Meeting 185
Form of Proxy 187
Corporate Information Inner Back Cover
Sathosa Motors PLC Annual Report 2020/213
ABout thIs IntegRAted RepoRt
About This Report
It is a pleasure to present Sathosa Motors
PLC’s (referred as SML or SATHOSA
Motors) third integrated Annual Report.
This report provides a comprehensive
understanding of Sathosa Motors PLC
referred to as the Company as well as
its subsidiary, Access Motors (Private)
Limited collectively referred to as the
Group. This Report will also share
Sathosa Motors’ financial and operational
performance for the year ending 31
March, 2021 and our collective strategies
to overcome the year’s challenges.
Purpose
We believe this report would provide our
stakeholders an overall understanding of
the challenges, strategies, performance
and direction of the Company within the
external environment, and the Company’s
strategic direction towards achieving
medium and long term value.
Scope and Boundaries
This Report comprise of two main
sections. From pages 4 to 103, it presents
the Management Review and Discussion,
while from pages 104 to 179, it presents
the financial disclosure information.
It will outline the Company’s human
and intellectual capital initiatives
during the pandemic, as well as our
commitment towards the environment
and social capital. We hope this provides
stakeholders an accurate assessment of
SML’s value creation.
Board Responsibility
This Integrated Annual Report was
developed under the guidance and
supervision of the Board and the Senior
Management of Company. This Report is
believed to contain a fair and objective
representation of the integrated
performance of the Company, its impacts
and all other material matters.
Forward Looking Statements
This Annual Report contains predicative
forward looking statements that
may alter, subject to numerous and
unforeseen external and internal factors.
There are risks and conditions that are
solely out of SML’s control, and therefore
the Board cannot be held responsible
for any forward looking statements
which are not assurances of future
performance.
Compliance
In keeping with integrated reporting
standards, this report has been presented
in accordance with GRI Standards:
Comprehensive option. The Board and the
Management have strived to apply the
recommendations of the GRI framework in
this report and conform to the guidelines
and concepts of Global Reporting Initiative
(GRI) Sustainability Reporting Standards,
and the Code of Best Practices on
Corporate Governance issued by CA Sri
Lanka.
This Integrated Annual Report is also
developed in compliance with the
Companies Act No. 07 of 2007 and
guidelines issued by the Securities and
Exchange Commission of Sri Lanka,
the International Integrated Reporting
Framework (IIRC) and the listing rules
of the Colombo Stock Exchange. SML’s
annual financial statements were
prepared in accordance with Sri Lanka
Accounting Standards (LKASs /SLFRSs)
guidelines laid down by the Institute of
Charted Accountants of Sri Lanka.
Sathosa Motors PLC Annual Report 2020/214
ABout us
estABLIshed In 1962, sAthosA MotoRs pLC hAs gRoWn to BeCoMe sRI LAnKA’s tRusted LeAdeR In the AutoMotIVe IndustRY. ouR Long-RunnIng pARtneRshIp WIth IsuZu MotoRs Ltd, hAs ALLoWed us to suppLY the doMestIC MARKet WIth the hIghest QuALItY CoMMeRCIAL VehICLes At the Most AFFoRdABLe pRICes. We ARe the nuMBeR one dIstRIButoR oF CoMMeRCIAL VehICLes In the CountRY, CAteRIng to A RAnge oF KeY eConoMIC seCtoRs.
Automobile Industry
01). sathosa Motors pLC
Authorised distributor for ISUZU in Sri Lanka
Sathosa Motors PLC (SML) is the franchise holder for Isuzu vehicles
and spare parts manufactured by Messrs Isuzu Motors Limited.
The key business lines of SML are sales of new vehicles, sales of
spare parts, workshop services and marine engine sales. Over the
decades, SML has created a value proposition to its loyal customer
base by providing unmatched after sales care service. SML caters
to the country’s need for reliable, low maintenance transportation
solutions, especially to the business community. SML will further
expand its position as a trusted leader in the automotive industry.
Staff Composition
Staff category Staff as at 31 March 2021
Managerial 15
Operational 24
Clerical and supportive 142
Total 181
gRoup pRoFILe & gRoup stRuCtuRe
Having been an active participant
in the country’s growth story, our
company is gearing itself to meet the
needs of an economy that is now on
an accelerated growth trajectory. Our
strong relationships with customers in
high-growth sectors such as agriculture,
construction, tourism, transport, fishery
and logistics have us going from strength
to strength.
As a publicly listed company, we are
dedicated to the highest standards of
integrity, transparency, responsibility and
ethical conduct. We believe in cultivating
a dynamic and productive organisational
culture to achieve the highest levels
of customer satisfaction while also
supporting wider economic activity and
deriving maximum benefits to all our
valued stakeholders.
Our dealership network comprises 120
dealers across the island, providing
total coverage in terms of spare parts
availability and comprehensive
after-sales services in all provinces.
02). Access Motors (pvt) Ltd – subsidiary Company
Authorised distributor for Jaguar and Land Rover in Sri Lanka
Established in 2012, Access Motors (Private) Limited is the sole
authorised distributor of Jaguar and Land Rover vehicles and
spare parts in Sri Lanka and operates in a highly competitive
premium automobile segment.
Staff Composition
Staff category Staff as at 31 March 2021
Managerial 14
Operational 56
Clerical and supportive 23
Total 93
Sathosa Motors PLC Annual Report 2020/215
ouR MIssIon
KeY CoRpoRAte VALues
To achieve excellence in customer satisfaction by cultivating a dynamic and productive organisational culture with highly motivated staff to provide the best quality vehicles at competitive and affordable prices, thereby generating the maximum benefit to all our stakeholders.
We value and believe in maintaining the highest standards of integrity, honesty, transparency, responsibility and ethical behaviour in all our dealings and transactions.
We respect the dignity of people
We are passionate about delivering the highest levels of service quality to all our internal and external stakeholders.
We encourage and respect diversity among our team in order to create an inclusive organisational culture.
We believe in leading by example.
We firmly believe in taking all prudent and responsible measures to strengthen our Company’s financial foundation.
We believe in the importance of ensuring excellence in all our processes and systems as a means of maintaining a strong niche position in the Sri Lankan market from expanding our dealership network, to introducing innovative product ranges to the market, to market development, to leveraging training as an opportunity to enhance expertise and productivity.
We are committed at all times to strengthening the corporate image of Sathosa Motors by communicating and delivering on our core values.
ouR VIsIon to be the trusted leader in the sri Lankan Automobile Industry by ensuring that we deliver only the best quality to our valued customers.
gRoup pRoFILe & gRoup stRuCtuRe
Sathosa Motors PLC Annual Report 2020/216
CoMpAnY hIstoRY
Although the demand for Japanese vehicles, especially for commercial vehicles, was
not encouraging in the 1960’s and early 1970’s, after the liberalisation of imports in
1978, Isuzu became the most sought after vehicle by fleet owners, government sector
etc.
Isuzu vehicles and spare parts imports and sales were handled by the New Vehicles &
Machinery Department of C.W.E. up to 1985.
The Ministry of Trade and Commerce under whose purview C.W.E. operated, decided to
convert the New Vehicles & Machinery Department as a fully owned subsidiary company
of the Co-operative Wholesale Establishment titled as “Sathosa Motors Limited” on
01 January 1985 to give more freedom to carry on business operations efficiently,
facing the competition from other vehicle dealerships.
Sathosa Motors Limited commenced operations with an issued capital of LKR
15,000,007 in 1985. In keeping with the government Policy, the Company was peoplised
on 26 August 1992 and 60% of issued capital was acquired by M/s C Itoch & Co., Limited
(ITOCHU Corporation) Tokyo, Japan, one of the largest trading organisations (Sogo-
Shosa) in Japan. Of the remainder, 10% was gifted to employees and 30% was issued to
the General Public.
In order to comply with new Companies Act No. 7 of 2007 the company was re-
registered as Sathosa Motors PLC.
Access Engineering PLC (AEL), a leading business enterprise in Sri Lanka, acquired the
shareholding held in Sathosa Motors PLC by ITOCHU Corporation of Japan in February
2012. Subsequently through the mandatory share purchase offer Access Engineering
increased their shareholding up to 84.42%.
The Company invested in 50% of the
equity of Access Motors (Private) Limited
on 01 April 2013.
Sathosa Motors PLC is the franchise
holder for Isuzu vehicles and spare parts
manufactured by M/s Isuzu Motors Ltd.
The Isuzu range of vehicles consists of
Double Cab Pickup Trucks, Light Duty
and Heavy Duty Commercial Vehicles,
Luxury Passenger Coaches and Special
Purpose Vehicles such as Fire Trucks,
Logging Trucks, Dump Trucks, Water &
Fuel Bowsers and various other types
of vehicles required in construction,
distribution of goods etc.
Our Head Office is situated at No.
25, Vauxhall Street, Colombo 02,
which comprises new vehicles sales
showrooms, spare parts department
and workshop for Isuzu vehicle repairs.
SML recently opened its latest branch in
Negombo. Accordingly, the SML branch
network has now grown to a total of 07
branches, signalling a steady continuation
of the operation expansion strategy.
the origin of sathosa Motors pLC goes back to 1962, when the Isuzu Agency was secured by the Co-operative Wholesale establishment (C.W.e) in 1962. the first agreement was signed between M/s Isuzu Motors Limited, tokyo, Japan (Manufacturer), M/s C Itoch & Co. Ltd., (distributor) and Co-operative Wholesale establishment (Franchise holder).
Sathosa Motors PLC Annual Report 2020/217
FInAnCIAL oVeRVIeW
Financial highlights 2020/21 2019/20 Change (%)
LKR'000 group Company group Company group Company
earnings highlights and RatiosRevenue 3,881,585 2,362,952 4,195,960 2,560,750 (7.5) (7.7)
Gross Profit 635,916 426,203 794,844 434,135 (20.0) (1.8)
EBITDA 289,803 153,401 366,688 152,559 (21.0) 0.6
EBIT 110,533 90,650 194,740 91,960 (43.2) (1.4)
Profit / (loss) before tax (29,867) 4,323 (142,105) (127,021) 79.0 103.4
Profit Attributable to Owners of the Company (3,766) 5,448 (81,028) (81,006) 95.4 106.7
Earnings/ (loss) per Share LKR (0.62) 0.90 (13.43) (13.43) 95.4 106.7
statement of Financial positionhighlights and Ratios
Total Assets 3,871,513 2,859,223 6,547,237 4,802,589 (40.9) (40.5)
Stated Capital 115,924 115,924 115,924 115,924 - -
Retained Earnings 1,535,197 1,491,177 1,537,360 1,484,569 (0.1) 0.4
Total Equity/Shareholders' funds 2,160,081 1,607,102 2,171,017 1,600,493 (0.5) 0.4
Total Liabilities 1,711,432 1,252,122 4,376,221 3,202,096 (60.9) (60.9)
Current Assets 1,737,090 882,710 4,921,562 3,324,209 (64.7) (73.4)
Current Liabilities 1,426,554 1,198,063 4,030,107 3,149,849 (64.6) (62.0)
Net Asset per Share LKR 273.65 266.36 274.01 265.26 (0.1) 0.4
Investor highlights and RatiosPrice Per Share LKR - 225.00 - 260.20 - (13.53)
Gross Profit Margin % 16.4 18.0 18.9 17.0 (13.5) 6.39
Net Profit Margin % (0.3) 0.2 (1.9) (3.2) (82.4) (107.29)
Return on Equity % (0.6) 0.3 (3.7) (5.1) (83.7) (106.70)
Debt/Total Assets % 44.2 43.8 66.8 66.7 (33.9) (34.32)
Gearing times 0.4 0.5 1.4 1.6 (73.6) (67.99)
Current Asset Ratio times 1.2 0.7 1.2 1.1 (0.3) (30.19)
Quick Asset Ratio times 0.6 0.3 0.6 0.6 3.9 (41.62)
Consolidated Revenue
2016/170
2,000
4,000
6,000
8,000
10,000
12,000LKR Mn
2017/18 2018/19 2019/20 2020/21
LKR Mn
total Assets
2016/170
1,000
2,000
3,000
4,000
6,000
5,000
7,000
8,000
2017/18 2018/19 2019/20 2020/21
LKR Mn
net Assets
2016/171,350
1,400
1,450
1,500
1,550
1,650
1,600
1,700
1,750
2017/18 2018/19 2019/20 2020/21
Sathosa Motors PLC Annual Report 2020/218
ReALIgned FoR Long teRM gRoWth
Sathosa Motors PLC Annual Report 2020/219
Sathosa Motors PLC Annual Report 2020/2110
ChAIRMAn’s MessAge
The 2020/21 financial year has been
a testing year for all industries across
the globe. The year saw governments
and industries grapple with the second
wave of the COVID-19 outbreak, which
paralysed many economies, including Sri
Lanka’s.
“sML Is WeLL AWARe oF the ChAngIng MARKet dYnAMICs And the need FoR sWIFt AdAptIon. We WILL ContInue to expLoRe neW oppoRtunItIes FoR gRoWth In LIne WIth the gRoup’s stRAtegIC gRoWth oBJeCtIVes. sML Is WeLL posItIoned to Meet these needs eVen In the FACe oF neW ChALLenges to CoMe.”
On the domestic front, the automobile
industry was one of the worst affected in
the 2020/21 financial year, as the state
imposed a vehicle import ban, coupled
with the economic slowdown caused
by the pandemic, had the industry in a
dilemma.
New motor vehicle registrations declined
drastically by 44.8% during the year
as a result of policy measures taken to
curtail non-essential imports, including
the importation of all motor vehicles for
personal use, and most of the vehicles
for commercial use. Notable reductions
in registrations were seen across all
Sathosa Motors PLC Annual Report 2020/2111
vehicle categories, with new registrations
of motor cars, goods transport vehicles
and dual purpose vehicles declining by
45%, 24%, and 29% respectively.
Despite the challenging external
environment, I am pleased to share that
the perseverance of the management
teams and the strategic re-alignment of
our core business segments have helped
Sathosa Motors PLC (SML) close the year
ended 31 March 2021, on a positive note.
Company Performance
The year presented multiple challenges
for Sathosa Motors PLC. On one hand, the
core business segments of commercial
vehicle sales were negatively impacted
by the vehicle import ban. On the other
hand, vehicle maintenance servicing
was impacted by the COVID-19 lockdown
which restricted customer movement.
However, with the ‘new normal’ setting
in place, investments in main repair
and maintenance workshop, and other
workshops and spare part outlets
in strategic locations and the go-to
market strategies in our lineup of ISUZU
commercial vehicles proved profitable for
the Group.
I am pleased to share that during the year,
the company recorded its highest spare
parts revenue, a historic high for the
spare parts business segment.
Notwithstanding the external macro-
economic environment and COVID-19
challenges, the Company also reported a
LKR 5 Mn profit during the financial year,
compared to the loss of LKR 81 Mn the
previous year.
Strategic Approach
Some of the challenges we’ve faced as a
group were new to us, which meant we
had to understand them and adapt swiftly.
The ability of a business to adapt and
change in a timely manner to the dynamic
and macro environment needs is critical
to its stability and sustenance. The
last two years have tested just that of
companies and industries.
SML is well aware of the changing
market dynamics and the need for swift
adaption. We will continue to explore new
opportunities for growth in line with the
Group’s strategic growth objectives. SML
is well positioned to meet these needs
even in the face of new challenges to
come.
Corporate Governance & Sustainability
Sathosa Motors PLC has in place, a
robust corporate governance framework
that ensures that our financial, social
and natural capital works well. At
each level of our management and
operations, the Company follows
governing principles designed to uphold
transparency and integrity at all levels.
The Company’s Board of Directors, the
Senior Management, and employees
follow a Code of Ethics that is aligned with
regulatory requirements.
As an industry leader in our segment,
we have continued to incorporate
systems, procedures and policies that are
environmentally friendly. Working in close
partnership with government authorities
and partners, we continuously seek better
ways to reduce any negative impacts on
the environment.
Looking Ahead
We believe that the worst has passed, and
the future holds greater opportunities
to expand and grow. The year’s
challenges have made us stronger and
our commitment much sturdier. Sathosa
Motors PLC is determined to seize these
opportunities in broadening our presence,
and diversifying our product and service
portfolio.
We look forward to venturing into new
businesses in line with the company’s
goals and exploring feasible investments
under the government’s vision towards
a booming domestic industrial and
manufacturing sector.
We are confident that SML’s brand equity,
customer confidence and service quality,
together with continuous innovation,
technology infusion and integrity will
steer the Company’s growth into the
future.
Appreciation
2020/21 has been a challenging year,
which Sathosa Motors PLC faced with
courage and confidence. I am thankful
to SML’s Board of Directors who placed
their unwavering trust and confidence
throughout this period. Our employees
have been a strength to SML. Their
commitment to ensure that our services
were available to our consumers was
truly outstanding. Therefore, I would
like to express my sincere gratitude
to our employees whose dedication
and determination has resulted in the
company’s progressive performance. I am
sincerely grateful to ISUZU Motors and
Itochu Corporation for the many years of
trusted partnership. I wish to also thank
our shareholders for their continued faith
in Sathosa Motors PLC.
s J s pereraChairman
04 August 2021
Sathosa Motors PLC Annual Report 2020/2112
MAnAgeMent ReVIeW
We consider the financial year 2020/21
as a year of many unforeseen challenges
as well as an opportunity to strengthen
our fundamentals despite the COVID-19
pandemic followed by economic
downturn. As was experienced by many
industries, the automobile industry
was affected due to the restrictions
imposed on vehicle importation. The
relentless obstacles of the year tested our
resilience to withstand challenges, and to
overcome them by timely decisions and
perseverance.
The year also tested our ability and
effort in building brand equity, customer
relationships, investment in improving
and expanding our network, focus in value
chain activities, the quality of our product
and service portfolio, and the training
and rewarding our staff. Our sustenance
in 2020/21 relied on all stakeholders’
patronage and brand equity, as well as the
quality of our products and services.
We are pleased to share that at a time
when the automobile industry was feeling
the impacts of the government’s import
restrictions and the unfavourable macro-
economic status, Sathosa Motors PLC has
overcome those challenges and seized
opportunities to end the year positively.
Financial Performance
Sathosa Motors PLC’s revenue during
the year under review was at LKR 2,363
Mn, a drop of 7.7% compared with LKR
2,560.7 Mn reported in the 2019/20
financial year. However, the Company’s
net profits improved to LKR 5 Mn vis-a-
vis a loss of LKR 81 Mn reported during
the corresponding period of the previous
financial year, thereby outperforming
previous year’s performance.
During the first quarter of the year, the
Company was closed due to the COVID-19
lockdown which resulted in a significant
impact on business, on top of the vehicle
import ban. As a result, in the first few
months of the financial year, overhead
costs were higher than the revenue being
generated.
The import restriction led to a vehicle
sales revenue drop of 14% compared
to the previous financial year. However,
SML recorded the highest spare parts
sales in history during the final quarter
of 2020/21. The total spare parts revenue
increased by 17% over the last financial
year.
SML’s investments in workshop
facilities in the previous year, reaped
benefits during the current financial
year contributing LKR 81.1 Mn to the
Company’s total GP, which is an increase
of 20%. All in all, despite the many
economic, pandemic and regulatory
challenges, Sathosa Motors has
performed favourably in 2020/21.
“the ReLentLess oBstACLes oF the YeAR tested ouR ResILIenCe to WIthstAnd ChALLenges, And to oVeRCoMe theM BY tIMeLY deCIsIons And peRseVeRAnCe.”
Sathosa Motors PLC Annual Report 2020/2113
Reaping Benefits
Sathosa Motors PLC has been investing
extensively in workshop facilities and
by setting up new branches in strategic
locations in selected cities. During the
year, a new branch opened in Negombo
focusing on inboard marine engines
and spare parts sales. The branch’s
performance exceeded expectations, and
the high volumes contributed positively
to overall revenue. Further, the head-
office and Peliyagoda workshop facilities
were upgraded and improved, increasing
workshop capacity. Altogether, the Group
has increased its workshop capacity by
four times than its previous capacity,
catering to a larger clientele in more
regions. Although the sector had a slow
start due to the COVID-19 lockdown,
yet a steady growth in the volumes at
workshops were seen and the year
recorded historic highest in revenue.
In the absence of new vehicle sales
following the import restriction, Access
Motors, a subsidiary of the Group, had to
enter the resale market of luxury vehicles
for Land Rover and Jaguar. However,
the slower economy and increasing
uncertainty that loomed during the year
proved disadvantageous for the resale
vehicle market.
However, the Company’s decision to focus
on increased spare parts sales of both the
passenger vehicle range of Jaguar and
Land Rover and the commercial transport
range of ISUZU trucks brought in top line
performance. Although stock delays were
experienced due to shipping and import
slowdown, the year recorded a growth in
spare parts sales. The Group’s revenue
mostly came from spare parts and
workshop revenues, helped by customer
loyalty and confidence in the quality of our
products and the value of our services.
SML forsees further growth in the
commercial vehicle sales segment in the
coming years boosted by the investment
and construction growth in Sri Lanka.
Leveraging on the global brand equity,
and unparalleled reliability and quality
of ISUZU Motor’s commercial vehicle
range, SML would vigorously expand its
brand availability and presence across Sri
Lanka.
Facing the Future in the ‘New Normal’
We are mindful that during the year, many
external factors have changed beyond
our expectations, and the impacts of
these external factors are likely to remain
longer than initially anticipated.
The COVID-19 pandemic, which has
suffocated many economies is becoming
a way of life to be factored into our short
to medium term planning. The economic
slowdown; the upward trends in the
“We WILL ReVIsIt ouR CoRe BusIness AReAs In ReLAtIon to MARKet CondItIons undeR the ‘neW noRMAL’. ouR MedIuM to Long teRM pLAnnIng WILL tAKe Into ACCount the need to dIVeRsIFY ouR VehICLe pRoduCt oFFeRIngs BeYond RoAd BAsed pAssengeR And goods tRAnspoRtAtIon.”
Sathosa Motors PLC Annual Report 2020/2114
exchange rate and inflation; shipping
and freight challenges such as limited
container spaces, increased freight
rates and higher shipping costs are of
concerns for our spare parts business.
We anticipate that state regulations
that curtail imports and import related
activities will continue hindering
passenger and commercial vehicle sales.
Further, impending random lockdown
curfews with each new variant of the
COVID-19 virus cannot be disregarded.
Our workshops and facilities will also
have to factor in the health and safety of
our staff, clients and other stakeholders
during the course of the pandemic.
We will revisit our core business areas in
relation to market conditions under the
‘new normal’. Our medium to long term
planning will take into account the need
to diversify our vehicle product offerings
beyond road based passenger and goods
transportation.
The Company plans to grow the after
sales and spare parts segment of the
business and introduce new business
ventures beyond its traditional and
comfort product lines. SML aims to
expand the workshop and spare parts
facilities in the coming year, offering new
and existing customers’ direct access to
obtain after sales services from regional
branches. In addition, where required, the
Company is keen to appoint dealers in
remote areas to support customers.
SML will also re-assess the traditional
methods of client servicing to identify
innovative ways to reach and service
clients more conveniently, safely and
efficiently.
In addition, we are keenly assessing
our internal processes, systems and IT
infrastructure to streamline and increase
efficiencies in our supply chain.
As a service company, our future is
determined by the value we can add
to our customers and their positive
experience with SML. We will continue
to strive to inspire our team whilst
integrating a spontaneous kaizen
culture to adopt a positive and customer
focused mindset as well as to face future
challenges in an ethical manner.
Sathosa Motors is optimistic about the
future and the impending growth potential
across business sectors, both current
and new. We will continue our vigorous
approach in investments towards
achieving sustainable growth despite
market conditions. SML aims to generate
new value additions leveraging on our
unique strengths. We are poised and
equipped to tackle external challenges
and to achieve our short, medium and
long term growth. Throughout these
efforts, SML will reinforce the corporate
“We WILL ContInue ouR VIgoRous AppRoACh In InVestMents toWARds AChIeVIng sustAInABLe gRoWth despIte MARKet CondItIons.”
MANAGEMENT REVIEW
Sathosa Motors PLC Annual Report 2020/2115
foundation. We are committed to enhance
our shareholders value and to issue
earnings to shareholders frequently. We
are confident that the Group’s profitability
will increase as well as our sustainable
value creation for all stakeholders in the
coming year.
Acknowledgment
We wish to thank the Chairman and the
Board of Directors for their visionary
thinking, strategic guidance and faith in
our efforts in a time of adversity for the
industry and the nation. Sathosa Motors
PLC has sustained its business, while
focusing on all possible growth areas due
to the leadership and intuitive thinking,
and support of its management team.
The senior management and support
teams have contributed tirelessly and
steadfastly towards the growth and
sustenance of the Company despite the
risks presented by the pandemic. We
owe our appreciation and thanks to all of
them for their commitment and prudent
actions during this time which were a
key contributor to our sustainability and
sectorial growth.
Our employees have continued to
provide excellent service to our clients
and support SML to grow despite risks
to their health during the pandemic.
The Management expresses special
appreciation to all its employees for their
dedication and support during this time.
We recognise and appreciate Isuzu
Motors, Itochu Corporation and all our
business partners who have stood by us
through challenging times and we are
grateful for their continuous loyalty, trust
and support. We wish to thank all our
shareholders and all other stakeholders,
including all our loyal and valuable
customers, whose unwavering confidence
in the management has been a source of
strength in performing our duties. We look
forward to your continued support as we
steer through challenging times.
J C JoshuaManaging Director
K A p pereraExecutive Director - Sales & Marketing
M JayahsuriyaExecutive Director
04 August 2021
Sathosa Motors PLC Annual Report 2020/2116
BoARd oF dIReCtoRs
Manoaj Jayahsuriya Sumal Perera Rohana Fernando
Christopher Joshua Priyantha Perera
Sathosa Motors PLC Annual Report 2020/2117
Dharshana Munasinghe Sepala Dahanayake
Nelson De Silva Chiran Wijesinghe
Sathosa Motors PLC Annual Report 2020/2118
Sumal PereraChairman (Non-Executive)
Sumal Perera was appointed to the Board
of Sathosa Motors PLC on 12 June 1998.
He is the Founder Chairman of the Access
Group of Companies founded in 1989.
He continues to be the Chairman of all
companies under the umbrella of the
Access Group. He is a Fellow Member of
the Chartered Institute of Management
Accountants - UK.
It is under his vision and leadership that
the Access Group of Companies has
grown to be a diversified and successful
business enterprise, in a span of over
three decades.
Joseph Christopher Joshua Managing Director (Executive)
Christopher Joshua was appointed to
the Board of Sathosa Motors PLC in April
2012 and also appointed as Managing
Director of Sathosa Motors PLC with
effect from 1 April 2019. He is one of the
Founder Directors and Shareholders of
Access Group of Companies and currently
serves as the Managing Director of
Access Engineering PLC. He is also the
Joint Managing Director of the Access
Group of Companies. He was instrumental
in heading some of the most successful
business units within the Access Group.
Companies under his purview include
Access Engineering PLC, Access Realties
(Private) Limited, Access Realties 2
(Private) Limited, Harbour Village (Private)
Limited, Lanka AAC (Private) Limited,
WUS Logistics (Private) Limited, Access
Logistics (Private) Limited, Access Energy
(Private) Limited, Access Natural Water
(Private) Limited, Eco Friendly Power
Developers (Private) Limited and business
units of Access International (Private)
Limited. He is also a Director of ZPMC
Lanka Company (Private) Limited and ARL
Elevate (Private) Limited.
Priyantha PereraExecutive Director, Sales & Marketing
Priyantha Perera is a Marketer and
Business Administrator by profession
with over 25 years of overall sales and
marketing experience. He has been in
the Automotive Industry for 19 years,
which includes 14 years at Toyota Lanka
(Private) Limited as a Senior General
Manager and 4 years at United Motors
Lanka PLC. He graduated from the
University of Sri Jayawardenepura with a
BSc. Management (Public) Special Degree
in 1999 and was awarded a Master’s
Degree in Business Studies (MBS) from
University of Colombo in 2009. He is also
a member of the Board of Directors at
Access Motors (Private) Limited.
Manoaj JayahsuriyaExecutive Director
Manoaj Jayahsuriya has over 34 years of
experience in diversified fields such as
the Sri Lanka Navy, operations, apparel
manufacturing, corporate planning and
human resources management. He is a
Project Management Professional (PMP)
who holds an MBA from the Postgraduate
Institute of Management (PIM) of
University of Sri Jayewardenepura,
BSc (Honours) from the University of
Colombo and a Postgraduate Diploma
in Psychology as well as several naval
professional qualifications. He is also
a Director of Access Motors (Private)
Limited.
Rohana FernandoNon-Executive Director
Rohana Fernando joined the Board of
Sathosa Motors PLC in September 2012.
He is an Engineer by profession and has
been attached to the Access Group since
1998. He is a Corporate Member of the
Institution of Engineers, Sri Lanka (IESL)
and has a BSc Degree in Civil Engineering
from the University of Peradeniya.
He currently holds the position of Director
/ COO of Access Engineering PLC. He is
also a Director of Access International
(Private) Limited, Eco Friendly Power
Developers (Private) Limited, Access
Realties (Private) Limited, Access Realties
2 (Private) Limited, Harbour Village
(Private) Limited, Access Projects (Private)
Limited, WUS Logistics (Private) Limited,
Access Logistics (Private) Limited, ARL
Elevate (Private) Limited and Lanka AAC
(Private) Limited.
Dharshana MunasingheNon-Executive Director
Dharshana Munasinghe was appointed to
the Board of Sathosa Motors PLC in April
2012. He has been attached to the Access
Group since 1996 and held Executive and
Senior Managerial positions throughout
his successful career.
Having held several positions in the
Group, he now functions as Director
– Business Development at Access
Engineering PLC. He is also a Director of
Access International (Private) Limited,
Access Motors (Private) Limited, Access
Realties (Private) Limited, Access Realties
2 (Private) Limited, ZPMC Lanka Company
(Private) Limited and ARL Elevate
(Private) Limited.
boARd of dIREcToRs
Sathosa Motors PLC Annual Report 2020/2119
M M Nelson De Silva Independent Non-Executive Director
Nelson De Silva who joined the Board
of Sathosa Motors PLC in February
2009, is an Associate Member of the
Institute of Chartered Accountants of Sri
Lanka. He holds a B.Sc Degree in Public
Administration from the University of
Sri Jayawardenapura. He serves as the
Managing Director of Ned Management
Consultants (Pvt) Ltd and he is the sole
Proprietor of M M N De Silva & Company.
He has been the Group Accountant of
Tisara Group, Senior Accountant of John
Keells Group, Finance Manager of Finlay
Chemicals & Dyes (Pvt) Ltd, Director of PE
Management Consultants (Pvt) Ltd and
Partner of HLB Edirisinghe & Company.
Chiran WijesingheIndependent Non-Executive Director
Chiran Wijesinghe has over 13 years
of experience in Senior Management
positions in different organisations in
Sri Lanka & Overseas. He has worked as
the Manager in Risk Advisory Services
of KPMG Sri Lanka and Group Internal
Auditor of Oman Hotels & Tourism Co.
SAGO (OHTC) managed by Aitken Spence
Hotels (Pvt) Ltd.
He currently holds the position of Chief
Risk Officer of Hirdaramani Group of
Companies. He is a Fellow Member of
Institute of Chartered Accountants of Sri
Lanka (ICASL) and Member of Institute
of Internal Auditors (IIA) USA. He holds
a Master of Business Administration
(MBA) from the University of Southern
Queensland (USQ) and BSc. Business
Administration (Special) – University of
Sri Jayewardenepura.
Sepala DahanayakeIndependent Non-Executive Director
Sepala Dahanayake was appointed to
the Board of Sathosa Motors PLC in
August 2018. He is an attorney-at-law
by profession. He has appeared in both
criminal and civil courts for over 39
years since graduating Law College of Sri
Lanka in 1981. He is an acting magistrate
for more than 20 years. He has held the
Vice Presidency of the Bar Association of
Mount Lavinia (2001-2003).
Sathosa Motors PLC Annual Report 2020/2120
senIoR MAnAgeMent
Indrajeewa Alahapperuma Priyantha Perera Manoaj Jayahsuriya
Dirk Joshua Christopher Joshua Lasitha Mendis
Sathosa Motors PLC Annual Report 2020/2121
Joseph Christopher Joshua Managing director (Executive)
Profile given on page 18.
Priyantha PereraExecutive director, sales & Marketing
Profile given on page 18.
Manoaj JayahsuriyaExecutive director
Profile given on page 18.
Maurice Dirk JoshuaGeneral Manager - Marketing
Dirk Joshua joined Sathosa Motors
PLC in August 2018 with over 14 years'
progressive experience in strategic
planning, improving operational efficiency,
team building and project management.
He was working at Access Engineering
PLC as a Senior Manager – Business
Development, and was in charge of
securing tenders and other projects
through networking and was liaising with
foreign principals to secure exclusive
dealerships for engineering products,
locally and internationally.
Indrajeewa AlahapperumaGeneral Manager – finance
Indrajeewa Alahapperuma was appointed
to the Senior Management team of
Sathosa Motors PLC in August 2018. He
has been attached to the Access Group
since 2012. Having held several positions
in the Group, he presently serves in
the capacity of the General Manager –
Finance.
He is an Associate Member of The
Institute of Chartered Accountants of
Sri Lanka. He holds a B.Sc. Accounting
(Special) Degree from the University of Sri
Jayewardenepura. He has over 13 years
of experience in the field of Finance and
Auditing.
Lasitha Eshan Christopher MendisGeneral Manager – support services
Lasitha Mendis joined Sathosa Motors PLC
in September 2018. His prior appointment
of almost 9 years was with John Keells
Stock Brokers (Pvt) Ltd, as Manager –
Institutional Sales.
He is a Member of the Chartered Institute
of Management Accountants-UK and
holds a MSc. in Financial Mathematics and
a BSc. in Accounting and Finance.
Sathosa Motors PLC Annual Report 2020/2122
ReALIgned FoR ALL InCLusIVe seRVICe
Sathosa Motors PLC Annual Report 2020/2123
Sathosa Motors PLC Annual Report 2020/2124
At the heart of our approach is our purpose: to
achieve excellence in customer satisfaction by
cultivating a dynamic and productive organisational
culture with highly motivated staff to provide the best
quality vehicles at competitive and affordable prices,
thereby generating the maximum benefit to all our
stakeholders.
What Sets Us Apart
We value and believe in maintaining the highest
standards of integrity, honesty, transparency,
responsibility and ethical behavior in all our
dealings and transactions.
We are passionate about delivering the highest
levels of service quality to all our internal and
external stakeholders.
We encourage and respect diversity among our
team in order to create an inclusive organisational
culture.
We believe in the importance of ensuring
excellence in all our processes and systems as a
means of maintaining a strong niche position in the
Sri Lankan market: from expanding our dealership
network, to introducing innovative product
ranges to the market, to market development, to
leveraging training as an opportunity to enhance
expertise and productivity.
We actively manage our business operations through
three principal operational activities.
ouR AppRoACh WhAt We do
Vehicle Sales
Marine Engine Sales
Spare Part Sales
Workshop Services & Repairs
BusIness ModeL
Sathosa Motors PLC Annual Report 2020/2125
WhAt We ReLY on the VALue We CReAte
1. Financial Capital
Financial capability to
enhance our business
Total Assets LKR 2.9 Bn
Total Equity LKR 1.6 Bn
Non Utilized Bank Facilities more than LKR 2 Bn
Subsidiary of one of the Sri Lanka’s top tier
Engineering Enterprises
2. Human Capital
The skills and experience
of our employees
181 employees including professionals and highly trained technicians
Recruitment of staff possessing appropriate skills in terms of
technical capability and personal strengths
Conduct several in-house and outstation training and development programs
Conduct several Employee Events and Welfare Activities
Creating a Safe Space for Professional Growth
4. Manufactured Capital
Property, plant and
equipment we own and use
Increase the capacity at Peliyagoda workshop
New Branch open at Negombo
Introduce new business line – Isuzu Marine Engine
Investment of SMS verification process of Isuzu Genuine part
5. Natural Capital
The natural resources that
we manage and use
EURO 4 Standard Vehicles
Advance water purification system for workshop operations
Implementing energy saving methods
depth experience and technological prowess in the Japanese
commercial vehicle segment in the automobile industry
successfully completed IFS ERP System post implementation
and continuous improvement
technology knowhow of Isuzu Marine Engine
3. Intellectual capital
Our collective expertise
and processes
strong relationship with business partners
conduct several Promotional Campaigns
Social Attributes and Targeted Marketing
6. Social and relationship capital
reputation and trust that
we have developed
Reinvestment into the business
- Retained earnings LKR 1.491 Bn
We draw upon six capitals in the
management of our business model.
Beyond meeting our income and total return targets we also consider the
wider value we deliver against each capital.
Sathosa Motors PLC Annual Report 2020/2126
CoRpoRAte goVeRnAnCe
At Sathosa Motors, we strongly believe
good corporate governance to be a
pivotal prerequisite to accomplish
enduring growth in the Company’s value
and that our business approach is as
crucial and decisive as our business
outcomes. Ingrained in our culture
is the fundamental principles good
corporate governance which permeates
our relationships with myriads of
stakeholders. To this end, Sathosa Motors
uses a well-defined and disciplined
corporate governance approach to
formulate and execute decisions in
connection to the Company and will
pursue its vision to be the trusted leader
in the Sri Lankan automobile industry by
ensuring delivery of unparalleled quality
to its valued customers. The Company’s
governance framework is equipped
with its own set of internal policies,
benchmarks and structures in order
to reach beyond mere compliance with
mandatory regulatory requirements and
instigate confidence in our shareholders
while ensuring financial and operational
integrity.
Our Corporate Governance philosophy
pervades aspects of the entire spectrum
of our operations including formulation
and evaluation of corporate strategy,
appointment and removal of directors
and key management personnel,
performance measurement and executive
compensation and risk oversight.
We have a clear and distinct purpose
which is to create unique and novel
products and services and to ensure
delivery of unparalleled quality to all our
valued stakeholders and without good
governance underpinned by our culture
and values; we would simply be unable to
deliver on that promise. We are committed
to high standards of corporate governance
in order to conduct our operations with
utmost propriety.
Corporate Governance Structure
Sathosa Motors employs a governance
and operating model underpinned by
precise and transparent segregation of
responsibilities and judicious mobilisation
of available resources in order to create
long-term sustainable growth for our
shareholders and deliver long-term
value to all stakeholders. We conduct our
business while taking into consideration
our social responsibilities and are
committed to the development of a
sustainable society. Whilst the Company
is in compliance with all mandatory
regulatory requirements of the country’s
laws and regulations, we have also
devised sound governance philosophies,
ethics, policies and values and integrated
and adopted our corporate governance
ethos in an attempt to transcend beyond
regulatory compliance. To this end, the
Company operates within an integrated
governance framework formulated after
taking into consideration the mandatory
provisions of the Companies Act No. 07
of 2007, Listing Rules of the Colombo
Stock Exchange (“CSE”) and rules of the
Securities and Exchange Commission
of Sri Lanka (“SEC”) and voluntary
provisions in the Code of Best Practices
on Corporate Governance (‘Code’) jointly
advocated by the SEC and the Institute of
Chartered Accountants of Sri Lanka (CA
Sri Lanka). Sathosa Motors PLC strongly
believes that avoiding information
asymmetries between stakeholders is of
paramount importance. The Company to
this end consistently strives to disclose
comprehensive, accurate and impartial
information to its numerous stakeholders
thereby enabling them to exercise their
right to well-informed decision making.
Sathosa Motors PLC profoundly believes
that it is of crucial importance to
establish a comprehensive governance
structure which compliments sustainable
growth into the future. Our corporate
governance structure consists of
our Board of Directors and four
Management Committees with well-
defined responsibilities and reporting
lines, clearly segregating management
functions and supervisory and oversight
functions which has led to heightened
transparency and expeditious decision-
making. The responsibilities of the Board
and Management Committees are far-
reaching and they are accountable for
reviewing and guiding corporate strategy,
performance management, ensuring
the integrity of Company’s accounting
and financial reporting systems and
overseeing the formal risk management
process. Under the leadership of our
Board of Directors, the Company has put
in place a comprehensive management
structure accompanied by clearly
defined policies, procedures and limits
of delegated authority. Our integrated
Corporate Governance structure is
outlined in the diagram below.
Sathosa Motors PLC Annual Report 2020/2127
Aduit Committee
Remuneration Committee
Related Party Transactions
Review Committee
Strategic Planning
Committee
Board of Directors
Mandatory compliance
1. Companies Act No. 07 of 20072. Sri Lanka Accounting and
Auditing Standard Act No. 15 of 1995
3. Listing Rules of Colombo Stock Exchange
4. SEC regulations
Voluntary adherence
1. Code of Best Practices jointly issued by SEC and CA Sri Lanka*
Assurance on the financial statements
1. External Independent Audit.
Internal audit
1. Review of systems, controls, processes and operations.
Compliance and Adherence Shareholders Assurance
Corporate Management
* SML has fully complied with the 2013 “Code” and has complied with almost the full 2017 “Code” to the extent of business exigencies and as required by SML
Leadership
Code of Ethics
At Sathosa Motors, we are committed to the highest standards of ethical behaviour as
outlined in our Code of Ethics and we firmly believe that the focus of good governance
should not be limited to effective functioning of the Board of Directors but also and very
importantly must extend on the culture within which our businesses and employees
operate and conduct themselves. This philosophy of good governance is ingrained and
embedded throughout Sathosa Motors PLC and manifests itself in numerous ways
including compliance with all mandatory regulatory requirements which relate to our
business, an absolute and non-negotiable requirement to maintain a healthy business
environment, ethical conduct of business which fosters accountability and transparency
in all our business dealings and a zero-tolerance approach to corruption and nefarious
conduct. Our Code of Ethics is outlined in the diagram below.
Conducting business in a professional manner
Transparency and accountability
Maintaining a healthy business environment
Recognising and honouring the rights of all stakeholders
Adhering to all regulatory requirements
Carrying out conflict resolution in a just and transparent manner
Chairman
To enable the Directors to generate the
effective Board debate and discussion
and to provide constructive challenge the
Company requires, the Chairman of the
Board provides leadership to the Board
and thereby influences the culture and
‘tone from the top’. He is responsible for
the provision of information to Directors
in order to make informed decisions and
promotion of the culture of openness and
constructive challenge which facilitates
a diversity of views to be expressed. The
Chairman is accountable for directing
the affairs of the Board to ensure the
Board focuses on value for money for
the shareholders and is available for
dialogue on key matters of the Company’s
governance and where shareholders have
particular concerns.
The Board
The Board aims to promote long-term
sustainable growth of our Company
and deliver value to investors and other
stakeholders as well as encouraging
a culture of risk awareness, openness
Sathosa Motors PLC Annual Report 2020/2128
coRpoRATE GoVERNANcE
and debate about strategic ideas and
ensure the circulation of accurate and
transparent information. The Board
sets the Company’s strategy and risk
appetite and reviews, approves and
guides corporate strategy. It also sets
performance objectives, monitors
implementation and corporate
performance and oversees major
capital expenditures, acquisitions and
divestitures. The Independent Non-
Executive Directors hold management
accountable and ensure Executive
Directors discharge their responsibilities
properly. The role of the Independent
Non-Executive Directors is to challenge
and scrutinise the performance of
management, including Executive
Directors and to guide corporate
strategy while reviewing management’s
performance in connection to
accomplishing agreed goals and
objectives. Decisions regarding new
Board appointments are taken by the
Board collectively and the qualifications
and experience of Board members are
decided based on the nature of the
business of the Company and the value
addition the member is expected to bring
to the Board and the Company. Profiles
of the Board of Directors are set out on
pages 18 to 19.
Board Composition
The Board consists of Directors with the
requisite range of skills, competence,
knowledge, experience and approach,
as well as a diversity of perspectives,
to set the context for appropriate
Board behaviour and to enable
effective discharge of its duties and
responsibilities. All Directors allocate
sufficient time to the Board to perform
their responsibilities effectively.
The Board as at 01 April 2021 comprised
of Nine (09) Directors out of whom three
(03) are Executive Directors and six (06)
are Non-Executive Directors including the Chairman. The Board comprises three (03)
Non-Executive Directors who are also independent. The Board therefore is deemed to
have sufficient balance in line with the requirements of the code.
M M N De Silva, W A C O Wijesinghe and R S Dahanayake who are the Non-Executive
Independent Directors qualify against the criteria for independence laid down by the
regulatory authorities and the aforesaid Directors have submitted signed declarations
to affirm their independence. The period of service of M M N De Silva exceeds nine (09)
years. However, the Board is of the view that the period of service does not compromise
his independence and objectivity in discharging his functions as an Independent Non-
Executive Director. Therefore, based on the declarations submitted, the Board deems M
M N De Silva as an Independent Director.
Board of Directors
Executive Directors
J C Joshua Managing Director
M Jayahsuriya Executive Director
K A P Perera Executive Director
Non-Executive Directors
S J S Perera Chairman
S D Munasinghe Director
D A R Fernando Director
Independent Non-Executive Directors
M M N De Silva Director
W A C O Wijesinghe Director
R S Dahanayake Director
Composition of Directors
Overall classification of the Board of Directors is depicted below
Board Balance and its Independence Tenure of Board Members
INED - 03
NED - 03
ED - 03
More than 05 years
06
03
Less than 05 years
INED - Independent Non-Executive Directors | NED - Non-Executive Directors | ED - Executive Directors
Sathosa Motors PLC Annual Report 2020/2129
Board Process
The Board meets regularly, at least, once every quarter and whenever the circumstances so require. The Directors are encouraged
to have free and open contact with management at all levels and full access to all relevant information. The Chairman of the
Board determines and decides on the subjects to be covered and it is the responsibility of the Company Secretary to circulate the
Board papers in advance. Any absences are excused in advance and are briefed immediately on the discussions held and actions
implemented during the meeting. The Board met four times during the financial year under review. Information pertaining to the
attendance of the meetings is illustrated below.
Name of the
Director
Board Meeting Attendance
18 May
2020
29 July
2020
09 November
2020
02 February
2021
S J S Perera Non-Executive Chairman / Non-Independent √ √ √ √
J C Joshua Executive Director √ √ √ √
M Jayahsuriya Executive Director √ √ √ √
K P Perera Executive Director √ √ √ √
M M N De Silva Non-Executive Director / Independent √ √ √ √
W A C O Wijesinghe Non-Executive Director / Independent √ √ √ √
R S Dahanayake Non-Executive Director / Independent √ √ X √
D A R Fernando Non-Executive Director / Non-Independent √ √ √ √
T A L Niroshan Non-Executive Director / Non-Independent √ √ √ *N/A
S D Munasinghe Non-Executive Director / Non-Independent √ √ √ √
* Resigned w.e.f. 31 December 2020
Board Responsibility
The Board’s duties and responsibilities
and key functions, for which they are
accountable, include:
Provision of entrepreneurial
leadership to the Company. To this
end, the Board reviews, approves
and directs corporate strategy, major
plans of actions, risk policy, annual
budgets and business plans; set
performance objectives; monitor
implementation and corporate
performance; and oversee major
capital expenditures.
Overseeing systems of internal
controls, in particular, financial and
operational controls and a formal
risk management process to enable
effective assessment of relevant
risks and ensure the integrity of the
Company’s accounting and financial
reporting systems.
Ensuring a transparent Board
nomination and election process,
selection and scrutiny of key
management and executive personnel
and to oversee succession planning.
Ensuring the Board and key executive
remuneration is aligned with the long-
term interests of the Company and
shareholders.
Managing potential conflicts of
interests of management, Board
members, shareholders and other
external parties and monitoring
the effectiveness of the Company’s
governance practices.
Conducting objective self-evaluation
with the aim to foster a culture of
effective Board behaviour.
Be available for dialogue with
shareholders and oversee the process
of communication and disclosure.
Dynamics
Framework
ContextOrganisational and Board Stewardship
Board Responsibility
Sathosa Motors PLC Annual Report 2020/2130
coRpoRATE GoVERNANcE
Role of the Company Secretary
The Company Secretary acts as a crucial
resource for the chair and for the Board
as a whole, ensuring the provision of
information and practical guidance,
the Directors require to effectively
discharge their duties and responsibilities
under relevant laws and regulations.
The secretary is also responsible for
the induction of new Directors and
conducting Board and General Meetings.
Furthermore, the Company Secretary
plays a pivotal role in sound corporate
governance and in ensuring that the
Board receives independent expertise and
advice where appropriate.
Board Committees
Audit Committee
The Audit Committee monitors the
integrity of the financial statements
and in the absence of a separate risk
committee, reviews the effectiveness of
the Company’s internal controls, internal
audit function and risk management
systems. It is responsible to provide
recommendations to the Board in relation
to the appointment, re-appointment
and removal of the external auditor
and approve the remuneration and
terms of engagement of the auditor. The
Committee keeps a close track of the
external auditors’ independence and
objectivity. The Audit Committee ensures
that there are opportunities ingrained
throughout the Company for employees
to act as ‘whistleblowers’ and report
improprieties and nefarious conduct. The
Audit Committee consists of three (03)
Non-Executive Directors and all of them
are independent directors. The Audit
Committee is chaired by M M N De Silva.
Audit Committee Composition
Name of the Director Designation Committee Report
M M N De Silva Chairman - Independent Non-Executive Director Refer Pages 91 to 92.
W A C O Wijesinghe Independent Non-Executive Director
R S Dahanayake Independent Non-Executive Director
Attendance of Directors at Audit Committee Meetings (01 April 2020 to 31 March 2021)
Name of the Director Designation Board Meeting Attendance
18 May
2020
29 July
2020
09 November
2020
02 February
2021
M M N De Silva Chairman - Independent Non-Executive Director √ √ √ √
W A C O Wijesinghe Independent Non-Executive Director √ √ √ √
R S Dahanayake Independent Non-Executive Director √ √ X √
T A L Niroshan Non-Executive Director √ √ √ *N/A
* Resigned w.e.f. 31 December 2020
Related Party Transactions Review Committee
Established on 31 March 2016, the objective of the Related Party Transactions Review Committee is to ensure that appropriate and
supervising authority relating to the related party transactions exposures, and policies on conflicts of interest or potential conflicts of
the interest between the its subsidiaries and other respective related party. The Committee also performs the oversight function on
behalf of the Board in complying with the Listing Rules of the Colombo Stock Exchange and with the Code of Best Practices on Related
Party Transactions issued by the Securities and Exchange Commission Sri Lanka. The Related Party Transactions Review Committee
comprises three (03) members and all of them are Independent Non-Executive Directors. The Related Party Transactions Committee
is chaired by M M N De Silva.
Related Party Transactions Review Committee Composition
Name of the Director Designation Committee Report
M M N De Silva Chairman - Independent Non-Executive Director Refer Pages 94 to 95.
W A C O Wijesinghe Independent Non-Executive Director
R S Dahanayake Independent Non-Executive Director
Sathosa Motors PLC Annual Report 2020/2131
Attendance of Directors at Related Party Transactions Review Committee Meetings (01 April 2020 to 31 March 2021)
Name of the
Director
Designation Board Meeting Attendance
18 May 2020 29 July 2020 09 November
2020
02 February
2021
M M N De Silva Chairman - Independent Non-Executive Director √ √ √ √
W A C O Wijesinghe Independent Non-Executive Director √ √ √ √
R S Dahanayake Independent Non-Executive Director √ √ X √
T A L Niroshan Non-Executive Director √ √ √ *N/A
* Resigned w.e.f. 31 December 2020
Remuneration CommitteeThe main objective of the Remuneration Committee is to determine the remunerations framework (pay scales applied to Director’s packages and the proportions of different types of reward within the overall package) on behalf of the Board and shareholders. This framework includes, but is not limited to, establishing stretching performance related elements of reward and is intended to promote the long term success of the company. The Remuneration Committee consists of three (03) Non-Executive Directors and two (02) out of the aforesaid Non-Executive Directors are Independent. S J S Perera serves as the chairman of the Remuneration Committee.
Remuneration Committee Composition
Name of the Director Designation Committee Report
S J S Perera Chairman - Non-Executive Director Refer Page 93.
M M N De Silva Independent Non-Executive Director
W A C O Wijesinghe Independent Non-Executive Director
Strategic Planning CommitteeThe Committee assists the Board and the Management in fulfilling its oversight responsibilities relating to strategic plans, which identify specific long-term goals and business objectives determined to be in the Company’s best interest. This includes helping the Board and the Management identify opportunities such as mergers and acquisitions, joint ventures, new markets or product lines, acquisition or disposition of capital assets, equity and debt funding and modifications of existing capital structure, dividend policy, and stock offerings, repurchase programmes and etc. Additionally, the Committee evaluates the progress of execution and effectiveness of the strategic plan, recommend changes to the plan where necessary or advisable and evaluate other issues or opportunities. The Committee comprises all three (03) Executive Directors of the Company. J C Joshua serves the Chairman of this Committee.
Strategic Planning Committee Composition
Name of the Director Designation Committee Report
J C Joshua Chairman - Executive Director Refer Page 96.
M Jayahsuriya Executive Director
K A P Perera Executive Director
Internal Audit and Internal ControlsThe Internal Audit Department acts as an important line of defense in creating a robust control environment to manage risks. The primary role of the Internal Audit function is to help the Board and management protect assets, reputation and the sustainability of the group. To this end, the Internal Audit provides an independent and an objective assurance on the design and operating effectiveness of the Company’s governance, risk management and control framework and processes, prioritising the heightened areas of risk. The independence of the Internal Audit function from the day-to-day line management responsibility is pivotal to its effective functioning as it assists to maintain an objective stance.
The Head of Internal Audit has a functional reporting line to the Audit Committee Chair. Results of the audit work together with an assessment of the Company’s overall governance, risk management and control framework and processes are regularly reported to the Audit Committee. These reports highlight key risks identified in connection with operational activities and regulatory requirements and provide an independent view of possible detrimental outcomes. The Audit Committee is ultimately responsible for the appointment, performance assessment and dismissal of the Head of Internal Audit.
Sathosa Motors PLC Annual Report 2020/2132
coRpoRATE GoVERNANcE
Statement of Compliance under Section 7.6 of the Listing Rules of the Colombo Stock Exchange on Corporate Governance
Principal Description Comment/Reference Compliance
Status
CSE Listing Rule 7.6 – Contents of Annual Report
(i) Names of persons who during the financial year were
directors of the Entity
Board of Directors Complied
(ii) Principal activities of the Entity and its subsidiaries
during the year and any changes therein
Notes to the Financial Statements Complied
(iii) The names and the number of shares held by the 20
largest holders of voting and non-voting shares and the
percentage of such shares held
Investor Capital Complied
(iv) The public holding percentage number of public
shareholders, under which option the entity complies
with the minimum public shareholding requirement and
total float adjusted market capitalisation.
Investor Capital Complied
(v) A statement of each Director’s holding and Chief
Executive Officer’s holding in shares of the Entity at the
beginning and end of each financial year
Investor Capital Complied
(vi) Information pertaining to material foreseeable risk
factors of the Entity
Risk Management Review Complied
(vii) Details of material issues pertaining to employees and
industrial Relations of the Entity.
During 2020/21 there were no material issues pertaining
to employees and industrial relations of the Entity
(viii) Extents, locations, valuations and the number of buildings
of the Entity’s land holdings and investment properties
Notes to the Financial Statements Complied
(ix) Number of shares representing the Entity’s stated capital Annual Report of the Board of Directors on the
affairs of the Company
Complied
(x) A distribution schedule of the number of holders in each
class of equity securities, and the percentage of their
total holdings
Investor Capital Complied
(xi) Financial ratios and market price information Investor Capital Complied
(xii) Significant changes in the Entity’s or its subsidiaries’
fixed assets and The market value of land, if the value
differs substantially from the book value.
Notes to the Financial Statements Complied
(xiii) Details of funds raised through a public issue, rights
issue and a private placement during the year.
In 2020/21 no funds were raised through a public issue,
rights issue or a private placement
(xiv) Employee Share Option Schemes and Employee Share
Purchase Schemes
The Company does not have any Employee Share Option
Schemes or Employee Share Purchase Schemes
(xv) Disclosures pertaining to Corporate Governance
practices in terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c.
of Section 7 of the Rules
Corporate Governance on pages 26 to 44
Refer Board of Directors pages 16 to 19
Refer annual Report of the Board of
Directors on pages 97 to 101
Committee Report on pages 91 to 96
Complied
(xvi) Related Party transactions exceeding 10% of the Equity
or 5% of the Total assets of the Entity as per Audited
Financial Statements, whichever is lower.
Related Party Transactions Review
Committee Report on pages 94 to 95
Notes to the Financial Statements on
pages 153 to 156
Complied
Sathosa Motors PLC Annual Report 2020/2133
Statement of Compliance under Section 7.10 of the Listing Rules of the Colombo Stock Exchange on Corporate Governance
Principal Description Comment/Reference Compliance
Status
CSE Listing Rule 7.10 – Corporate Governance
a. and b. Compliance with corporate governance rules Annual Report of the Board of Directors on the
affairs of the Company
Complied
CSE Listing Rule 7.10.1 – Non-Executive Directors
a., b.
and c.
Composition of the Non-Executive Directors. At least
2 members or 1/3 of the Board, whichever is higher
should be NED’s
Board of Directors / Board Composition 06 out
of 9 Board members are NED’s
Complied
CSE Listing Rule 7.10.2 – Independent Directors
a. Composition of the Independent Directors Board of Directors / Board Composition 03 out
of 06 NED’s are independent.
Complied
b. Signed and dated declaration of each Independent
Director
Compliance with Code of Best Practice on
Corporate Governance jointly issued by CA Sri
Lanka and SEC
Complied
CSE Listing Rule 7.10.3 – Disclosures Relating to Directors
a. and b. Determination of independence or non-independence of
each NED
Board of Directors
Compliance with Code of Best
Practice on Corporate Governance jointly
issued by CA Sri Lanka and SEC
All Independent NED’s have submitted
declarations as to their independence.
Complied
c. A brief Resume of each Director Board of Directors Complied
d. Brief Resume of newly appointed Director/s No new Directors were appointed during the financial year.
CSE Listing Rule 7.10.4 – Criteria for Defining ‘Independence’
a. to h. Criteria to meet to be an Independent Director Compliance with code of Best Practice on
Corporate Governance jointly issued by CA
Sri Lanka and SEC.
Complied
CSE Listing Rule 7.10.5 – Remuneration Committee
a. Composition Corporate Governance Complied
b. Functions Remuneration Committee report on page 93 Complied
c. Disclosures in the Annual Report
a) Names of the Directors comprising the
Remunerations Committee
b) Statement of remuneration policy
c) Aggregate remuneration paid to executive and non-
executive directors.
Refer Remuneration Committee report on
page 93
Note No to financial statements
Annual Report of the Board of Directors on
affairs of the Company
Complied
Sathosa Motors PLC Annual Report 2020/2134
coRpoRATE GoVERNANcE
Principal Description Comment/Reference Compliance
Status
CSE Listing Rule 7.10.6 – Audit Committee
a. 1. Composition – Shall Comprise of NED’s, a majority of
whom shall be independent
2. A NED shall be the Chairman of the Committee
3. CEO and CFO should attend Audit Committee
meetings
4. The Chairman of the Audit Committee or one member
should be a member of a recognised professional
accounting body
Audit Committee report on pages 91 to 92
Chairman of Audit Committee is an
independent NED
The MD and the GM – Finance attend to
Audit Committee meetings
The Chairman and one (01) committee
member of the Audit Committee are
members of a recognised professional
accounting body
Complied
b. Functions Audit Committee Report Complied
c. Disclosures in the Annual Report
1. Names of Directors comprising the Audit Committee
2. Audit Committee shall make a determination of the
independence of the External Auditors
3. Report on manner AC carries out its functions
Audit Committee report on pages 91 to 92 Complied
The Company’s Adherence to Code of Best Practices on Corporate Governance Issued Jointly by the Institute of Chartered
Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.
Principal Comment Compliance
Status
A Directors
A.1 The Board
A.1 Board of directors in the corporate governance section on pages 27 to 31 Complied
A.1.1 During the year four scheduled Board meetings were conducted, all of which were well planned and
informed in advance and all Members were eligible to attend. Attendance of members at meetings is
given in page 29
Complied
A.1.2 A brief profile of each member of the Board of directors and Senior Management team is given in pages
18 to 21
Complied
A.1.3 The Board collectively and the Directors individually, have recognised their duty to act in accordance
with the prevailing laws of the country. The Board has taken measures to ensure compliance with all
necessary rules and regulations applicable to the Company. The Board also complies with the sound
framework of business practices in place, which further strengthens compliance with existing laws
and regulations. In matters of strategic importance to the Company, the Board obtains independent
professional advice, if it deems necessary, at the expense of the Company.
Complied
A.1.4 All Directors had access to the services of a professional company secretarial body, which ensured
that the Board received information on a timely manner for the effective conduct of meetings. The
firm also provided the Board with advice on matters relating to compliance with rules and regulations,
proper conduct of meetings and the adoption of best practices of corporate governance. The firm is also
responsible for the distribution of the Company’s Annual Report to its shareholders.
Complied
Sathosa Motors PLC Annual Report 2020/2135
Principal Comment Compliance
Status
A.1.5 All Directors are encouraged to bring independent judgment on matters relating to strategic direction
of the Company, effective utilisation of resources, performance and business conduct. The vast
experience and knowledge they possess in their specialised fields ensure the execution of this judgment.
Transparency of the judgments is further enhanced with the existence of three Independent Non-
Executive Directors who continue to critically evaluate the decisions of the Executive Directors. The Board
has put in place a culture of accepting the contribution of each member and all Directors have an equal
opportunity to express their views and ideas. The composition of the Board is sufficient enough to ensure
balance of power and no Director dominates the conduct of meetings or the Board’s decision making
process.
Complied
A.1.6 All Directors dedicated an adequate amount of time on matters relating to the Company and the
Board. Their contribution to the Company was evident in the participation at Board meetings, Board
Subcommittee meetings and in the decisions passed through circular resolution. Relevant Board Papers,
together with supplementary information, were sent at least a week prior to the Board meetings so as to
give them adequate time to critically review and study the contents. In the event additional information
was requested by the Board through the Company Secretary the same was made available at the earliest
in order to enhance the effectiveness of Board decisions.
Complied
A.1.7 One third of the directors could request for a resolution to be presented to the Board for the best interest
of the Company.
Complied
A.1.8 Every Director who is appointed newly to the Board will be given adequate training in order to carry
out his duties in the capacity of Director. Each Director is well aware of requirement of his continuous
professional development in order to serve as a Director. During the year under review, sharing
knowledge among board members, attending seminars conducted by professional bodies are some of
the initiatives taken with respect to training and development.
Complied
A.2 Chairman and Chief Executive Officer (CEO)
A.2 Company does not have a CEO position. The duties and responsibilities of the CEO is performed by the
MD. There is a clear division of responsibilities of the positions of Chairman and Managing Director (MD)
in order to ensure a balance of power and authority in strategic and operational policy decisions. As
such, Chairman is responsible for the leading and effective conduct of the business to the Board and MD
is responsible for managing the business in accordance with policy directions formulated by the Board.
Decision making at the highest level happens by adopting the rule of simple majority. Decision-making
of the highest level occurs by adopting the roles of simple majority. No one individual is vested with
unfettered powers of decision-making.
Complied
A.2.1 The Chairman is mainly responsible for leading, directing and controlling the affairs of the Board
including the Board balance, effective conduct of Board meetings and special meetings of the Board. He is
also responsible for maintaining effective external relationships. Day-to-day affairs of the Company are
headed by the Managing Director who is supported by the Executive Directors. MD gives leadership to the
Senior Management team who is collectively responsible for the conduct of day-to day operations.
Complied
A.3 Chairman’s Role
A.3 Chairman’s profile on page 18 Complied
A.3.1 The Chairman is responsible for making sure that the agenda, minutes of prior meetings; Board papers
and supplementary information are circulated among the members in advance, giving sufficient time
for preparation. Agenda for each Board Meeting is finalised by the Chairman in consultation with the
Company Secretary and where necessary, feedback from the other members is taken.
Complied
Sathosa Motors PLC Annual Report 2020/2136
coRpoRATE GoVERNANcE
Principal Comment Compliance
Status
A.4 Financial Acumen
A.4 A brief profile of each member of the Board of directors is given on pages 18 to 19 Complied
A.5 Board Balance
A.5 Refer composition of the board under corporate
governance on the page 28
Complied
A.5.1 Refer composition of the board under corporate
governance on the page 28
Complied
A.5.2 Refer composition of the Board under corporate
governance on the page 28
Complied
A.5.3 Three Non-Executive Directors on the Board are not involved in day-to-day affairs of the Company and
they do not have any business or other relationship that could materially interfere with the exercise
of their unfettered and independent judgment. Additionally, each independent Non-Executive Director
submits a written declaration of his independence to the Board on an annual basis. This written annual
submission is also considered as part of their annual performance evaluation. Based on the written
declaration submitted by the independent NED’s for the financial year 2020/21, they were considered as
continuing to be independent.
Complied
A.5.4 During the year, each Non-Executive Director submitted a dated and signed declaration regarding
their independence against the specified criteria set out in the code. While this declaration fulfilled the
requirements of Schedule J of this code, on circumstance rose for the determination of independence by
the Board outside the criteria set out by the Code.
Complied
A.5.5 Based on the declarations submitted to the Board and other information available the following Non-
Executive Directors of the Board were decided to be independent as at the end of the financial year.
M M N De Silva
W A C O Wijesinghe
R S Dahanayake
Complied
A.5.6 This is not applicable as there are no Alternate Directors in the Company N/A
A.5.7 This is not applicable for the Company as the Chairman of the Company is not the CEO. N/A
A.5.8 Please refer comment under A.5.7 Complied
A.5.9 The Chairman holds meetings with the NEDs’ without the presence of Executive Directors as and when
necessary.
Complied
A.5.10 During the year, there were no matters of the Company that the Board was unable to resolve
unanimously. However, in the event such matter arises, the Company Secretary records same in
sufficient detail in the Board minutes. These minutes are circulated among Board members prior to the
next meeting.
Complied
A.6 Supply of Information
A.6 The Board was provided with timely information by way of Management Reports, Proposals and Board
Papers during the year. The information was made available by the Company Secretary along with the
agenda at least seven days prior to the meeting in order to provide sufficient, time for preparation. In the
event, information provided was not sufficient supplementary information was provided on the request of
Board Members.
Complied
A.6.1 Members of the Board (mainly executive) are provided with Management Reports and Performance
report on a monthly basis, both in a quantitative and qualitative manner. In addition to this, the entire
Board is provided with Board Papers and other relevant information by the Corporate Management.
Complied
Sathosa Motors PLC Annual Report 2020/2137
Principal Comment Compliance
Status
A.6.2 As a norm, all Board Papers are circulated to the Board Members 10 working days before hand for them
to study the material and prepare themselves for the meeting and within two weeks of the meeting the
decisions taken and the discussion points are minuted and circulated for their review / comments and
finalisation.
Complied
A.7 Appointments to the Board
A.7 All Board appointments are based on the capacity of the individual concerned to pass the “fit and proper”
test, which in turn is based on the qualifications, experience and the value that can be added by the
individual to the Board as well as to the Company. Existing Directors are vested with the autonomy to
critically evaluate the potential candidate in the above test and a final decision Is taken by the Board
collectively.
Complied
A.7.1 The Company does not have a Nomination Committee in place. However, the existing Board members
function in a manner that is similar to a formally appointed Nomination Committee in matters concerning
new appointments to the Board.
Complied
A.7.2 The Board is satisfied with its composition and the level of qualifications, knowledge and experience it
possesses as a whole in order to meet strategic demands facing the Company.
Complied
A.7.3 No new Director was appointed during the year. However, all new appointments are promptly
communicated to the CSE together with brief resume containing the member's expertise, other
Directorships held and Independence for public dissemination.
N/A
A.8 Re-Election
A.8 Directors are re-elected with the sanction of the shareholders at the Annual General Meeting of the
Company. The Articles of Association of the Company requires one third of the Non Directors (other than
nominee Directors of the Major Shareholder) to appear for re-election at each Annual General Meeting.
Recommendations on the re-election of Directors are given by the Company Secretary and the same is
reviewed by the Board.
Complied
A.8.1 In terms of the Articles of Association of the Company, one third of the Non Executive Directors is
required to retire by rotation every year. The re-election of Non Executive Director is sanctioned by the
shareholders at the AGM of the Company
Complied
A.8.2 In the event a new Director is appointed to the Board, he/she will offer himself/herself for election by the
shareholders at the first opportunity.
Complied
A.8.3 Resignation
A.8.3 Before the formal resignation the Directors explain their reasons for the resignation decision and the
same is being minuted under the Board meeting minutes. Also when Directors send their resignation
letters, they explain the decisive factors in the resignation letter for documentation purposes.
Complied
A.9 Appraisal of Board Performance
A.9 Performance of the Board is evaluated from time to time with at least once a year to ensure that
responsibilities are satisfactorily discharged. Appraisal of Board performance is usually coordinated by
the Company Secretary and overseen by the Chairman.
Complied
A.9.1 Performance of the Board for the financial year 2020/21 was assessed at the first Board Meeting
conducted for the financial year 2021/22. The evaluation was done against the targets and goals set at
the beginning of the financial year 2020/21 covering areas such as, strategic direction of the Company,
regulatory and legal compliance, corporate governance, risk management, financial performance,
systems management and internal audit function among others. The Board was satisfied as a whole of its
performance in the year 2020/21.
Complied
Sathosa Motors PLC Annual Report 2020/2138
coRpoRATE GoVERNANcE
Principal Comment Compliance
Status
A.9.2 Members of the Board and Board Committees carried out self-assessments of their performance for the
FY 2020/21 against targets set at the beginning of the year. Minutes of the results of these assessments
were recorded by the Company Secretary and areas for improvement in the FY 2021/22 were identified.
Over the years, both individual and collective performance appraisal of the Board has facilitated
continuous development and improvement.
Complied
A.9.3 When a member’s name is up for re-election the rest of the Board members discuss the value addition
brought by that particular member to the Board and the contribution made thereof. Based on the
discussion points the decision is made on to re-elect. The discussion points are being minuted under the
Board meeting minutes.
Complied
A.9.4 The performance of the Board has been appraised though a formalised process of individual appraisal by
enabling each member to self – appraise on an anonymous basis.
Complied
A.10 Disclosure of Information in Respect of Directors
A.10 Shareholders are informed as and when necessary about changes to the Board, interest in the shares of
the Company and other relevant details through disclosures and financial results released to the CSE for
public dissemination.
Complied
A.10.1 Board of director’s section on pages 18 to 19 Complied
A.11 Appraisal of Chief Executive Officer
A.11 Not applicable as the Company does not have a CEO N/A
A.11.1 Not applicable as the Company does not have a CEO N/A
A.11.2 Not applicable as the Company does not have a CEO N/A
B Directors’ Remuneration
B.1 Remuneration Procedure
B.1 Remuneration payable to the Executive Directors of the Company is recommended by the Remuneration
Committee. Remuneration payable to the Non-Executive Directors of the Company is recommended by
the Board as a whole. No Director is involved in deciding his own remuneration.
Complied
B.1.1 The Remuneration Committee is responsible for recommending the remuneration payable to Executive
Directors. The Committee makes recommendations to the Board, which is responsible for the final
determination.
Complied
B.1.2 The Remuneration Committee appointed by the Board consisted of three Non-Executive Directors out of
which two were independent.
Complied
B.1.3 Details of the Remuneration Committee are given in page 93 of this Report. Complied
B.1.4 Remuneration payable to the Non-Executive Directors is decided by the Board as a whole. The Non-
Executive Directors are paid a monthly fee for being a Member of the Board and its Subcommittees.
Since the Non-Executive Directors are not involved in the day-to-day affairs of the Company they are not
entitled to any performance incentives.
Complied
B.1.5 The Remuneration Committee consulted the Chairman and the Managing Director in providing
recommendations regarding the remuneration of other Executive Directors. The Chairman and the
Managing Director are not remunerated by the Company.
Complied
Sathosa Motors PLC Annual Report 2020/2139
Principal Comment Compliance
Status
B.2 Level and Make Up of Remuneration
B.2 The remuneration package of both Executive and Non-Executive Directors is based on a variety of factors
including their contribution to the Company, market rates of remuneration and their expectation. The
Board is aware of the fact that the level of remuneration should be sufficient enough to attract and retain
Directors of high caliber to direct the Company. Portion of the remuneration of the Executive Directors’
is linked to their performance which is evaluated against targets set and agreed at the beginning of the
period.
Complied
B.2.1 The Remuneration Committee considers the value addition of Executive Directors and their contribution
to the achievement of short and long-term objectives in structuring their remuneration packages so as to
ensure that nothing is paid more than necessary
Complied
B.2.2 As the remuneration of the key personnel are being decided and approved by the Board based on the
evaluation and recommendation made by the Remuneration committee in parity with the current market
rates and packages provided, the Executive Director’s remuneration also follows the same process,
also providing specific targets in the ED’s TOR which directs the ED in achieving the organisational
performance goals overall.
Complied
B.2.3 The Committee conducts an analysis of other companies in the industry in deciding the levels of
remuneration of the Company. If the need arises the Company carries out an annual salary survey in
determining the level of remuneration of key positions and their increment.
Complied
B.2.4 Companies within the Group operate in different market sectors where the remuneration and
employments conditions are substantially different to those of the Company.
Complied
B.2.5 The extent of contribution and value addition towards achieving the set targets and objectives of a
particular year is the key determinant in deciding the performance related element of the remuneration
of the Executive Directors.
Complied
B.2.6 Not applicable as there are no executive share options in the Company. N/A
B.2.7 Provisions of Schedule E of the Code were followed in designing schemes of performance related
remuneration.
Complied
B.2.8 There are no compensation commitments (including pension contributions) in Directors contracts of
service.
N/A
B.2.9 Not applicable as the Company’s objective is to avoid early termination by all means. N/A
B.2.10 The remuneration of Non-Executive Directors reflects the degree of responsibilities and the level of time
commitment extended by them in contributing and adding value to the Company’s decision-making. The
NEDs’ do not have any share options in the Company.
Complied
B.3 Disclosure of Remuneration
B.3 Compensation paid to Key Management Personnel is given in page 156 of this Report. Remuneration
Committee Report is given in the page 93
Complied
B.3.1 Names of the members of the Remuneration Committee and the compensation paid to Key Management
Personnel are given in pages 93 & 156 of this Report respectively.
Complied
Sathosa Motors PLC Annual Report 2020/2140
coRpoRATE GoVERNANcE
Principal Comment Compliance
Status
C Relations with Shareholders
C.1 Constructive Use of the Annual General Meeting (AGM) and conduct of General Meetings
C.1 The Company considers the AGM as the primary tool of communication with shareholders. The Notice of
Meeting inviting all shareholders is given on page 185 of this Report. All shareholders are free to raise
any queries from the Board, on matters relating to the Company at the AGM. The Board encourages an
open dialogue with shareholders at the AGM. Usual proposals adopted at the AGM include the Annual
Report and the Accounts, reappointment of Directors and Auditors and any other matter that require
shareholder approval as per the provisions of the Articles Association of the Company.
Complied
C.1.1 All related papers and the Notice of Meeting are sent to the shareholders 15 days before the AGM through
the Company Secretary
Complied
C.1.2 To receive and consider the Annual Report and Accounts is the first resolution adopted at every AGM.
Further, the Company proposes separate resolutions on each substantially separate issue. Hence
shareholders are given the opportunity to vote separately on each substantial issue.
Complied
C.1.3 The secretariat and admin teams have strict follow up from the day the notice of the meeting along
with the Annual report which is sent to the shareholders. They track the appointed proxies at the time
of the registration of the AGM and the team notes the casted votes in favour of the passed resolutions
accordingly.
Complied
C.1.4 Before the AGM date, the Company Board and the respective sub committees meet and organise how the
AGM should process and run through the possible questions that the management may face. Accordingly
all the committee heads are prepared in an instance where a related question is post to answer them.
Complied
C.1.5 The Notice of Meeting and related documents is circulated to the shareholders 15 working days prior to
the AGM. Summary of the procedures governing voting at the AGM is provided in the proxy form, which is
circulated to shareholders together with the notice of meeting 15 working days prior to the AGM.
Complied
C.2 Communication with Shareholders
C.2 The AGM, Annual Report and other General Meetings (as and when required) are the primary means of
communication with shareholders. Additionally, the Company makes disclosures on material and price
sensitive matters from time to time to the CSE for dissemination among the public.
Complied
C.2.1 Refer comment given under C.2. Complied
C.2.2 The Company’s policy on information dissemination is based on the prime need of creating a fair market
for the Company’s securities among all market participants. Hence the Company focuses on accurate,
timely, relevant and open information dissemination and communication so as to avoid any market
malpractice or doubt.
Complied
C.2.3 The Company has disclosed the contact information in all their publications and always encourages
our shareholders to connect with us. Apart from that in our website we have allocated a separate page
indicating Investor information such as the market price per share
Complied
C.2.4 The point of contact is given in the Corporate information of this Report Complied
C.2.5 The shareholders are free to correspond with the Board either directly or through the Company Secretary
as they wish. The Directors can also be met by the shareholders on appointment. The Company Secretary
keeps a record of all valid correspondence from the shareholders and directs them to the appropriate
Board member who in return would respond as necessary.
Complied
C.2.6 Both the Company Secretary as well as members of the Board act as contact points in relation to
shareholder matters.
Complied
Sathosa Motors PLC Annual Report 2020/2141
Principal Comment Compliance
Status
C.2.7 Responses for shareholder queries directly sent to individual members of the Board are sent by the
respective members. Queries directed to the Company Secretary are responded by the Directors via the
Company Secretary.
Complied
C.3 Major and Material Transactions
C.3 Refer the Related Party Transactions Review Committee Report on page 93 and Note 27 of Notes to the
Financial Statements.
Complied
C.3.1 Refer the Related Party Transactions Review Committee Report on page 93 and Note 27 of Notes to the
Financial Statements.
Complied
C.3.2 Refer the Related Party Transactions Review Committee Report on page 93 and Note 27 of Notes to the
Financial Statements.
Complied
D Accountability and Audit
D.1 Financial Reporting
D.1 The Annual Report of the Board of Directors on the Affairs of the Company making the relevant
declarations is given on page 97 to 101 of this Report.
Complied
D.1.1 Refer Financial Report on Pages 110 to 177 Complied
D.1.2 Audited Financial Statements give a true and Fair view of the operations of the Company, Interim
Financial Statements and other price sensitive disclosures are made by the Company periodically and
as and when required in accordance with the applicable rules and regulations. In these aspects the
Company complied with the requirements of the Companies Act No. 07 of 2007, Registrar of Companies,
Department of Inland Revenue and Sri Lanka Accounting Standards and reporting requirements of the
Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka.
Complied
D.1.3 The Financial statements itself has the respective declaration stating that all standards, legal
requirements are met with and the GM - Finance signs the financial statements below that declaration.
Apart from that the annual declaration is also signed by the GM - Finance confirming the same.
Complied
D.1.4 The Annual Report of the Board of Directors on the Affairs of the Company making the relevant
declarations, is given on page 97 to 101 of this Report
Complied
D.1.5 ‘Directors responsibility for Financial Reporting’, ‘Statement of Auditors’ and the ‘Directors Statement on
Internal Control’ are given on page 102, 105 to 109 & 103 respectively
Complied
D.1.6 ‘Management Discussion and Analysis’ is given on pages 10 to 103 of this Report Complied
D.1.7 Not applicable as there was no serious loss of capital during the year N/A
D.1.8 The Company has set in place an effective and comprehensive system of internal control for identifying,
recording and disclosing related party transactions. This system ratified by the Board ensures that there
is no conflict of interest when transacting with related parties and that there will be no bias or favourable
treatment. All related party transactions as defined in Sri Lanka Accounting Standards – LKAS 24
‘Related Party Transactions’ are disclosed in Note 27 to the Financial Statements.
Complied
D.2 Risk Management and Internal Control
D.2 The Company operates with a sound system of internal control within an integrated risk management
framework that is formulated and ratified by the Board. This system ensures that Shareholders
interests and Company assets are safeguarded. The Board Audit Committee is responsible to the Board
for ensuring the effective operation of the system of internal controls to achieve the objectives of the
Company.
Complied
Sathosa Motors PLC Annual Report 2020/2142
coRpoRATE GoVERNANcE
Principal Comment Compliance
Status
D.2.1 The Board is responsible for formulating and implementing appropriate systems of internal control for
the Group and in turn assessing its effectiveness. The Group's internal audit division assists the Board
of Directors and the Audit Committee in carrying out the above task. Any internal control system has its
inherent limitations. The Board is aware of the inherent limitations and has taken appropriate steps to
minimise same. The Directors' responsibility for maintaining a sound system of internal control is given
in the Board of Directors' Statement on Internal Control on page 103
Complied
D.2.2 The confirmation of the risk assessment conducted and the principal risks faced by the Company are
disclosed in the Risk Management Review which is given on pages 45 to 58 of this Report.
Complied
D.2.3 The Company Internal Audit function has been carried out by the Holding Company internal audit team
and overseen by the Board Audit Committee.
Complied
D.2.4 Operation and review of internal controls is done by the Internal Audit function as a continuous and
on-going process including internal control over financial reporting. These reports are forwarded to
the Audit Committee for review to ensure that the system of internal control and the risk management
process are effective. The Board is responsible for making disclosures on internal controls. In 2020/21
the Board reviewed the effectiveness of the system of internal control in place within the Company and
directed to upgrade same as required
Complied
D.2.5 Refer page 103 for the ‘Directors Statement on Internal Controls’. Complied
D.3 Audit Committee
D.3 Accounting policies and financial reporting principles of the Company are formulated so as to ensure
compliance with all applicable standards, rules and other regulations. At times the guidance of the
External Auditors is also sought in this process.
Complied
D.3.1 The Audit Committee comprises three Independent Non-Executive Directors and one Non-Executive
Director of the Board. The Chairman of the Committee is an Independent Non-Executive Director
Complied
D.3.2 SML has developed a Charter for the Audit Committee clearly defining the objective/duties of the
Committee, each member’s duties and responsibilities and administrative arrangements etc.
Complied
D.3.3 Disclosures
D.3.3 The Audit Committee report enhances a descriptive note regarding the Audit committee and how they
discharge their duties and also show how they have allocated their valuable time by participating in the
meetings and decision making. (Ref. Pages 91 to 92)
Complied
D.4 Related Party Transaction Review Committee
D.4 As a group norm when transacting with related parties of the group the responsible parties stress on
the price at which the transaction takes place to make sure that neither the buyer nor the seller will gain
extra ordinary gain through the same.
Complied
D.4.1 Company has considered the guidelines provided in the LKAS 24 in defining the related parties, in
developing the charter for the Related Party Transaction Committee.
Complied
D.4.2 In compliance with the requirements of the voluntary code of the Corporate Governance the Related Party
Transaction Review Committee comprise of three Non-Executive Directors who are also independent.
Also the Executive Director attends the meetings upon invitation by the committee.
Complied
D.4.3 Company has developed a charter for the Related Party Transaction Review Committee clearly defining
the objective/duties of the Committee, each member’s duties and responsibilities and administrative
arrangements etc.
Complied
Sathosa Motors PLC Annual Report 2020/2143
Principal Comment Compliance
Status
D.5 Code of Business Conduct and Ethics
D.5 Refer pages 26 to 31 of this Report. – Corporate governance – Board of Directors. Complied
D.5.1 Sathosa Motors PLC has a Code of Ethics which includes the code of conduct and is circulated to
Directors and all employees. The Board ensures that the Directors and the employees strictly adhere to
the Code of Ethics of the Company in their duties so as not to adversely affect the brand of access in any
manner. The violation of the code of ethics is an offence which is subject to disciplinary action.
Complied
D.5.2 The price sensitive transactions relating to Investments are monitored through the Audit Committee.
Significant matters are informed to the Board for further action
Complied
D.5.3 Refer the report of the Related Party Transaction Review Committee on pages 94 to 95 Complied
D.5.4 Refer page 27 – Corporate Governance – Board of Directors. Complied
D.6 Corporate Governance Disclosures
D.6 This Report on the Company’s compliance with the CA Sri Lanka/SEC ‘Code of Corporate Governance’
meets this requirement
Complied
D.6.1 Same as D.5 Complied
E Institutional Investors
E.1 Shareholder Voting
E.1 Board encourages the active participation of Institutional shareholders at the AGM. In addition, Executive
Directors meet institutional shareholders upon their request to discuss about the Company’s past
performance and future strategies.
Complied
E.1.1 The most structured and continuous dialogue the Company has with the shareholders is the AGM. The
Chairman is available to meet shareholders at the end of each AGM and can be met on appointment on
other occasions. The Chairman then communicates the views and concerns of shareholders to the Board
as a whole.
Complied
E.2 Evaluation of Governance Disclosure
E.2 Institutional investors are encouraged to give due weight to all relevant factors drawn to their attention in
evaluating Companies’ governance arrangements.
Complied
F.1 Investing/Divesting Decisions
F.1 The Company encourages individual shareholders to carry-out adequate analysis or seek independent
advice in investing or divesting decisions. The Company facilitates this process by providing information
necessary for the same on a timely and unbiased basis.
This Integrated Report prepared by the Company gives sufficient information to shareholders to carry out
their own analysis of the Company and its operations.
Complied
F.2 The Company encourages individual shareholders to participate in General Meetings and exercise their
voting rights.
Complied
G Internet of things and cyber security.
G.1 Refer Risk Management on pages 45 to 58 of this Annual Report (Information & Technology Risk) Complied
G.2 The functions of the CISO is carried out by the Manager IT reported to Executive Director Complied
G.3 Relevant risks are discussed at internal audit report and reported the same to Audit committee. High risk
matters referred to the Board for further actions
Complied
G.4 Address issues at IRM annual Audit done by an independent third party and issues reported through a
Management Letter
Complied
G.5 Company adheres to the required level of cyber security by analysing the gravity of the requirement. IT
Department takes necessary precautionary measures to mitigate related risks.
Complied
Sathosa Motors PLC Annual Report 2020/2144
Principal Comment Compliance
Status
H Environment, Society and Governance (ESG)
H.1 Refer Pages 62 to 87 of the Annual Report - Human, Intellectual, Manufacturing, Natural, Social and
Relationship Capital
Complied
H.1.2 Refer Pages 62 to 87 of the Annual Report Human, Intellectual, Manufacturing, Natural, Social and
Relationship Capital
Complied
H.1.3 Refer Pages 62 to 87 of the Annual Report Complied
H.1.4 Refer Pages 26 to 44 of the Annual Report Corporate Governance for this requirement Complied
H.1.5 SML understands its role and responsibility in ESG reporting and ensure that the Company adheres to the
ESG reporting requirements.
Complied
Statement of Compliance under Section 168 of Companies Act No. 7 of 2007
Principal Description Comment Compliance
Status
Section 168 – Contents of Annual Report
(1) (a) The nature of the business of the Group and the Company
together with any change thereof during the accounting
period
Notes to the Financial Statements Complied
(1) (b) Signed Financial Statements of the Group and the
Company for the accounting period completed
Financial Statements Complied
(1) (c) Auditor’s Report on the Financial Statements and any group
Financial Statements
Independent Auditors’ Report Complied
(1) (d) Change in accounting policies made during the
accounting period
Notes to the Financial Statements Complied
(1) (e) Particulars of entries in the interests register made during
the accounting period
Annual Report of the Board of
Directors
Complied
(1) (f) Remuneration and other benefits of Directors during the
accounting period
Notes to the Financial Statements Complied
(1) (g) Total amount of donations made by the Company during the
accounting period
Annual Report of the Board of
Directors
Complied
(1) (h) Names of the persons holding office as Directors of the
Company as at the end of the accounting period and the
names of any persons who ceased to hold office as Directors
of the Company during the accounting period
Board of Directors Complied
(1) (i) Amounts payable by the Company to the person or firm
holding office as Auditor of the Company as audit fees and
as a separate item, fees payable by the Company for other
services provided by that person or firm
Notes to the Financial Statements Complied
(1) (j) Particulars of any relationship (other than that of Auditor)
which the Auditor has with or any interests which the Auditor
has in, the Company or any of its subsidiaries
Annual Report of the Board of
Directors
Complied
(1) (k) Be signed on behalf of the Board by two Directors of
the Company
Financial Statements Complied
coRpoRATE GoVERNANcE
Sathosa Motors PLC Annual Report 2020/2145
enteRpRIse RIsK MAnAgeMent
SML’s risk management process continues to evolve to ensure it is reflective of the
shape of the business and its operations. The internal audit function has been founded
to be fully aligned with the Board and the Board subcommittees to further sharpen the
focus on the Company’s internal risk and control environment. The Company recognises
that a consistent, agile, and responsive approach to risk management is crucial to the
sustainable delivery of its business objectives.
SML`S Direction to Risk Management
Company follows the three lines of defence concept to strengthen our overall
responsibility and mitigate the risk to acceptable level. The Three Lines of Defence
model distinguishes among three groups (or lines) involved in effective risk
management. In the first line of defence, the risk is owned and managed by operational
managers and they are responsible for implementing corrective actions to address
process and control deficiencies. The
second line of defence provides the
policies, frameworks, tools, techniques
and support to enable risk and
compliance to be managed in the first
line and conducts monitoring to manage
risk effectively. The third line of defence
is executed by the internal auditors as the
governing body and Senior Management
with comprehensive assurance based on
the highest level of independence and
objectivity within the organisation.
External Audit
Regulator
1st Line of Defence 2nd Line of Defence 3rd Line of Defence
Internal Audit
Financial Control
Security
Risk Management
Quality
Inspection
Compliance
Management Controls
Internal Control Measures
COVERING BODy/AUDIT COMMITTEE
SENIOR MANAGEMENT
Sathosa Motors PLC Annual Report 2020/2146
ENTERpRIsE RIsK MANAGEMENT
Risk Management Responsibility
Board of directors The Board is responsible for maintaining a sound risk management policy and monitor & modify the policy
as required to safeguard the stakeholders’ interest. The Board is responsible to clearly identify as to who is
responsible for implementation of each element of the plan, facilitate and authorise those who identified to
achieve each such element of the plan and allocate the resources for effective implementation of the plan.
Board subcommittees
Responsible for
overseeing the Board in
setting risk strategies,
polices, framework,
models & procedures in
liaison with management
and in the discharge
of its duties relating to
corporate accountability
and associated risk in
terms of management
assurance and reporting.
Audit Committee
The key functions of the
Audit Committee are
usually associated with
internal control and risk
management, financial
reporting, compliance
with legal and regulatory
requirements and
relevant issue related to
the process of external
and internal audit.
Related Party Transaction
Review Committee.
The objective of the
Committee is to ensure
appropriate authority
relating to the related
party transactions
exposures, policies on
conflicts of interest or
potential conflicts of
the interest between
its subsidiaries and
other respective related
parties is exerted. The
Committee also performs
the oversight function
on behalf of the Board
in complying with the
Listing Rules of the
Colombo Stock Exchange
and the Code of Best
Practices on Related
Party Transactions issued
by the Securities and
Exchange Commission Sri
Lanka.
Remuneration Committee.
The Remuneration
Committee`s main
objective is to determine
the framework, broad
policy and levels of
remuneration for the
executives as deemed
appropriate. This
framework includes,
but is not limited
to, establishing and
stretching performance
related elements of
reward and is intended
to promote the long term
success of the Company.
Strategic Planning Committee.
The Committee assists the Board and the Management in fulfilling its responsibilities relating to strategic
plans, to determine specific long-term goals and business objectives to be in the Company’s best interest. This
includes helping the Board and the Management to identify opportunities such as mergers and acquisitions,
joint ventures, new markets or product lines, acquisition or disposition of capital assets, equity and debt
funding and modifications of existing capital structure, dividend policy, and stock offerings, repurchase
programmes etc. Additionally, the Committee evaluates the progress of execution and effectiveness of the
strategic plan.
Sathosa Motors PLC Annual Report 2020/2147
Management Corporate Management
Corporate management team ensures that the
organisation is operating adequately and effectively
by taking on responsibility for implementation of
strategies and allocating resources towards success
by reviewing operating and financial performance of
Company’s operational divisions/subsidiaries. The
management also assures that the Company is in
line with internal control framework in all material
aspects.
Group Risk Management
The Audit Committee performs quarterly based risk
management assessments through the Internal
Audit Reports and findings of the Company and
its subsidiaries and reviews the internal control
processes, and evaluates the adequacy and
effectiveness of the risk management and internal
control system. The Committee also seeks the
observations of the Independent External Auditors of
the Company.
operations Each business unit’s risk management function is led
by the respective head of the unit, supported by its
General Manager. Executive Directors together with
the Senior Management considers the operational
risks that arise from the execution of the Company’s
business including risks that arise from changes
in the macro and micro environmental factors. The
consolidated risks and the mitigating actions are
presented to the Strategic Planning Committee and
the Audit Committee for review.
The Board
The ultimate
responsibility for setting
the risk appetite for the
Effective Management
of risk rests with the
Board. Acting within the
authority delegated by
the Board, the Strategic
Planning Committee and
the Audit Committee
review specific risk
profiles and receives
regular reports on risk
management, which
include the Company’s
portfolio trends, policies,
standards and soundness
of internal controls,
infrastructure and
regulatory compliance.
These Committees are
authorised to investigate
or seek any information
relating to an activity
within the Terms of
Reference.
Internal Audit
The Company Internal
Audit Department
focuses on providing an
independent oversight
to the Board and the
Audit Committee on the
processes and controls
that help to mitigate
major risks.
Sathosa Motors PLC Annual Report 2020/2148
ENTERpRIsE RIsK MANAGEMENT
Risk Management Process
Identify the Risk
Measure /Rating Risks
Examine Solutions
Implementation Solutions
Monitor Results
Risk Management Process
to mitigate impacts. In addition to the
above the Company’s Risk Management
process would cover curbing the loss of
valuable resources including time, assets,
income, property and people, protecting
the reputation and public image of the
organisation, preventing or reducing legal
liabilities and enhancing the Company’s
smooth operations.
Risk Matrix for Risk Assessment
The following risk matrix is developed as
a technique for analysing and evaluating
risk. This matrix mainly focuses on risk
analysis based on qualitative perception.
The likelihood of occurrence of a risk is
determined based on past experience,
industry and organisational trends and
judgment. The severity of a risk is the
potential financial or a non-financial loss/
damage to the Organisation. This can
also be determined based on experience,
discussion, calculation, judgment etc.
Based on likelihood and severity, risks
are categorised into three categories
where relevant actions are proposed.
Accordingly risks need to be monitored,
communicated and controlled. These
three areas are identified based on the
risk tolerance (appetite) limits agreed as
given below.
SML defines the pivotal area of Risk
Management as the organised application
of management policies, procedures
and practices to identify potential risks,
measure their frequency and severity,
examine alternative solutions, decide
which solution to use and monitor the
results. Through a dynamic process,
risks are identified and evaluated at
appropriate levels throughout the
Company. This process is regularly
reviewed by the Management Committee
as a part of the Company’s organisational
and operational approach to Risk
Management.
The Company risk management process
ensures option to accept, avoid, control,
or transfer a risk. Moreover, the Company
has set up an effective plan to prevent
and mitigate risk along with mechanisms
to reduce the impact if and when a
risk occurs. The timely recognition and
appropriate handling of these operational
threats is incorporated into the Company’s
Risk Management process.
The Board accepts overall responsibility
for risk management and determines
the nature and extent of the principal
risks to be taken and assesses the
effectiveness of the risk management and
internal control systems that are in place
IMPA
CT
Significant Plan for action (Mitigate or transfer) Immediate action (Mitigate or avoid) Immediate action (Mitigate or avoid)
Moderate No action (Accept or avoid) Plan for action (Mitigate or transfer) Immediate action (Mitigate or share)
Minor No action (Accept) No action (Accept) Plan for action (Mitigate or transfer)
Low Medium High
LIKELIHOOD
Sathosa Motors PLC Annual Report 2020/2149
Risk Assessment
The Board and the Audit Committee analyses the level of risk associated with the Company’s principal risks and whether these risks
are consistent with the Company’s overall appetite in relation to these risks. The “heat map” sets out the positioning of the Company’s
principal risks by impact and probability both before and after any mitigation measures are taken into account.
The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that
would threaten its business model, future performance, solvency, or liquidity.
IMPA
CT
Significant 1 2 4 11 7 8 9 13 3 5 12 6 10 14
Moderate 1 2 4 11 7 8 9 13 3 5 12 6 10 14
Minor
Low Medium High
LIKELIHOOD
Risk position before mitigation action Risk position after mitigation action
Mitigating Top Risks
The Company determines the top risks through a review process that analyses the risks facing the company and its business units, in
relation to SML’s near to medium-term strategy and longer-term aspirations, in the context of the external and internal environment.
Top risks include those risks and opportunities that have a direct potential impact on income, expenditure and capital as these are the
main drivers of the approved financial risk appetite and tolerance metrics.
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Increased Increased
1
Finance/Credit
Risk
Probability of loss inherent in
financing methods which may impair
the ability to provide an adequate
return.
Credit risk is the possibility of a loss
resulting from a buyer’s failure to
meet contractual obligations.
It refers to the risk that a seller
may not receive the owed
receivable balance, which results
in an interruption of cash flows and
increased costs for collection.
Interest rate risk exists in an
interest-bearing asset and liabilities,
such as deposits, loans or bonds,
due to the possibility of a change in
the asset’s value resulting from the
variability of interest rates.
Evaluate the customer
creditworthiness before allocating
the credit facilities, introduced
additional discounts for early
settlements, closely monitor
until settlement and obtain bank
guarantees as collaterals to mitigate
the credit risk at affordable level.
Evaluate the recoverability of
outstanding balances at each
reporting period and make the
necessary adjustment to the
financial statements.
Liquidity risk is managed by effective
utilisation of existing bank facilities.
Negotiate with banks to obtain the
competitive rates.
Manage the cash flow and working
capital at its optimal level.
Mitigating the credit risk
through weekly recovery
meetings and effective customer
creditworthiness evaluations.
Sathosa Motors PLC Annual Report 2020/2150
ENTERpRIsE RIsK MANAGEMENT
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Unchanged Unchanged
2
Technological
risk
Company is reliant on sufficient
management and technical skills,
including qualified professionals
such as technicians, automobile
engineers and operators as well as
seasoned managers, to improve and
optimise our existing businesses and
advance the Company growth
Company has a strategic talent
management framework in
place that spans the key talent
management drivers of attraction,
development and retention.
Company focus on developing levels
of competence, as well as in a wide
range of skills development and
learner-ship programmers, whereby
technical staff is sent to ISUZU Japan
on training and to face the technical
competitions organised by them.
Succession management and
development is crucial for our
growth and the development of
critical skills in our businesses. The
company has refocused its critical
skills programmers to address the
skills gaps.
Company provides attractive
performance-based incentives to
retain the valuable employees.
Keep developing that acquired
new technologies on a par with
global industry practices.
Unchanged Unchanged
3
Compliance risk
This risk is associated with changes
in Government policies, laws,
regulations and statutes. Compliance
Risk relates to a company being
able to comply with all the laws,
regulations and statutes applicable
to a country.
The Company constantly keeps
abreast of changes to the Regulatory
framework to mitigate the risk
associated therein.
Company is focused on identifying
changes in the regulatory landscape
and ensuring that Company is
prepared to respond to these
changes.
Company has systems and
processes in place to ensure
compliance with applicable laws and
regulations.
Setting the appropriate policies and
procedures to improve the control
environment.
Company adopted its risk
mitigation strategies to maintain
a high standard of regulatory
compliance.
Sathosa Motors PLC Annual Report 2020/2151
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Increased Increased
4
Competition
Risk
Risk due to increase in competition,
has the possibility of reducing
market share and margins.
Increasing productivity and
efficiency in order to ensure that
the prices remain competitive
despite increasing efficiency
through Research and Development
investments and the adoption of best
practices.
Maintain the differentiation from
competitors through offering the
best product and attractive after
sales services.
Company remained alert
with regard to ensuring its
competitiveness. The Company
has always been on alert with the
re-condition market.
Increased Increased
5
Socioeconomic
and political
risk
Company’s ability to sustain
the business and execute on its
growth strategy depends on key
macroeconomic factors that drive
near to medium-term business plans
and long-term strategic decisions.
Unexpected changes or sustained
periods of unfavorable macro-
economic conditions may impact
earnings and profitability, cash flow,
liquidity and growth.
Our planning assumptions take
account of important near to
medium-term and long-term drivers
related to key macro-economic
factors.
Adhering to government direction
with regard to COVID-19 pandemic.
Company monitors the external
environment continuously and
adjusts planning assumptions
accordingly.
Company implemented the Business
Performance Enhancement
Programmes to assist the
organisation in responding to
unfavorable macroeconomic
conditions.
Company is closely monitoring
the Board-approved risk appetite
measures for specific financial
metrics and actively manages cash
flow and liquidity.
Due to COVID-19 impact during the
year, many economic activities of
the country were affected.
Sathosa Motors PLC Annual Report 2020/2152
ENTERpRIsE RIsK MANAGEMENT
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Increased Increased
6
Operation Risk
Poor level of long-term
macroeconomic factors as a result
of market weaknesses may have
adverse impacts on capital available
to achieve growth targets. This may
impact on the Company’s ability to
timely execute its growth targets in
line with the strategy.
Company is focusing on identifying
the necessary business development
and other activities that should
be prioritised and executed in this
current low capital environment.
Company is aligning capital
allocation principles with Company
earnings growth and asset return
targets, taking balance sheet and
funding risks into consideration.
Company is refocusing its capital
portfolio to enable flexibility in terms
of investment strategies and choices
aligned to Company financial growth
and return targets.
The Company changes its operation
to adhere to the impact from
COVID-19 pandemic to ensure the
growth target of the Company.
Operational expansion to new
locations and introduce new
segments to the business operation.
Due to import restriction on
vehicles and high competition for
resale vehicle market.
Sathosa Motors PLC Annual Report 2020/2153
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Unchanged Increased
7
Information
Technology
related Risk
Breakdowns and failures in
information systems and the use
of obsolete systems will adversely
affect the smooth operations of the
Company.
Facilitating internet and access to
the system for employees to work
from home could be susceptible to
cyber-attacks/viruses.
A well designed and secured
Information Technology security
infrastructure has been implemented
throughout the organisation. The
security infrastructure includes:
recovery strategies, data back –ups
stored at off-site locations, virus
scanners, proxy servers etc.
Compliance of security infrastructure
is regularly monitored.
The Company carries out regular
meetings with the IT service provider
to identify the requirement to
upgrade the present system and in-
house repairs initiated.
Making use of various tools such as
proxies, firewalls and administrative
restrictions to allow for the
organisation to alleviate or decrease
downtime and increase operational
efficiency.
Organisation-wide awareness on IT,
cyber security and training staff on
various ways of handling sensitive
information.
Evaluating IT and cyber security
risks, discussing with the
management regarding the potential
outcomes and creating a course of
action to minimise the risk.
Thoroughly evaluating and
regulating external suppliers
providing IT infrastructure/services
to ensure security and smoothness
of operations
Centralisation of IT system to
standardise the process.
Increase the remote access to the
system due to implementation of
work from home.
Sathosa Motors PLC Annual Report 2020/2154
ENTERpRIsE RIsK MANAGEMENT
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Unchanged Unchanged
8
Fraud risk
Fraud risk arises due to weaknesses
in the internal controls, which could
result in financial losses and loss of
customer confidence.
The Internal Audit Department
conduct audits on a regular basis in
the areas, which are susceptible to
the occurrence of frauds.
Authority and approval limits are
implemented for all the functions of
the Company, making the employees
accountable for their actions.
Ensuring appropriate segregation of
duties.
Every key activity is subjected to the
scrutiny of another suitably skilled
and authorised employee.
When a fraud is detected, immediate
remedial action is taken to prevent
repetition.
Introduce whistleblowing policy and
procedures to the Company.
Company has managed to
continue with robust internal
controls to mitigate risks
associated with frauds and build-
up ethical working environment
for employees.
Sathosa Motors PLC Annual Report 2020/2155
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Unchanged Unchanged
9
Reputation Risk
Reputation risk is the risk that an
event or incident could damage the
image of the Company.
Having in place a budgetary process
and a budgetary control mechanism
on a monthly basis to ensure that the
Company’s performance is in line
with its targets.
Adopting stringent quality assurance
policies with regard to inventory &
services bought from third parties as
well as the inputs.
Ensuring all tractable stakeholders
including customers & suppliers are
in compliance with relevant laws and
regulations.
The Code of Ethics of the Company
is expected to be followed by all
without any exception.
Maintain suggestion box at each
location, customer inquiry/
suggestions through company
website, introduce SMS based spare
part verification system to promote
ISUZU genuine spare parts.
Company’s policies, procedures
and best practices continued
to be the foundation of its
uncompromising approach to
ethical and transparent business
during financial year.
Increased Increased
10
Foreign
currency risk
Foreign currency risk, also known as
exchange rate risk, is the financial
risk arising from fluctuations in the
value of a base currency against a
foreign currency in which a company
has assets or obligations.
There are three types of foreign
exchange risk. Those are Transaction
risk, Translation risk & Economic
risk. Company is mainly faced to
Transaction risk.
Continuously monitoring the
movements of the exchange rate
to identify potential exchange rate
trend.
Enter into forward rate booking
agreements with banks to mitigate
the foreign currency fluctuation risk.
Operating foreign currency bank
accounts to minimise the currency
conversion risk.
Negotiate with banks to get the best
exchange rate for foreign currency
conversions.
Exchange rate fluctuation
negatively affected the Company’s
operations.
Sathosa Motors PLC Annual Report 2020/2156
ENTERpRIsE RIsK MANAGEMENT
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Unchanged Increased
11
Liquidity Risk
Liquidity risk is finance risk that the
Company not meeting their short
term financial obligation, especially
because inability to convert assets in
to cash without incurring a loss.
Continuously monitor the cash flow
position and manage the cash flow of
the Company to ensure the optimal
level of working capital.
Obtain bank facilities to meet the
unexpected liquidity demands at a
competitive rate.
Planning and monitoring of
operational targets, cash flow
forecasts and capital expenditure.
Uncertainty in the market due
to the impact of the COVID-19
pandemic on the economy.
Unchanged Increased
12
Supply Chain
Risk
Supply chain risk is the probability
that an inbound supply problem will
disrupt a business. This includes
issues with suppliers, shipments
and markets that disrupt production,
operation & sales. This risk creates
reputational issues.
Enter into long-term supply
contracts with suppliers and
ensure more favorable conditions
in the contract by using the strong
negotiation position of the company.
Maintain good relationships with
suppliers.
Introduce new product lines which
are not restricted to import by
Government.
Import restriction by Government
was directly affected the core
business of the Company.
Sathosa Motors PLC Annual Report 2020/2157
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Increased
13
Human capital
and labour risk
Failure to attract and retain key
management could lead to a lack
of necessary expertise or lack of
continuity in executing strategy.
Potential impact on operational
performance due to COVID-19 as
there may be health and safety
concerns for employees.
Recruit /retain of the best talent pool
in the industry.
Conducting periodic performance
appraisals of staff to monitor the
performances.
Continuous training and development
of staff both on-site and off-site.
Adopt market-based compensation,
including appropriate incentive
packages.
Introduce whistleblowing policy and
procedures to the Company.
Offices/ branches adhere to the
DReAM concept to control COVID 19
by:
Maintaining distance.
Wearing mask.
Practicing personal hygiene.
Notifying relevant authorities
in case of complications or
symptoms.
Adhering to government directions
with regards to the work
environment.
Observing the bio-secure bubble
concept whereby, the number of
employees working in a particular
area is limited to and secluded. This
reduces health and safety concerns
and allows for rapid implementation
of COVID-19 control measures.
Company placed a strong
emphasis on retaining key
talent through performance
recognition and reward schemes,
succession planning, leadership
and career development
programmes, ensuring that high
quality employees are retained,
despite the highly competitive
environment.
Sathosa Motors PLC Annual Report 2020/2158
ENTERpRIsE RIsK MANAGEMENT
Risk Risk description Risk mitigation strategies 2019/20 2020/21
Increased
14
Procurement
Risk
Material/services price variations
and non-availability of them will
adversely affect the progress of the
business.
Reduction in the ability to supply
spare parts due to the ongoing
pandemic as vendors may have
difficulties in securing the supplies.
Potential delays expected while
receiving spare parts leading to an
overall decline in performances
across various business activities.
Delays due to import restrictions
imposed by the government,
affecting the overall operation and
increasing lead times due to surge in
prices of imported supplies.
Establishing relationships with many
global and local suppliers for raw
materials and commodities in order
to reduce over-dependency on a
single supplier/brand.
Entering into forward contracts with
suppliers.
Introduce supplier registration
process.
Regular supplier evaluations
are conducted to ascertain their
product capacity, product quality,
performance, risk and sustainability
of suppliers.
The procurement risk has
primarily increased due to the de-
valuation of the Sri Lankan Rupee
and import restriction imposed by
the government.
The prevailing pandemic situation
has increased the lead times of
procurement.
Sathosa Motors PLC Annual Report 2020/2159
opeRAtIng LAndsCApe
Global Outlook
Impacted by the COVID-19 pandemic, the
global economy continued to decelerate
in 2020. The global economy contracted
by 3.3% in 2020, compared to a growth
of 2.8% in 2019, according to the
International Monetary Fund. For most
nations, the immediate dual priority was
to ensure adequate resources for health
care systems and to limit economic
damage.
Global unemployment was one of
the worst affected by the pandemic.
According to the International Labour
Organisation, the global reduction in
work hours in the second quarter of 2020
compared with the fourth quarter of 2019
was equivalent to the loss of 400 million
full-time jobs.
While manufacturing and other
production sectors had a slow recovery
during the year, the services and
telecommunications sectors grew in 2020
on increased demand.
However, the global economic momentum
is forecasted to pick up supported by
anticipated vaccine powered recovery in
the second half of 2021, and continued
adaptation of economic activity.
Advanced economies are expected to
recover faster than most emerging
market economies, due to increased
access to vaccines and large policy space
available to maintain accommodative
macroeconomic policies for an extended
period. Accordingly, advanced economies
are projected to grow by 5.1% and 3.6%, in
2021 and 2022, respectively.
Sri Lankan Economy
The Sri Lankan economy contracted by
3.6% in 2020 recording a negative GDP
growth rate vis a vis a growth rate of 2.3%
in 2019.
The major reasons for the downturn
were mobility restrictions and other
containment measures imposed locally
and internationally to prevent the
spread of COVID-19. This impacted real
economic activity across all sectors,
but the industrial sector was one of
the worst affected. Services also had a
notable contraction due to the pandemic
driven deceleration in transportation,
accommodation services and other
personal services.
However, the information and
communication sector showed a 13.7%
growth during the year fuelled by the
demand for digital education, banking,
shopping, and other activities during the
lockdown.
Unemployment rate in Sri Lanka also rose
above 5% for the first time since 2009, as
labor-force participation rate declined,
due to uncertainties surrounding the
pandemic.
The overall size of Sri Lanka’s economy
fell to US dollars 80.7 billion in 2020 from
US dollars 84.0 billion in 2019 due to the
pandemic’s overall impacts.
Resulting from the combined effects of
the contraction in Gross Domestic Product
(GDP) at current market prices and the
depreciation of the Sri Lankan Rupee
against the US dollar, GDP per capita
declined to US dollars 3,682 in 2020 from
US dollars 3,852 in the previous year.
Inflation
Inflation remained broadly within the
desired range of 4-6% during 2020,
while core inflation continued to stay low
throughout the year. Subdued demand
conditions, well anchored inflation
expectations, and downward revisions
to administered prices helped maintain
inflation at the targeted level, despite
upward pressures from food inflation,
particularly due to elevated prices of
certain essential food items.
Headline inflation (Colombo Consumer
Price Index - CCPI based), recorded at
4.2% by end 2020, compared to 4.8%
recorded in December 2019. Headline
inflation (National Consumer Price
Index – NCPI base), which attaches a
relatively high weight to food items,
broadly followed the trend in CCPI based
headline inflation. NCPI based year-on-
year headline inflation decelerated to
4.6% by end 2020, compared to 6.2%
recorded in December 2019. Meanwhile,
core inflation, which excludes the
subcategories of volatile food, energy,
and transport from headline inflation, and
reflects the underlying inflationary trends
by removing seasonal price fluctuations
and the effects of key administratively
determined prices, remained subdued
throughout 2020, as per the CCPI and
the NCPI. Accordingly, year-on-year core
inflation based on the CCPI and the NCPI
decelerated to 3.5% and 4.7% respectively
by end 2020, compared to 4.8% and 5.2%,
recorded at the end of 2019, respectively.
Further, CCPI core inflation was 3.1%
while NCPI core inflation was 4.3% by
March 2021.
Interest Rates
Interest rates in 2020 were relaxed by
the Central Bank to support economic
recovery of industries affected by the
COVID-19 pandemic.Monetary policy
efforts to contain interest rates and
improve liquidity helped improve the
downward trend of the overall economy
and stabilise it during the year. The
Standing Deposit Facility Rate (SDFR)
and the Standing Lending Facility Rate
(SLFR), were reduced by a total of 250
basis points on five occasions to their
historically lowest levels of 4.50% and
5.50%, respectively, during 2020. The SRR
Sathosa Motors PLC Annual Report 2020/2160
applicable on rupee deposit liabilities was reduced on two occasions by a total of 3%
age points to 2.00% during 2020.
The Central Bank also implemented regulatory measures to reduce excessive interest
rates charged on certain financial products, including credit cards and pawning, to
help ease the monetary policy transmission process and to support borrowers. Based
on the operational and regulatory measures, aggregate market lending rates declined
to historic lows, and new lending rates declined to single digit levels. This led market
deposit rates to also decrease substantially.
Exchange Rate
The depreciating Sri Lanka Rupee against the JPY had a negative impact on the import
sector during the year. While essential goods imports continued despite the pressures
on the exchange rate, non-essential goods imports such as vehicles and spare parts
were restricted by the government as a way of managing the exchange rate fluctuation.
As at the financial year end of 31 March 2021, the Sri Lanka Rupee traded at a nominal
rate of LKR 1.7987 against the JPY. (CBSL: JPY-LKR Indicative Rate Chart | Central Bank
of Sri Lanka
Source: cbsl.gov.lk
nominal exchange Rate - JpY
Apri
l 202
0
May
202
0
June
202
0
July
202
0
Augu
st 2
020
Sept
embe
r 20
20
Oct
ober
202
0
Nov
embe
r 20
20
Dec
embe
r 20
20
Janu
ary
2021
Febr
uary
202
1
1.65
1.70
1.75
1.80
1.85
1.90
The depreciation of the rupee increased the cost of vehicle and spare parts imports
during the reporting year. The Government’s import policy restrictions on vehicles
and spare parts to manage the foreign currency outflow impacted both of SML’s key
business segments. Further, the Government imposed restrictions on opening LC at
sight, permitting LCs only on issuance with a minimum 180 days credit period. This
regulation further increased the cost of spare parts. Inability to import new vehicles and
higher cost of spare parts imports, lowered the Company’s profitability in the reporting
financial year.
Automobile Industry
The automobile industry performance in 2020/21 financial year, was impacted by the
COVID-19 lockdown as well as the state imposed ban on vehicle imports.
opERATING LANdscApE
According to the Registrar of Motor
Vehicles, new motor vehicle registrations
declined by 44.8% during the year as
a result of policy measures to curtail
vehicle imports, including the importation
of motor vehicles for personal use. As a
result, a notable reduction in registration
of vehicles were seen across all vehicle
categories with new registrations of
motor cars, goods transport vehicles and
dual purpose vehicles declining by 45%,
24%, and 29%, respectively.
Company Performance review
Despite the challenging external
environment, Sathosa Motors PLC (SML)
performed relatively better compared
to the overall industry performance.
While SML’s passenger vehicle segment
was heavily impacted by government
regulatory measures, the commercial
vehicle category continued imports for
a limited period under essential imports
category.
With the increase in demand for the
domestic essential services sector during
the year, the requirement for island-wide
transportation of goods offered SML an
opportunity to import vehicles to serve
this need. However these imports were
subject to case by case approval of the
Import Controller, and therefore were
limited.
Vehicle maintenance, servicing and
spare parts segment grew during
the few months post lockdown while
mobility restrictions during COVID-19
lockdown affected customer servicing.
Revenue generated from spare parts sale
increased to LKR 425Mn from LKR 364Mn
in 2020, which is a growth of 16.5%. In
2020, the Company recorded its highest
spare parts revenue, a historic high for
the spare parts business segment.
Sathosa Motors PLC Annual Report 2020/2161
Under the ‘new normal’, investments into
the repair and maintenance of existing
workshops in strategic locations and the
go-to market strategies in our lineup
of ISUZU commercial vehicles proved
profitable for the Company.
Notwithstanding the external macro-
economic environment and COVID-19
challenges, the Company reported a LKR
6.6Mn profit during the financial year,
compared to the loss of LKR 78.6Mn in the
previous year, which is encouraging.
SML’s strategic initiative to increase is
branches and service outlets helps the
Company remain profitable during the
year. The Company also launched a new
branch in Negombo expanding into the
marine engineering sector, with the aim of
providing spare parts and servicing to the
fishing, and boating community in general.
This strategic decision of the marine
division in Negombo has proved profitable
during the year the Company is confident
that it will be a key profit venture in the
coming years.
Vehicle sales
year Number of
Vehicles Sold
2020/21 254
2019/20 323
Vehicle sales is SML’s core business
segment, and traditionally comprise
of 75% of Sathosa Motors’ revenue.
With the COVID-19 pandemic and the
vehicle import restriction imposed by
the government, vehicle sales segment
saw a drastic drop in revenue due to
unavailability of vehicles to sell. The
subsidiary Company re-strategised to
enter the re-sale market of the Land
Rover and Jaguar range of luxury vehicles
as a means of sustaining this segment of
the business.
However, SML’s ISUZU commercial vehicle
segment which includes ISUZU brand
trucks, ISUZU double cabs, remained
strong during the year benefitting from
the Company’s ability to import a limited
fleet of commercial vehicles required for
the construction, agriculture and other
active sectors including government
institutions during the year. SML has
maintained its leadership position in the
Japanese commercial vehicle import
market in Sri Lanka thanks to the ISUZU
brand equity and strong customer
relationships with stakeholders over the
years.
ISUZU branded commercial vehicle
sales have decreased by 14% in the
2020.The number of new vehicles sold
during 2019 and 2020 were 254 and 323
respectively. Vehicle sales revenue was at
LKR 1,777Mn in 2020 compared with LKR
2,068Mn in 2019.
Spare parts/ Workshop sales
2020/21
(LKR)
2019/20
(LKR)
Spare
Parts
424,571,435 364,369,357
Workshop
Repairs
154,224,800 128,213,325
Sathosa Motors’ after sales and spare
part sales have increased significantly
during the year under review, despite
challenges arising from external factors
and policy decisions. Revenue from spare
parts sales increased to LKR 427,7Mn
from LKR 364,3Mn in 2019, which is a
growth of 16.5%. The company recorded
its highest spare parts revenue, a
historic high for the spare parts business
segment during 2020.
SML has maintained its brand promise
of providing authentic and genuine
spare parts to our customers and our
partner ISUZU Motors have supported
SML continuously during the pandemic
to make available promptly all spare
parts required by our commercial vehicle
owners.
New workshops were added to support
the regional customer base by investing
in two state of the art workshop facilities
in Kurunegala and Negombo. In addition,
regional agents for SML’s range of
vehicles have been appointed to service
customers in key regional towns and
villages. Further investments were
made to develop the spare part sales
and facilities at the Peliyagoda head
office premise, which has contributed
immensely towards our success. SML
invested LKR 100Mn to upgrade the
Peliyagoda premise with advanced
facilities, equipment and tools. The
Colombo (head office) workshop premise
also got a facelift with the workshop
entrance to the workshop being revamped
with asphalt paving in the entrance access
road and the parking areas.
The workshops have been strengthened
to meet the demand by providing
additional technical and skilled human
resources whilst providing training
opportunities for existing teams to
improve their knowledge and skills.
Further, SML has invested in improving its
brand equity as well as customer service
experience, and safety at all workshops,
and continue to explore convenient and
innovative ways to better serve our
customers in the ‘new normal’.
Sathosa Motors PLC Annual Report 2020/2162
FInAnCIAL CApItAL
Sathosa Motors PLC Annual Report 2020/2163
Sathosa Motors PLC had a slow start
to the financial year with the COVID-19
lockdown continuing into the first few
months of the year. Further, SML’s core
business of vehicle sales was impacted
by the government vehicle import
restriction gazette in May 2020. However,
the Company re-strategised its business
for the remainder of the financial year
optimising the investments in workshop
upgrades and expansions into regional
facilities during the current year and
previous years.
The Company launched a new branch
in Negombo expanding into the marine
engine sector, with the aim of providing
spare parts and servicing to the fishing,
and boating community. The new branch
is well equipped with expert engineers
and service technicians to support any
marine engine after sale services. This
strategic decision proved profitable
during the year and the Company is
confident that its profitability will grow in
the coming years.
Although SML couldn’t achieve forecasted
targets due to external challenges
that hindered continuity of operations
during most of the year, the Company
managed to close the year positively. The
Company’s revenue was at LKR 2,363
Mn in the year, drop of 7.7% from LKR
2,561Mn in the last year.
The investments into expanding the
workshop operations towards the
year’s revenue and generated a revenue
increase by LKR 26Mn, which was a 20%
growth rate, vis a vis last year. Despite
import challenges, the spare parts
segment of the business also reported
a sales increase by LKR 60Mn, which
is a growth rate of 17% compared with
the same period last year. Although a
recent addition to SML, the Marine Engine
segment contributed LKR 7.3Mn of sales
during the year.
However, vehicle sales decreased
significantly due to lower inventories
caused by import restrictions. Vehicle
sales revenue decreased by LKR 291.3Mn,
14% lower as against the last year.
Revenue - group
New Vehicles - LKR 2,844.23 Mn
Spare Parts - LKR 799.29 Mn
Work Shop Repairs - LKR 230.75 Mn
Marine Engine Sales - LKR 7.31 Mn
0%
73%
6%
21%
Revenue - Company
New Vehicles - LKR 1,776.84 Mn
Spare Parts - LKR 424.57 Mn
Work Shop Repairs - LKR 154.22 Mn
Marine Engine Sales -LKR 7.31 Mn
0%
75%
7%
18%
Profit for the year
The Group reported a 20% drop in gross
profits at LKR 635.9Mn for the year
compared with LKR 794.8Mn reported
the last year. The Company earned
LKR 426.2Mn in gross profits in 2021
compared with LKR 434.1Mn reported the
last year, recording a 1.8% drop in gross
profits for the year.
Earnings before Interest and Tax (EBIT)
Group EBIT declined sharply by 43.2%
during the year under review from
LKR 110.5Mn in 2020. Company EBIT
decreased by 1.4% during the financial
year under review.
Net Finance Costs
SML net finance costs were significantly
lower when compared with the previous
financial year. The net finance cost
of Group and Company decreased by
58% and 61% vis a vis the last year
respectively. The decrease in finance
costs was due to lower debtors and
stocks held during the year and low
interest rate compare with last year.
Operating Expenses
The Group’s operating expenses
decreased by 6% while the Company’s
operating expenses also increased by 6%.
Group reported a loss of LKR 12.9Mn in
the reporting financial year from LKR
79.9Mn last year. This was a decreased
loss recorded by 84% vis a vis last
year. However, the Company reported a
marginal profit for the current financial
year of LKR 5.4Mn as against the loss
reported of LKR 81Mn reported during the
last financial year.
Review of Financial Position
The Group as well as the Company’s
property, plant and equipment increased
during the year from 41% to 54%
respectively, as SML acquired an adjoining
land to the existing head office premises
in Vauxhall Street, adding to its property
assets.
SML’s inventories decreased during
the year due to import restriction of
vehicles. Subsequently, a decrease was
seen in the inventories and trade debtors
by 68% and 50% in Group and 69% of
Company inventories and trade debtors
Sathosa Motors PLC Annual Report 2020/2164
respectively. Insufficient vehicle stock due to import restrictions was the main reason for the decrease.
Trade creditors also decreased during the year by 42% and 52% in the Group and Company respectively.
The year was marked by financial constraints caused mainly by government policy decision to restrict vehicle and vehicle related
imports while the COVID-19 pandemic had a lesser impact on the overall financial position of SML.
The restriction in imports reduced the working capital requirement of the business which in turn lowered the loan and borrowing
requirement. Loans and borrowings reduced by 73% and 67% in the Group and Company respectively.
Debentures held by the Company matured during the reporting year and the Company has no debentures on hold at the end of the
financial year 2021/22.
Direct Economic Value Generated and Distributed
Direct Economic Value Generated And Distributed Group Company
2020/21 2019/20 2020/21 2019/20
Value Created
Gross Revenue 3,881,584,608 4,195,960,439 2,362,952,341 2,560,749,579
(-) Cost of Goods and Services (Excluding
Depreciation and remuneration to employees)
(3,278,009,439) (3,434,924,436) (1,969,089,682) (2,160,422,011)
Value added from operations 603,575,169 761,036,003 393,862,659 400,327,568
Other Income 177,614,571 153,127,365 32,551,321 13,292,788
Finance Income 41,382,983 70,438,071 39,205,290 62,022,541
total Value Created 822,572,723 984,601,439 465,619,270 475,642,897
Value distributed
Operating Costs 183,437,058 216,010,227 78,190,040 53,105,091
Remuneration to the Employees 280,228,804 296,172,973 169,315,587 172,794,143
Directors' Fees and Remuneration 24,827,700 25,908,667 24,827,700 25,908,667
Community Investments - - - -
Government Levies 879,029 325,785 879,029 325,785
Corporate Taxes - - - -
Interest Cost 181,782,810 407,283,285 125,531,993 281,003,868
Dividends - - - -
total Value distributed 671,155,401 945,700,937 398,744,349 533,137,554
total Value Retained 151,417,322 38,900,501 66,874,921 (57,494,658)
total Value distributed and Retained 822,572,723 984,601,439 465,619,270 475,642,897
Value Retained
Profit Retained (27,852,345) (133,666,746) 4,124,033 (118,713,253)
Depreciation & Amortisation 179,269,667 172,567,247 62,750,889 61,218,595
total Value Retained 151,417,322 38,900,501 66,874,921 (57,494,658)
fINANcIAL cApITAL
Sathosa Motors PLC Annual Report 2020/2165
Categories of Shareholders
Categories of
Shareholders
31 March 2021 31 March 2020
Number of
Shareholders
Number of
Shares
Percentage
(%)
Number of
Shareholders
Number of
Shares
Percentage (%)
Local Individuals 1,048 252,282 4.18 999 254,028 4.21
Local Institutions 41 5,749,793 95.29 40 5,747,947 95.26
Foreign Individuals 143 29,983 0.50 143 30,083 0.5
Foreign Institutions 4 1,564 0.03 4 1,564 0.03
1,236 6,033,622 100.00 1,186 6,033,622 100.00
Investor Capital Structure
Number of Shares Held 31 March 2021 31 March 2020
From To Number of
Shareholders
Number of
Shares
Percentage
(%)
Number of
Shareholders
Number of
Shares
Percentage
(%)
1 1,000 1,183 178,003 2.95 1,138 167,478 2.78
1,001 10,000 49 110,719 1.84 43 101,068 1.68
10,001 100,000 2 25,820 0.43 3 45,996 0.76
100,001 1,000,000 1 625,335 10.36 1 625,335 10.36
Over 1,000,000 1 5,093,745 84.42 1 5,093,745 84.42
1,236 6,033,622 100.00 1,186 6,033,622 100.00
Directors’ Shareholding As At 31 March 2021
Name of Director Number of Shares Percentage (%)
1. S J S Perera Nil Nil
2. M M N De Silva 1,100 0.018
3. J C Joshua Nil Nil
4. S D Munasinghe Nil Nil
5. D A R Fernando Nil Nil
6. W A C O Wijesinghe Nil Nil
7. R S Dahanayake Nil Nil
8. M Jayahsuriya Nil Nil
9. K A P Perera Nil Nil
Share Prices for the year
Market Price per Share 2020/21
LKR
Date 2019/20
LKR
Date
Highest Price during the year 300.00 30 December 2020 449.00 5 April 2019
Lowest Price during the year 215.50 18 March 2021 250.00 12 March 2020
Closing Price 225.00 260.20
Sathosa Motors PLC Annual Report 2020/2166
Public Holding
As at 31 March 2021 2020
Public Holding % 15.559 15,543
Number of public shareholders 1,234 1,183
Float adjusted market capitalisation (LKR. Mn) 211 244
Ordinary Voting shares of Sathosa Motors PLC have been transferred from the Main Board to Diri Savi Board, with effect from 02 July
2018.
The Float adjusted market capitalisation of the Company falls under Option 2 of Rule 7.13.1 (b) of the Listing Rules of the Colombo
Stock Exchange and the Company has complied with the minimum public holding requirement applicable under the said Option.
Twenty Major Shareholders
31 March 2021 31 March 2020
NAME Number of
Shares
Percentage
(%)
Number of
Shares
Percentage
(%)
1. Access Engineering PLC 5,093,745 84.423 5,093,745 84.423
2. Lakshmans Housing and Construction Co Pvt Ltd 625,335 10.364 625,335 10.364
3. Bank of Ceylon No. 1 Account 13,194 0.219 13,194 0.219
4. Mr M Mahibalan 12,626 0.209 16,601 0.275
5. Mr R D Leelaratna 9,900 0.164 8,898 0.147
6. Mr U I Suriyabandara 7,127 0.118 6,202 0.103
7. Mr N A N D D Gunasekara 5,450 0.090 5,450 0.090
8. Mr K C Vignarajah 4,209 0.070 4,209 0.070
9. Mr G C Goonetilleke 4,050 0.067 4,050 0.067
10. Mr R D U A Ranamuka 4,000 0.066 4,000 0.066
11. Mrs M P R Silva 3,655 0.061 - -
12. Mr A H Munasinghe 3,598 0.060 3,598 0.060
13. Mr S Gowrisangar 3,300 0.055 3,300 0.055
14. Tea Ceylon Investments (Pvt) Ltd 2,850 0.047 2,850 0.047
15. Ms S N Dias 2,600 0.043 1,700 0.028
16. Mr L M Dias 2,400 0.040 2,400 0.040
17. Mr P K Sambasivam 2,260 0.037 2,260 0.037
18. Mr N Anoshan 2,115 0.035 - -
19. Mrs A N Herath / Mrs N E Herath 2,107 0.035 4,826 0.080
20. Mrs R R Rumy 2,059 0.034 2,059 0.034
Sub Total 5,806,580 96.237 5,804,677 96.206
Other 227,042 3.763 228,945 3.794
Total 6,033,622 100 6,033,622 100
fINANcIAL cApITAL
Sathosa Motors PLC Annual Report 2020/2167
huMAn CApItAL
Sathosa Motors PLC Annual Report 2020/2168
Sathosa Motors consider its human
capital as its most valued resource. The
professional and skilled teams at SML
have been a key factor in maintaining the
Company’s industry leadership position.
Our human resource play a crucial role in
achieving the Company’s short, medium
and long term goals and objectives. SML
human resource policies and strategies
therefore are developed to ensure that
our human capital is well optimised and
equally well rewarded.
Our surveys have identified the Top 5
reasons why candidates opt to work with
SML. They are:
Corporate Stability
Positive Work Environment
Higher Job Security
Fair Pay
Job Satisfaction
SML Code of Business Ethics, Conduct
and Integrity
We have set in place a well put together
code of conduct and ethics that support
SML’s values. Our employees adhere to
these rules and regulations in the Code of
Business Conduct and Ethics throughout
their tenure with SML which has been a
secret to our success.
Developing a KAIZEN Culture
During the year under review, the
Company has focused on introducing
the KAIZEN culture within our Company.
KAIZEN is a Japanese term meaning
"change for the better" or "continuous
improvement." It is a Japanese business
philosophy regarding the processes that
continuously improve operations and
involve all employees. Kaizen aims to
improve productivity as a gradual and
methodical process where employee
opinion is given an opportunity to be
heard so that leaders become aware of
the problems on ground that employees
face daily. SML is keen to develop a
culture that encourages employees to constantly improve and through this influence
and change the way people think, by exposing and problem solving.
This approach will deliver an elevated level of stability in the organisation, as it
develops a culture where employees can overcome any future challenges through joint
problem solving and decision making. In this culture, employees will be the drivers of
change and problem solvers of the Company as they are trained to identify and provide
simple solutions to recurring problems.
We use PDCA Cycle, Root Cause Analysis as tools to help data-based decision-making.
This culture provides organisations with stability and more secure operational
processes.
SML understands and acknowledges that our workforce is diverse. Therefore, the
Company welcomes the multiple ideas for problem solving from the employees who
represent diverse backgrounds and cultures. We believe this philosophy will inspire
innovation and build positive attitudes that would translate into to quantifiable benefits
to the organisation in future.
Workforce Composition
Our workforce is a representation of our strong HR policies that foster non-
discriminatory and inclusive approach in recruitment. The multi-disciplinary expertise
and experience of our workforce has immensely contributed towards value creation
in our customer service and support. While we are an equal opportunity provider, our
industry is traditionally a male dominated one due to the nature of the technical and
mechanical services that we offer.
Staff Composition
00
Age Group18-20
142
Age Group21-25
329
Age Group26-30
1810
Age Group31-35
294
Age Group36-40
143
Age Group41-45
221
Age Group46-50
133
Age Group51-55
70
Age GroupAbove 55
ManagerialMale -14 | female -1
15
Number ofEmployees
OperationalMale -24
24
Number ofEmployees
Clerical & SupportiveMale -111 | female -31
142Number ofEmployees
huMAN cApITAL
Sathosa Motors PLC Annual Report 2020/2169
Human Capital Development
Developing the capacities, skills and knowledge of our human capital is of utmost importance to SML. The automobile industry
is a dynamic industry where technology and services are rapidly changing. To remain current and updated, our human resource
is provided with ample opportunities both overseas and locally to enhance and refine their skills and knowledge. Whilst career
advancement is nurtured, SML also provides a healthy work environment that is both enabling and inspiring our human resource to
create value to their professional and personal growth.
Training and Development
Training Programme Target Group Type Date Total
Training
hrs.
Duration
hrs.
No. of
Participants
Advanced excel training programme - 1st Batch
All divisions External 12 December 2020 & 19 December 2020
144 16 9
Advanced excel training Programme - 2nd Batch
All divisions External 16 January 2021 & 23 January 2021
224 16 14
Technical training programme - Introduction to transmission system
Vehicle Sales Division
Internal 27 January 2021 30 3 10
Drivers training - Basic vehicle maintenance tips and effective driving
All Drivers Internal 12 February 2021 31.5 3.5 9
IFS User training - Functions & Tips
Workshop Divisions / Spare Parts Divisions
Internal 13 February 2021 16 4 4
Technical training (Operating a paint booth)
Workshop Divisions External 01 March 2021 28 3.5 8
Training on general company policies and how to maintaining safety & personal hygiene
Workshop Divisions Internal 22 March 2021 15 0.5 30
System training - Subcontract manual invoices
Workshop Divisions Internal 19 March 2021 6 1 6
General training on how to fairly & legally terminate an employee
Human Resources Divisions
External 25 March 2021 16 8 2
Recruitment and Retention
SML’s recruitment policy is based on the below guidelines:
Recruitment of staff possessing appropriate skills in terms of technical capability and personal strengths
Maintain consistency of recruitment and selection process between all business units
Safeguard transparency in the recruitment process
Our recruitment policies are transparent and merit based. Providing our human resource with due rewards and recognitions are
considered integral in inspiring loyalty, commitment and employee retention.
Performance Evaluation
SML currently implements a comprehensive evaluation of performance that identifies learning needs and provides valuable feedback
for improvement. Our performance evaluation and appraisal process instils a performance driven culture within the company. Human
capital development has been in-built into our strategic growth in the long term, and therefore, the Company has taken initiative to
increase employee satisfaction, whilst pursuing our corporate objectives.
Sathosa Motors PLC Annual Report 2020/2170
huMAN cApITAL
Creating a Safe Space for Professional
Growth
The COVID-19 pandemic has reinforced
the need for safe and healthy work
environments across all SML facilities.
In addition to ensuring staff safety, the
Company is equally concerned with the
physical, emotional and psychological
wellbeing of our employees.
We encourage professionalism,
cooperation and healthy competition
amongst our employees that have led to
higher productivity and innovation within
the Company. The Company continues
to provide employees with a learning
and growth work environment that is
satisfying, informative and engaging to all
our employees.
Employee Events and Welfare Activities
Over the year, SML has developed
teamwork, cooperation, mutual respect,
empathy and kindness amongst our
human capital through events and
activities that have given the employees
an opportunity to engage socially within
their colleagues and extended teams.
While we have focused our human capital
develop beyond training and development,
we have also implemented recognition
and rewards events and welfare schemes
to support our employees.
COVID-19 Response
SML introduced a COVID-19 preparedness
and response plan in October 2020,
intended to provide a planned and
strategic approach to manage business
continuity during the COVID-19 pandemic.
In keeping with the guidelines of this
plan, pandemic related risk levels
in workplaces were identified and
appropriate controls and measures were
implemented as a preventive effort to
minimise the spread of the COVID-19
pandemic. This supported our business
continuity during the first and second
waves of the pandemic.
During the year, our welfare activities
were limited to COVID-19 related efforts.
SML distributed dry ration packs worth
LKR 10,000 amongst employees who
underwent self-quarantine due to
exposure to the COVID-19 virus. The dry
rations were of immense assistance to
the employees who were not in a position
to purchase or source necessary food
items during the quarantine period.
At this challenging time, SML considered
the safety of our employees and our
customers as a key priority in continuing
our business. In order to ensure the
safety and wellbeing of the staff, SML
sponsored PCR testing of employees. This
measure safeguarded the workplaces
and workshops from the potential risk
of COVID-19 spread within the Company
and helped to maintain health and safety
among all employees.
Sathosa Motors PLC Annual Report 2020/2171
InteLLeCtuALCApItAL
Sathosa Motors PLC Annual Report 2020/2172
We believe that SML’s intellectual capital has helped the Company maintain its leadership status in the industry. Over the years, SML
has built on the knowledge, skills, experience, and expertise that has evolved, passed on and grown. Our collective intellectual capital
drives the dynamic business strategy of the Company and has helped us remain relevant and technologically advanced.
We see a harmonious synergy between intellectual capital and our human capital through employee proficiency, training, work ethics,
knowledge and experience. Therefore, SML has invested in enhancing the Company’s intellectual capital through human resource
development.
In 2020, despite being a year under lockdown during most months, SML’s commitment to enriching and enhancing our intellectual
capital continued. We have focused mainly in developing the knowledge and skills of workshop teams in line with SML’s strategic
decision to increase the number of regional after sales service points and increase workshop capacities.
During the year under review, 15 training sessions have been conducted within 12 months, completing 690 trainings hours, training
150 employees. Details of the intellectual training sessions are provided in the table below:
Training Programme Target Group Type Date Total
Training
hrs.
Duration
hrs.
No. of
Participants
Overall understanding about
Isuzu competitiveness and to
work efficiently & effectively to
meet shareholders expectations
and customer satisfaction while
building personal responsibility
and team work
Workshop Divisions Internal 12 July 2020 105 3.5 30
Budget Webinar - Comprehensive
study on the new budget
proposals and implementation
Finance Division External 19 November 2020 16 8 2
Customer Creation Awareness Finance Division/
Workshop Divisions
Internal 11 December 2020 10 2 5
Soft Skill Development
Programme
Finance Division/
Human Resources
Divisions
Internal 22 January 2021 32 2 16
Webinar on Conducting Industrial
Accident Instigations
HR Divisions /
Workshop Divisions
External 26 January 2021 10.5 3.5 3
Sri Lanka Customs Finance Division External 30 March 2021 6 3 2
Knowledge and Experience
SML places utmost importance in the knowledge and experience of our staff, which forms the basis of our intellectual capital, towards
which the Company continuously invests in building the team’s expertise and experience.
We are proud of the fact that most of our employees have served the Company for over 5 years, and during which time we have
extensively invested in growing them. With each year at SML, the staff accumulated a broad base of new knowledge in their expert
areas. Their skills are continuously enhanced and their technical and professional knowledge and know how improved with training,
overseas exposure and associations with our principals and partners.
INTELLEcTuAL cApITAL
Sathosa Motors PLC Annual Report 2020/2173
Maintaining our market leadership in the
Japanese commercial vehicle segment
over the years, has given SML capabilities,
insights, and specialist knowledge
that has clearly set us apart from the
competition in the rapidly diversifying
industry of vehicle import, sales and
servicing.
Corporate Culture
Our performance based culture ensures
that every individual has the opportunity
to shine and be recognised for the value
and contribution they make towards
the organisation. Every member of our
team is encouraged to add value to the
workplace and be held accountable for
their actions. Our corporate culture is
one that fosters open communication and
employee engagement.
Systems and Processes
SML’s systems and processes form the
backbone of our business and its day
to day functions. Our teams rely on the
comprehensive and efficient systems and
processes the Company has set in place
to guide their operations for seamless
business.
The Company has designed systems,
procedures and processes in keeping
with industry and regulatory ethics and
frameworks. These can be found in the
company’s procedure manuals, SOPs, ERP
systems and financial controls that have
been introduced over the years.
During the year 2018, SML invested in an
advanced ERP solution which has helped
maximise operational efficiencies across
all business areas. This has enhanced the
Company’s customer service efficiencies
and responsiveness, increased business
performance, and streamlined business
processes whilst lowering operational
costs. SML has enabled this software to
manage all sales and operational data,
and to better organise it and make data
retrieval easy.
SML is a Member of;
The Ceylon Chamber of Commerce
Ceylon Motor Traders Association
Sathosa Motors PLC Annual Report 2020/2174
MAnuFACtuRedCApItAL
Sathosa Motors PLC Annual Report 2020/2175
SML’s manufactured capital is an area
that the Company considers important
in achieving our strategic objectives.
Our manufactured capital includes value
driven initiatives that have enriched
SML brand and our service offer to our
customers. This is synonymously tied with
our brand promise and brand values that
SML upholds.
During the year, SML’s manufactured
capital has expanded into the regions,
strengthening our brand presence and
increasing customer value additions at
the regional level. We have invested in
acquiring new property, expanding our
workshops and upgrading them with
state of the art facilities, improving the
availability, delivery and efficiency of
our spare parts business and customer
service aspects.
The total investment in manufactured
capital in 2020 was LKR 553.5Mn.
Workshops and Service Centers
Peliyagoda workshop service center
was upgraded with advanced facilities.
In our service and repair solutions, the
workshops provide services that include
all minor and major vehicle spare parts
supply and repair as well as lubricant
support.
The Company has invested in improving
workshop and service facilities with high
quality equipment which has increased
productivity, safety and reliability. As
at 31 March 2021, SML reported a net
book value of LKR 27.7Mn in machinery
and tools. SML purchased LKR 12.3Mn
worth of machinery, tools and equipment
to enhance the workshop capacity and
efficiency.
Equipment
Our workshop facilities are equipped
with advance machinery including
compressors, tools, hoists as well
as heavy duty hydraulic vehicle lifts
required for inspection and diagnostics in
mechanical repairs.
SML workshops rely on a range of
advanced technology equipment installed
for collision repair and analytics.
These machinery are operated by
skilled and versatile technicians trained
locally and overseas, to the stringent
manufacturers’ standards of operation.
In addition to above, the Company also
possess a range of office equipment,
fixtures and fittings utilised in regular
administration activities.
SML’s equipment and infrastructure
was further expanded during the year
with extensive investments in workshop
facilities.
New SML Branch in Negombo
A new branch selected for its strategic
location close to marine activities and
livelihoods was opened in Negombo
focusing on inboard marine engines and
spare parts sales.
Lands
Details of the land held by the company
are disclosed in note 13 to the financial
statements.
Sathosa Motors PLC Annual Report 2020/2176
nAtuRALCApItAL
Sathosa Motors PLC Annual Report 2020/2177
SML place immense value in upholding
sustainable environment policies and
practices in our business. Our natural
capital consist of both renewable and
non-renewable energy sources, and all
other natural resources that are used in
our processes, production of goods and
providing of services.
SML’s approach to environmental
sustainability aims to mitigate any
potentially harmful waste that are
released to the environment by nature of
the industry we operate in. The Company
is aware of its responsibility towards
minimising our carbon footprint and the
conservation of the environment and its
limited resources. We have committed
to include the environment as a key area
of concern in all our strategic initiatives
which includes a systematic approach to
reduce our carbon footprint in our daily
operations.
Environment Compliance
SML has obtained the necessary
approvals and authorisations to
discharge, deposit effluents, waste and
air emissions that may arise as a result of
SML’s operations and processes.
Across the divisions and branches of
the company, we have implemented
guidelines to avoid usage of
environmentally hazardous material. We
also prioritise suppliers who are abide by
environment standards and implement
environmentally safe practices. SML’s
supplier evaluation includes this aspect
as well.
In accordance with the standards and
criteria prescribed by the National
Environmental (Protection and Quality)
Regulations No. I of 2008, waste water
treatment, sampling and safety aspects
have been implemented in our workshops.
In addition, SML has introduced multiple
initiatives to reduce the Company’s carbon
footprint and minimise waste. In doing so,
we have focused on below key areas:
Energy Efficiency
Water Management
Waste Management
Other Environmental Friendly
Practices
Water Management
SML operates in a high water
consumption business environment.
We are conscious that water is a
scarce resource which needs greater
conservation. We are also concerned
that our operations do not pollute the
environment, and other water resources
within the environment. To minimise
water pollution and efficient water
management, SML has introduced
sophisticated water purification
systems in workshops to ensure that no
contaminated water is released to the
environment. Instead, our purification
systems make sure that chemicals, oils,
residues and other harmful and toxic
material is removed from the water prior
to release.
All waste water generated from our
operations in the service station
are treated conforming to Central
Environment Authority approved
standards.
SML also initiates below activities:
Installation of efficient taps and other
equipment that reduce water waste
Internal awareness campaigns on
water resource and its best usage
practices
Training on water purification and
waste water treatment at workshop
facilities
Water Consumption
Month Total Units used
Head
Office
Peliyagoda
WS
Matara
Branch
Panchikawaththa
Branch
Negombo
Branch
Total
Apr-20 160 75 17 0 - 252
May-20 274 178 16 1 - 469
Jun-20 314 195 17 1 - 527
Jul-20 286 254 18 1 - 559
Aug-20 247 241 20 2 - 510
Sep-20 248 276 19 1 - 544
Oct-20 166 219 19 1 - 405
Nov-20 215 343 18 0 - 576
Dec-20 188 299 19 2 - 508
Jan-21 247 271 19 0 3.67 541
Sathosa Motors PLC Annual Report 2020/2178
NATuRAL cApITAL
Month Total Units used
Head
Office
Peliyagoda
WS
Matara
Branch
Panchikawaththa
Branch
Negombo
Branch
Total
Feb-21 237 270 18 1 3.67 530
Mar-21 234 290 16 2 3.67 546
Total 2,816.00 2,911.00 216.00 12.00 11.00 5,966
Waste Management
SML has continued to ensure safe waste
disposal methods across our workshops
and other facilities. These initiatives
are implemented for all potentially
environmentally harmful residues such
as burnt oil, electronic waste, packaging
cardboards and other items.
The Company also follows
environmentally friendly practices to
minimise solid as well as other types of
waste generated by staff.
Our environment friendly waste
management includes:
Less paper policy – by introducing
digital sharing in place of printed copy
sharing, we have cut down on the
need for paper use.
Awareness – frequent campaigns
internally to create staff awareness
to minimise waste and best disposal
practices.
Recycle - recyclable waste generated
within our workplaces are handed
over to CEA approved recycling
partners who will ensure they are
recycled in a safe manner. This
includes e-waste, residual oil and
cardboard/paper.
Energy Efficiency
SML’s energy policy ensure that periodical
review of energy usage and consumption
is conducted to ensure that the Company’s
energy resource is optimised. This
has allowed the Company to increase
energy efficiency and provide valuable
information for energy planning for the
future. Our energy usage varies based on
the Company’s throughput level at each
segment of the value chain.
SML ensures therefore that all
branches and processes are monitored
continuously and necessary steps are
taken to reduce our carbon footprint
through minimising energy wastage and
increasing energy efficiency through staff
awareness, installation of energy efficient
appliance and similar initiatives.
In addition, the Company has
implemented:
Planning to install solar panels - the
Peliyagoda facility will be installed
with solar panels in the future with a
view to minimise grid energy usage
Thermal insulation on roofs - by
installing thermal insulation we have
managed heating within our premises
to minimise use of air conditioning.
CFL and LED lighting – by converting
to CFL and LED lighting has reduced
the electricity consumption across the
buildings and increased our energy
efficiency
Smart machinery - by investing in
environmentally friendly and energy
efficient machinery and equipment
has helped bring down the energy
consumption and release of harmful
elements to the environment
Efficient energy zones – by identifying
energy zones and dividing the lighting
control system into several zones with
separate switches, we have increased
energy optimisation and reduced
energy waste
Electricity Consumption
Month Total units consumed during the period
Head Office Peliyagoda
WS
Matara
Branch
Kurunegala
Branch
Rathnapura
Branch
Panchikawaththa
Branch
Negombo
Branch
Total
Apr-20 4,885 1,802 813.5 974 232.5 182 8,889
May-20 10,460 4,785 663.5 974 465 182 17,530
Jun-20 16,282 6,591 663.5 1,184 462 650 25,833
Jul-20 16,736 9,484 2,414 1,436 593 522 31,185
Aug-20 15,099 5,926 1,375 1,257 354 469 24,480
Sathosa Motors PLC Annual Report 2020/2179
Month Total units consumed during the period
Head Office Peliyagoda
WS
Matara
Branch
Kurunegala
Branch
Rathnapura
Branch
Panchikawaththa
Branch
Negombo
Branch
Total
Sep-20 13,286 5,967 1,831 1,278 536 417 23,315
Oct-20 13,131 5,920 1,641 1,414 301 0 22,407
Nov-20 10,499 5,581 612 1,239 331 444 18,706
Dec-20 12,033 7,066 631 1,016 305 134 21,185
Jan-21 13,204 6,190 553 900 278 347 653 22,125
Feb-21 13,041 5,530 599 1,149 369 464 653 21,805
Mar-21 14,655 8,387 777 1,295 324 472 653 26,563
Total 153,311 73,229 12,574 14,116 4,551 4,283 1,958 264,021
EURO 4 Standard Vehicles
SML was amongst the first in the industry
to introduce EURO 4 standard vehicle in
Sri Lanka specifically designed for the
local market. This initiative continued
in the commercial vehicle category of
SML during the year under review and
offered a range of Euro 4 standard model
options in the Japanese truck range.
Euro 4 standard vehicles emit 68% less
particulate matter (PM), 57% less nitrogen
oxide, and 50% less carbon monoxide in
comparison to Euro 2 standard vehicles.
SML achieved a steady rate of above 65%
market leadership in the EURO 4 segment
since the introduction of the product line
up. We are determined to work towards
achieving the Sri Lankan Government’s
plans to reduce carbon emission
considerably by 2025.
Other Environment Friendly Practices
and Processes
In addition to above areas, SML has
initiated processes and practices in
keeping the environment safe. These
focus on air and noise pollution as
well as minimising soil pollution in our
environment.
Fuel
By procuring fuel efficient machinery,
we have saved on energy usage in our
workshops. In addition, SML ensures that
all vehicles and machines are regularly
maintained and assessed for fuel
consumption; fuel consumption against
mileage of vehicles and machinery for
any deviation; disposal of redundant
machinery; avoidance of fuel driven
equipment including generators.
Emission
We understand the need to keep
emissions low to minimise our carbon
footprint. Towards this, SML has taken
multiple initiatives to track our emissions
and reduce it. Some of these include:
Measuring emissions of generators,
vehicles, and other machinery to
identify any abnormal compositions in
the emission.
Emissions in fuel-driven equipment
such as generators are measured
and appropriate action such as filter
replacement or servicing is done to
rectify any irregularities.
Ensuring that all our products
(vehicles) are equipped with the latest
technology for lower carbon emission
and energy efficiency.
Noise and Soil Pollution
We are mindful that by the nature of our
operations, noise and soil pollution are
potential environment risks. In order
to lower these pollutants from being
released to the environment. We have
isolated high noise generating equipment
and replaced them with less noisy
machinery. On soil pollution, SML has
developed secondary containment options
to contain lubricants, oil and fuel stored
within our workshops to ensure that any
leak or spill is prevented.
Future Outlook
With a view to minimising grid energy
usage and to optimise natural energy
resources, SML plans to invest in solar
panels at our flagship workshop at
Peliyagoda, with the capacity to generate
sufficient energy to manage the electricity
usage of Peliyagoda Workshop.
Sathosa Motors PLC Annual Report 2020/2180
soCIAL And ReLAtIonshIp CApItAL
Sathosa Motors PLC Annual Report 2020/2181
Sathosa Motors has a rich and extensive
social and relationship capital built on
years of trust, brand equity, and loyalty.
Our philosophy to foster this capital is
built into our commitment and promise
towards our multiple stakeholders:
customers, business partners, community
and suppliers. We have remained credible,
transparent, trustworthy and committed
to serving each stakeholder relationship
which has strengthened our social and
relationship capital over the years.
Our stakeholders include individuals,
organisations and institutes, groups and
communities that directly or indirectly
associate with SML in our end-to-end
process of delivering our products and
services. This includes those who are
directly or indirectly be impacted by
the operations, policies and procedures
of our company. This is important in
creating value to our stakeholders and
these stakeholders are determined by the
authority they exert on SML and the level
of interest they have in SML operations.
Stakeholder engagement process
Identifications - Stakeholders and
their concerns
engagement and prioritisation
- Engaging stakeholders and
prioritising concerns
planning and Implementation - Identifying methods to address concerns and
allocating resources to relevant teams to implement solutions
Reporting - Communicating implemented solutions to stakeholders
Business Partners
Government and Regulatory Bodies
Industry Peers and Competitors
Society
Investors and Shareholders
Suppliers and Sub-Contractors
Banks and Prospective Lenders
Employees
Customers
SATHOSAMOTORS PLC
Customers
Our customer is a key stakeholder in our business whose patronage of our products and services has ensured the
growth and sustenance of our business. SML initiates multiple engagement opportunities with customers through
events that provide them with necessary updates and information on our dynamic portfolio of products and services.
Sathosa Motors PLC Annual Report 2020/2182
Business Partners
We have built a strong relationship with our business partners who have strengthened our business over the years.
Our business partners who are both local and foreign have been instrumental in technology and knowledge sharing
that has helped SML maintain our industry leadership position.
SML has continuously achieved targets and met business partner expectations. As part of achieving this, we ensure
our products are available to our customers at all times and conduct multiple customer awareness, brand loyalty
initiatives that keep our customers updated on products and services. We have expanded SML’s product presence
and customer base through similar efforts.
Our main foreign business partners are;
ISUZU Japan
ITOCHU Corporation – Japan
Isuzu Motors International Operation – Thailand
ISUZU Motors Limited
Isuzu is filling a significant role in the world as a manufacturer of commercial vehicles, light commercial vehicles and diesel engines.
Isuzu's sophisticated technological strength and various fruits are expected to meet further social demands and produce good
prospects for the future.
Name Isuzu Motors Limited
Foundation/
Establishment
1916/April 1937
Capital Capital 40.6 billion yen(March 2021)
President Masanori Katayama, President and Representative Director
Sales Consolidated 1,908,1 bilion yen
Non-Consolidated 922,6 bilion yen
(April 2020-March 2021)
Employees Consolidated 36,624
Non-Consolidated 8,149
(March 2021)
Major Products
Isuzu Corporate Vision
Isuzu Corporate Mission
Address
Heavy- medium- and light-duty trucks, buses, passenger vehicle engines, industrial-use diesel engines.
Isuzu will always mean the best
A leader in transportation, commercial vehicles and diesel engines, supporting our customers and
respecting the environment
Trust, Action, Excellence
A global team delivering inspired products and services committed to exceeding expectations
6-26-1 Minami-Oi, Shinagawa-ku, Tokyo 140-8722 Japan
Tel. 81-3-5471-1141
socIAL ANd RELATIoNshIp cApITAL
Sathosa Motors PLC Annual Report 2020/2183
ITOCHU Corporation
ITOCHU was established in 1949, but was founded in 1858.
ITOCHU has introduced a “division company” structure to facilitate prompt responses to the needs of markets and customers since
April 1997. At present, the company consists of 8 division companies.
Name ITOCHU Corporation
Foundation/
Establishment
In year 1858 / 1949
Capital 253,448 million yen (March 2021)
President /Chairman /
CEO
Masahiro Okafuji, Chairman & Chief Executive Officer
Sales Consolidated 10,362,628 million yen
Non-Consolidated 3,575,369 million yen
(April 2020-March 2021)
Employees Consolidated 125,944
Non-Consolidated 4,215
(March 2021)
Major Products
Corporate Vision
(Guideline of Conduct)
Corporate Mission
Address
Various products such as textile, machinery, metals, minerals, energy, chemicals, food, general products,
realty, information and communications technology, and finance, as well as business investment in Japan
and overseas.
The ITOCHU Group declares “I am One with Infinite Missions” as our new Guideline of Conduct. These
are words that realise our thoughts behind “Sampo-yoshi” and provide direction for ITOCHU Group
employees in performing ideal business operations.
The ITOCHU group declares the spirit of “Sampo-yoshi” as our new corporate mission, which spirit
originates from the message of our founder Chubei Itoh.
"Sampo-yoshi" means good for the seller, good for the buyer, good for society.
Tokyo Headquarters :
5-1, Kita-Aoyama 2-chome,
Minato-ku, Tokyo 107-8077, Japan / TEL : +81-3-3497-2121
Osaka Headquarters :
1-3, Umeda 3-chome,
Kita-ku, Osaka, 530-8448, Japan / TEL : +81-6-7638-2121
Sathosa Motors PLC Annual Report 2020/2184
socIAL ANd RELATIoNshIp cApITAL
Isuzu Motors International Operations (Thailand) Co., Ltd (IMIT)
Isuzu Motors International Operations (Thailand) Co., Ltd (IMIT) is a subsidiary of Isuzu Motors Limited. Of the production base in
Thailand, ISUZU group is the sole exporter of ISUZU LCV (Light Commercial Vehicle) to more than one hundred countries all over the
world.
The Company established in 2002 under the name of "Isuzu Operations (Thailand) Co., Ltd. to increase its business coverage and
to strengthen the quality of the service. The business expanded into 3S (Sales, Service, Spare Part) and the company was renamed
"Isuzu Motors International Operations (Thailand) Co., Ltd." in 2011.
Name Isuzu Motors International Operations (Thailand) Co., Ltd (IMIT)
Foundation/
Establishment
In year 2002
Capital 678,000,000 THB (March 2021)
President /Chairman /
CEO
Kimitoshi Kurokawa
Sales Consolidated Nil
Non-Consolidated 57,836,496,861 THB
(April 2020-March 2021)
Employees Non-Consolidated 164 Person
(March 2021)
Major Products
Corporate Vision
Corporate Mission
Address
CBU, CKD, Service Parts: ACS, CSO, Spare Parts
ISUZU will always mean the best.
ISUZU will always contribute to make an affluent society by supporting "Transportation".
We for stabilisation and expansion of LCV export business as a core leading business in ISUZU. We
deliver the best satisfaction to our customers throughout the life-cycle from vehicle purchase to after-
sales.
ISUZU MOTORS INTERNATIONAL OPERATIONS (THAILAND) CO., LTD.
1010 Shinawatra Tower III, 24th-25th Floor,
Vibhavadi Rangsit Road, Chatuchak, Bangkok 10900.
Sathosa Motors PLC Annual Report 2020/2185
Investors and Shareholders
SML frequently engages with our investors and shareholders through meetings and promotional activities. We
keep our investors and shareholders informed and updated continuously enabling informed decision making about
their investments. We are committed to provide them with satisfactory returns on their investments and maintain
transparency throughout our business operations.
Suppliers and Sub-Contractors
Our suppliers and sub-contractors are part of the backbone of our business. They ensure that SML’s supply chain
is undisturbed so that we can provide efficient services to our clients. We have built strong relationships with
our suppliers and sub-contractors over the years which has been instrumental in creating value addition to our
customers. They are continuously kept informed of our expectations, standards, compliance requirements, quality of
service as well as procurement policies.
Government and Regulatory Bodies
The Government and its regulatory bodies are a key stakeholder of the automobile industry. SML maintains cordial
relations with the government and regulatory authorities in resolving industry grievances whilst complying with
regulatory requirements.
Banks and Prospective Lenders
Financial institutions are a valuable partner for SML as they provide necessary capital to fund our development
activities. SML has ensured that our relationship with our banks and prospective lenders have been honest and
trustworthy, which has led to mutual respect and trust in all our dealings with our banking and lending partners.
Employees
Our employees are the brand ambassadors of our Company. Ensuring that our employees are content through
recognitions, rewards, professional and career growth opportunities and personal goal achievement ensures that
our employees can contribute productively and efficiently towards achieving SML’s targets and objectives. The
Company also provide a safe and secure working environment that encourage work-life balance.
Industry Peers and Competitors
Our industry peers and competitors have been a strength during challenging times in voicing common grievances
and seeking benefits for the industry’s growth. SML conducts and participates in multiple events and activities in
maintaining positive relationships with the industry peers and competitors.
Society
The society and the environment we have a direct or indirect impact on is an important stakeholder in our growth.
SML has encouraged transparent and honest communications with our societal stakeholders to ensure that our
business has a positive impact on their lives as well as on the environment.
Sathosa Motors PLC Annual Report 2020/2186
socIAL ANd RELATIoNshIp cApITAL
Nurturing Key Relationship
Strengthening robust relationships with stakeholders is an ongoing process within SML. We have put in place a sound communication
method and tools and engage the right people and processes to do so. Our employees are well-equipped to deliver service excellence
and they too benefit from processes and systems that are in place. Maintaining loyalty and trust through exceptional services remain
underpinned by open channels of communication.
Stakeholder Group Stakeholder concerns and aspirations Method of Engagement Frequency of
Engagement
Investors and
Shareholders
Financial performance of the Company Periodic meetings with the Board of
Directors
When required
Monetary returns on their investments Annual Report Annually
Business Expansion plans of the Company The Annual General Meeting Annually
Transparency and disclosure Corporate website Continuously
Risk management One-to-one discussions with the Board of
Directors
When required
Customers Product Quality Customer engagement events Periodically
Customer Service One-on-one discussions with relevant
departments
When required
Continuity of services corporate website Continuously
Employees Rewards and recognition Staff meetings Periodically
Training and development Discussions with Managers When required
Career advancement opportunities Training programmes Periodically
Work life balance Special staff events Periodically
Retirement Benefit plans Evaluation and rewards programme Annually
Business Partners Contractual opportunities Special networking events Periodically
Growth potential Meetings When required
Future business prospects Business Proposals When required
Timely settlement of dues Reminder Letters / Confirmations Periodically
Government and
regulatory authorities
Regulatory compliance Timely feedback through submission of
reports
Periodically and
when required
Industry growth Participating in various forums and
discussions
Periodically and
when required
Managing the business impact on the
country's economy
Ensuring compliance Continuously
Society and
Environment
Environmental and economic impact of the
business process
Compliance to regulatory requirements Continuously
Employment Opportunities Participating in trade events Periodically
Communicating through print and
electronic media channels
When required
Sathosa Motors PLC Annual Report 2020/2187
Strengthening Social and Relationship Capital
SML actively engages with our stakeholders through events and sponsorships that
support and benefit our stakeholders. These activities nurture the social relationships
between SML and our partners, as well as enhance our operational value. A series of
events are initiated throughout the year to build this social relationship.
Customer Awareness Campaigns organised by the Company - 2021
Peliyagoda Fish Market Complex & Manning Market Promotion 16.03.2021
Garage Campaign - Colombo Team 27.03.2021
Kudawella fish market - Matara Team 27.03.2021
Campaign - Ratnapura Team 27.03.2021
Dambulla Dedicated Economic Center - Kurunegala Team 24.03.2021
Negombo Fish Market Complex - Negombo Team 19.03.2021
Social Attributes and Targeted Marketing
The Company has effectively utilised social and digital media platforms to engage our
multiple audiences. We have been successful in reaching potential customers through
social media networks increasing SML’s reach to a wider audience as well as increasing
brand awareness.
Our social media campaigns have been developed with different target groups and
target specific activities. The customised content for each target group of SML’s product
and service categories are placed in different social media platforms to suit the target
groups.
Some of our key social media platforms include:
Facebook / Instagram
Sathosa Motors facebook Homepage; https://www.facebook.com/SathosaMotorsPlc
Sathosa Motors Instagram Homepage; https://www.instagram.com/isuzusrilanka/
For SML , Facebook, Instagram and Whats App applications provide real time interaction,
customer analytics, group behaviour information as well as better customer feedback.
This has enabled us to better strategise our campaigns and our stakeholder approach.
Non-digital marketing
The Company has implemented multiple
awareness and promotional campaigns
through non-digital channels such as
through partnerships with dealers
and promotions carried out at various
locations.
Future Outlook
SML believes that digital reach is the most
effective and efficient methods to reach
our customer base. Therefore, we hope
to expand our digital media presence by
increasing our digital media activities
in the coming year. The innovative
methods of digital marketing can feature
personalised content that appeals and
engages our stakeholders.
Whilst our digital marketing efforts will
be enhanced, we will continue to engage
our customers through traditional media
as well.
Sathosa Motors PLC Annual Report 2020/2188
ReALIgned FoR stRength And duRABILItY
Sathosa Motors PLC Annual Report 2020/2189
Sathosa Motors PLC Annual Report 2020/2190
Financial statementsAudit Committee Report 91
Remuneration Committee Report 93
Related Party Transactions Review Committee Report 94
Strategic Planning Committee Report 96
Annual Report of the Board of Directors on the Affairs
of the Company 97
The Statement of Directors Responsibility 102
Directors Statement on Internal Control Introduction 103
Financial Calendar 104
Independent Auditor’s Report 105
Statement of Profit or Loss and Other
Comprehensive Income 110
Statement of Financial Position 111
Statement of Changes in Equity 112
Statement of Cash Flows 113
Notes to the Financial Statements 114
Sathosa Motors PLC Annual Report 2020/2191
AudIt CoMMIttee RepoRt
Audit committee of SML is established
under the Corporate Governance rules of
section 7.10.6 of Colombo Stock Exchange
and Code of best practices on corporate
governance issued jointly by the Institute
of Chartered Accountants of Sri Lanka and
the Securities and Exchange Commission
of Sri Lanka.
Role of the Committee
The role of the Audit Committee is
to oversight of the Accounting and
financial reporting system, design and
implementation of internal control system
and risk management procedures, assure
compliance with accounting standards,
applicable laws, regulations and best
practice and review the independence of
external auditors and the scope, result
and effectiveness of audit process.
Terms of Reference
The Audit Committee terms of reference
encompass managing its authority and
duties, established for the purpose of
assisting the Board in fulfilling their
responsibilities that include the Financial
reporting, Internal control and risk
management, Internal audit, compliance
with Laws and regulation and External
audit.
Financial Reporting
The Audit committee responsible to
oversight the company’s financial
reporting process on behalf of the board
to ensure that financial statements are
prepared in compliance with regulatory
requirements including the Sri Lanka
Accounting Standards and Company Act
No 7 of 2007.
The Audit Committee reviewed the
Group’s quarterly and annual Financial
Statements prior to its publication and the
review included:
Appropriateness and changes in
Accounting Policies
Significant estimates and highly
judgmental areas
Compliance with relevant Accounting
Standards and applicable regulatory
requirements
Issues arising from the Internal Audit
and Independent External Audit
The Group’s/Company’s ability to
continue as a going concern
Internal Controls & Risk Management
The Committee assessed an effective
Internal control system is in place
to provide reasonable assurance on
safeguarding the Company’s assets
and reliability of Financial Statements.
Effectiveness of the Company’s internal
control system is evaluated through
reports provided by the management,
Internal Auditors and Independent
External Auditors. And also committee
reviewed and assessed the capability
of the company’s risk management
process to identified significant risk and
addressed those significant risk areas
effectively.
Internal Audit
The Committee is responsible for
oversight the role and effectiveness of
the internal audit function by monitoring
the results of its work and the responses
of management to its recommendations.
The Audit Committee meets the Internal
Auditors on a quarterly basis and reviews
their findings in order to identify risks
attached to different areas of operation
and effectiveness of internal controls.
The Committee reviewed and approved
the 2021/22 internal audit plan at its
meeting in May 2021 and continued to
monitor progress against this plan during
the year. Results and management actions
arising from the reviews undertaken in
2020/21 were discussed in detail at each
of the Committee’s meetings.
Compliance of Laws and Regulations
The Audit Committee reviewed the
reports submitted by the management
and the Internal Auditors on compliance
with applicable laws and regulations.
The Committee is satisfied that laws
and regulations are duly complied and
statutory payments have been made on a
timely basis.
Independent External Auditors
The Audit Committee reviewed the
independence and objectivity of the
Independent External Auditors, Messrs
KPMG Sri Lanka, Chartered Accountants.
The Audit Committee has met with the
External Auditors to review their audit
plan and any observations made by them.
The Committee has received a declaration
from the External Auditors, confirming
that they do not have any relationship
or interest in the Company or its
subsidiaries. The Committee reviewed the
non-audit services and its impact on the
independence of the External Auditors.
The Audit Committee has recommended
to the Board that Messrs KPMG be re-
appointed as the Independent External
Auditor and that the re-appointment be
included in the agenda of the Annual
General Meeting.
Sathosa Motors PLC Annual Report 2020/2192
Committee Composition
The committee continued to comprise of the four non-executive directors as set out
below. To ensure compliance with the requirements of the rule 7.10.6 of Listing Rules
of the Colombo Stock Exchange and Code of Best Practices on Corporate Governance
issued jointly by the Institute of Chartered Accountants and Securities Exchange
Commission of Sri Lanka, Committee membership comprises three (3) Independent
Non-Executive Directors and one (1) Non-Executive Director of the Company.
Category Number of Directors
Name
Independent Non-Executive Directors 3
Non-Executive Directors 1
The Committee is authorised by the Board to seek any information necessary to fulfill its
duties, call any member of staff to be questioned at a meeting of the Committee, as and
when required, and obtain independent legal, accounting or other professional advice, at
the Company’s expense, which might be necessary for the fulfillment of its duties.
The brief profiles of the existing members of the Committee are given on pages 18 to 19
of the Annual Report.
Meeting Attendance
The Committee met on the following occasions to discuss matters relating to the
financial year. Members’ attendance was as follows:
Attendance of Audit Committee During the Period 01 April 2020 to 31 March 2021
18 May
2020
29 July 2020 09 November
2020
02 February
2021
1. M M N de Silva √ √ √ √
2. W A C O Wijesinghe √ √ √ √
3. R S Dahanayake √ √ x √
4. T A L Niroshan √ √ √ *N/A
* Resigned w.e.f. 31 December 2020
In addition to the Committee members,
the meetings were attended by the
Executive Directors, General Managers
and the Internal Auditor by invitation. The
Company secretaries were also present at
every meeting.
Conclusion
The Audit Committee is satisfied that
the effectiveness of the organisational
structure of the Company and of the
implementation of Company’s Accounting
Policies and operational controls provide
reasonable assurance that the affairs of
the Company are managed in accordance
with Company policies and that the
Company assets are properly accounted
for and adequately safeguarded. The
Committee is also satisfied that the
Company and its subsidiaries are able to
continue as a going concern.
M M n de silvaChairman – Audit Committee
04 August 2021
AudIT coMMITTEE REpoRT
Sathosa Motors PLC Annual Report 2020/2193
ReMuneRAtIon CoMMIttee RepoRt
Remuneration Committee was
established to ensure compliance with
the requirements of Section 7.10.5 of
the Listing Rules of the Colombo Stock
Exchange and the Code of Best Practices
on Corporate Governance issued jointly
by the Institute of Chartered Accountants
of Sri Lanka and Securities Exchange
Commission of Sri Lanka.
Role of the committee
The remuneration committee
determine the remuneration policy
for Senior Management and making
recommendations to the Board
on recruitment, remuneration and
performance evaluation on Senior
Management including Executive
Directors of the company.
Terms of Reference
The Remuneration Committee functions
within the parameters of agreed
terms of reference. The Committee
is accountable for ensuring that
remuneration arrangements are align
with performance.
Remuneration committee Responsibilities
includes,
Review the framework for the
remuneration and terms and
conditions of employment of the
chairman of the board and of
executive directors.
Monitor the level and structure of the
remuneration of senior managers.
Set detailed remuneration of the executive directors and chairman including
termination payments.
Ensure that executive directors are fairly rewarded for their contribution to the
performance of the company.
Ensure transparency to shareholders that remuneration of the executive directors
is set by individuals with no personal interest in the outcome of the committee
decisions.
Remuneration Policy
The company remuneration policy is designed to motivate, attract and retain the
executive directors and key management personal. Remunerations which are linked
to the individual skills, experiences and performances that align with the company
strategy. Salaries and other benefit are reviewed periodically considering the peer
group companies and institutional guidelines.
All the non-executive directors receive a fee for represents on the board and board
Committees. They do not receive any performance related incentive payments.
Composition and Meeting Attendance
Composition of the Board appointed Remuneration Committee is comprised of two (2)
Independent Non-Executive Directors and One (1) Non-Executive Director. There were no
changes to the composition of the committee as at 31 March 2021.
S J S Perera Chairman, Non – Executive Director
M M N de Silva Independent Non – Executive Director
W A C O Wijesinghe Independent Non – Executive Director
The Committee is authorised by the Board to seek appropriate professional advice
within the Company as and when it considers necessary.
s J sumal pereraChairman
Remuneration Committee
04 August 2021
Sathosa Motors PLC Annual Report 2020/2194
ReLAted pARtY tRAnsACtIons ReVIeW CoMMIttee RepoRt
I am pleased to present the report of
the Related Party Transactions Review
Committee for the financial year ended
31 March 2021. During the year, the
Committee has continued to review
and report to the Board on the Group's
Related Party Transactions. The Board
has established the Related Party
Transactions Review Committee based on
the terms of the Code of Best Practice on
Related Party Transactions issued by the
Securities and Exchange Commission of
Sri Lanka and the Section 9 of the Listing
Rules of the Colombo Stock Exchange.
Role of the Committee
The role of the Related Party Transaction
review Committee exercises oversight
function on behalf of the Board in
complying with the Listing Rules of the
Colombo Stock Exchange and with the
Code of Best Practices on Related Party
Transactions (“the Code”) issued by the
Securities and Exchange Commission
of Sri Lanka. The Committee has also
adopted best practices as recommended
by the Institute of Chartered Accountants
of Sri Lanka.
Terms of Reference
The terms of reference of the Related
Party Transactions Committee
encompasses aspects relating to matters
outlined in the Listing Rule of the Colombo
Stock Exchange.
Analysing and reviewing all proposed
Related Party Transactions with the
exception of those exempted by the
Code.
Identify whether proposed Related
Party Transactions require Board or
Shareholder approval.
Directors of the Company are not
allowed to take part in any discussion
regarding proposed Related Party
Transactions for which they are
related parties with the exception of
occasions in which the Committee
requests Directors to give information
with regard to Related Party
Transactions.
Recommendation of creating a special
committee to review and provide
approval for proposed Related Party
Transactions in view of any conflict of
interest.
Duties of the Committee
Reviewing in advance all proposed
related party transactions of the
Company except those explicitly
exempted by the terms of Rule 9.5 of
the Listing Rules of the Colombo Stock
Exchange
Reviewing if there are any proposed
material changes of previously
reviewed related party transaction
before the completion of the
transaction
To review a related party transaction,
the Committee will be provided with
all relevant material information
of the related party transaction,
including the terms of the transaction,
business purpose of the transaction,
benefits to the Company and to the
related party, and any other relevant
matters. In determining whether to
approve a Related Party Transaction,
the Committee will consider the
following factors, among others, to the
extent relevant to the related party
transaction:
1. Whether the terms of the related
party transaction are fair and on arms
length basis to the Company and
would apply on the same basis if the
transaction did not involve a related
party.
2. Whether there are any compelling
business reasons for the Company
to enter into the Related Party
Transaction and the nature of
alternative transactions, if any.
3. Whether the related party transaction
would present an improper conflict
of interest for any Director or Key
Managerial Personnel of the Company,
taking into account the size of the
transaction, the overall financial
position of the Director, Executive
Officer or other related party, the
direct or indirect nature of the
Director’s, Key Managerial Personnel’s
or other related party’s interest in the
transaction and the ongoing nature
of any proposed relationship and any
other factors the Board/ Committee
deems relevant.
Determining whether related party
transactions that are to be entered
into by the Company require the
approval of the Board or shareholders
of the Company;
Review, revise, formulate and approve
policies and procedures on related
party transactions
Establishing guidelines for the Senior
Management to follow regarding
dealings with recurrent related party
transactions
Ensuring that immediate market
disclosures and disclosures in the
Annual Report are made as required
by the applicable rules/ regulations in
a timely and detailed manner.
Policies and Procedures
As per the existing practice, all related
party transactions must be reported to
the Audit Committee and referred for
approval by the Committee in accordance
with this policy. Such transactions are
also disclosed to stakeholders through
the Company’s Financial Statements.
In case of frequent/repetitive/regular
transactions which are in the normal
course of business of the Company, the
Committee may grant standing pre-
approval.
Sathosa Motors PLC Annual Report 2020/2195
Performance Review during the year
During the year, there were no non-recurrent or recurrent related party transactions
that exceeded the respective thresholds mentioned in the Listing Rules requiring
disclosure in the Annual Report. Details of other related party transactions entered into
by the Company/Group of Companies during the year are disclosed in Note 27 of Notes
to the Financial Statements.
Committee Composition
In accordance with Section 9.2.2 of the Listing Rule of the Colombo Stock Exchange,
the Related Party Transactions Review Committee comprises three Independent Non-
Executive Directors and one Non-Executive Director, who were appointed by resolution
at a Board meeting. The Committee comprised the following members:
Category Number of Directors
Independent Non Executive Directors 3
Non Executive Directors 1
The brief profiles of the existing members of the Committee are given on pages 18 and
19 of the Annual Report.
Meeting Attendance
During the year 2020/21, the Committee members attended meetings as set in the
following table:
Attendance of Related Party Transactions Review Committee
(01 April 2020 to 31 March 2021)
Name
18 May
2020
29 July
2020
09 November
2020
02 February
2021
1 M M N de Silva √ √ √ √
2 Chiran Wijesinghe √ √ √ √
3 R S Dahanayake √ √ x √
4 T A L Niroshan √ √ √ NA *
* Resigned w.e.f. 31 December 2020
Declaration
There were no recurrent or non-recurrent
related party transactions which required
additional disclosures in the 2020/21
Annual Report under Colombo Stock
Exchange Listing Rule 9.3.2.
A Declaration by the Board of Directors
on compliance with the rules pertaining
to the Related Party Transactions appears
in the Report of the Board of Directors on
pages 98 to 99 of the Report.
M M nelson de silvaChairman
Related Party Transactions Review
Committee
04 August 2021
Sathosa Motors PLC Annual Report 2020/2196
stRAtegIC pLAnnIng CoMMIttee RepoRt
Strategic Planning Committee Report
Strategic Planning Committee was
established to focus on planning and
setting strategic directions to achieve
goals and objectives of the Company.
During the year the committee has
continued to review and report to the
Board on the Company’s strategic
direction, trends and issues in achieving
its goals and objectives.
Role of the Committee
The role of the Committee is to assist
the Board with its responsibilities for the
Company’s vision, mission and strategic
direction. The Committee complies
with the best practices in corporate
governance.
The Committee met several times during
the year to discuss the Company’s
strategic direction and its major strategic
issues.
Responsibilities Includes,
Periodically reviewing the Company’s
vision, mission, strategic initiatives,
major programs and services and
making recommendations to the
Board.
Identifying critical strategic issues facing the Company and assisting in the analysis
of alternative strategic options.
Ensuring that the Management has established an effective strategic planning
process with time lines and targets.
Reviewing new products, services and business opportunities go in line with current
business operation.
Advising the Board on the trends in Organisation industry, market/ community, and
core competencies.
Develop key performance indicators for the company level to measure the objectives
achievement.
Reviewing and forwarding to the Board, strategic plans of subsidiary organisations
to assure they are aligned with the system’s strategic direction and goals.
Composition
The Committee comprised three (3) Executive Directors of the Board. J C Joshua serves
as the Chairman of this Committee.
Name of the Director Designation
J C Joshua Chairman - Executive Director
M Jayahsuriya Executive Director
K A P Perera Executive Director
J C Joshua Chairman
Strategic Planning Committee
04 August 2021
Sathosa Motors PLC Annual Report 2020/2197
AnnuAL RepoRt oF the BoARd oF dIReCtoRs onthe AFFAIRs oF the CoMpAnY
The Directors of Sathosa Motors PLC
have pleasure in presenting their Annual
Report of the Company, together with
the Audited Financial Statements of the
Company for the year ended 31 March
2021. This Report covers Chairman’s
Message, Corporate Governance and
Management Structure, Enterprise Risk
Management, Sustainability and all other
relevant information for the year ended
31 March 2021, in addition to the Audited
Financial Statements.
The Company’s Board of Directors is
responsible for confirming that the
information stated in the Annual Report
on the Affairs of the Company, contains
the information required in terms of the
Companies Act No.07 of 2007, the Listing
Rules of the Colombo Stock Exchange and
is guided by recommended best practices.
General
Sathosa Motors PLC was incorporated in
Sri Lanka on 11 March 1982 under the
Companies Ordinance No: 51 of 1938
and re-registered under the Companies
Act No.7 of 2007. Listed on the Colombo
Stock Exchange on 07 November 1993.
The registration number of the Company
is PQ 105.
Principal Activities of the Company and
Review of Performance during the year
SML is the authorised distributor for
ISUZU in Sri Lanka. Access Motors
(Private) Limited is the subsidiary of
Sathosa Motors PLC and authorised
distributor for Jaguar and Land Rover in
Sri Lanka.
Review of the Performance
Review of the financial and operational
performance of the Company and the
Group are described in the Management
Review and under the review of business
operations in Pages 12 to 15 Segment-
wise contribution to Group revenue,
profits, assets and liabilities are provided
in Note 6 (page 121) of the Financial
Statements.
Financial Statements
The Financial Statements of the Group
prepared in line with Sri Lanka Accounting
Standards (SLFRs/LKASs), inclusive of
specific disclosures, duly signed by two
Directors on behalf of the Board and
the Auditors are included in this Annual
Report and forms part and parcel hereof.
Financial Results and Appropriations
Revenue
Revenue generated by the Company
amounted to LKR 2,363Mn (2020 - LKR
2,561Mn) whilst Group revenue amounted
to LKR 3,882Mn (2020 - LKR 4,196Mn).
Profits and Appropriations
The profit after tax of the Company was
LKR 5.4Mn (2020 – Loss is LKR 81Mn),
whilst the Group loss attributable to
owners of the Company for the year was
LKR 3.8Mn (2020 – Loss is LKR 81Mn)
Dividend
The Company has not paid dividends
during the year under review.
Reserves
The reserves of the Company and
Group as at 31 March 2021 amounted
to LKR 1,491Mn (2020 – LKR 1,485 Mn)
and LKR 1,535 Mn (2020 - LKR 1,537
Mn) respectively. The movement and
composition during the year are given in
the Statement of Changes in Equity on
page 112.
Accounting Policies
The Accounting Policies adopted in the
preparation of Financial Statements of the
Company and the Group is given on pages
114 to 177 of the Annual Report.
The financial statements of the Company
have been prepared in accordance with
the Sri Lanka Accounting Standards
(SLFRSs and LKASs) and the policies
adopted thereof are given on pages 110
to 177 Figures pertaining to the previous
period have been re-stated where
necessary to conform to the presentation
for the year under review.
Donations
The Company did not make any donations
during the year under review and the
previous year.
Corporate Social Responsibility
The Company continued its Corporate
Social Responsibility initiatives with a
range of Programs, details of which are
set out on Pages 68 to 70 of this Report.
Property Plant and Equipment (PPE) and
Intangible Assets
The Company’s and Group’s capital
expenditure on PPE amounted to LKR
553.5 Mn (2020 – LKR 61.4 Mn) and
LKR 712.4 Mn (2021 –LKR 197.4 Mn)
respectively and all other related
information and movements have been
disclosed in note 13 (Pages 133 to 136) to
the Financial Statements.
The Company did not incur capital
expenditure on intangible assets
during the year under review (2020
– Nil). Group’s capital expenditure on
intangible assets amounted to LKR 1 Mn
(2020 – LKR 1 Mn) and all other related
information and movements have been
disclosed in note 14 (Page 136) to the
Financial Statements.
Investments Matured during the Financial
year 2020/21
A detailed description of the Company’s
investment in debentures given in Note 18
(Page 142) to the Financial Statements.
Sathosa Motors PLC Annual Report 2020/2198
Stated Capital
The Stated Capital of the Company
is LKR 115,924,290/- representing
6,033,622 ordinary shares (2020 – LKR
115,924,290/- representing 6,033,622
ordinary shares), as given in Note 22
(Page 146) to the Financial Statements.
Share Information
Shareholders
There were 1,236 shareholders registered
as at 31 March 2021 (1,186 shareholders
as at 31 March 2020). The details of
distribution are given on Pages 64 to 66 of
this Report.
Major Shareholders, Distribution
Schedule and other information
Information on the distribution of
shareholding, analysis of shareholders,
market values per share, earnings,
dividends, net assets per share, twenty
largest shareholders of the Company,
percentage of shares held by the public
as per the Listing Rules of the Colombo
Stock Exchange are given on Page 66
under Investor Capital.
The Board Of Directors
Directors’ Responsibility for Financial
Reporting
The Directors are responsible for the
preparation of Financial Statements of the
Company to reflect a true and fair view of
the state of its affairs. The Directors are of
the view that these financial statements
have been prepared in conformity
with requirements of the Sri Lanka
Accounting Standards (SLFRSs/LKASs),
the Companies Act No. 7 of 2007 and
the Listing Rules of the Colombo Stock
Exchange.
The Statement of Directors’ Responsibility
is given on Page 102. .
Names of Directors
The names of the Directors who held
office as at the end of the accounting
period are given below and their brief
profiles appear on pages 18 to 19.
Executive Directors
J C Joshua Managing Director
M Jayahsuriya
K A P Perera
Non - Executive Directors
S J S Perera Chairman
S D Munasinghe
D A R Fernando
Independent Non - Executive Directors
M M N de Silva
W A C O Wijesinghe
R S Dahanayake
Board Committees
The Audit Committee, Remuneration
Committee, Strategic Planning Committee
and the Related Party Transactions
Review Committee function as Board
Sub Committees, with Directors, who
possess the requisite qualifications and
experience. The composition of the said
Committees as at 31 March 2021 is as
follows.
Audit Committee
M M N de Silva Chairman
W A C O Wijesinghe
R S Dahanayake
Remuneration Committee
S J S Perera Chairman
M M N de Silva
W A C O Wijesinghe
Related Party Transaction Review
Committee
M M N de Silva Chairman
W A C O Wijesinghe
R S Dahanayake
Strategic Planing Committee
J C Joshua Chairman
M Jayahsuriya
K A P Perera
Interests Register
The Company maintains an Interests
Register in terms of the Companies Act,
No. 7 of 2007, which is deemed to form
part and parcel of this Annual Report and
available for inspection upon request.
All related party transactions which
encompasses the transactions of
Directors who were directly or indirectly
interested in a contract or a related party
transaction with the Company during the
accounting period are recorded in the
Interests Register in due compliance with
the applicable rules and regulations of the
relevant Regulatory Authorities.
The relevant interests of Directors in the
shares of the Company as at 31 March
2021 as recorded in the Interests Register
are given in this Report under Directors’
shareholding.
Related Party Transactions
The Company’s transactions with Related
Parties, given in note 27 to the Financial
Statements, have complied with Colombo
Stock Exchange Listing Rule 9.3.2 and
Code of Best Practices on Related Party
Transactions under the Securities
Exchange Commission Directive issued
under Section 13(c) of the Securities
Exchange Commission Act as declared by
the Board of Directors.
ANNuAL REpoRT of ThE boARd of dIREcToRs oNThE AffAIRs of ThE coMpANy
Sathosa Motors PLC Annual Report 2020/2199
Directors’ Remuneration
The Directors’ remuneration is disclosed under key management personnel
compensation in Note 27.5 to the Financial Statements on page 156.
Directors’ Interests In Contracts
Directors’ interests in contracts with the Company are stated below. The Directors
have no direct or indirect interest in any other contract or proposed contract with the
Company. Except for the transactions referred to in Note 27.5 (page 156) to the Financial
Statements, the Company did not carry out any transaction with any of the Directors.
Directors’ Shareholding
The relevant interests of the Directors in the shares of the Company as at 31 March
2021 are as follows.
Shareholding
as at 31 March 2021
Shareholding as at
31 March 2020
S J S Perera Nil Nil
J C Joshua Nil Nil
M M N De Silva 1,100 1,100
S D Munasinghe Nil Nil
D A R Fernando Nil Nil
W A C O Wijesinghe Nil Nil
R S Dahanayake Nil Nil
M Jayahsuriya Nil Nil
T A L Niroshan N/A* 1,000
K A P Perera Nil Nil
* Resigned w.e.f. 31 December 2020
Corporate Governance
The Board of Directors confirms, that they are in compliant with section 7.10 of the
Listing Rules of the CSE. The Chairman, the Board of Directors and the Key Management
Staff is dedicated towards upholding an effective Corporate Governance Framework
in compliance with the Code of Business Conduct, Ethics of the Company and in
implementing systems and structures required to ensuring best practices within the
Company.
The Corporate Governance of the Company is reflected in its strong belief in protecting
and enhancing stakeholder value in a sustainable manner, supported by a sound system
of policies and practices. Prudent internal controls ensure professionalism, integrity
and commitment of the Board of Directors, Management and employees.
The Corporate Governance Statement on Pages 26 to 44 explains the measures adopted
by the Company during the year of review.
Sustainability
The Company pursues its business
goals based on a model of stakeholders’
governance. Finding of the continuous
internal stakeholder engagements have
enabled the Company to focus on material
issues highlighted by other stakeholders
such as employees, customers, suppliers
and the community. These steps have
been encapsulated in a Company-
wide strategy focused on sustainable
development which is continuously
evolving based on the above mentioned
stakeholder engagements. Refer Capital
Formation and Distribution on Pages 64
to 66.
Employment Policy
The Company’s employment policy
is totally non-discriminatory which
respects individuals and provides carrier
opportunities irrespective of the gender,
race or religion.
At a Company level as at 31 March 2021 a
total of 181 persons were in employment
(188 persons as at 31 March 2020). Refer
Human Capital on Pages 67 to 70 for more
information.
Supplier Policy
The Company applies an overall policy
of agreeing and clearly communicating
terms of payment as part of the
commercial agreements negotiated with
suppliers and endeavors to pay for all
items properly charged in accordance
with these agreed terms. As at 31 March
2021 trade and other payables of the
Company and Group amounted to LKR 236
Mn (2020 –LKR 494 Mn) and LKR 456 Mn
(2020 – LKR 793 Mn) respectively.
The Company strives to integrate
principles of sustainable practices in its
value chain through extensive stakeholder
Sathosa Motors PLC Annual Report 2020/21100
consultations, the findings of which are
integrated in to work plans.
Environmental Protection
The Company complies with appropriate
environmental laws and regulations
to fulfill the best practices applicable
in the country of operation. After
making adequate enquiries from the
management, the Directors are satisfied
that the Company operates in a manner
that minimises the detrimental effects on
the environment and provides products
and services that have a beneficial effect
on the customers and the communities
within, which the Company operates.
Refer Environmental Capital on Pages 76
to 79 for more information.
Research and Development
The Company has an active approach
to research and development and
recognises the contribution that it can
make to the Company’s operations.
Significant expenditure has taken place
over the years and substantial effort will
continue to be made to introduce new
products and processes and develop
existing products and processes to
improve operational efficiency.
Statutory Payments
The Directors confirm that to the best
of their knowledge, all taxes, duties and
levies payable by the Company and its
subsidiaries, all contributions, levies and
taxes payable on behalf of, and in respect
of employees of the Company and the
Group and all other known statutory dues
as were due and payable by the Company
and the Group as at the Statement of
Financial Position date have been paid
or, where relevant provided for, except as
specified in Note 11.2 (Page 128) to the
Financial Statements covering uncertainty
over income tax treatments.
Contingent Liabilities
Except as disclosed in Note 28 (Page 156)
to the Financial Statements, there were
no material Contingent Liabilities as at the
reporting date.
Risk Management
An ongoing process is in place to identify
and manage the risks that are associated
with the business and operations of the
Company and the Group on a quarter
basis. The Directors review this process
through the Audit Committee, to identify
the competence and success of internal
controls.
Specific steps taken by the Company in
managing the risks are detailed in the
section on Enterprise Risk Management
on Pages 45 to 58 .
Events Occurring after the Balance Sheet
Date
Except for the matters disclosed in Note
29 (Page 157) to the Financial Statements,
there were no material events as at
the date of the Auditor’s Report, which
require adjustment to or disclosure in the
Financial Statements.
Going Concern
The Financial Statements are prepared
on going concern principles. After making
adequate enquires from the Management,
the Directors are satisfied that the
Company has adequate resources to
continue its operations in the foreseeable
future.
Independent Auditors’ Report
The Report of the Independent Auditor on
the Financial Statements of the Company
is given on Pages 105 to 109.
Auditors
Messrs KPMG, Chartered Accountants
served as the Auditors during the year
under review. They do not have any
interest in the Company other than that of
Auditor.
A total amount of LKR 1,322,500 is
payable by the Company to the Auditors
for the year under review as audit fees.
The Auditors have expressed their
willingness to continue in office. A
resolution to re-appoint the Auditors and
to authorise the Directors to determine
their remuneration will be proposed at the
Annual General Meeting.
Independence of Auditors
Based on the declaration provided by
Messrs KPMG, Chartered Accountants and
to the extent that the Directors are aware,
the Auditors do not have any relationship
with (other than that of the Auditor), or
interest in, the Company, which in the
opinion of the Board, may reasonably be
considered to have a bearing on their
independence within the meaning of the
Code of Professional Conduct and Ethics
issues by The Institute of Chartered
Institute of Sri Lanka as at the reporting
date.
Tax Related Services
All tax related services are provided
by Messrs Ernst & Young, Chartered
Accountants.
ANNuAL REpoRT of ThE boARd of dIREcToRs oNThE AffAIRs of ThE coMpANy
Sathosa Motors PLC Annual Report 2020/21101
Compliance with Laws and Regulations
To the best of knowledge and belief
of the Directors, the Group/Company
has not engaged in any activity, which
contravenes laws and regulations of the
country.
Annual Report
The Board of Directors approved the
consolidated Financial Statements on 04
August 2021.
Annual General Meeting
The thirty sixth (37th) Annual General
Meeting will be held on 15 September
2021.
The notice of the Annual General Meeting
appears on Page 185.
This Annual Report is signed for and on
behalf of the Board of Directors by
s J s perera Chairman
J C JoshuaManaging Director
p W Corporate secretarial (private) LimitedSecretaries
04 August 2021
Colombo
Sathosa Motors PLC Annual Report 2020/21102
the stAteMent oF dIReCtoRs ResponsIBILItY
This Statement sets out the responsibility
of the Board of Directors in relation to
the Financial Statements of the Company
and its Subsidiaries. Responsibility of
the Auditors in relation to the Financial
Statements of the Company and its
Subsidiaries is set out in the ‘Independent
Auditors Report’ given in pages 105 to
109.
The Directors are responsible for the
proper recording and maintenance of
books of accounts of all transactions of
the Company and its Subsidiaries under
the provisions of the Companies Act No.
07 of 2007.
In terms of this Act the Directors are
responsible for preparing Financial
Statements that give a true and fair view
of the state of the affairs of the Company
and its Subsidiaries at the end of each
financial year. These statements consist
of the Statement of Comprehensive
Income giving a true and fair view of
the profit or loss of the Company and its
Subsidiaries for the financial year, the
Statement of Financial Position giving a
true and fair view of the state of affairs
of the Company and its Subsidiaries as at
the end of the financial year, Statement
of Changes in Equity, Statement of Cash
Flows & the Notes thereto.
In preparing these Financial Statements
the Directors are required to ensure that;
Appropriate accounting policies
have been selected and applied in
a consistent manner and material
departures, if any, have been disclosed
and explained;
Financial Statements are presented in
accordance with Sri Lanka Accounting
Standards (SLFRS/LKAS); and
reasonable and prudent judgments
and estimates have been made
so that the form and substance of
transactions are properly reflected;
Financial Statements provide the
information required by and otherwise
comply with the Companies Act and
the Listing Rules of the Colombo Stock
Exchange;
The Company maintains with
reasonable accuracy sufficient
accounting records to disclose the
financial position of the Company and
the Group;
Financial Statements have been
prepared on a going concern basis
and they are of the view that sufficient
resources are available to justify it
Further, the Directors confirm that they
have taken reasonable measures to
safeguard the assets of the Company and
Group and in this regard have established
appropriate systems of internal control
with a view to preventing and detecting
fraud and other irregularities.
The External Auditors were provided
with all information and explanations
necessary to enable them to form their
independent opinion on the Financial
Statements.
Compliance Report
The Directors confirm that to the best
of their knowledge, all taxes, duties and
levies payable by the Company and its
Subsidiaries, all contributions, levies
and taxes payable on behalf of and in
respect of the employees of the Company
and its Subsidiaries and all other known
statutory dues as were due and payable
by the Company and its Subsidiaries as
at reporting have been paid or, where
relevant, provided for, except as specified
in Note No 28 (156 to 157) to the Financial
Statements covering commitments and
contingencies.
By Order of the Board,
p W Corporate secretarial (private) LimitedSecretaries
04 August 2021
Colombo
Sathosa Motors PLC Annual Report 2020/21103
dIReCtoRs stAteMent on InteRnAL ContRoL IntRoduCtIon
Introduction
This Statement is presented by the Board
based on the recommendation made by
the ‘Code of Best Practice on Corporate
Governance 2013’ jointly issued by the
Securities & Exchange Commission of
Sri Lanka and the Institute of Chartered
Accountants of Sri Lanka.
Board’s Responsibility
The Board of Directors are responsible
for the adequacy and effectiveness of the
Company’s system of internal controls.
However, such a system is designed to
manage the Company’s key exposure
areas within an acceptable risk profile
rather than eliminating the risk of failure
to achieve the Company’s objectives.
Accordingly the system of internal
controls can only provide a reasonable
assurance but not absolute against the
material misstatement of management
and financial information and records
or against financial losses or fraud. The
Board has established an ongoing process
for identifying, evaluating and managing
the significant exposures faced by the
Company and this process includes
enhancing the system of internal controls
as and when there are changes for the
business environment or regulatory
framework.
Key Internal Control Processes
Following features of the System of
Internal Control put in place by the Board
provide reasonable assurance regarding
the reliability of financial reporting.
They also ensure the adequacy and
effectiveness of the system.
Committees appointed by the Board
to assist them in ensuring the
effectiveness of Company’s daily
operations, and to ensure that these
daily operations are within the
corporate objectives, strategies and
annual budget ratified by the Board
Internal Audit Department which is
headed by the Chief Internal Auditor
carries out periodic audits on an on-
going basis covering all operational
units to ensure the effectiveness of
the system of internal control. These
audits are carried out in accordance
with the Annual Audit Plan approved
by the Board Audit Committee and
findings of the same are submitted
to the Board Audit Committee for
their review on a quarterly basis.
Additionally Special Audits are
conducted as and when the need
arises and findings of the same
are submitted to the Board Audit
Committee for their review.
The Board Audit Committee
reviews internal control issues
identified by the Internal Audit
Department, regulatory bodies and
the management, and evaluates
the adequacy and effectiveness of
the risk management and internal
control systems. They also review the
internal audit functions with particular
emphasis on the scope of audits and
quality of internal audits.
In accordance with Sri Lanka
Accounting Standards comprising
SLFRS and LKAS, processes that are
required to comply with requirements
of recognition, measurement,
presentation and disclosures were
introduced and implemented.
Continuous monitoring is in progress
to enhance the system’s effectiveness
and efficiency.
Confirmation Statement
Based on the above processes, the Board
of Directors confirms that the financial
reporting system of the Company has
been designed to provide reasonable
assurance regarding the reliability of
financial reporting and the preparation
of Financial Statements for external
purposes has been done in accordance
with the Sri Lanka Accounting Standards
(SLFRS/LKASs), requirements of the
Company’s Act No 7 of 2007 and Listing
Rules of the Colombo Stock Exchange.
s J s pereraChairman
J C JoshuaManaging Director
M M n de silvaChairman, Audit Committee
04 August 2021
Sathosa Motors PLC Annual Report 2020/21104
FINANCIAL CALENDAR
Thirty Sixth (36th) Annual General Meeting 28 September 2020
Annual Report 2019/20 04 September 2020
Interim Financial Statements – 2020/21
Interim Financial Statements as of 30 June 2020
(First Quarter Report)
12 August 2020
Interim Financial Statements as of 30 September 2020
(Second Quarter Report)
10 November 2020
Interim Financial Statements as of 31 December 2020
(Third Quarter Report)
03 February 2021
Interim Financial Statements as of 31 March 2021
(Fourth Quarter Report)
19 May 2021
Sathosa Motors PLC Annual Report 2020/21105
To the Shareholders of Sathosa Motors PLC Report on the Audit of Financial Statements
Opinion We have audited the financial statements of Sathosa Motors PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31 March 2021, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information as set out on pages 110 to 177 of this Annual Report.
In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 March 2021, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
Basis for Opinion We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the company financial statements and the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the company financial statements and the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Independent AudItoR’s RepoRt
Sathosa Motors PLC Annual Report 2020/21106
1. Management assessment of the Company’s ability to continue as going concern due to pandemic
Risk Description Our Response
The Group incurred a net loss of LKR 12.98 Mn for the year ended 31 March
2021.
However, the financial statements have been prepared on a going concern
basis. In adopting the going concern basis of preparation of the financial
statements, the directors have reviewed the company’s cash flow
projections prepared by the management. The cash flow projections were
based on management’s assumptions and estimation of future cash inflows
and outflows, also taking into consideration the impact of COVID-19 global
pandemic and government restrictions imposed.
Notes to the financial statements, describes the impact of COVID-19
outbreak to the current year financial statements and possible effects to
the Company’s future prospects, performance and cash flows. Further the
management considered it appropriate to adopt the going concern basis of
accounting in preparing financial statements and their identification of any
material uncertainties to the Company’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial
statements.
We identified the assessment of impacts of COVID-19 related events as a key
audit matter because the cash flow projections referred to above involves
consideration of future events and circumstances which are inherently
uncertain, and effect of those uncertainties may significantly impact the
resulting accounting estimates.
Therefore, the assessment requires the exercise of significant management
judgement in assessing future cash inflows and outflows which could be
subject to potential management bias.
Our audit procedures included;
Assessing the directors’ assessment of the
Company’s ability to continue as a going
concern, including the underlying data and key
assumptions used to make the assessment, and
evaluated the directors’ plans for future actions
in relation to their going concern assessment.
Obtaining the Company’s cash flow projections
covering a period of twelve months from
the reporting period end date and assessing
these key assumptions used in preparing the
projections.
Evaluating the sensitivity of the projected
available cash by considering downside
scenarios together with reasonably plausible
changes to the key assumptions and
considering whether there were any indicators
of management bias in the selections of the
assumptions.
Inspecting the facility agreements for the
Company’s long-term loans to identify any
financial covenants or similar terms and
assessing the implication of these on the
Company’s liquidity;
Assessing the adequacy of disclosures in the
financial statements in relation to the impact
of prevailing pandemic situation to sustain
its operations in the foreseeable future with
reference to the requirements of the prevailing
standards.
INdEpENdENT AudIToR’s REpoRT
Sathosa Motors PLC Annual Report 2020/21107
2. Recoverability of Trade ReceivablesAs described in Note 20 Trade Receivables, Group’s Trade Receivables amount to LKR 470 Mn as at 31 March 2021.
Risk Description Our Response
Trade Receivables are significant to the Group due to trade Receivables of Sathosa Motors PLC and its Subsidiary company, Access Motors (Pvt) Ltd.
The Group’s allowances for doubtful debts are based on management’s estimate of the expected credit losses to be incurred, which is estimated by taking into account the credit history of the Group’s customers and current market and customer-specific conditions, all of which involve a significant degree of management judgement.
The Group’s allowances for doubtful debts include a specific element based on individual debtors and a collective element based on historical experience adjusted for certain current factors.
The uncertainty on the impact of COVID-19 introduced significant estimation uncertainty in relation to the measurement of the Group’s allowance for doubtful debts. The rapidly evolving consequences of COVID-19 and government, business and consumer responses could result in significant adjustments to the allowance within the current financial years.We identified assessing the recoverability of trade receivables as a key audit matter because the significance of the trade receivables to the consolidated financial statements and the assessment of the recoverability is inherent subjectivity and required significant management judgment, which increases the risk of error or potential management bias.
Our audit procedures included; Understanding and evaluating the design, implementation and
operating effectiveness of management’s key internal controls in respect of the valuation of trade debtors, which included credit control procedures and the application of the Group’s doubtful debt provisioning policy.
Assessing how management had assessed the impact of Covid-19 within the credit losses model to assess whether that it was appropriately considered in the measurement of doubtful debts at year end. In particular, we assessed Management’s assessment of the likelihood of a severe economic downturn caused by Covid-19 at the reporting date with reference to the reasonable and supportable information available to management at that date.
On a sample basis, assessing whether items in the trade debtors’ ageing report were classified within the appropriate ageing bracket by comparing individual items in the report with underlying documentation, which included sales invoices and goods delivery notes.
Assessing the assumptions and estimates made by the management for the allowances for doubtful debts with reference to our understanding of the debtors’ financial condition, the industry in which the debtors are operating, the ageing of overdue balances and historical and post year-end cash receipts from the debtors and by performing a retrospective review of the historical accuracy of these estimates.
Assessing the adequacy of financial statements disclosure as per the required accounting standards.
Sathosa Motors PLC Annual Report 2020/21108
Other InformationManagement is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our Auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial StatementsManagement is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
INdEpENdENT AudIToR’s REpoRT
Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Sathosa Motors PLC Annual Report 2020/21109
We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matter in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.
CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 2618.
ChARteRed ACCountAnts Colombo, Sri Lanka 04 August 2021
Sathosa Motors PLC Annual Report 2020/21110
stAteMent oF pRoFIt oR Loss And otheR CoMpRehensIVe InCoMe
group CompanyFor the year ended 31 March 2021 2020 2021 2020 note LKR LKR LKR LKR
Revenue 07 3,881,584,608 4,195,960,439 2,362,952,341 2,560,749,579
Cost of sales (3,245,668,639) (3,401,116,550) (1,936,748,882) (2,126,614,125)
gross profit 635,915,969 794,843,889 426,203,459 434,135,454
Other Income 08 177,614,571 153,127,365 32,551,321 13,292,788
Administrative expenses (680,993,980) (670,622,469) (361,811,737) (310,475,037)
Selling and distribution expenses (29,574,205) (82,541,890) (13,863,518) (44,992,987)
Other operating expenses 11.2 7,570,570 (66,680) 7,570,570 -
operating profit 110,532,925 194,740,215 90,650,095 91,960,218
Finance income 41,382,983 70,438,071 39,205,290 62,022,541
Finance costs (181,782,810) (407,283,285) (125,531,993) (281,003,868)
net finance costs 09 (140,399,827) (336,845,214) (86,326,703) (218,981,327)
profit / (loss) before tax 10 (29,866,902) (142,104,999) 4,323,392 (127,021,109)
Income tax (expense)/ reversal 11.1 16,886,808 62,193,628 1,124,315 46,014,721
profit/ (loss) for the year (12,980,094) (79,911,371) 5,447,707 (81,006,388)
other Comprehensive Income:Items that will not be reclassified to profit & LossRe-measurements of defined benefit liability 25.2 2,690,347 4,618,662 1,527,377 3,318,068
Related tax 11.1 (645,683) (1,293,225) (366,570) (929,059)
other Comprehensive income for the year, net of tax 2,044,664 3,325,437 1,160,807 2,389,009
total Comprehensive income for the year (10,935,430) (76,585,934) 6,608,514 (78,617,379)
profit/ (loss) attributable to:Owners of the Company (3,766,192) (81,028,416) 5,447,707 (81,006,388)
Non-controlling interests (9,213,902) 1,117,045 - -
(12,980,094) (79,911,371) 5,447,707 (81,006,388)
total Comprehensive income attributable to:Owners of the Company (2,163,456) (78,171,193) 6,608,514 (78,617,379)
Non-controlling interests (8,771,974) 1,585,259 - -
(10,935,430) (76,585,934) 6,608,514 (78,617,379)
earnings/(Loss) per shareBasic / diluted earnings/(loss) per share 12 (0.62) (13.43) 0.90 (13.43)
The Accounting Policies and Notes form an integral part of these Financial Statements.
Figures in brackets indicate deductions.
Sathosa Motors PLC Annual Report 2020/21111
stAteMent oF FInAnCIAL posItIon
group CompanyAs at 31 March, 2021 2020 2021 2020 note LKR LKR LKR LKR
AssetsProperty, plant and equipment 13 1,852,732,135 1,315,020,107 1,433,601,234 931,847,253Intangible assets 14 17,594,802 23,826,742 15,816,986 22,483,802Right -of- use assets 16.1 219,748,080 257,348,311 35,612,339 32,455,213Deferred tax assets 11.6 44,347,703 29,480,376 26,542,853 26,653,747Investment in subsidiary 17 - - 464,940,064 464,940,074non current assets 2,134,422,720 1,625,675,536 1,976,513,476 1,478,380,089
Inventories 19 838,009,215 2,638,593,133 475,068,772 1,519,545,441Investments in debentures 18 - 614,935,154 - 614,935,154Trade and other receivables 20 713,161,383 1,431,392,038 317,898,911 1,019,545,746Amounts due from related parties 27.1 3,842,251 97,788,672 1,243,403 89,906,502Current tax assets 11.5 52,265,082 75,892,191 44,729,236 34,397,086Cash and cash equivalents 21 129,812,340 62,960,694 43,769,541 45,878,676Current assets 1,737,090,271 4,921,561,882 882,709,863 3,324,208,605total assets 3,871,512,991 6,547,237,418 2,859,223,339 4,802,588,694
equityStated capital 22 115,924,290 115,924,290 115,924,290 115,924,290Retained earnings 1,535,197,038 1,537,360,494 1,491,177,333 1,484,568,819equity attributable to owners of the Company 1,651,121,328 1,653,284,784 1,607,101,623 1,600,493,109Non-controlling interests 508,959,772 517,731,746 - -total equity 2,160,081,100 2,171,016,530 1,607,101,623 1,600,493,109
LiabilitiesInterest bearing loans and borrowings 23 - 54,492,000 - -Deferred income 24 5,265,318 5,484,707 5,265,318 5,484,707Employee benefits 25.1 36,527,017 38,576,603 22,078,228 24,673,603Lease liabilities 16.2 243,085,677 247,560,241 26,714,886 22,088,035non current liabilities 284,878,012 346,113,551 54,058,432 52,246,345
Trade and other payables 26 456,416,469 792,831,145 235,999,651 494,323,946Amounts due to related parties 27.2 131,832,101 143,609,495 131,671,904 143,197,959Interest bearing loans and borrowings 23 816,000,000 2,984,500,194 816,000,000 2,494,343,500Lease liabilities 16.2 11,092,427 10,696,366 3,178,847 2,749,774Unclaimed dividend 4,146,312 4,146,312 4,146,312 4,146,312Bank overdraft 21 7,066,570 94,323,825 7,066,570 11,087,749Current liabilities 1,426,553,878 4,030,107,337 1,198,063,284 3,149,849,240total liabilities 1,711,431,891 4,376,220,888 1,252,121,716 3,202,095,585total equity and liabilities 3,871,512,991 6,547,237,418 2,859,223,339 4,802,588,694
net assets per share 38 273.65 274.01 266.36 265.26
The Accounting Policies and Notes form an integral part of these Financial Statements.It is certified that the Financial statements have been prepared in compliance with the requirements of the Companies Act, No 07 of 2007.
s I AlahapperumaGeneral Manager Finance
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 of Directors of Sathosa Motors PLC.
M Jayahsuriya K A p pereraDirector Director
04 August 2021Colombo
Sathosa Motors PLC Annual Report 2020/21112
stAteMent oF ChAnges In eQuItY
Attributable to the equity holders of the Companygroup stated Retained non-controlling total capital earnings total interests equity LKR LKR LKR LKR LKR
Balance as at 01 April 2019 115,924,290 1,615,531,687 1,731,455,977 316,146,505 2,047,602,482
Profit for the year - (81,028,416) (81,028,416) 1,117,045 (79,911,371)
Other comprehensive income
for the year net of tax - 2,857,223 2,857,223 468,214 3,325,437
total comprehensive income for the year - (78,171,193) (78,171,193) 1,585,259 (76,585,934)
Non controlling interest of Access
Motors (Private) Limited right issue - - - 199,999,982 199,999,982
Balance as at 31 March 2020 115,924,290 1,537,360,494 1,653,284,784 517,731,746 2,171,016,530
Loss for the year - (3,766,192) (3,766,192) (9,213,902) (12,980,094)
Other comprehensive income for
the year net of tax - 1,602,736 1,602,736 441,928 2,044,664
total comprehensive income for the year - (2,163,456) (2,163,456) (8,771,974) (10,935,430)
Balance as at 31 March 2021 115,924,290 1,535,197,038 1,651,121,328 508,959,772 2,160,081,100
Company stated Retained total capital earnings equity LKR LKR LKR
Balance as at 01 April 2019 115,924,290 1,563,186,198 1,679,110,488
Profit for the year - (81,006,388) (81,006,388)
Other comprehensive income for the year net of tax - 2,389,009 2,389,009
total comprehensive income for the year - (78,617,379) (78,617,379)
Balance as at 31 March 2020 115,924,290 1,484,568,819 1,600,493,109
Profit for the year - 5,447,707 5,447,707
Other comprehensive income for the year net of tax - 1,160,807 1,160,807
total comprehensive income for the year - 6,608,514 6,608,514
Balance as at 31 March 2021 115,924,290 1,491,177,333 1,607,101,623
The accounting policies and notes form an integral part of these Financial Statements.
Figures in brackets indicate deductions.
Sathosa Motors PLC Annual Report 2020/21113
stAteMent oF CAsh FLoWs
group CompanyFor the year ended 31 March 2021 2020 2021 2020 note LKR LKR LKR LKR
Cash flows from/ (used in) operating activitiesProfit / (loss) before tax (29,866,902) (142,104,999) 4,323,392 (127,021,109)Adjustments for:Depreciation of property plant and equipment 13.1/ 13.2 129,703,986 118,969,262 51,753,319 47,530,719Amortisation of intangible assets 14.1 6,991,733 7,498,147 6,666,816 7,286,233Impairment of intangible assets 14.1 - 619,415 - 619,415Depreciation of right-of-use assets 16.1 42,573,937 45,480,423 4,330,754 5,782,228Amortisation of grants received 24 (219,389) (219,389) (219,389) (219,389)Provision for /(reversal of) inventories 19.1 56,549 (18,106,695) 56,549 (19,849,103)Provision for/write off debtors 20.1 10,664,446 3,727,373 5,479,946 5,125,547Profit on sale of property, plant and equipment 8 (55,046,812) (11,761,977) - (735,107)Provision for employee benefits 25.2 8,732,363 9,353,148 5,415,989 5,718,387Write back of advances 8 (23,446,617) (4,757,595) (2,315,843) (4,757,595)Net finance costs 9 140,399,827 336,845,214 86,326,703 218,981,327operating profit before working capital changes 230,543,121 345,542,327 161,818,236 138,461,553
Working Capital Changes :Inventories 1,800,527,369 (563,525,783) 1,044,420,120 (121,570,773)Trade and other receivables 742,030,627 1,017,075,742 696,166,899 (92,596,109)Amount due to related parties (11,777,394) (367,647,397) (11,526,055) 39,656,751Amount due from related parties 93,946,421 (65,605,316) 88,663,099 (89,508,143)Trade and other payables (312,968,059) (134,982,779) (256,008,452) 242,445,798Cash generated from operating activities 2,542,302,085 230,856,795 1,723,533,847 116,889,077Interest paid (150,414,421) (367,740,738) (122,522,410) (270,455,012)Income tax paid (9,463,511) (24,694,682) (9,463,511) (12,641,650)Gratuity paid 25.1 (8,091,602) (4,828,952) (6,483,987) (3,034,414)net cash flows from/ (used in) operating activities 2,374,332,551 (166,407,577) 1,585,063,939 (169,241,999)
Cash flows from/ (used in) investment activitiesPurchase of property, plant & equipment 13.1/ 13.2 (712,437,102) (197,497,582) (553,507,300) (61,476,712)Purchase of intangible assets 14.1 (759,793) (856,282) - -Proceeds from sale of property, plant & equipment 101,205,046 25,813,870 - 17,813,870Investment in subsidiary company - - - (199,999,982)Consideration on maturity of investment in debentures 18.1 580,790,000 - 580,790,000 -Interest received 75,528,138 47,774,301 73,350,445 39,858,771net cash flows from/ (used in) investing activities 44,326,289 (124,765,693) 100,633,145 (204,304,053)
Cash flows from/ (used in) financing activitiesProceed for borrowings 23.2 11,988,504,483 19,707,362,280 11,325,963,423 17,960,381,535Repayment of loans 23.1/ 23.2 (14,211,496,677) (19,975,778,843) (13,004,306,923) (18,018,611,987)Repayment of lease liabilities 16.2 (41,557,745) (34,701,467) (5,441,540) (4,535,280)Proceeds from issue of shares to NCI - 199,999,982 - -net cash flows used in financing activities (2,264,549,939) (103,118,048) (1,683,785,040) (62,765,732)
net increase/(decrease) in cash and cash equivalents 154,108,901 (394,291,318) 1,912,044 (436,311,784)Cash and cash equivalents as at 01 April (31,363,131) 362,928,187 34,790,927 471,102,711Cash and cash equivalents as at 31 March 122,745,770 (31,363,131) 36,702,971 34,790,927
Analysis of cash and cash equivalentsCash and cash equivalents 21 129,812,340 62,960,694 43,769,541 45,878,676Bank overdraft 21 (7,066,570) (94,323,825) (7,066,570) (11,087,749) 122,745,770 (31,363,131) 36,702,971 34,790,927
Cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management.The accounting policies and notes form an integral part of these financial statements.Figures in brackets indicate deductions.
Sathosa Motors PLC Annual Report 2020/21114
01 Corporate information 1.1 Reporting entity Sathosa Motors PLC is a public quoted
company incorporated and domiciled
in Sri Lanka, registered under the
Companies Act No. 7 of 2007 and is listed
on the Colombo Stock Exchange. The
registered office and principal place of
business of the Company is situated at No.
25, Vauxhall Street, Colombo 02.
The consolidated Financial Statements
of Sathosa Motors PLC as at and for the
year ended 31 March 2021 comprise
the Company and its Subsidiary, Access
Motors (Private) Limited. Sathosa Motors
PLC holds 50% of Access Motors (Private)
Limited.
The Financial Statements of the
Company and its subsidiary have a
common financial year which ends on 31
March and are prepared using uniform
accounting policies.
1.2 Principal activities and nature of operations
The principal activity of the Company is
importing and distribution of Isuzu new
vehicles, Marine engines, spare parts
and operating workshops for vehicle
repairs.
Access Motors (Private) Limited is in the
business of importation and sale of Land
Rover vehicles and Jaguar vehicles, the
Subsidiary Company operates workshops
and sale of Land Rover and Jaguar spare
parts.
SML Realities (Private) Limited has been
wind up due to the non-operation of
the Company during the financial year
2020/21.
1.3 Parent Company The Parent Company of Sathosa Motors
PLC is Access Engineering PLC (AEL).
AEL is primarily involved in the business
of Construction activities and supply
of construction – related services and
materials.
02 Basis of preparation 2.1 Statement of compliance The Financial Statements of the Company
and those consolidated comprise the
Statement of Financial Position, the
Statement of Profit or Loss and Other
Comprehensive Income, Statement of
Changes in Equity, and Statement of
Cash Flows together with the Accounting
Policies and Notes to the Financial
Statements.
These Financial Statements have been
prepared and presented in accordance
with Sri Lanka Accounting Standards
(SLFRSs / LKASs) as issued by the
Institute of Chartered Accountants of
Sri Lanka (CA Sri Lanka) and with the
requirements of the Companies Act No.
7 of 2007 and the Listing Rules of the
Colombo Stock Exchange.
2.2 Responsibilities of the Financial Statements
The Board of Directors is responsible
for preparation and presentation of the
Financial Statements of the Company and
its subsidiaries as per provisions of the
Companies Act No. 07 of 2007 and the Sri
Lanka Accounting Standards (SLFRSs/
LKASs).
The consolidated and separate Financial
Statements were approved and
authorised for issue by the Board of
Directors on 04 August 2021.
2.3 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.
Financial Assets and Financial
Liabilities that have been measured at
fair value- SLFRS 9 (Note 32)
Employee benefit liability recognised
based on the actuarial valuation -
LKAS 19 (Note 25)
2.4 Functional and Presentation Currency
These Consolidated Financial Statements
are presented in Sri Lankan Rupees
(LKR), which is the Group's functional and
presentation currency.
2.5 Significant accounting judgments, estimates and assumptions
The preparation of the Group's
Consolidated Financial Statements in
conformity with Sri Lanka Accounting
Standards (SLFRSs/LKASs) requires
management to make judgments,
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 these estimates.
The 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 and in any future
periods affected.
The key assumptions concerning the
future and other key resources estimation
uncertainty at the reporting date that
have a significant risk of causing a
material adjustment to the carrying
amounts of assets, liabilities within next
financial year, are also described in the
individual notes of the related Financial
Statement line items below. The Group
based its assumptions and estimates
on parameters available when the
consolidated Financial Statements were
notes to the FInAnCIAL stAteMents
Sathosa Motors PLC Annual Report 2020/21115
prepared. Existing circumstances and
assumptions about future developments,
however, may change due to market
changes or circumstances arising that
are beyond the control of the Group. Such
changes are reflected in the assumptions
when they occur.
Management considered the following
items, where significant judgments,
estimates and assumptions have been
used in preparing these Financial
Statements.
Information about assumptions and
estimate uncertainties as at 31 March
2021 that have a significant risk of
resulting in a material adjustment to the
carrying amounts of assets and liabilities
in the next financial year is included in the
following notes:
Revenue recognition [Note 07]
Income tax - Current tax and deferred
tax [Note 11]
Measurement of defined benefit
obligation: key actuarial assumptions
[Note 25]
Recognition and measurement of
provisions and contingencies: key
assumptions about the likelihood and
magnitude of an outflow of resources
[Note 28]
Fair value measurement of
financial instruments [Note 33]; Key
assumptions used discounted cash
flow (DCF) model
Depreciation of Property, Plant and
Equipment [Note 13]
Amortisation of Intangible Assets
[Note 14]
Provision for expected credit losses of
trade receivables and contract assets;
Key assumptions for provision matrix
to calculate ECL. [Note 32]
going ConcernIn light of ongoing COVID-19 pandemic
situation, the Group and the Company has
assessed its going concern and a detailed
disclosure of its assessment is provided
below.
The COVID-19 pandemic, which has
suffocated many economies is becoming
a way of life to be factored into our
short to medium term planning. The
economic slowdown; the upward trends
in the exchange rate and inflation;
shipping and freight challenges such
as limited container spaces, increased
freight rates and higher shipping costs
are of concerns for our spare parts
business. We anticipate that state
regulations that curtail imports and
import related activities will continue
hindering passenger and commercial
vehicle sales. Further, impending random
lockdown curfews with each new
variant of the COVID-19 virus cannot be
disregarded.
In determining the basis of preparing
the financial statements for the year
ended 31 March 2021, the directors are
responsible for assessing the Group's
and the Company's ability to continue as
a going concern and based on available
information, the management has
assessed the existing and anticipated
postlockdown economic implications
on the group of companies and the
appropriateness of the use of the
going concern basis. The management
performed multiple stress tested
scenarios considering cost management
practices, cash reserves, ability to secure
additional funding to finance the adverse
effect to the cash flow, ability to secure
supplies, expected revenue streams,
credit and collection management
practices and ability to defer non-
essential capital expenditure. Unutilised
bank facilities of the Group as at 31 March
2021 are disclosed in Note 23.3.
After considering the risks and likelihood
of outcomes, the Board of Directors
is satisfied that the Company and its
subsidiary have adequate liquidity and
business plans to continue to operate the
business operations for the foreseeable
future and have therefore continued
to adopt the going concern basis in
preparing the financial statements.
Furthermore, Management is not aware
of any material uncertainties related
to events or conditions that may cast
significant doubt upon the Group's/
Company's ability to continue to be
prepared on a going concern basis other
than disclosed above.
estimation uncertainity in preparation of financial statements due to the post-lockdown economic implications of CoVId-19 pandemicThe post-lockdown implications have
increased the uncertainty of estimates
made in preparation of the Financial
Statements. The estimation uncertainty is
associated with:
The extent and duration of the
disruption to businesses arising
from the actions of stakeholders
such as government, businesses and
customers
The extent and duration of the
expected economic downturn due
to impact on GDP capital markets,
credit risk of our customers , impact
of unemployment and possible
decline in consumer discretionary
spending
The effectiveness of government and
central bank measures that have
and will be put in place to support
businesses through this disruption
and economic downturn.
The significant accounting estimates
impacted by these forecasts and
associated uncertainties are related to
expected credit losses and recoverable
amount assessments of non-financial
assets, recoverable value of property
plant and equipment and net realisable
value of inventory.
Sathosa Motors PLC Annual Report 2020/21116
Collectively assessed allowance for expected credit losses The post-lockdown economic implications
on the country’s economy and how
businesses and consumers respond
to same are uncertain. There could be
a possible increase in credit risk due
to the loss of income by some of the
businesses and the individuals who are
our customers, which would delay the
settlements of customer dues whilst the
possibility of default also exists.
This uncertainty is reflected in the Group’s
assessment of expected credit losses
from its credit portfolio which are subject
to a number of management judgements
and estimates. Judgements relevant to
expected credit loss computations are
further discussed in note 34.1.1 to these
financial statements.
2.6 Materiality and aggregation Each material class of similar items is
presented separately in the Financial
Statements. Items of dissimilar nature or
function are presented separately unless
they are immaterial as permitted by the
Sri Lanka Accounting Standard - LKAS 1
on 'Presentation of Financial Statements'
and amendments thereto.
Notes to the Financial Statements are
presented in a systematic manner which
ensures the understandability and
comparability of Financial Statements
of the Group and the Company.
Understandability of the Financial
Statements is not compromised by
obscuring material information with
immaterial information or by aggregating
material items that have different natures
or functions.
2.7 Offsetting Financial assets and financial liabilities
are offset and the net amount reported
in the statement of financial position only
when there is a legally enforceable right to
offset the recognised amounts and there
is an intention to settle on a net basis or to
settle the liabilities simultaneously. Income
and expenses are not offset in the income
statement, unless required or permitted by
Sri Lanka Accounting Standards (SLFRSs/
LKASs) and as specifically disclosed in
the Significant Accounting Policies of the
Company.
2.8 Comparative information The presentations and classification of
Consolidated Financial Statements of
the previous years have been amended,
where relevant for better presentation
and to be comparable with those of the
current year.
03 Summary of significant accounting policies
The Group has initially adopted Definition
of a Business (Amendments to IFRS 3)
from 1 April 2020. A number of other
new standards are also effective from
1 April 2020 but they do not have a
material effect on the Group’s financial
statements.
The Group applied Definition of a Business
(Amendments to IFRS 3) to business
combinations whose acquisition dates
are on or after 1 April 2020 in assessing
whether it had acquired a business or a
group of assets. The details of accounting
policies are set out in Note 3.1.
The accounting policies set out below
have been applied consistently to all the
periods presented in these Financial
Statements and have been applied
consistently by the Group, unless
otherwise stated.
3.1 Basis of consolidation The Consolidated Financial Statements
comprise the Financial Statements of the
Group and its subsidiaries prepared in
terms of Sri Lanka Accounting Standards
(SLFRS 10)- Consolidated Financial
Statements. Control is achieved when
group is exposed, or has rights, to
variable returns from its involvement with
the investee and has the ability to affect
those returns through its power over the
investee.
Specifically, the Group controls an
investee if, and only if, the Group has:
Power over the investee (i.e. existing
rights that give it the current ability
to direct the relevant activities of the
investee)
Exposure or rights, to variable
returns from its involvement with the
investee.
The ability to use its power over the
investee to affect its returns.
"Generally, there is a presumption that a
majority of voting rights results in control.
To support this presumption and when
the Group has less than a majority of the
voting or similar rights of an investee, the
Group considers all relevant facts and
circumstances in assessing whether it
has power over an investee, including:
The contractual arrangement(s) with
the other vote holders of the investee
Rights arising from other contractual
arrangements
The Group’s voting rights and potential
voting rights
Business combinations are accounted
for using the acquisition method as at
the acquisition date - i.e. when control
is transferred to the Group. Control is
the power to govern the financial and
operating policies of an entity so as to
obtain benefits from its activities. In
assessing control, the Group also takes
into consideration potential voting rights
that are currently exercisable.
The Group reassesses whether or
not it controls an investee if facts and
circumstances indicate that there are
changes to one or more of the three
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21117
elements of control. Consolidation of a
subsidiary begins when the Group obtains
control over the subsidiary and ceases
when the Group loses controls of the
subsidiary. Assets, liabilities, income
and expenses of a subsidiary acquired or
disposed of during the year are included
in the consolidated Financial Statements
from the date the Group gains control
until the date the Group ceases to control
the subsidiary.
Profit or loss and each component
of OCI are attributed to the equity
holders of the parent of the Group and
to the non controlling interests,even
if this result in the non controlling
interest having a deficits balance.When
necessary,adjustments are made to the
financial statements of subsidiaries
to bring their accounting policies
in line with the Group's accounting
policies.All intra group assets and
liabilities,equity,income,expenses and
cash flows relating to transactions
between members of the group are
eliminated in full on consolidation.
A change in the ownership interest of a
subsidiary, without a loss of control, is
accounted for as an equity transaction.
If the Group loses control over a
subsidiary, it derecognises the related
assets (including goodwill), liabilities,
non-controlling interest and other
components of equity, while any resultant
gain or loss is recognised in profit or loss.
Any investment retained is recognised at
fair value.
3.1.1 Business Combinations The Group accounts for business
combinations using the acquisition
method when the acquired set of activities
and assets meets the definition of a
business and control is transferred to the
Group (see 3.1.2). In determining whether
a particular set of activities and assets is
a business, the Group assesses whether
the set of assets and activities acquired
includes, at a minimum, an input and
substantive process and whether the
acquired set has the ability to produce
outputs.
The Group has an option to apply a
‘concentration test’ that permits a
simplified assessment of whether an
acquired set of activities and assets is not
a business. The optional concentration
test is met if substantially all of the
fair value of the gross assets acquired
is concentrated in a single identifiable
asset or group of similar identifiable
assets.
The consideration transferred in the
acquisition is generally measured at fair
value, as are the identifiable net assets
acquired. Any goodwill that arises is
tested annually for impairment (see
3.8). Any gain on a bargain purchase is
recognised in profit or loss immediately.
Transaction costs are expensed as
incurred, except if related to the issue of
debt or equity securities.
The consideration transferred does not
include amounts related to the settlement
of pre-existing relationships. Such
amounts are generally recognised in
profit or loss.
Any contingent consideration is measured
at fair value at the date of acquisition.
If an obligation to pay contingent
consideration that meets the definition
of a financial instrument is classified
as equity, then it is not remeasured,
and settlement is accounted for within
equity. Otherwise, other contingent
consideration is remeasured at fair value
at each reporting date and subsequent
changes in the fair value of the contingent
consideration are recognised in profit or
loss.
If share-based payment awards
(replacement awards) are required
to be exchanged for awards held by
the acquiree’s employees (acquiree’s
awards), then all or a portion of the
amount of the acquirer’s replacement
awards is included in measuring the
consideration transferred in the business
combination. This determination is
based on the market-based measure
of the replacement awards compared
with the market-based measure of the
acquiree’s awards and the extent to
which the replacement awards relate to
precombination service.
3.1.2 Subsidiary
Subsidiary entity is controlled by the
Parent. The Financial Statements of
subsidiary is included in the Consolidated
Financial Statements from the date that
control commences, until the date that
control ceases. In separate Financial
Statements, investment in subsidiary is
stated at cost.
3.1.3 Transactions eliminated on consolidation
Intra-group balances and transactions,
and any unrealised income and expenses
arising from intra-group transactions, are
eliminated in preparing the consolidated
Financial Statements. Unrealised losses
are eliminated in the same way as
unrealised gains, but only to the extent
that there is no evidence of impairment.
Appropriate classification is made when
the classification of subsidiary differs
from classification of the parent
3.1.4 Loss of control When the Group loses control over a
subsidiary, it derecognises the assets
and liabilities of the subsidiary, and
any related NCI and other components
of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest
Sathosa Motors PLC Annual Report 2020/21118
retained in the former subsidiary is
measured at fair value when control is
lost.
3.2 Foreign currency transactions Transactions in foreign currencies are
translated into the respective functional
currencies of Group companies at the
exchange rates at the dates of the
transactions.
Monetary assets and liabilities
denominated in foreign currencies are
translated into the functional currency at
the exchange rate at the reporting date.
Non-monetary assets and liabilities that
are measured at fair value in a foreign
currency are translated into the functional
currency at the exchange rate when the
fair value was determined. Non-monetary
items that are measured based on
historical cost in a foreign currency are
translated at the exchange rate at the
date of the transaction and no translation
is made subsequently unless determined
to realise at fair value. Foreign currency
differences are generally recognised in
profit or loss.
3.3 Impairment of non-financial assets
The Group assesses at each reporting
date, whether there is an indication
that an asset may be impaired. If any
indication exists, the Company estimates
the asset’s recoverable amount. An
asset’s recoverable amount is the higher
of an asset’s or cash-generating units
(CGU) fair value less costs to sell and its
value in use and is determined for an
individual asset, unless the asset does
not generate cash inflows that are largely
independent of those from other assets
or groups of assets. Where the carrying
amount of an asset or CGU exceeds
its recoverable amount, the asset is
considered impaired and is written down
to its recoverable amount. In assessing
value in use, the estimated future cash
flows are discounted to their present
value using a pre-tax discount rate that
reflects current market assessments of
the time value of money and the risks
specific to the asset. In determining fair
value less costs to sell, recent market
transactions are taken into account, if
available. If no such transactions can
be identified, an appropriate valuation
model is used. These calculations are
corroborated by valuation multiples,
quoted share prices for publicly traded
Companies or other available fair value
indicators.
Impairment losses are recognised in
the Profit or Loss in those expense
categories consistent with the function of
the impaired asset, except for a property
previously revalued where the revaluation
was taken to other comprehensive
income. In this case, the impairment is
also recognised in other comprehensive
income up to the amount of any previous
revaluation.
For assets excluding goodwill, an
assessment is made at each reporting
date as to whether there is an indication
that previously recognised impairment
losses may no longer exist or may have
decreased. If such indication exists, the
Company estimates the asset's or cash
generating unit's recoverable amount. A
previously recognised impairment loss is
reversed only if there has been a change
in the assumptions used to determine
the asset's recoverable amount since the
last impairment loss was recognised. The
reversal is limited so that the carrying
amount of the asset does not exceed
its recoverable amount, nor exceed the
carrying amount that would have been
determined, net of depreciation, had no
impairment loss been recognised for
the asset in prior years. Such reversal
is recognised in the statement of Profit
or Loss unless the asset is carried at
a revalued amount, in which case the
reversal is treated as a revaluation
increase.
Based on the assessments made to the
recoverable amounts of non-financial
assets, including investments in
subsidiaries, there were no indications
that require an adjustment in the financial
statements.
3.4 Statement of cash flows The statement of cash flows has been
prepared using the ‘indirect method’ in
accordance with Sri Lanka Accounting
Standard - LKAS 7 on ‘Statement of
Cash Flows’. Cash and cash equivalent
comprise of cash in hand, cash at bank
and short term investments that are
readily convertible to known amount of
cash and subject to an insignificant risk of
change in value.
Interest received and dividends received
are classified as investing cash flows,
while dividend paid is classified as
financing cash flow and interest paid
is classified under the operating cash
flows for the purpose of presentation of
Statement of Cash Flows.
Bank overdrafts that are re payable on
demand and forming an integral part
of the Group’s cash management are
included as a component of cash and
cash equivalent for the purpose of the
Statement of Cash Flow.
3.5 Current versus non-Current classification
The Group presents assets and
liabilities in the statement of financial
position based on current/non-current
classification. An asset is current when it
is:
Expected to be realised or intended
to sold or consumed in the normal
operating cycle.
Held primarily for the purpose of
trading.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21119
Expected to be realised within
twelve months after the reporting
period:
Or
Cash or cash equivalent unless
restricted from being exchanged or
used to settle a liability for at least
twelve months after the Reporting
Period.
All other assets are classified as non-
current.
A liability is current when:
It is expected to be settled in the
normal operating cycle
It is held primarily for the purpose of
trading
It is due to be settled within
twelve months after the reporting
period
Or
There is no unconditional right to
defer the settlement of the liability
for at least twelve months after the
reporting period.
The terms of the Liability that could,at
the option of the counterparty,result
in its settelment by the issue of
equity instruments do not affect its
classification
The Group classifies all other liabilities
including deferred tax liabilities as non-
current.
Deffered Tax assets and liabilities are
classified as non current assets and
liabilities
04 Changes in accounting policies and disclosures
The Group applied for the first time,
certain standards and amendments,
which are effective for annual periods
beginning on or after 1 April 2020. The
Group has not early adopted any other
standard, interpretation or amendment
that has been issued but is not yet
effective
4.1 Amendments to SLFRS 3: Definition of a Business
The amendment to SLFRS 3 Business
Combinations clarifies that to be
considered a business, an integrated set
of activities and assets must include, at
a minimum, an input and a substantive
process that, together, significantly
contribute to the ability to create output.
Furthermore, it clarifies that a business
can exist without including all of the
inputs and processes needed to create
outputs. These amendments had no
impact on the consolidated financial
statements of the Group, but may impact
future periods should the Group enter into
any business combinations
4.2 Amendments to LKAS 1 and LKAS 8 Definition of Material
The amendments provide a new definition
of material that states, “information
is material if omitting, misstating or
obscuring it could reasonably be expected
to influence decisions that the primary
users of general purpose financial
statements make on the basis of those
financial statements, which provide
financial information about a specific
reporting entity.” The amendments
clarify that materiality will depend on
the nature or magnitude of information,
either individually or in combination with
other information, in the context of the
financial statements. A misstatement
of information is material if it could
reasonably be expected to influence
decisions made by the primary users.
These amendments had no impact on the
consolidated financial statements of, nor
is there expected to be any future impact
to, the Group
4.3 Annual Ammendments to Conceptual Framework for Financial Reporting
The Conceptual Framework is not a
standard, and none of the concepts
contained therein override the concepts
or requirements in any standard. The
purpose of the Conceptual Framework
is to assist the ICASL in developing
standards, to help preparers develop
consistent accounting policies where
there is no applicable standard in place
and to assist all parties to understand
and interpret the standards. This will
affect those entities which developed
their accounting policies based on the
Conceptual Framework. The revised
Conceptual Framework includes some
new concepts, updated definitions
and recognition criteria for assets and
liabilities and clarifies some important
concepts. These amendments had no
impact on the consolidated financial
statements of the Group
4.4 Amendments to SLFRS 16 Covid-19 Related Rent Concessions
On 28 May 2020, the ICASL issued
Covid-19-Related Rent Concessions -
amendment to SLFRS 16 Leases The
amendments provide relief to lessees
from applying SLFRS 16 guidance
on lease modification accounting for
rent concessions arising as a direct
consequence of the Covid-19 pandemic.
As a practical expedient, a lessee may
elect not to assess whether a Covid-19
related rent concession from a lessor
is a lease modification. The amendment
applies to annual reporting periods
beginning on or after 1 June 2020. Earlier
application is permitted. This amendment
had no impact on the consolidated
financial statements of the Group.
05 New accounting standards issued but not effective as at reporting date
A number of new standards are effective
for annual periods beginning after 1
April 2021 and earlier application is
Sathosa Motors PLC Annual Report 2020/21120
permitted; however, the Group has not
early adopted the new or amended
standards in preparing these financial
statements.
The following amended standards and
interpretations are not expected to have a
significant impact on the Group’s financial
statements.
5.1 Amendments to LKAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the ICASL issued
amendments to paragraphs 69 to 76 of
LKAS 1 to specify the requirements for
classifying liabilities as current or non-
current. The amendments clarify:
What is meant by a right to defer
settlement
That a right to defer must exist at the
end of the reporting period
That classification is unaffected
by the likelihood that an entity will
exercise its deferral right
That only if an embedded derivative
in a convertible liability is itself
an equity instrument would the
terms of a liability not impact its
classification
The amendments are effective for annual
reporting periods beginning on or after
1 January 2023 and must be applied
retrospectively. The Group is currently
assessing the impact the amendments
will have on current practice and whether
existing loan agreements may require
renegotiation
5.2 Reference to the Conceptual Framework – Amendments to SLFRS 3
In May 2020, the ICASL issued
Amendments to SLFRS 3 Business
Combinations - Reference to the
Conceptual Framework. The amendments
are intended to replace a reference to
the Framework for the Preparation and
Presentation of Financial Statements,
issued in 1989, with a reference
to the Conceptual Framework for
Financial Reporting issued in March
2018 without significantly changing its
requirements.
The Board also added an exception to
the recognition principle of SLFRS 3
to avoid the issue of potential ‘day 2’
gains or losses arising for liabilities and
contingent liabilities that would be within
the scope of LKAS 37 or IFRIC 21 Levies, if
incurred separately.
At the same time, the Board decided
to clarify existing guidance in SLFRS
3 for contingent assets that would not
be affected by replacing the reference
to the Framework for the Preparation
and Presentation of Financial
Statements.
The amendments are effective for annual
reporting periods beginning on or after
1 January 2022 and apply prospectively.
The amendments are not expected to
have a material impact on the Group
5.3 Proceeds before intended use Property, Plant and Equipment:
In May 2020, the ICASL issued Property,
Plant and Equipment — Proceeds before
Intended Use, which prohibits entities
from deducting from the cost of an item
of property, plant and equipment, any
proceeds from selling items produced
while bringing that asset to the location
and condition necessary for it to be
capable of operating in the manner
intended by management. Instead, an
entity recognises the proceeds from
selling such items, and the costs of
producing those items, in profit or
loss.
NoTEs To ThE fINANcIAL sTATEMENTs
The amendment is effective for annual
reporting periods beginning on or after
1 January 2022 and must be applied
retrospectively to items of property, plant
and equipment made available for use
on or after the beginning of the earliest
period presented when the entity first
applies the amendment.
The amendments are not expected to
have a material impact on the Group
5.4 IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities
As part of its 2018-2020 annual
improvements to SLFRS standards
process the ICASL issued amendment
to SLFRS 9. The amendment clarifies
the fees that an entity includes when
assessing whether the terms of a
new or modified financial liability are
substantially different from the terms of
the original financial liability. These fees
include only those paid or received by the
borrower and the lender, including fees
paid or received by either the borrower
or lender on the other’s behalf. An entity
applies the amendment to financial
liabilities that are modified or exchanged
on or after the beginning of the annual
reporting period in which the entity first
applies the amendment. The amendment
is effective for annual reporting periods
beginning on or after 1 January 2022 with
earlier adoption permitted. The Group
will apply the amendments to financial
liabilities that are modified or exchanged
on or after the beginning of the annual
reporting period in which the entity first
applies the amendment.
The amendments are not expected to
have a material impact on the Group.
Sathosa Motors PLC Annual Report 2020/21121
6. Operating segments
Accounting policyThe Segment is a distinguishable component of the Group that is engaged either in providing related products or services (business
segment), or in providing Products or Services within a particular Economic Environment (Geographical Segment), which is subject
to risks and returns that are different from those of the Segments. The Group's primary format for segmental reporting is based on
Business Segments. The Business segments are determined based on the Group's management and internal reporting structure.
The following summary describes the operations of each reportable segment.
Reportable segments Operations
Vehicle sales Importation and distribution of brand new Isuzu, Range Rover and Jaguar vehicles as authorised
agent in Sri Lanka
Marine Engine Sales Importation and distribution of brand new Isuzu Marine Engines
Spare sales Importation and distribution of brand new Isuzu, Range Rover and Jaguar spare parts
Workshop services Carry out workshop repair services for Isuzu, Range Rover and Jaguar vehicles
Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.
The activities of the Group are located mainly in Sri Lanka. Consequently, the economic environment in which the Group operated is
not subject to risks and rewards that are significantly different on a geographical basis. Hence disclosure by geographical region is
not required.
The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured
consistently with profit or loss in the consolidated financial statements.
6.1 Business Segment
group Vehicle spare parts Workshop repair Marine engine total
sales sales & services sales
For the year ended 31 March, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR
Revenue
Segment revenue 2,844,231,291 3,189,216,897 802,479,484 792,700,058 253,861,671 235,311,006 7,314,815 - 3,907,887,261 4,217,227,961
Inter-segment elimination - - (3,194,342) - (23,108,311) (21,267,522) - - (26,302,653) (21,267,522)
total revenue net of tax 2,844,231,291 3,189,216,897 799,285,142 792,700,058 230,753,360 214,043,484 7,314,815 - 3,881,584,608 4,195,960,439
segment gross profit 206,489,526 451,873,990 334,462,157 261,579,318 93,945,429 81,390,581 1,018,857 - 635,915,969 794,843,889
Operating profit 110,532,925 194,740,215
Finance income 41,382,983 70,438,071
Finance costs (181,782,810) (407,283,285)
net finance costs (140,399,827) (336,845,214)
profit /(Loss) before tax (29,866,902) (142,104,999)
Income tax reversal 16,886,808 62,193,628
profit/(Loss) for the year (12,980,094) (79,911,371)
Capital expenditures (713,196,896) (198,353,864)
Depreciation and amortisation 179,269,667 171,947,832
Sathosa Motors PLC Annual Report 2020/21122
Company Vehicle spare parts Workshop repair Marine engine total
sales sales & services sales
For the year ended 31 March, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR
Revenue
Segment revenue 1,776,841,291 2,068,166,897 427,765,777 364,369,357 177,333,111 149,480,847 7,314,815 - 2,389,254,994 2,582,017,101
Inter-segment elimination - - (3,194,342) - (23,108,311) (21,267,522) - - (26,302,653) (21,267,522)
total revenue net of tax 1,776,841,291 2,068,166,897 424,571,435 364,369,357 154,224,800 128,213,325 7,314,815 - 2,362,952,341 2,560,749,579
segment gross profit 163,964,707 204,583,441 180,108,095 167,094,564 81,111,799 62,457,449 1,018,858 - 426,203,459 434,135,454
Operating profit 90,650,095 91,960,218
Finance income 39,205,290 62,022,541
Finance costs (125,531,993) (281,003,868)
Net finance costs (86,326,703) (218,981,327)
profit /(Loss) before tax 4,323,392 (127,021,109)
Income tax (expense)/reversal 1,124,315 46,014,721
profit/(Loss) for the year 5,447,707 (81,006,388)
Capital expenditures (553,507,300) (61,476,712)
Depreciation and amortisation 62,750,889 60,599,180
7. Revenue from contracts with customers
Accounting policyRevenue represents the amounts derived from importing and distribution of vehicles, marine engines, spare parts and provision of
workshops repair services and local charges which fall within the Group’s ordinary activities net of trade discounts and turnover
related taxes.
Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an
amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Timing of
transferring the goods and services to the customer is determined based on judgments taking into the consideration of the nature
of the goods and services that offers to the customers. Further, revenue is recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognition will not occur.
Five-step model with reference to SLFRS 15, Revenue from contracts with customers is applied before the revenue is recognised in
books.
1. identify the contract with customers
2. Identify the separate performance obligations
3. Determine the transaction price of the contract
4. Allocate the transaction price to each of the separate performance obligations, and;
5. Recognise the revenue as each performance obligation is satisfied.
Performance obligation is satisfied, an entity recognises as revenue the amount of the transaction price (which excludes estimates of
variable considerations, if any) that is allocated to that performance obligation. Transaction prices are explicitly stated in the contract
with customers and agreed upon.
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Sathosa Motors PLC Annual Report 2020/21123
The following specific criteria are used for the purpose of recognition of revenue.
Revenue streamsThe Group generates revenue primarily from Sale of brand new vehicles, marine engines, spare parts and providing workshop repair
services.
performance obligations and revenue recognition policies:
Type of Product/ services Nature and timing of satisfaction of performance obligations, including significant payment terms
Revenue recognition
Sale of Vehicles,Marine
Engines and Spare Parts
Customers obtain control of goods when the goods
are delivered to and have been accepted at their
premises. Invoices are generated at that point in time.
"Revenue is recognised when the goods
are delivered and have been accepted by
customers at their premises. Advances
received are included in liabilities as
advance received from customers.
Workshop Repair Services Company undertakes repairs and services on
Isuzu and Range Rover/Jaguar vehicles. Each job
commences with/without receipt of advance payment
from customer depending on the service to be
carried out.However, the stage of completion is not
significant for the group and company.
Revenue from workshop services/ repairs
are recognised at the time of relevant job
is completed or in proportion to the stage
of completion of the job when the outcome
of service/ repair of the vehicle can be
estimated reliably.
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
New Vehicles 2,844,231,291 3,189,216,897 1,776,841,291 2,068,166,897
Spare Parts 799,285,142 797,160,766 424,571,435 365,974,320
Work Shop Repairs 230,753,360 218,525,359 154,224,800 131,630,529
Marine Engine Sales 7,314,815 - 7,314,815 -
3,881,584,608 4,204,903,022 2,362,952,341 2,565,771,746
NBT - (8,942,583) - (5,022,167)
Net Revenue 3,881,584,608 4,195,960,439 2,362,952,341 2,560,749,579
As instructed by the Ministry of Finance and approved by the Cabinet of Ministers, NBT has been abolished with effect from 01
December 2019
Sathosa Motors PLC Annual Report 2020/21124
8. Other Income
Accounting policyIncome earned in other sources, which are not directly related to the ordinary course of business are recognised as other operating
income.
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Sundry income 77,905,185 129,995,125 9,019,521 1,187,417
Profit on sale of property, plant and equipment 55,046,812 11,761,977 - 735,107
Agency commission 5,125,200 5,621,052 5,125,200 5,621,052
Amortisation of asset related grants 219,389 219,389 219,389 219,389
Write back of advances/ Inventory 23,446,617 4,757,595 2,315,843 4,757,595
Foreign exchange gain 15,871,368 772,227 15,871,368 772,228
177,614,571 153,127,365 32,551,321 13,292,788
gain on disposal of property, plant and equipmentThe gain on disposal of property, plant and equipment is determined as the difference between the carrying amount of the property,
plant and equipment at the time of disposal and the proceeds from disposal net of expenses incurred in disposal.
9. Finance Income/ (Costs)
Accounting policyThe Group’s finance income and finance costs include:
Interest income- include interest earned from investment in debentures and money market investments.
Interest expenses - include interest payment on bank loan, bank overdraft and lease liabilities.
Interest income or expense is recognised using the effective interest method.
The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of
the financial instrument to:
the gross carrying amount of the financial asset; or
the amortised cost of the financial liability
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset or to the
amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition,
interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income reverts to the gross basis.
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 in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with
the borrowing of funds.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21125
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Finance IncomeInterest Income 41,382,983 70,438,071 39,205,290 62,022,541
41,382,983 70,438,071 39,205,290 62,022,541
Finance CostsInterest on short term loan (144,548,397) (346,659,347) (122,415,930) (268,733,516)
Interest on bank overdraft (5,866,024) (28,108,611) (106,480) (9,104,258)
Interest on lease liabilities (31,368,389) (32,515,327) (3,009,583) (3,166,094)
(181,782,810) (407,283,285) (125,531,993) (281,003,868)
net finance costs (140,399,827) (336,845,214) (86,326,703) (218,981,327)
10. Profit before income tax expenses
Accounting policyExpenditure recognition
All expenditure incurred in the running of the business and in maintaining the Property, Plant and Equipment in a state of efficiency
has been charged to profit & loss in arriving at the profit for the year. Expenses are recognised in the Statement of Profit or Loss on
the basis of a direct association between the cost incurred and the earning of specific items of income.
For the purpose of presentation of Statement of Profit or Loss, the Directors are of the opinion that "function of expenses" method
presents fairly the elements of the enterprises performance; hence such presentation method is adopted.
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Profit/(Loss) before tax is stated after charging all
expenses including following:
Directors' Emoluments and Fees (Note 27.5) 24,827,700 25,908,667 24,827,700 25,908,667
Auditors' remuneration - Statutory Audit 2,567,500 2,567,500 1,322,500 1,322,500
- Non Audit services 140,000 133,000 - -
Legal Expenses 1,762,318 3,593,569 1,762,318 3,593,569
Depreciation of property plant and
equipment (Note 13.1/13.2) 129,703,986 118,969,262 51,753,319 47,530,719
Amortisation of intangible assets (Note 14.1) 6,991,733 7,498,147 6,666,816 7,286,233
Impairment of intangible assets (Note 14.1) - 619,415 - 619,415
Amortisation of right-of-use assets (Note 16.1) 42,573,948 45,480,423 4,330,754 5,782,228
Personnel Cost ( Note 10.1) 280,228,804 296,172,974 169,315,587 172,794,144
Professional fees & Secretarial Fees 5,673,944 2,994,494 4,735,405 1,574,053
Provision for/ (reversal of) impairment of
Trade receivables (Note 20.1) 10,664,446 3,727,373 5,479,946 5,125,547
Provision for /(reversal of) inventories (Note 19.1) 56,549 (18,106,695) 56,549 (19,849,103)
Sathosa Motors PLC Annual Report 2020/21126
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
10.1 Personnel Cost
Salaries, Wages and Other related costs 242,451,133 258,326,187 146,115,424 150,080,687
Provision for employee benefits (Note 25.2) 8,732,363 9,353,148 5,415,989 5,718,387
Defined contribution plan - EPF and ETF 29,045,308 28,493,639 17,784,174 16,995,070
280,228,804 296,172,974 169,315,587 172,794,144
11. Income tax
Accounting policyIncome tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a
business combination, or items recognised directly in equity or in OCI.
The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet
definition of income taxes, and therefore accounted for them under LKAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Current taxCurrent Income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the
tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively enacted at the reporting date. Current tax also includes any tax
arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
Current tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are
subject to interpretation and establishes provisions where appropriate.
deferred taxDeferred tax is provided using the liability method on temporary differences between the tax base of the assets and liabilities and
their carring amount for financial reporting purposes at the reporting date.
deferred tax liabilities are recognised for all taxable temporary differences except:When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a
business combination and , at the time of the transaction,affects neither the accounting profit nor taxable profit or loss;
In respect of taxable tempory differences associated with investments in subsidiaries,associates and interests in joint
arrangements,when the timing of reversal of the temporary difference can be controlled and it is probable that the temporary
differances will not reverse in the foreseeable future.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21127
deferred tax assets are recognised for all deductible temporary differences,the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that is probable that taxable profit will be available against which the
deductible temporary differance, and the carry forward of unused tax credits and unused tax losses can be utilised, except.
When the deferred tax assets relating to the deductible temporary differences arises from the initial recognision of an asset or
liability in a transaction that is not a business combination and at the time of the transaction,affects niether the accounting profit nor
taxable profit or loss.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
In respect of deductible temporary differences associated with investments in subsidiaries,associate and interest in joint
arrangements, deferred tax assets are recognised only to extent that it is probable that the temporary difference will reverse in the
foreseeable future and taxable profit will be available against which the temporary difference can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax
assets are re assessed at each reporting date and are recognised to the extent that is has become probable that future taxable profits
will allow the deferred tax assets to be recovered.
Deferred tax assets and liabilities measured at the tax rates that are expected to apply in the year when the assets are realised or
liability is settled,base on tax rates (and tax laws)that have been enacted or substatively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the
reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
significant judgments relating to deferred taxesDeferred tax assets are recognised in respect of tax losses to the extent that it is probable that future taxable profits will be available
and can be utilised against such tax losses. Judgement is required to determine the amount of deferred tax assets that can be
recognised, based upon the likely timing and level of future taxable profits, together with future tax-planning strategies.
sales taxExpenses and assets are recognised net of the amount of sales tax, except:
When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the
sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable
When receivables and payables are stated with the amount of sales tax included
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the statement of financial position.
Sathosa Motors PLC Annual Report 2020/21128
11.1 Current tax
the major components of income tax expenses
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Amounts recognised in the statement of profit or lossCurrent income taxCurrent income tax expense (Note 11.3) - 798,685 - -
Over provision in respect of previous years (1,373,797) (4,712,742) (868,639) (5,623,883)
deferred tax:Relating to origination of temporary differences (Note 11.6) (15,513,011) (58,279,571) (255,676) (40,390,838)
Income tax reversals reported in the consolidated
statement of profit or loss (16,886,808) (62,193,628) (1,124,315) (46,014,721)
Amounts recognised in the consolidated statement of other comprehensive incomeRelating to origination of temporary differences (Note 11.6) 645,683 1,293,225 366,570 929,059
Deferred tax charged to other comprehensive income 645,683 1,293,225 366,570 929,059
11.2 IFRIC 23 Uncertainty over Income Tax Treatments
two Income tax Assessments; 2009/2010 and 2010/2011Revenue authorities are of the view 2/3rd disallowance is applicable for Nation Building Tax (NBT) paid on imports. However the
Company is claiming the position that 2/3rd disallowance is applicable for NBT paid quarterly only.
Assessment no. 01 – 2009/10The Company has been issued an assessment for Nation Building Tax for the year of assessment 2009/10 for sum of LKR 7,350,762/-
and LKR 3,675,381/- as penalty thereon.
The Company submitted an appeal against the above assessment and the Commissioner General of Inland Revenue made a
determination affirming the said assessment at the conclusion of the appeal hearing. The Company appealed to the Tax Appeals
Commission and Tax Appeals Commission also confirmed the determination of the Commissioner General of Inland Revenue. The
Company thereafter appealed against the said decision of the Tax Appeals Commission to the Court of Appeal and the Court of Appeal
affirmed the decision of the Tax appeal Commission. The Company finally appealed to the Supreme Court and Supreme Court refused
to grant leave for this case (SC (Spl) LA 43) at the hearing taken place on 21 January 2020.
Based on the decision of the Supreme Court in not granting leave to appeal for the case 2009/10 (SC (Spl) LA43), Sathosa Motors PLC
decided to concede to court decision and withdraw from the case filed.
Assessment no. 02 2010/11The Company has been issued an assessment for Nation Building Tax for the year of assessment 2010/11 for sum of LKR 7,790,377/-
and LKR 3,895,189/- as penalty thereon (Similar case as 2009/10).
The company’s legal professionals are of the opinion that the Company will not be able to defend against these case. Therefore the
Company compelled to withdraw from this case considering the unfavourable verdict delivered by court in respect of previous case.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21129
Accordingly the Company has made a provision in full for these assessments during the financial year ended 31 March 2019.
Afterwards, the management carried out necessary communications with the Commissioner-Large Corporate Unit-IRD and explained
how the import restrictions and current economic and social changes have impacted our business negatively.
The Commissioner expressed his concurrence for the facts we explained and was agreed to wave off the full penalty amount (LKR
7.57Mn) and charge only the tax liability in order to settle these two cases.
Accordingly we have made the full payment for the remaining tax liability which is LKR 9.47Mn and got these two cases settled. Now
both cases have been eliminated from the IRD pending cases list (Legacy Division)."
11.3 Reconciliation of accounting profit to income tax expense
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Accounting profit / (loss) before income tax expense (29,866,902) (142,104,999) 4,323,392 (127,021,109)
Aggregated disallowable items 304,211,959 158,580,853 102,098,203 35,090,573
Aggregated allowable items (349,554,686) (235,307,099) (139,950,432) (121,337,623)
Income from Investment Income 39,205,290 70,687,870 39,205,290 62,272,340
Current year tax loss carried forward / (claimed)
during the year (Note 11.4) 36,004,339 150,995,819 (5,676,453) 150,995,819
total taxable income - 2,852,444 - -
Tax @ 24% (2020 - 28% ) - 798,685 - -
Current tax on profit for the year - 798,685 - -
11.4 Tax loss reconciliation
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Tax Losses Brought forward 150,995,819 - 150,995,819 -
Tax Loss incurred/ (utilised) during the year 36,004,339 150,995,819 (5,676,453) 150,995,819
Tax Losses carried forward 187,000,158 150,995,819 145,319,366 150,995,819
Sathosa Motors PLC Annual Report 2020/21130
11.5 Current tax liabilities / (assets)
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Balance at the beginning of the year (75,892,191) (47,283,452) (34,397,086) (16,131,554)
Provision made during the year - 798,685 - -
Over provision in respect of previous years (1,373,797) (4,712,742) (868,639) (5,623,883)
Payments made during the year (9,463,511) (1,233,490) (9,463,511) (563,410)
ESC recoverable 34,450,072 (21,096,953) - (10,134,477)
WHT recoverable 14,345 (2,364,239) - (1,943,762)
Balance at the end of the year (52,265,082) (75,892,191) (44,729,236) (34,397,086)
11.6 Deferred tax liabilities/ (assets)
Balance at the beginning of the year (29,480,376) 27,505,970 (26,653,747) 12,808,032
origination of temporary differencesRecognised in profit or loss (22,904,295) (58,279,571) (4,679,485) (40,390,838)
Recognised in OCI 645,683 1,293,225 366,570 929,059
Effect of changes in tax rate in Profit or Loss 7,391,285 - 4,423,809 -
Balance at the end of the year (44,347,703) (29,480,376) (26,542,853) (26,653,747)
11.7 Reconciliation of Deferred tax assets and liabilities
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
deferred tax liabilityTemporary differences arising from Property,
Plant & Equipment 130,008,341 131,045,871 100,564,133 98,935,835
Total temporary difference of deferred tax liability 130,008,341 131,045,871 100,564,133 98,935,835
Closing Deferred tax liability @ 24% (2020 - 28%) 31,202,001 36,692,844 24,135,392 27,702,034
deferred tax assetsTemporary difference arising from retirement
benefit obligations (36,527,022) (38,576,611) (22,078,232) (24,673,606)
Temporary difference arising from unutilised tax losses (182,822,467) (150,995,818) (145,319,366) (150,995,819)
Temporary difference arising from provision for inventories (34,447,813) (12,525,000) (30,962,417) (9,039,607)
Temporary difference arising from impairment of
trade receivables (20,107,090) (7,873,032) (12,061,933) (6,581,987)
Temporary difference arising from Right -of- use assets (40,886,044) (26,362,468) (737,404) (2,836,770)
total temporary difference of deferred tax assets (314,790,436) (236,332,929) (211,159,352) (194,127,789)
Closing Deferred tax asset at 24% (2020 - 28%) (75,549,705) (66,173,220) (50,678,245) (54,355,781)
net temporary differences (184,782,096) (105,287,058) (110,595,219) (95,191,954)
Net deferred tax liability/ (asset) (44,347,703) (29,480,376) (26,542,853) (26,653,747)
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21131
11.8 Movement in Deferred tax assets and liabilities during the year
group Balance Recognised Recognised Balance Recognised Recognised Balance as at in profit in as at in profit in as at 01.04.2019 or loss oCI 31.03.2020 or loss oCI 31.03.2021 LKR LKR LKR LKR LKR LKR LKR
Property plant and equipment 41,996,141 (5,303,297) - 36,692,844 (5,490,849) - 31,201,995
Retirement benefit obligations (10,827,902) (1,266,774) 1,293,225 (10,801,451) 1,389,282 645,683 (8,766,485)
Carried forward tax loss - (42,278,829) - (42,278,829) (1,598,562) - (43,877,391)
Provision for inventories (2,501,484) (1,005,516) - (3,507,000) (4,760,474) - (8,267,475)
Provision for impairment
of trade receivables (1,160,785) (1,043,664) - (2,204,449) (2,621,252) - (4,825,701)
Right -of- use assets (7,381,491) (7,381,491) (2,431,159) (9,812,651)
27,505,970 (58,279,571) 1,293,225 (29,480,376) (15,513,011) 645,683 (44,347,703)
CompanyProperty plant and equipment 22,315,440 5,386,594 - 27,702,034 (3,566,645) - 24,135,389
Retirement benefit obligations (7,086,157) (751,512) 929,059 (6,908,610) 1,243,264 366,570 (5,298,776)
Carried forward tax loss - (42,278,829) - (42,278,829) 7,402,183 - (34,876,646)
Provision for inventories (2,013,448) (517,642) - (2,531,090) (4,899,890) - (7,430,980)
Provision for impairment
of trade receivables (407,803) (1,435,153) - (1,842,956) (1,051,907) - (2,894,865)
Right -of- use assets - (794,296) - (794,296) 617,319 - (176,977)
12,808,032 (40,390,838) 929,059 (26,653,747) (255,676) 366,570 (26,542,853)
11.9 Recoverability of temporary differences arising from tax losses
The Company recognised a Deferred Tax asset consequent to the changes in the Inland Revenue Act No. 24 of 2017. As per the said
Act, which was effective from 01 April 2018, 100% of taxable income is allowed to be deducted against the tax losses incurred.
According to the transitional provisions of the new act, the brought forward tax loss can be claimed against taxable income for a
period of 6 years.
The Management carefully analysed the availability of the future taxable profits against which the unused tax losses can be utilised.
In this assessment the Company estimated the profitability using the internal budgets and plans in a conservative manner. In this
assessment, directors noted the composition of the carried forward tax loss as given in the Note 11.4 Current estimated duration of
recoverability of deferred tax asset is 6 years until March 2027.
The Tax loss amounting to LKR 4,177,694 of the Group has not been been considered for deferred tax due to the suspicion in
availability of profit for the upcoming years caused by the import restrictions imposed by the Government of Sri Lanka amidst the
Covid 19 situation in the country.
Sathosa Motors PLC Annual Report 2020/21132
11.10 Applicable rates of income tax
The income tax provision for the Company is computed in accordance with the Bill to amend the Inland Revenue Act No. 24 of 2017,
which was issued on 18 March 2021. The Bill has been passed in the Parliament and Certified by the Honorable Speaker on 13 May
2021 and it incorporates all the income tax proposals announced to date and implemented by way of guidelines issued by the Inland
Revenue Department at the instruction of the Ministry of Finance. CA Sri Lanka through a guideline issued on “Application of Tax
Rates in Measurement of Current Tax and Deferred Tax in LKAS 12” dated 23 April 2021 has acknowledged that an Inland Revenue
(Amendment) Bill which is presented to the Parliament for the first reading is ‘Substantively enacted’ as per LKAS 12 – Income Tax
and the proposed tax rules and rates given in the Inland Revenue (Amendment) Bill can be used to measure the current tax and
deferred tax.
Accordingly, the new tax rate of 24% has been considered to be substantially enacted as at reporting date for the computation of
current and deferred tax computation in these Financial Statements for the year ended 31 March 2021
12. Earnings per share
Accounting policyBasic earnings/(Loss) per shareBasic Earnings/(Loss) per share is calculated by dividing the net profit attributable to equity holders of the Sathosa Motors PLC by the
weighted average number of ordinary shares in issue during the year.
diluted earnings/(Loss) per shareDiluted Earnings/(Loss) per Share is determined by adjusting the profit or loss attributable to ordinary share holders and the
weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
group CompanyFor the year ended 31 March 2021 2020 2021 2020
Amount used as the numeratorProfit / (Loss) attributable to ordinary shareholders (LKR) (3,766,192) (81,028,416) 5,447,707 (81,006,388)
Amount used as the denominatorWeighted average number of ordinary shares as at the end 6,033,622 6,033,622 6,033,622 6,033,622
Basic / diluted earnings/(loss) per share (LKR) (0.62) (13.43) 0.90 (13.43)
There were no potentially dilutive ordinary shares in issue at any time during the year/previous year. Hence diluted earning/(loss) per
share is same as the basic earning/(loss) per share.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date
of authorisation of these financial statements.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21133
13. Property plant and equipment
Accounting policyProperty, plant and equipment are tangible items that are held for use in the production or supply of goods or services, for rental to
others, or for administrative purpose and are expected to be used during more than one period. The Group applies the requirements
of LKAS 16 in accounting of property, plant and equipment.
Property, Plant and Equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the
Group and the cost of the asset can be reliably measured. Items of property, Plant and Equipment including construction in progress
are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of an item of property, plant and equipment comprise its purchase price and any directly attributable costs of bringing the
asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labor, and
any other costs directly attributable to bringing the asset to the working condition for its intended use. This also includes cost of
dismantling and removing the items and restoring in the site on which they are located and borrowing costs on qualifying assets.
Purchased software that is integrated to the functionality of the related equipment is capitalised as part of equipment.
When parts of an item of Property, Plant and Equipment have different useful lives, they are accounted for as separate items (major
component) of Property, Plant and Equipment.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable
that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The
carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are
recognised in profit or loss as incurred.
Depreciation is recognised in Statement of Profit or Loss on the straight-line basis over the estimated useful lives of each part of
item of Property, Plant and Equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless
it is reasonably certain that the Group will obtain ownership by the end of the lease term. Depreciation of an asset begins when it
is available for use whereas depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale
(or included in a disposal group that is classified as held for sale) and the date that the asset is de-recognised. Depreciation is not
charged on Freehold Land and Capital Work in Progress.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:
Asset Category Useful life (years)
Freehold Building 50
Leasehold Building 8-20
Plant Machinery and Tools 5-8
Motor Vehicles 5
Office Equipment 5
Furniture & Fittings 5
The residual value, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end
and adjusted prospectively, if appropriate.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when
the asset is derecognised. Gains are not classified as revenue.
Sathosa Motors PLC Annual Report 2020/21134
13. Property plant and equipment (Contd.)
Reconciliation of beginning and ending balances by classes of Assets
13.1 Group
Freehold Leasehold
Cost plant, Capital
Machinery Motor office Furniture work in
Land Building and tools Vehicles equipment & Fittings Building progress total
LKR LKR LKR LKR LKR LKR LKR LKR LKR
Balance as at 01 April 2019 326,086,000 42,426,049 111,937,320 251,315,025 102,653,430 87,701,864 503,006,414 303,826,938 1,728,953,040
Additions - - 39,964,723 59,000,000 4,003,319 5,224,838 3,540,255 85,764,447 197,497,582
Disposals - - - (31,777,834) - - - - (31,777,834)
Transfers - - - - - - 338,165,910 (338,165,910) -
Balance as at 31 March 2020 326,086,000 42,426,049 151,902,043 278,537,191 106,656,749 92,926,702 844,712,579 51,425,475 1,894,672,788
Additions 511,318,080 - 36,559,108 59,579,269 11,438,260 70,314,299 23,228,086 - 712,437,102
Disposals - - (17,460,235) (110,803,654) - (6,674,789) - - (134,938,678)
Transfers - - 51,425,475 - - - - (51,425,475) -
Balance as at 31 March 2021 837,404,080 42,426,049 222,426,391 227,312,806 118,095,009 156,566,212 867,940,665 - 2,472,171,212
Accumulated depreciation
Balance as at 01 April 2019 - 795,968 54,617,766 139,522,762 69,728,490 59,807,206 153,937,167 - 478,409,359
Charge for the year - 848,520 16,211,106 36,209,242 12,914,969 14,426,497 38,358,928 - 118,969,262
Disposals - - - (17,725,940) - - - - (17,725,940)
Balance as at 31 March 2020 - 1,644,488 70,828,872 158,006,064 82,643,459 74,233,703 192,296,095 - 579,652,681
Charge for the year - 848,520 21,638,092 32,323,595 12,408,414 15,217,868 47,267,497 - 129,703,986
Disposals - - (12,723,425) (71,367,690) - (5,826,475) - - (89,917,590)
Balance as at 31 March 2021 - 2,493,008 79,743,539 118,961,969 95,051,873 83,625,096 239,563,592 - 619,439,077
Carrying value as at 31 March 2021 837,404,080 39,933,041 142,682,852 108,350,837 23,043,136 72,941,116 628,377,073 - 1,852,732,135
Carrying value as at 31 March 2020 326,086,000 40,781,561 81,073,171 120,531,128 24,013,290 18,692,999 652,416,484 51,425,475 1,315,020,107
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21135
13.2 Company
Freehold Leasehold
Cost plant, Capital
Machinery Motor office Furniture work in
Land Building and tools Vehicles equipment & Fittings Building progress total
LKR LKR LKR LKR LKR LKR LKR LKR LKR
Balance as at 01 April 2019 326,086,000 42,426,049 25,218,543 128,367,126 60,720,227 18,338,030 255,471,997 297,149,128 1,153,777,100
Additions - - 14,730,997 - 1,719,319 469,359 3,540,255 41,016,782 61,476,712
Disposals - - - (25,208,589) - - - - (25,208,589)
Transfers - - - - - - 338,165,910 (338,165,910) -
Balance as at 31 March 2020 326,086,000 42,426,049 39,949,540 103,158,537 62,439,546 18,807,389 597,178,162 - 1,190,045,223
Additions 511,318,080 - 12,308,061 - 2,950,248 3,765,525 23,165,386 - 553,507,300
Balance as at 31 March 2021 837,404,080 42,426,049 52,257,600 103,158,537 65,389,794 22,572,914 620,343,548 - 1,743,552,523
Accumulated depreciation
Balance as at 01 April 2019 - 795,968 16,003,767 80,665,263 43,091,761 12,140,954 66,099,364 - 218,797,077
Charge for the year - 848,520 3,540,632 12,896,075 4,897,762 2,958,464 22,389,266 - 47,530,719
Disposals - - - (8,129,826) - - - - (8,129,826)
Balance as at 31 March 2020 - 1,644,488 19,544,399 85,431,512 47,989,523 15,099,418 88,488,630 - 258,197,970
Charge for the year - 848,520 4,954,287 6,043,791 5,480,855 3,164,214 31,261,652 - 51,753,319
Balance as at 31 March 2021 - 2,493,008 24,498,686 91,475,303 53,470,378 18,263,632 119,750,282 - 309,951,289
Carrying value as at 31 March 2021 837,404,080 39,933,041 27,758,915 11,683,234 11,919,416 4,309,282 500,593,266 - 1,433,601,234
Carrying value as at 31 March 2020 326,086,000 40,781,561 20,405,141 17,727,025 14,450,023 3,707,971 508,689,532 - 931,847,253
(a) Freehold Land and Building carried at cost (Company / group)
Location Land Building
extent Cost / Carrying Value
(LKR)
extent Cost (LKR)
Carrying value (LKR)
number of Buildings
No. 86, Vauxhall Street, Colombo 02 83.07 Perches 837,404,080 3763 Sqft. 42,426,049 39,933,041 1
(b) Capital work-in-progressCapital work-in-progress includes the construction of capital assets which mainly consists of building and plant & machinery. Working
progress has been completed and transfer to the respective assets during the year.
(c) Capitalised borrowing costsThere were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year 2021 (2020 –
Nil).
Sathosa Motors PLC Annual Report 2020/21136
(d) Fully depreciated but still in useThe cost of fully depreciated property, plant and equipment of the Group and the Company which are still in use amounted to:
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Fully depreciated property, plant and equipment 276,695,522 197,511,052 171,662,353 149,654,253
(e) property, plant and equipment pledged as security for liabilitiesThere were no items of property, plant and equipment pledged as securities for liabilities of the Group as at the reporting date.
(f) title restriction on property, plant and equipmentThere were no restrictions existed on the title of the property, plant and equipment of the Group as at the reporting date.
(g) Impairment of property, plant and equipmentDue to the temporary ceasing of operations because of the lockdown in the country, property, plant and equipment (PPE) is under-
utilised or not utilised for a period and capital work – in - progress is suspended. It is also possible that carrying value of property
plant and equipment may get affected. Based on the assessment carried out by the Management with the following judgements on the
potential impairment loss of property, plant and equipment, the management has concluded that no impairment provision is required
to be made in the financial statements as at the reporting date in respect of property, plant and equipment.
The Management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate
the risks associated with COVID-19 pandemic for the next 12 months from the date of this report. Therefore, currently, the Group/
Company does not have an intention to discontinue any operation to which an asset belongs or plans to dispose of an asset before the
previously expected date. Thus, there will be no change in the manner in which the asset is used or is expected to be used.
(h) temporarily idle property, plant and equipmentThere are no temporarily idle property, plant and equipment as at the reporting date.
14. Intangible assets
Accounting policyIntangible Assets are recognised if it is probable that economic benefits are attributable to the assets will flow to the entity and
cost of the assets can be measured reliably. Intangible assets that are acquired by the Group/Company are measured at cost less
accumulated amortisation and accumulated impairment losses.
All computer software cost incurred, which are not internally related to associate hardware, which can be clearly identified, reliably
measured and its probable that they will lead to future economic benefits, are included in the Statement of Financial Position under
the category of intangible assets.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which
it relates. All other expenditure including expenditure on internally generated goodwill and brands is recognised in profit or loss as
incurred.
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method
over their estimated useful lives, and is recognised in profit or loss.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21137
The estimated useful lives for current and comparative years are as follows
- Computer software 5 Years
- Enterprise Resource Planning (ERP) 5 Years
Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively, if
appropriate.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
14.1 Reconciliation of beginning and ending balances
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
CostBalance at the beginning of the year 44,214,966 43,358,684 36,431,143 36,431,143
Additions 759,793 856,282 - -
Balance at the end of the year 44,974,759 44,214,966 36,431,143 36,431,143
Accumulated impairment and amortisationBalance at the beginning of the year 20,388,224 12,207,662 13,947,341 6,041,693
Charge for the year 6,991,733 7,498,147 6,666,816 7,286,233
Impairment provided during the year - 619,415 - 619,415
Balance at the end of the year 27,379,957 20,388,224 20,614,157 13,947,341
Carrying value 17,594,802 23,826,742 15,816,986 22,483,802
Intangible assets mainly consists of the IFS Enterprise Resource Planning system software and IFS user license acquired by the
Company.
(a) Capitalised borrowing costsThere were no capitalised borrowing costs related to the acquisition of intangible assets during the year 2021 (2020 – Nil).
(b) Fully amortised but still in useThe cost of fully amortised intangible assets of the Group and the Company which are still in use amounted to:
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Fully depreciated intangible assets 9,303,119 9,303,119 3,097,079 3,097,079
(c) Intangible assets pledged as security for liabilitiesThere were no items of intangible assets pledged as securities for liabilities of the Group as at the reporting date.
Sathosa Motors PLC Annual Report 2020/21138
(d) title restriction on intangible assetsThere were no restrictions existed on the title of the intangible assets of the Group as at the reporting date.
(e) Impairment of Intangible AssetsDue to the temporary ceasing of operations because of the lockdown in the country, intangible asset is under-utilised. It is also
possible that carrying value of intangible assets may get affected. Based on the assessment carried out by the Management with
the following judgements on the potential impairment loss of intangible assets, the management has concluded that no impairment
provision is required to be made in the financial statements as at the reporting date.
The Management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate
the risks associated with COVID-19 pandemic for the next 12 months from the date of this report. Therefore, currently, the Group/
Company does not have an intention to discontinue any operation to which an asset belongs or plans to dispose of an asset before the
previously expected date. Thus, there will be no change in the manner in which the asset is used or is expected to be used.
(f) temporarily idle Intangible AssetsThere are no temporarily idle intangible assets as at the reporting date.
15. Pre-paid lease payments
Accounting policyLeasehold property comprises of land use rights and is amortised on a straight-line basis over the period of the lease in accordance
with the pattern of benefits expected to be derived from the lease. Leasehold property is tested for impairment annually and is
written down where applicable. The impairment loss if any is recognised in the Statement of Profit or Loss.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
CostBalance at the beginning of the year - 102,050,366 - 12,050,366
Transfer to Right of Use Assets - (102,050,366) - (12,050,366)
Balance at the end of the year - - - -
Accumulated amortisationBalance at the beginning of the year - 64,666,621 - 4,666,620
Transfer to Right of Use Assets - (64,666,621) - (4,666,620)
Balance at the end of the year - - - -
Carrying value - - - -
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21139
16. Right of Use Assets and Leases
As a lesseeAt commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the
contract to each lease component on the basis of its relative stand-alone prices. However. for the leases of property the Company has
elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or
to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the
lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the
right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over
the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing
rate (IBR). Generally, the Group uses its IBR as the discount rate.
The Group determines its IBR by obtaining interest rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased. The IBR is the rate of interest that the Group would have to pay to borrow
over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset
in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when
no observable rates are available and is required to make certain entity-specific estimates (such as the entity’s stand-alone credit
rating).
Lease payments included in the measurement of the lease liability comprise the following:
fixed payments. including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement
date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Group is reasonably certain to exercise. lease payments in an optional renewal
period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the
Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate. if there is a change in the Group's estimate of the amount expected to be
payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or
termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in 'Right-of-use asset' and lease
liabilities in 'lease liability' in the statement of financial position.
Sathosa Motors PLC Annual Report 2020/21140
short-term leases and leases of low-value assetsThe Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases.
The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Amounts recognised in the statement of financial position and statement of profit or loss
Set out below are the carrying amounts of the Group's right of use assets and the movements for the period ended 31 March 2021.
16.1 Right of use assets
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Cost Balance at the beginning of the year 367,495,355 - 42,904,061 -
Transfer from prepaid lease rentals - 102,050,366 - 12,050,366
Transfer from prepaid advances - 4,646,700 - 4,646,700
Impact due to initial application of SLFRS 16 - 260,798,289 - 26,206,995
Adjusted balance at the beginning of the year 367,495,355 367,495,355 42,904,061 42,904,061
Addition during the year 7,487,880 - 7,487,880 -
Disposal during the year (91,879,177) - - -
Balance at the end of the year 283,104,058 367,495,355 50,391,941 42,904,061
Accumulated AmortisationBalance at the beginning of the year 110,147,044 - 10,448,848 -
Transfer from prepaid lease rentals - 64,666,621 - 4,666,620
Adjusted balance at the beginning of the year 110,147,044 64,666,621 10,448,848 4,666,620
Amortisation of right-of-use during the year 42,573,937 45,480,423 4,330,754 5,782,228
Disposal Amortisation of prepaid lease rental (89,365,003) - - -
Balance at the end of the year 63,355,978 110,147,044 14,779,602 10,448,848
Carrying value 219,748,080 257,348,311 35,612,339 32,455,213
CompanyLeasehold Land relate to the property persistently known and called " SATHOSA MOTORS WORKSHOP" is located at No: 25/11, New
Nuge Road, Peliyagoda acquired by Sathosa Motors PLC on a 99 years lease commencing from 1987. The total gross area of the land
is 343.93 perches.The estimated useful life of leasehold right as at 31 March 2021 is sixty five (65) years (remaining lease period).
Details of the leasehold buildings are as follows;
property located at extent Commencing date total Lease Remaining lease (sq Ft) of lease period period period
No.78, Colombo Road, Dombokka, Kurunegala 7680 01 August 2017 10 years 6 years & 4 months
No.679, Galle Road, Walgama, Matara 5310 01 November 2016 10 years 5 years & 7 months
No.42, Panchikawatta Road, Colombo 10 440 01 October 2020 3 years 2 years & 6 months
No.1/1, Colombo Road, Weeragoda, Hidellana, Ratnapura 828 01 May 2017 5 years 1 year & 1 month
No.231, Nalallawatta, Pitipana North, Negombo 1600 05 January 2021 10 years 9 years & 9 months
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21141
subsidiaryAccess Motors (Private) Limited recognised prepaid lease payments in respect of Welisara workshop premises which has been
subleased by Frontier Automotive (Private) Limited. Remaining lease period as at 31 March 2021 is one year.
The Group does not foresee any impairment of right -of- use assets due to the post-lockdown economic implications of COVID-19
pandemic and does not anticipate discontinuation of any asset for which the Group possesses the right to use. Lease liabilities are not
reassessed as there are no known moratoriums received for the lease payments so far.
16.2 Lease liability
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Balance at the beginning of the year 258,256,607 - 24,837,809 -
Impact due to initial application of SLFRS 16 - 260,798,289 - 26,206,995
Adjusted balance at the beginning of the year 258,256,607 260,798,289 24,837,809 26,206,995
Addition during the year 7,487,881 - 7,487,881 -
Interest expense charged to income statement 31,368,389 32,159,785 3,009,583 3,166,094
Repayments (41,557,745) (34,701,467) (5,441,540) (4,535,280)
Disposal of lease (1,377,028) - - -
Balance at the end of the year 254,178,104 258,256,607 29,893,733 24,837,809
Current 11,092,427 10,696,366 3,178,847 2,749,774
Non current 243,085,677 247,560,241 26,714,886 22,088,035
total lease liability 254,178,104 258,256,607 29,893,733 24,837,809
(a) Maturity analysis - contractual undiscounted cash flowsWithin the next 12 months 41,753,716 39,136,991 6,333,075 5,230,500
Between 1 and 2 years 42,164,970 41,281,490 6,303,765 5,388,350
Between 2 and 3 years 45,260,267 41,838,219 6,386,941 5,319,765
Between 3 and 4 years 46,866,534 45,526,241 5,759,876 5,154,941
Between 4 and 5 years 50,801,667 46,579,405 6,344,343 4,677,476
Beyond 5 years 237,252,614 239,376,160 11,440,388 11,008,539
total undiscounted lease liabilities 464,099,768 453,738,506 42,568,388 36,779,571
(b) Amount recognised in profit or lossAmortisation of right-of-use asset 42,573,937 45,480,423 4,330,754 5,782,228
Interest on lease liabilities 31,368,389 32,159,785 3,009,583 3,166,094
73,942,326 77,640,208 7,340,337 8,948,322
(c) Amount recognised in the statement of cash flowsTotal cash outflow for lease (41,557,745) (34,701,467) (5,441,540) (4,535,280)
(41,557,745) (34,701,467) (5,441,540) (4,535,280)
Sathosa Motors PLC Annual Report 2020/21142
17. Investments in subsidiaries
Accounting policyInvestment in subsidiaries are initially recognised at cost in the financial statements of the Company. Any transaction cost relating
to acquisition of investment in subsidiaries are immediately recognised in the income statement. Following initial recognition,
Investment in subsidiaries are carried at cost less any accumulated impairment losses. The net assets of each subsidiary are
reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the
recoverable amount of the investment is estimated and the impairment loss is recognised to the extent of its net assets.
CompanyAs at 31 March, 2021 2020 effective holding no.of shares Cost no.of shares Cost percentage LKR LKR
Access Motors (Private) Limited 50% 32,503,906 464,940,064 32,503,906 464,940,064
SML Realities (Private) Limited 100% - - 1 10
32,503,906 464,940,064 32,503,907 464,940,074
SML Realities (Private) Limited has been wind up due to the non-operation since incorporation of the Company.
An impairment assessment was carried out as at 31 March 2021 and it was concluded that net realisable value of the investment in
subsidiary exceed its carrying value.
18. Investments in debentures
Accounting policyThe Company intends to hold the assets to maturity for the contractual cash flows and these cash flows consist solely of payments of
principal and interest on the principal amount outstanding.
This consists investment in quoted debentures which have been designated as financial assets at amortised cost and measured at
amortised cost using EIR method and are subject to impairment.
group / CompanyAs at 31 March, Interest Maturity Face value 2021 2020 Investment Institution rate date (LKR) LKR LKR
Nation Development Bank PLC 9.40% 22 June 2020 206,460,000 - 211,298,517
Hatton National Bank PLC 11.25% 27 March 2021 200,000,000 - 222,746,575
Access Engineering PLC 10.25% 16 November 2020 174,330,000 - 180,890,062
- 614,935,154
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21143
18.1 Reconciliation of carrying amount
group / CompanyAs at 31 March, 2021 2020 LKR LKR
Carrying value at the beginning of the year 614,935,154 592,271,384Interest capitalised during the year 38,008,840 59,939,835Maturity of investments during the year (580,790,000) -Interest received during the year (72,153,994) (37,276,065)Carrying value at the end of the year - 614,935,154
19. InventoriesAccounting policyInventories are stated at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. The cost of inventories is comprised of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, but excluding borrowing costs. Net realisable value is the estimated selling price in the normal course of business less estimated cost of realisation and/or cost of conversion from their existing state to saleable condition.
Inventory movement, mainly with respect to spare parts is reviewed as at the end of reporting period by an experienced staff member (head of the division) who has a fair knowledge / expertise to assess the recoverability of inventory and the items that are identified as irrecoverable are written off during the year. For this purpose the Company gets the support of the workshop manager who possesses a fair amount of technical expertise, which helps to identify the technical obsolescence of the inventory items.
The cost of each category of inventory is determined on the following basis:
New Vehicles, Marine Engines , Work in Progress and Goods in Transit - At actual costSpare Parts and General Stores - At actual cost on weighted average basisAllowance for impairment - All inventory items are tested for impairment periodically
Work in progressThe on-going workshop repairs that are not fully completed as at the reporting date are classified as work in progress.
goods in transitThe goods where the risk and rewards are passed to the entity based on the shipping terms but not yet received to the entity.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
New Vehicles 330,966,190 1,671,288,135 271,141,785 887,505,160Spare Parts 453,977,597 328,568,841 217,030,704 111,509,577Marine Engines 12,591,915 - 12,591,915 -Work in Progress 20,070,578 25,552,621 1,425,366 2,670,439General Stores 3,841,421 4,572,746 3,841,421 4,572,746Goods in Transit 51,009,329 643,002,056 - 544,193,389 872,457,030 2,672,984,399 506,031,191 1,550,451,311Provision for Inventories (Note 19.1) (34,447,815) (34,391,266) (30,962,419) (30,905,870)
838,009,215 2,638,593,133 475,068,772 1,519,545,441
Sathosa Motors PLC Annual Report 2020/21144
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
19.1 Provision for inventories
Balance at the beginning of the year 34,391,266 52,497,961 30,905,870 50,754,973
Provision made during the year 13,545,286 9,041,160 12,646,702 7,298,752
Reversal for the year (13,488,737) (27,147,855) (12,590,153) (27,147,855)
Balance at the end of the year 34,447,815 34,391,266 30,962,419 30,905,870
19.2 Inventories pledged as security for liabilities
There were no items of inventory pledged as securities for liabilities of the Group as at the reporting date.
19.3 COVID-19 impact on inventory provision
The Board of Directors has assessed the potential impairment loss of inventory as at 31 March 2021 by considering the potential
impact of COVID-19 on net realisable value based on the implications on subsequent selling prices and cost to complete in additional
to the normal assessment process, where applicable, declines in inventory values were recognised in the income statement. Based on
the assessment carried no further impairment provision is required to be made in the financial statements as at the reporting date in
respect of inventory provision other than the disclosed provision in Note 19.1 of these financial statements.
20. Trade and other receivables
Accounting policyTrade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Other
financial nature receivables are recognised as other receivables. If collection is expected in one year or less (or in the normal
operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are initially measured at fair value and subsequently measured at amortised cost using the Effective
Interest Rate method (EIR) less any provision for impairment calculated using expected credit loss method.
Measurement of eCLsECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects
to receive). ECLs are discounted at the effective interest rate of the financial asset.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21145
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Trade Receivables - New Vehicles 327,127,186 563,755,988 85,164,237 328,386,765
- Spare Parts 81,528,505 51,926,278 81,528,505 51,926,278
- Work Shop 54,005,822 130,855,909 54,005,822 37,903,510
- Marine Engines 6,900,000 - 6,900,000 -
469,561,513 746,538,175 227,598,564 418,216,553
Provision for impairment (Note 20.1) (20,107,089) (9,442,643) (12,061,933) (6,581,987)
449,454,424 737,095,532 215,536,631 411,634,566
Deposits and prepayments 28,519,531 24,702,738 18,705,014 14,888,221
Advances given to suppliers 97,917,606 584,546,258 28,075,423 547,988,062
VAT receivable 37,815,049 37,749,472 36,133,812 37,224,231
Loans and advances to employees 6,194,824 2,896,642 6,096,823 2,781,605
Other receivables 93,259,949 44,401,396 13,351,208 5,029,061
713,161,383 1,431,392,038 317,898,911 1,019,545,746
Set out below is the movement in the allowance for expected credit losses of trade receivables ;
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
20.1 Provision for impairment
Balance at the beginning of the year 9,442,643 5,715,270 6,581,987 1,456,440
Provision for the year 10,664,446 3,727,373 5,479,946 5,125,547
Balance at the end of the year 20,107,089 9,442,643 12,061,933 6,581,987
20.2 COVID-19 impact on impairment provision
The Board of Directors has assessed the potential impairment loss of trade debtors as at 31 March 2021 by considering the potential
impact of COVID-19 on recoverability when assessing the trade recoverable balances. The impact is incorporated within the Expected
Credit Loss (ECL) computation to reflect the differences between the economic conditions duirng the year under review over which
the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected recovery
period. Based on the assessment carried no further impairment provision is required to be made in the financial statements as at the
reporting date in respect of impairment provision other than the disclosed provision in Note 20.1 of these financial statements.
Sathosa Motors PLC Annual Report 2020/21146
21. Cash and cash equivalents
Accounting policyCash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits with a
maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as
defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group’s cash management.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Short term call deposits 893,091 19,345,826 893,091 19,345,826
Cash in hand 2,743,091 2,650,354 613,499 373,227
Cash at Bank 126,176,158 40,964,514 42,262,951 26,159,623
Cash and cash equivalents in the
statement of financial position 129,812,340 62,960,694 43,769,541 45,878,676
Bank Overdraft (7,066,570) (94,323,825) (7,066,570) (11,087,749)
Cash and cash equivalents in the statement of cash flows 122,745,770 (31,363,131) 36,702,971 34,790,927
22. Stated capital
2021 2020 number Value number Value of shares of shares of shares of shares Issued and fully paid LKR LKR
At the beginning of the Year 6,033,622 115,924,290 6,033,622 115,924,290
At the end of the Year 6,033,622 115,924,290 6,033,622 115,924,290
The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the shareholders or one vote per share in case of a poll. All shares rank equally with regard to the Company's residual
assets.
22.1 Company has neither declared nor paid dividends to the Company shareholders during the financial year ended 31 March 2021.
(2020- Nil)
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21147
23. Loans and borrowings
Accounting policyLoans and borrowings are initially recognised at fair value net of directly attributable transaction costs. Subsequently they are
measured at amortised cost.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Current interest bearing loans and borrowingsTerm loan (Note23.1) - 14,280,000 - -
Import and short term loan (Note23.2) 816,000,000 2,970,220,194 816,000,000 2,494,343,500
816,000,000 2,984,500,194 816,000,000 2,494,343,500
non-current interest bearing loans and borrowingsTerm loan (Note 23.1) - 54,492,000 - -
- 54,492,000 - -
total loans and borrowings 816,000,000 3,038,992,194 816,000,000 2,494,343,500
23.1 Term loan
Balance at the beginning of the year 68,772,000 97,332,000 - -
Repayment during the year (68,772,000) (28,560,000) - -
Balance at the end of the year - 68,772,000 - -
Payable within one year - 14,280,000 - -
Payable after one year - 54,492,000 - -
- 68,772,000 - -
23.2 Import and Short term loan
Balance at the beginning of the year 2,970,220,194 3,210,076,757 2,494,343,500 2,552,573,952
Obtained during the year 11,988,504,483 19,707,362,280 11,325,963,423 17,960,381,535
Repayment during the year (14,142,724,677) (19,947,218,843) (13,004,306,923) (18,018,611,987)
Balance at the end of the year 816,000,000 2,970,220,194 816,000,000 2,494,343,500
Payable within one year 816,000,000 2,970,220,194 816,000,000 2,494,343,500
816,000,000 2,970,220,194 816,000,000 2,494,343,500
Information about the Group's exposure to liquidity risks and interest rate is included in Note 34.2 and 34.3.1
Sathosa Motors PLC Annual Report 2020/21148
23.3 Terms and repayment schedule
The terms and conditions of outstanding loans and facilities are as follows:
Company name Lending institution
nature of the facility
Interest rate
Maturityperiod
Face value LKR
2021 LKR
2020 LKR
details of collaterals
Company
Sathosa Motors PLC Bank of Ceylon Revolving short term Loan
Market rate over AWPLR
01 Month -
-
594,000,000
-
Commercial Bank
Revolving short term Loan
Market rate over AWPLR
01 Month -
-
935,000,000
-
Import loan Market rate over AWPLR
01 Month -
-
265,343,500
-
National Development Bank
Revolving short term Loan
Market rate over AWPLR
03 Months 155,000,000 155,000,000 300,000,000 -
Seylan Bank Revolving short term Loan
Market rate over AWPLR
03 Months 661,000,000 661,000,000 400,000,000 -
816,000,000 2,494,343,500
subsidiary
Access Motors (Private) Limited
National Development Bank
Import loan/ Short-Term Loan
Interest rate 12.75%
04 Months - - 200,000,000 Corporate Guarantees issued by Sathosa Motors PLC and Foresight Engineering (Private) Limited on equal basis
Guarantee Interest rate 1.5%
04 Months -
Hatton National Bank
Bank Loan AWPLR + 1% (Renew monthly)
84 Months - - 68,772,000
LC/ Short-Term Loan & TOD facilities
AWPLR + 1%
04 Months - - 275,876,694
- 544,648,694
816,000,000 3,038,992,194
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21149
24. Deferred income
Accounting policyGrants received are recognised initially as deferred income at fair value when there is a reasonable assurance that they will be
received and the Group will comply with the conditions associated with the Grant, and are then recognised in the Statement of
Comprehensive income as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for
expenses incurred are recognised in the Statement of Comprehensive income as other income on a systematic basis in the periods in
which the expenses are recognised.
group/CompanyAs at 31 March, 2021 2020 LKR LKR
Balance at the beginning of the year 5,484,707 5,704,096
Amortisation during the year (219,389) (219,389)
Balance at the end of the year 5,265,318 5,484,707
The above represents the grants received for the construction of work shop at Peliyagoda and are amortised over a period of fifty (50)
years (remaining period of amoritisation is 24 years).
25. Employee benefits
Accounting policyshort term employee benefitsShort term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected
to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the
employees and the obligation can be estimated reliably.
employee contribution plans-epF and etFA defined contribution plan is a post-employment benefit plan under which an entity pays a fixed contribution to a separate entity and
will have no legal or constructive obligation to pay further amounts. All employees who are eligible for Employees’ Provident Fund
Contributions and Employees’ Trust Fund Contributions are covered by relevant contributions funds in line with the relevant statutes.
Employer’s contributions to the defined contribution plans are recognised as an expense in profit or loss when incurred.
employee defined benefit plansThe liability recognised in the Statement of Financial Position in respect of defined benefit plan is the present value of defined benefit
obligation at the reporting date. The defined benefit obligation is calculated annually by independent actuary using Project Unit
Credit (PUC) method as recommended by LKAS 19 - ‘Employee Benefits. Actuarial gains and losses for the defined benefit plans are
recognised in full in the period in which they occur in Other Comprehensive Income.
However, according to the Payment of Gratuity Act No. 12 of 1983, the liability for gratuity payment to an employee arises only after
the completion of 5 years of continued service.
The Defined benefit plan liability has not been externally funded by the Company as well as subsidiaries of the group.
Sathosa Motors PLC Annual Report 2020/21150
25.1 Reconciliation from the opening balances to the closing balances for the net employee defined benefit liability.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Balance at the beginning of the year 38,576,603 38,671,069 24,673,603 25,307,698
Current service cost 5,325,916 5,015,630 2,948,629 2,681,463
Interest cost 3,406,447 4,337,518 2,467,360 3,036,924
Actuarial gains (2,690,347) (4,618,662) (1,527,377) (3,318,068)
44,618,619 43,405,555 28,562,215 27,708,017
Less: Payments made during the year (8,091,602) (4,828,952) (6,483,987) (3,034,414)
Balance at the end of the year 36,527,017 38,576,603 22,078,228 24,673,603
25.2 Expense recognised in statement of profit or loss and
other comprehensive income
Current service cost 5,325,916 5,015,630 2,948,629 2,681,463
Interest cost 3,406,447 4,337,518 2,467,360 3,036,924
expense recognised in statement of profit or loss 8,732,363 9,353,148 5,415,989 5,718,387
Actuarial (gains)/ losses recognised in
Other comprehensive income (2,690,347) (4,618,662) (1,527,377) (3,318,068)
total provision for the year 6,042,016 4,734,486 3,888,612 2,400,319
CompanyAn actuarial valuation of the provision for defined benefit plan was carried out as at 31 March 2021 by Actuarial & Management
Consultants (Private) Limited. The valuation method used by the actuaries to value the employee benefits obligation is the ''Projected
Unit Credit (PUC) method'', the method recommended by the Sri Lanka Accounting Standard (LKAS 19) '' Employee Benefits''.
subsidiaryThe defined benefit obligation of the subsidiary has been calculated using the "Projected Unit Credit (PUC) method" in compliance with
LKAS 19 "Employee Benefits".
25.3 Key assumptions and quantitative sensitivity analysis
The cost of the defined benefit plan is determined using actuarial valuations and it involves making various assumptions. These
include the determination of the discount rate, future salary increases, staff turn over and retirement age (mortality in service). Due to
the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting date.
The following were the principal actuarial assumptions at the reporting date.
Company subsidiaryAs at 31 March, 2021 2020 2021 2020
Discount Rate 7% 10% 8% 10%
Expected Annual Average Salary Increment Rate 5% 8% 4.13% 6%
Staff Turnover Factor 15.17% 11% 15.34% 16.5%
Retirement Age 55 Years 55 Years 55 Years 55 Years
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Sathosa Motors PLC Annual Report 2020/21151
discount rateIn the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 7% p.a. for Sathosa Motors PLC and 8%
for Access Motors ( Private) Limited (2019/20 – 10% p.a.) has been used to discount future liabilities considering yield available on
high quality government bonds with anticipated long-term rate of inflation.
Given the sudden fall in markets and the decline in high-quality corporate bond rates that has occurred as a result of COVID-19, the
Group has considered the impact on the defined benefit obligations with the independent actuarial specialists as at the reporting date.
Since the complexity of the valuation and the underlying assumptions are based on long-term nature including the application of risk
discount rate which is formulated on the market yield of long-term government and corporate bonds, there is no significant impact on
retirement benefit obligation from COVID-19 pandemic.
expected annual average salary increment rateBased on the actual salary increment rates of the Group over the past few years, future economic outlook of the country an increase
in the long term salary increment rate is factored into the valuation for the current year.
staff turnover factorBased on the actual staff turnover of the Company over the past few years, Group has used staff turnover factor of 15.17 % p.a
(Sathosa Motors PLC) and 15.34 % p.a (Access Motors Private Limited) to value future liabilities.
25.4 Sensitivity of assumptions used
A quantitative sensitivity analysis for significant assumptions as at 31 March is, as shown below:
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
discount rate 1% less 38,178,228 40,300,568 23,077,252 25,776,922
1% More 34,994,035 36,983,443 21,159,276 23,665,705
salary increment rate 1% less 34,839,613 36,817,212 21,032,923 23,526,502
1% More 38,316,271 40,450,739 23,196,960 25,909,158
The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit
obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses
are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be
representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in
isolation of one another.
Sathosa Motors PLC Annual Report 2020/21152
25.5 Future expected contributions to the defined benefit plans
The following payments are expected contributions to the employee benefit obligation in future years:
CompanyAs at 31 March, 2021 2020 LKR LKR
Within the next 12 months 3,684,669 5,648,465
Between 1 and 2 years 3,188,137 6,106,420
Between 2 and 5 years 6,772,330 5,357,839
Between 5 and 10 years 6,430,602 5,356,788
Beyond 10 years 2,002,490 2,204,091
Total expected payments 22,078,228 24,673,603
The Weighted average duration of the defined benefit plan obligation at the end of the reporting period is 4.59 years (2020: 4.64 years)
25.6 Number of employees
The number of employees at the end of the year are as follows:
sathosa Motors pLC Access Motors (private) LimitedAs at 31 March, 2021 2020 2021 2020
Number of Employees 179 188 93 101
26. Trade and other payables
Accounting policyTrade payables are the aggregate amount of obligation to suppliers for goods delivered to or services consumed by the group in the
ordinary course of business. Trade payables are classified as current liabilities if they are payable within one year or less.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Trade and other payables are normally non-interest bearing liabilities.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Trade payables 344,737,037 562,422,743 184,285,019 423,805,919
Accrued expenses 31,172,312 62,105,687 17,254,114 23,846,087
Retention payables 1,578,729 860,690 1,578,729 860,690
Statutory payment liabilities 3,006,186 10,610,686 2,505,153 10,109,653
Advance received 58,645,569 150,355,652 13,100,016 29,775,671
Finance lease liabilities - 549,761 - -
Other payables 17,276,636 5,925,926 17,276,620 5,925,926
456,416,469 792,831,145 235,999,651 494,323,946
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Sathosa Motors PLC Annual Report 2020/21153
27. Related party disclosure
terms and conditions of transactions with related partiesThe sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. All
outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees
provided or received for any related party receivables or payables. The Group has not recorded impairment of receivable from related
parties based on Expected Credit Loss (ECL) for the year ended 31 March 2021 ( 2020 - Nil) .This assessment is undertaken each
financial year through examining the financial position of the related party and the market in which the related party operates.
27.1 Amount due from related parties
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Access Engineering PLC 980,716 3,416,924 868,897 50,067
Access Natural Water (Private) Limited 24,940 5,704,726 24,940 5,704,726
Access Industrial Systems (Private) Limited 295,362 84,101,086 295,362 84,101,086
Access International Projects (Private) Limited 30,736 20,709 30,736 20,709
Access International (Private) Limited 217,523 29,914 - 29,914
Access Real Estate (Private) Limited 23,468 - 23,468 -
S D Munasinghe 528,520 510,197 - -
Sheran Fernando 1,279,002 1,279,002 - -
Foresight Engineering (Private) Limited 461,984 - - -
ARL Elevate (Private) Limited - 2,726,114 - -
3,842,251 97,788,672 1,243,403 89,906,502
27.2 Amount due to related parties
Access Engineering PLC 131,527,809 143,254,968 131,527,809 143,074,591
Access Natural Water (Private) Limited 94,179 182,278 94,179 123,368
Reprographics (Private) Limited 85,275 64,715 41,060 -
Loan received from Directors 107,534 107,534 - -
Access Transport & Services (Private) Limited 17,304 - - -
Access Motors (Private) Limited - - 8,856 -
131,832,101 143,609,495 131,671,904 143,197,959
Sathosa Motors PLC Annual Report 2020/21154
27.3 Transactions with related parties
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
holding CompanySales of Goods / Rendering of services 41,928,944 2,119,242 41,283,521 307,506
Purchases of Goods / Receiving of services (17,375,810) (17,091,863) (2,400,000) (2,612,500)
Interest received 11,314,515 17,917,781 11,314,515 17,917,781
Construction of Peliyagoda workshop building (28,762,569) (39,435,243) (28,762,569) (39,435,243)
subsidiary CompanyPurchases of Goods / Receiving of Services - - (148,145) -
Subscription to right issue - - - (199,999,982)
other related party companiesSales of Goods / Rendering of Services 66,739,012 105,754,361 30,175,049 102,743,743
Purchases of Goods / Receiving of Services (3,896,815) (1,878,736) (1,003,759) (1,160,012)
Purchase of Fixed Assets (124,982,118) (64,715) (1,528,918) -
Disposal of Fixed Assets 36,112,554 17,750,000 - 17,750,000
Loan Obtained 417,500,000 435,000,000 - -
Loan Repayment (417,500,000) (418,500,000) - -
Loan given 566,000,000 (205,000,000) - -
Loan settlement (566,000,000) 205,000,000 - -
Subscription to right issue - 199,999,982 - -
(a) Recurrent Related party transactionsThere were no recurrent related party transactions which in aggregate value exceeds 10% of the consolidated revenue, which
required additional disclosures in the 2020/21 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best
Practices on Related Party Transactions under the Securities and Exchange Commission Directive issued under Section 13 (c) of the
Securities and Exchange Commission Act.
(b) non-Recurrent Related party transactionsThere were no non-recurrent related party transactions which in aggregate value exceeds 10% of the equity or 5% of the total assets
whichever is lower, which required additional disclosures in the 2020/21 Annual Report other than the transactions specified above
under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities and
Exchange Commission Directive issued under Section 13 (c) of the Securities and Exchange Commission Act.
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Sathosa Motors PLC Annual Report 2020/21155
27.4 Directorship held by Directors in other Group of Companies
Company name Company (sML) subsidiary
s J
s p
erer
a
J C
Josh
ua
d A
R F
erna
ndo
s d
Mun
asin
ghe
M J
ayah
suri
ya
K A
p p
erer
a
t t
B C
Fer
nand
o
s M
p d
issa
naya
ke
t A
A F
erna
ndo
holding company
Access Engineering PLC √ √ √ √
subsidiary Company
Access Motors (Private) Limited √ √ √ √ √ √ √
other related party companies
A R L Elevate (Private) Limited. √ √ √ √
Access Projects (Private) Limited √ √
ZPMC Lanka Company (Private) limited √ √
Access International (Private) Limited √ √ √ √ √
Access Natural Water (Private) Limited √ √
Access Industrial Systems (Private) Limited √
Access International Projects (Private) Limited √
Access Real Estate (Private) Limited √ √
Reprographics (Private) Limited √
Foresight Engineering (Private) Limited √ √ √
J C J Hodings (Private) Limited √ `
Access Transport & Services (Private) Limited √ √ √
Access Residencies (Private) Limited √ √ √
Following company directors neither hold shareholding nor directorship of above companies except for the shareholding of T A L
Niroshan in Access Engineering PLC.
- M M N De Silva
- W A C O Wijesinghe
- R S Dahanayake
- T A L Niroshan (Resigned w.e.f. 31 December 2020)
Sathosa Motors PLC Annual Report 2020/21156
27.5 Transactions, arrangements and agreements involving Key Management Personal (KMP) and their Close Family Members
(CFM)
According to LKAS 24 “Related Party Disclosures”, Key Management Personnel are those having authority and responsibility for
planning, directing and controlling the activities of the entity. Accordingly Board of Directors (including executive and non -executive
Directors) have been classified as key Management Personnel of the Group.
Compensation paid to Key Management personnel of the group
group CompanyFor the year ended 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Total compensation paid to Key Management Personnel 24,827,700 25,908,667 24,827,700 25,908,667
Close Family Members (CFM) of the KMPs are those family members who may be expected to influence or be influenced by that KMPs
in their dealing with the entity. They may include KMPs domestic partner and children, children of the KMPs domestic partner and
dependents of the KMP or the KPMs's domestic partner. During the year no transactions have been done with CFMs.
directors LoanNo loans have been given to the directors of the Company.
other transactions with Key Management personnelThere were no other transactions with Key Managerial Personnel other than those disclosed in Note 27.3 to these Financial
Statements.
28. Provisions, commitments and contingencies
Accounting policyProvisions are recognised when the Group/Company has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate
can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed the reimbursement
is recognised as a separate asset when the reimbursement is virtually certain. The expense relating to provision is presented in
income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when
appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is
recognised as a finance cost.
Provisions are calculated based on the historical experience and the specific terms in the individual cases. The Group arrives at an
estimate on the basis of an evaluation of the most likely outcome.
All known provisions have been accounted for in preparing the Financial Statements.
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Sathosa Motors PLC Annual Report 2020/21157
Contingent Liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present
obligations where the transfer of economic benefit is not probable or cannot be readily measured. All contingent liabilities are
disclosed as a note to the financial statements unless the outflow of resources is remote. A contingent liability recognised in a
business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be
recognised in accordance with the general guidance for provisions above (LKAS 37) or the amount initially recognised less, when
appropriate, cumulative amortisation recognised in accordance with the guidance for revenue recognition. Contingent assets are
disclosed, where inflow of economic benefit is probable.
Currently the Group/Company is involved in pending litigations and claims arising out of the normal conduct of the business. The
Group/ Company does not expect the pending litigations and claims, individually and in aggregate, to have a material impact on
Group’s Financial Position, operating profit or cash flow in addition to amounts accrued as provision for legal disputes.
28.1 Contingencies
(a) pending litigation for the year ended 31 March 2021There were no material contingencies as at the reporting date for the Company and its subsidiaries
(b) Corporate guaranteeCorporate guarantee issued by Sathosa Motors PLC on behalf of Access Motors (Private) Limited is LKR 481.5 Mn and USD 1 Mn as at
31 March 2021 for the purpose of working capital requirement.
There were no material contingencies as at the reporting date except for disclosed above for the Company and its subsidiaries.
28.2 Commitments
There were no material commitments, which have been approved or contracted for by the Company and its subsidiaries as at the
reporting date.
29. Events occurring after the reporting date
There were no material events occurred subsequent to the reporting date as at 31 March 2021 that require adjustments to or
disclosure in the Financial Statements.
30. Group Impact of COVID-19 on Financial Statements
The COVID-19 pandemic, which has suffocated many economies is becoming a way of life to be factored into our short to medium
term planning. The economic slowdown; the upward trends in the exchange rate and inflation; shipping and freight challenges such
as limited container spaces, increased freight rates and higher shipping costs are of concerns for our spare parts business. We
anticipate that state regulations that curtail imports and import related activities will continue hindering passenger and commercial
vehicle sales. Further, impending random lockdown curfews with each new variant of the COVID-19 virus cannot be disregarded.
After a strict lockdown period of over a month, curfew has been gradually eased off. Whilst the operations have resumed, it is
encouraging that there is no indication of community spread in the country as of now. This has allowed the Group to commence
operations with arrangements to permit only the staff whose physical presence is required to come to the workplace with others
working from home on a roster basis under the Health and Safety Guidelines issued by the government with the safety of staff being
paramount. The Group has developed requisite Health and Safety Guidelines to ensure a safe environment for employees, customers
and other stakeholders.
The new limitations recently imposed on the importation of commercial vehicles by the Government Gazette notification no. 2176/19 dated 22 May 2020, is negatively impacting the regular business, which is sales of vehicles and spare parts. In order to minimise
Sathosa Motors PLC Annual Report 2020/21158
the negative impact of the limitation imposed on imports, Sathosa Motors PLC has negotiated with the Import Controller to get the required approvals for importation of commercial vehicles and spare parts in order to service all customers who are in the provision of essential services to the nation, and Access Motors (Private) Limited is still on the negotiation process with Jaguar Land Rover regarding the payment terms as the Government has granted permission to import vehicles and spare parts on the basis that the payment can be made after six month. Until such time, the Group carry out its vehicle sales with the available inventory and accepts sales orders by obtaining a reservation advance for future vehicle delivery. Furthermore, the Group is focusing more on generating revenue from the sale of spare parts and after sales services to mitigate the impact from import limitation.
The full extent and duration of the post-lockdown economic implications on the Group’s/Company’s operations and financial performance will be felt during the financial year 2020/21. The Group has been closely monitoring the impact of the developments on the Group’s businesses as to how the entity will continue its operations in the future in a manner it will continue to operate in its optimum capacity to generate profits and meet its commitments and has developed comprehensive action plans to mitigate the future risk associated with post-lockdown economic implications that resulted to put in place contingency measures. These contingency measures include controlling budget, initiating cost savings, re-allocating resources to unaffected business lines, re-prioritising its services with available staff, obtaining approval from Government authorities to meet export orders, increasing safety stock levels used for spare parts division, maintaining regular contacts with debtors and increasing market responsiveness by adopting new sales strategies.
The global situation is extremely volatile at present and since the impact of the pandemic on the Group’s business is closely linked to the suppliers in other countries, an estimate of the long term outlook may not be realistic at this stage as it requires more time to access and quantify the impact of Covid-19 at Company level in consultation with the immediate and ultimate parent companies. However, the Management will continue to monitor developments both locally and globally and take timely action to mitigate any risks to the financial stability of the Group.
As far as the Group’s businesses are concerned, this has forced to operate below its normal capacity. However, the Group is confident that it has the adequate resources and capability to withstand the uncertainty this pandemic has created, and most importantly the management are of the opinion that the workshop repairs and spare parts sales shall have very minimal impact as there is no any other authorised agent in Sri Lanka for Isuzu, Landrover and Jaguar, additionally the Group also has readily available financial support from its Parent Group and availability of banking facilities to continue its operations smoothly, hence the Group is satisfied of the ability of continuing its operations for the foreseeable future.
The Company response to the pandemic focused on securing a safe work environment for our employees, continuing our business operations, providing our customers with quality services while supporting our communities as a socially responsible corporate citizen.
31. Non-controlling interest (NCI)NCI are measured initially at their proportionate share of acquiree's identifiable net assets at the date of acquisition. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
The total profit or loss for the year of the Company and its subsidiary included in consolidation are shown in the consolidated Statement of Profit or Loss and other Comprehensive income with the proportion of profit or loss after taxation pertaining to minority shareholders of subsidiary being deducted as “Non controlling interest”. All assets and liabilities of the Company and of its subsidiary included in consolidation are shown in the consolidated Statement of Financial Position. The interest of minority shareholders of subsidiary in the fair value of net assets of the Group is indicated separately in the consolidated Statement of Financial Position under the heading “Non-controlling interest”. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as, equity transactions. Adjustments to non-controlling interests are based on a proportionate amount of the net assets
of the subsidiary.
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Sathosa Motors PLC Annual Report 2020/21159
ownership interest held by nCI
principal place of business
nature of the business 2021 2020
Access Motors (Private)
Limited
Sri Lanka Authorised distributor for Jaguar and Land
Rover in Sri Lanka
50% 50%
The following are summarised financial information of Access Motors (Private) Limited. The information is before inter-company
eliminations.
As at/ for the year ended 31 March, 2021 2020 LKR LKR
statement of profit or loss and other comprehensive incomeRevenue 1,518,780,411 1,635,210,860
Profit /(Loss) for the year (18,427,804) (2,228,044)
Profit / (Loss) attributable to NCI (9,213,902) 1,117,045
Other Comprehensive Income 883,857 936,428
Total Comprehensive Income (17,543,947) (1,291,617)
Total Comprehensive Income attributable to NCI (8,771,974) 1,585,259
Inter-company transaction elimination at group level (148,145) -
statement of financial positionNon-current assets 622,849,296 612,235,518
Current assets 854,389,264 1,597,353,278
Non-current liability 230,819,581 293,867,207
Current liability 228,499,436 880,258,097
Net assets 1,017,919,543 1,035,463,491
net assets attributable to nCI 508,959,772 517,731,746
statement of cash flowsCash flows generated from operating activities 791,446,307 11,249,951
Cash flows used in investing activities (58,484,549) (128,877,151)
Cash flows generated from/(used in) financing activities (580,764,900) 159,647,666
net increase in cash and cash equivalents 152,196,858 42,020,466
Having evaluted the business continuity plans and the cash flows (where necessary) of the subsidiary, the Group determined that no
impairment provision is required for the carrying value of non-controlling interest due to the COVID-19 pandemic as at 31 March 2021.
Sathosa Motors PLC Annual Report 2020/21160
32. Financial Assets and Financial Liabilities
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of
another entity.
32.1 Financial assets
(a) Initial Recognition and measurementFinancial assets within the scope of SLFRS 9 are classified as amortised cost, fair value through other comprehensive income (FVOCI),
and fair value through profit or loss (FVTPL).
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and
the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing
component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain
a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price
determined under SLFRS 15.
(b) Classification and measurementIn order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash
flows that are "solely payments of principal and interest (SPPI)" on the principal amount outstanding. This assessment is referred to
as the SPPI test and is performed at an instrument level.
The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial
assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in
the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the
asset.
(c) subsequent measurementFor purposes of subsequent measurement, financial assets are classified in to four categories based on the entity's business model
and the cash flow characteristics:
(a) financial assets at amortised cost;
(b) financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments);
(c) Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity
instruments);
(d) financial assets at fair value through profit or loss.
Financial assets at amortised costThe Group measures financial assets at amortised cost if both of the following conditions are met:
(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash
flows and
(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group's
financial assets at amortised cost includes trade receivables, short term deposits, corporate debt securities and other current
financial assets.
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Sathosa Motors PLC Annual Report 2020/21161
Financial Assets at fair value through oCI (debt instruments)The Group measures financial assets at fair value through OCI if both of the following conditions are met:
(a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and
selling financial assets; and
(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are
recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost.
The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is
recycled to profit or loss.
Financial assets designated at fair value through oCI (equity instruments)Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair
value through OCI when they meet the definition of equity under LKAS 32 Financial Instruments: Presentation and are not held for
trading. The classification is determined on an instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the
statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a
recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair
value through OCI are not subject to impairment assessment.
Financial Assets at fair value through profit or lossFinancial Assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial
recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets
are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including
separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.
Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value
through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at
amortised cost or fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss
on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in
the fair value recognised in the statement of profit or loss. This category includes listed equity investments which the Group had not
irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognised as other income in
the statement of profit or loss when the right of payment has been established.
(d) derecognitionA financial asset (or, where applicable, apart of a financial asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group's consolidated statement of financial position) when:
The rights to receive cash flows from the asset have expired, or
The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a "pass-through" arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
Sathosa Motors PLC Annual Report 2020/21162
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the
transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has
retained.
(e) Impairment of Financial AssetsThe Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or
loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a
12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a
lifetime ECL).
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not
track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has
established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to
the debtors and the economic environment.
For debt instruments at fair value through OCI, the Group applies the low credit risk simplification. At every reporting date, the
Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information
that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the debt
instrument.
The Group’s debt instruments at fair value through OCI comprise solely of quoted bonds that are graded in the top investment
category (Very Good and Good) by the Good Credit Rating Agency and, therefore, are considered to be low credit risk investments. It is
the Group’s policy to measure ECLs on such instruments on a 12-month basis. However, when there has been a significant increase in
credit risk since origination, the allowance will be based on the lifetime ECL. The Group uses the ratings from the Good Credit Rating
Agency both to determine whether the debt instrument has significantly increased in credit risk and to estimate ECLs.
Aside from this note, other disclosures relating to impairment of financial assets (trade receivables) are included in Note 20.1
32.2 Financial liabilities
(a) Initial recognition and measurementFinancial liabilities are classified, at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Group financial liabilities include trade and other payables, loans and borrowings including bank overdraft.
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(b) Classification and measurementThe measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss incurred financial liabilities held-for-trading and financial liabilities designated
upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held-for-trading if they are incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in
hedge relationships as defined by SLFRS 9. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held-for-trading are recognised in the Statement of Profit or Loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of
recognition, and only if the criteria in SLFRS 9 are satisfied. The Group has not designated any financial liability as at fair value
through profit or loss.
Loans & BorrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in the profit or loss 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 Statement of Profit or Loss. This category generally applies to
interest-bearing loans and borrowings.
(c) derecognitionA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of
a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit or Loss.
offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if
there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise
the assets and settle the liabilities simultaneously.
Sathosa Motors PLC Annual Report 2020/21164
32.3 Financial Instruments - Statement of Financial Position
group CompanyAs at 31 March 2021 2020 2021 2020 note LKR LKR LKR LKR
(a) Financial AssetsAmortised CostInvestment in debentures 18 - 614,935,154 - 614,935,154
Trade receivables 20 449,454,424 737,095,532 215,536,631 411,634,566
Amounts due from related parties 27.1 3,842,251 97,788,672 1,243,403 89,906,502
453,296,675 1,449,819,358 216,780,034 1,116,476,222
Cash and Cash Equivalents 21 129,812,340 62,960,694 43,769,541 45,878,676
total 583,109,015 1,512,780,052 260,549,575 1,162,354,898
(b) Financial Liabilitiesother Financial LiabilitiesLoans and borrowings 23 816,000,000 3,038,992,194 816,000,000 2,494,343,500
Trade payable and Finance Lease Liability 26 344,737,037 562,972,504 184,285,019 423,805,919
Lease liabilities 16.2 254,178,104 258,256,607 29,893,733 24,837,809
Amounts due to related parties 27.2 131,832,101 143,609,495 131,671,904 143,197,959
Unclaimed dividend 4,146,312 4,146,312 4,146,312 4,146,312
Bank overdraft 21 7,066,570 94,323,825 7,066,570 11,087,749
total 1,557,960,124 4,102,300,937 1,173,063,538 3,101,419,248
33. Fair value measurements and related fair value disclosures
33.1 Fair value measurement
Fair-value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values
are disclosed in this note.
Accounting policyFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either:
In the principal market for the asset or liability
Or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
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The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset
or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by
using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and
best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure
fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Input that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
33.2 Fair Value Hierarchy
The Group does not anticipate the fair value of the above to be significantly different to their carrying values and considers the impact
as not material for the disclosure.
The Group has not disclosed the fair values for fnancial instruments such as investment in debentures, trade receivables, amounts
due from/to related parties, trade payables, lease liabilities and unclaimed dividends, since their carrying value are a reasonable
approximation of fair values, due to short term maturity periods.
Sathosa Motors PLC Annual Report 2020/21166
33.2.1 Fair Value Hierarchy - GroupThe following table shows the carrying amount and fair value measurement hierarchy of the Group's financial assets and liabilities in
the statement of financial position.
Carrying Amount Fair Value
As at 31 March 2021 Financial Assets at
Amortised Cost
Financial
Liabilities at
Amortised Cost
total Level 1 Level 2 Level 3 total
note LKR LKR LKR LKR LKR LKR LKR
Financial Assets
Trade receivables 20 449,454,424 - 449,454,424 - - - -
Amounts due from related parties 27.1 3,842,251 - 3,842,251 - - - -
Cash and Cash Equivalents 21 129,812,340 - 129,812,340 - - - -
total Financial Assets 583,109,015 - 583,109,015 - - - -
Financial Liabilities
Loans and borrowings 23 - 816,000,000 816,000,000 - 816,000,000 - 816,000,000
Trade payable and Finance Lease
Liability
26 - 344,737,037 344,737,037 - - - -
Lease liabilities 16.2 - 254,178,104 254,178,104 - - - -
Amounts due to related parties 27.2 - 131,832,101 131,832,101 - - - -
Unclaimed dividend - 4,146,312 4,146,312 - - - -
Bank overdraft 21 - 7,066,570 7,066,570 - - - -
total Financial Liabilities - 1,557,960,124 1,557,960,124 - 816,000,000 - 816,000,000
Carrying Amount Fair Value
As at 31 March 2020 Financial Assets at
Amortised Cost
Financial
Liabilities at
Amortised Cost
total Level 1 Level 2 Level 3 total
note LKR LKR LKR LKR LKR LKR LKR
Financial Assets
Investment in debentures 18 614,935,154 - 614,935,154 - - - -
Trade receivables 20 737,095,532 - 737,095,532 - - - -
Amounts due from related parties 27.1 97,788,672 - 97,788,672 - - - -
Cash and Cash Equivalents 21 62,960,694 - 62,960,694 - - - -
total Financial Assets 1,512,780,052 - 1,512,780,052 - - - -
Financial Liabilities
Loans and borrowings 23 - 3,038,992,194 3,038,992,194 - 3,038,992,194 - 3,038,992,194
Trade payable and Finance Lease
Liability
26 - 562,972,504 562,972,504 - - - -
Lease liabilities 16.2 - 258,256,607 258,256,607 - - - -
Amounts due to related parties 27.2 - 143,609,495 143,609,495 - - - -
Unclaimed dividend - 4,146,312 4,146,312 - - - -
Bank overdraft 21 - 94,323,825 94,323,825 - - - -
total Financial Liabilities - 4,102,300,937 4,102,300,937 - 3,038,992,194 - 3,038,992,194
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33.2.2 Fair Value Hierarchy - CompanyThe following table shows the carrying amount and fair value measurement hierarchy of the Company's financial assets and liabilities
in the statement of financial position.
Carrying Amount Fair Value
As at 31 March 2021 Financial
Assets at
Amortised
Cost
Financial
Liabilities at
Amortised
Cost
total Level 1 Level 2 Level 3 total
note LKR LKR LKR LKR LKR LKR LKR
Financial Assets
Trade receivables 20 215,536,631 - 215,536,631 - - - -
Amounts due from related parties 27.1 1,243,403 - 1,243,403 - - - -
Cash and Cash Equivalents 21 43,769,541 - 43,769,541 - - - -
total Financial Assets 260,549,575 - 260,549,575 - - - -
Financial Liabilities
Loans and borrowings 23 - 816,000,000 816,000,000 - 816,000,000 - 816,000,000
Trade payable and Finance Lease
Liability
26 - 184,285,019 184,285,019 - - - -
Lease liabilities 16.2 - 29,893,733 29,893,733 - - - -
Amounts due to related parties 27.2 - 131,671,904 131,671,904 - - - -
Unclaimed dividend - 4,146,312 4,146,312 - - - -
Bank overdraft 21 - 7,066,570 7,066,570 - - - -
total Financial Liabilities - 1,173,063,538 1,173,063,538 - 816,000,000 - 816,000,000
Carrying Amount Fair Value
As at 31 March 2020 Financial
Assets at
Amortised
Cost
Financial
Liabilities at
Amortised
Cost
total Level 1 Level 2 Level 3 total
note LKR LKR LKR LKR LKR LKR LKR
Financial Assets
Investment in debentures 18 614,935,154 - 614,935,154 - - - -
Trade receivables 20 411,634,566 - 411,634,566 - - - -
Amounts due from related parties 27.1 89,906,502 - 89,906,502 - - - -
Cash and Cash Equivalents 21 45,878,676 - 45,878,676 - - - -
total Financial Assets 1,162,354,898 - 1,162,354,898 - - - -
Financial Liabilities
Loans and borrowings 23 - 2,494,343,500 2,494,343,500 - 2,494,343,500 - 2,494,343,500
Trade payable and Finance Lease
Liability
26 - 423,805,919 423,805,919 - - - -
Lease liabilities 16.2 - 24,837,809 24,837,809 - - - -
Amounts due to related parties 27.2 - 143,197,959 143,197,959 - - - -
Unclaimed dividend - 4,146,312 4,146,312 - - - -
Bank overdraft 21 - 11,087,749 11,087,749 - - - -
total Financial Liabilities - 3,101,419,248 3,101,419,248 - 2,494,343,500 - 2,494,343,500
Sathosa Motors PLC Annual Report 2020/21168
34. Financial Risk Management
The Group has exposure to the following risks arising from financial instruments:
Credit risk
Liquidity risk
Market risk
This note represents information about the Group's exposure to each of the above risks, the Group's objectives policies and processes
for measuring and managing risk.
Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework.
The Board of Directors has established the risk management policies to identify and analyse the risks face by the group and set
appropriate risk limits and controls and to monitor risk and adherence to limits. Risk management policies and systems are reviewed
regularly, and aim to develop a disciplinary constructive control environment, in which all employees understand their roles and
obligations through training, management standards and procedures.
The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risk face by the Group. The Group Audit
Committee is assisted in its oversight role by Internal Audiao undertakes both regular and adhoc reviews of risk management
controls and procedures, the result of which are reported to the Audit Committee. The committee reports regularly to the board of
directors on its activities.
The board of Directors reviews, verifies, agree the policies for managing each type of risk which are summarised below.
34.1 Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from Group's receivables from customers and investment securities.
The carrying amounts of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was as follows.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Investment in debentures - 614,935,154 - 614,935,154
Trade receivables 449,454,424 737,095,532 215,536,631 411,634,566
Amounts due from related parties 3,842,251 97,788,672 1,243,403 89,906,502
Cash and Cash Equivalents 129,812,340 62,960,694 43,769,541 45,878,676
583,109,015 1,512,780,052 260,549,575 1,162,354,898
34.1.1 Trade receivablesThe Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management
also considers the factors that may influence the credit risk of its customer based including default risk associate with the industry
and country in which customers operate. Each new customer is analysed individually for credit worthiness, reviews external ratings,
if they are available financial statements, credit agency information, industry information, and in some cases bank references. Each
business units monitor the customers' financial standing (financial insolvency) and outstanding customer receivables are regularly
monitored. An impairment analysis is performed at each reporting date on an individual basis. The calculation is based on actual
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Sathosa Motors PLC Annual Report 2020/21169
incurred historical data. The minimum exposure to credit risk at the reporting date is the carrying value of the each class of financial
assets disclosed in Note 34.1
The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several
industries and operate in largely independent markets and material payments being backed by guarantees and enters contractual
agreements with client before starting the operations.
Impact of CoVId-19 pandemicThe COVID-19 pandemic post lockdown situation of the country has impacted to the country's economy and business activities which
would delay the settlements of customer dues. Composition of significant amount of government debtors and guarantee private
debtors will reduce the possibility of default in payments.
Age analysis of trade receivables as at reporting date as follows:
As at 31 March, 2021 2020 trade provision for trade provision for receivables impairment receivables impairment LKR LKR LKR LKR
groupNeither past due nor impaired - - - -
Past due but not impaired 131,244,215 - 358,585,498 -
< 30 days 129,892,861 2,502,725 17,653,701 266,696
30–60 days 28,985,912 1,116,318 55,151,052 715,142
61–90 days 9,514,205 379,098 83,534,586 601,122
91–120 days 2,423,249 138,049 18,653,624 257,422
> 120 days 167,501,071 15,970,899 212,959,714 7,602,261
total 469,561,513 20,107,089 746,538,175 9,442,643
Gross carrying value 469,561,513 746,538,175
Allowance for expected credit losses (20,107,089) (9,442,643)
net carrying value 449,454,424 737,095,532
CompanyNeither past due nor impaired - - - -
Past due but not impaired 131,244,215 - 358,585,498 -
< 30 days 59,903,483 2,249,663 1,843,835 741
30–60 days 19,292,992 938,626 19,068,022 569,295
61–90 days 4,583,807 353,698 22,830,213 510,536
91–120 days 979,926 130,805 2,804,041 128,664
> 120 days 11,594,141 8,389,141 13,084,944 5,372,751
total 227,598,564 12,061,933 418,216,553 6,581,987
Gross carrying value 227,598,564 418,216,553
Allowance for expected credit losses (12,061,933) (6,581,987)
net carrying value 215,536,631 411,634,566
The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on historic
payment pattern and extensive analysis and follow up procedures implemented on the customer credit risk.
Sathosa Motors PLC Annual Report 2020/21170
The movement in the allowance for impairment in respect of trade receivables during the year is disclosed in Note 20.1 to the
Financial Statements
expected Credit Loss (eCL) AssessmentThe aging of trade receivables at the reporting date that were impaired was as follows;
The Group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days
past due for groupings of various customer segments that have similar loss patterns (i.e., product type, customer type and rating, and
coverage by letters of credit etc).
The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust
the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross
domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults in the sector, the
historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the
forward-looking estimates are analysed.
However the Group has taken into account the changes to macro economic factors and risk due to COVID -19 impact and formulated
necessary alterations to the impairement templates. The resultant increase in impairment provision due to this change is
incorporated to the carrying value of trade and other receivables as at the year end.
The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant
estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical
credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future.
34.1.2 Short term deposits and Cash and Cash Equivalents
Credit risk from balances with banks and financial institution is managed by the Group’s treasury management in accordance with the
Group’s policy.
The Group held Short Term deposits and cash and cash equivalent as at 31 March 2021 which represents its maximum credit
exposure on these assets.
As at 31 March 2021, 91% of the favorable balances of bank and financial institution were rated ‘AA-’ or better for the Group.
group
As at 31 March, 2021 2020Fitch Rating group LKR % LKR %
AA+ - 0% 16,469,435 27%
AA - 0% 3,068,920 5%
AA- 116,095,007 91% 34,169,281 57%
A+ 8,711,433 7% 5,293,755 9%
A 2,262,809 2% - 0%
A- - 0% 1,308,950 2%
127,069,249 100% 60,310,340 100%
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Company
As at 31 March, 2021 2020Fitch Rating group LKR % LKR %
AA+ - 0% 16,469,435 36%
AA - 0% 3,068,920 7%
AA- 34,414,562 80% 19,387,040 43%
A+ 6,478,671 15% 5,271,105 12%
A 2,262,809 5% - 0%
A- - 0% 1,308,950 3%
43,156,042 100% 45,505,449 100%
34.1.3 Investment in debenturesAs at 31 March no any debenture investment (2020 – 100%) were guaranteed by a banking institution with a rating of “A” or better for
the Group.
Fitch rating group / CompanyAs at 31 March, 2021 2020 LKR % LKR %
AA- - 0% 222,746,575 36%
A+ - 0% 392,188,580 64%
- 0% 614,935,155 100%
34.2 Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that
are settled by delivering cash or another financial asset. The Group monitors its risk of a shortage of funds using a liquidity planning
tools. The Group’s approach of managing liquidity risk is to ensure as far as possible that it will always have sufficient liquidity meets
its liability when due, and maintaining the balance between financial assets and liabilities and forecasting cash flows from operating
activities, without incurring unacceptable losses or risking damages to the Group’s reputation.
The Board of Directors is satisfied that the Company and its subsidiaries have adequate liquidity and business plans to continue to
operate the business and to mitigate the increased liquidity risks arising from the business and movement restrictions made due to
COVID-19 pandemic, for the next 12 months from the date of this report.
Sathosa Motors PLC Annual Report 2020/21172
Maturity profileThe following are the remaining contractual maturities of the financial liabilities at the reporting date.
(a) the maturity analysis of Liabilities - group
Contractual Cashflows
Carrying on Within Within More than
As at 31 March 2021 amount total demand 1 year 1-2 years 2 years
LKR LKR LKR LKR LKR LKR
Loans and borrowings 816,000,000 816,000,000 - 816,000,000 - -
Trade payable and Finance Lease Liability 344,737,037 344,737,037 - 344,737,037 - -
Lease liabilities 254,178,105 464,099,768 - 41,753,716 42,164,970 380,181,082
Amounts due to related parties 131,832,101 131,832,101 - 131,832,101 - -
Unclaimed dividend 4,146,312 4,146,312 4,146,312 - - -
Bank overdraft 7,066,570 7,066,570 - 7,066,570 - -
1,557,960,125 1,767,881,788 4,146,312 1,341,389,424 42,164,970 380,181,082
Contractual Cashflows
Carrying on Within Within More than
As at 31 March 2020 amount total demand 1 year 1-2 years 2 years
LKR LKR LKR LKR LKR LKR
Loans and borrowings 3,038,992,194 3,038,992,194 - 2,984,500,194 54,492,000 -
Trade payable and Finance Lease Liability 562,972,504 562,972,504 - 562,972,504 - -
Lease liabilities 258,256,607 453,738,506 - 39,136,991 41,281,490 373,320,025
Amounts due to related parties 143,609,495 143,609,495 - 143,609,495 - -
Unclaimed dividend 4,146,312 4,146,312 4,146,312 - - -
Bank overdraft 94,323,825 94,323,825 - 94,323,825 - -
4,102,300,937 4,297,782,836 4,146,312 3,824,543,010 95,773,490 373,320,025
(a) the maturity analysis of Liabilities - Company
Contractual Cashflows
Carrying on Within Within More than
As at 31 March 2021 amount total demand 1 year 1-2 years 2 years
LKR LKR LKR LKR LKR LKR
Loans and borrowings 816,000,000 816,000,000 - 816,000,000 - -
Trade payable and Finance Lease Liability 184,285,019 184,285,019 - 184,285,019 - -
Lease liabilities 29,893,733 42,568,388 - 6,333,075 6,303,765 29,931,548
Amounts due to related parties 131,671,904 131,671,904 - 131,671,904 - -
Unclaimed dividend 4,146,312 4,146,312 4,146,312 - - -
Bank overdraft 7,066,570 7,066,570 - 7,066,570 - -
1,173,063,538 1,185,738,193 4,146,312 1,145,356,568 6,303,765 29,931,548
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Contractual Cashflows
Carrying on Within Within More than
As at 31 March 2020 amount total demand 1 year 1-2 years 2 years
LKR LKR LKR LKR LKR LKR
Loans and borrowings 2,494,343,500 2,494,343,500 - 2,494,343,500 - -
Trade payable and Finance Lease Liability 423,805,919 423,805,919 - 423,805,919 - -
Lease liabilities 24,837,809 36,779,571 - 5,230,500 5,388,350 26,160,721
Amounts due to related parties 143,197,959 143,197,959 - 143,197,959 - -
Unclaimed dividend 4,146,312 4,146,312 4,146,312 - - -
Bank overdraft 11,087,749 11,087,749 - 11,087,749 - -
3,101,419,248 3,113,361,010 4,146,312 3,077,665,627 5,388,350 26,160,721
Trade and other payables are settled during the availability of the credit terms.
34.3 Market Risk
Market risk is the risk that changes in the market process- e.g. foreign exchange rates, interest rates will affect the Group's income
or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return. All such transactions are carried out within the guidelines set
by the Group Management.
Market risk comprise of the following types of risk:
I. Interest rate risk
II. Currency risk
III.Commodity price risk
IV.Equity price risk
34.3.1 Interest rate riskInterest rate risk is the risk that the fair value of future cash flows of a financial instrument fluctuate because of changes in the
market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long term
debt obligation. The Group utilises various financial instruments to manage exposures to interest rate risks.
Sathosa Motors PLC Annual Report 2020/21174
At the reporting date, the Group's interest - bearing financial instruments were as follows:
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Fixed Rate InstrumentsFinancial AssetsDebentures - 614,935,154 - 614,935,153
Short term call deposits 893,091 19,345,826 893,091 19,345,826
893,091 634,280,980 893,091 634,280,979
Fixed Rate InstrumentsFinancial LiabilitiesShort term and import loans - 200,000,000 - -
- 200,000,000 - -
Variable Rate InstrumentsFinancial LiabilitiesTerm Loan - 68,772,000 - -
Short term and import loans 816,000,000 2,770,220,194 816,000,000 2,494,343,500
Bank Overdraft 7,066,570 94,323,825 7,066,570 11,087,749
823,066,570 2,933,316,019 823,066,570 2,505,431,249
During the financial year, consecutive reductions in policy rates and monetary easing policies by Central Bank of Sri Lanka to
encourage banks and finance companies to reduce lending rates.
sensitivity AnalysisA reasonable possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit
or loss by the amounts shown below. The analysis assumes that all other variables, in particular, foreign currency exchange rates,
remain constant.
group CompanyAs at 31 March 2021 2020 2021 2020 LKR LKR LKR LKR
Fixed Rate Instruments - Financial Liabilities100 bp Increase - (2,000,000) - -
100 bp Decrease - 2,000,000 - -
Variable Rate Instruments - Financial Liabilities100 bp Increase (8,230,666) (29,333,160) (8,230,666) (25,054,312)
100 bp Decrease 8,230,666 29,333,160 8,230,666 25,054,312
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21175
34.3.2 Currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates. The Group exposes to the foreign currency risk on purchases, foreign operations that are denominated in a
foreign currencies.
Impact of CoVId-19 pandemicDue to the loss of foreign currency inflows to the country during the lockdown period of the covid 19 pandemic, resulted in an increase
in USD exchange rates against Sri Lankan Rupee (LKR) as at 31 March 2021. USD appreciated at the second half of March 2021, group
has taken several measures to manage risk as the group deals with foreign currency outflows to their suppliers.
The summary quantitative data about the group's exposure to currency risk as reported to the management of the Group is as follows,
2021 2020
gBp usd sgd JpY gBp usd sgd JpY
Trade Payables - Foreign
Creditors 43,856 19,412 373,588 70,199,215 236,411 278,850 - -
Gross Statement of Financial
Position Exposure 43,856 19,412 373,588 70,199,215 236,411 278,850 - -
The summary quantitative data about the Company's exposure to currency risk as reported to the management of the Company is as
follows,
2021 2020
gBp usd sgd JpY gBp usd sgd JpY
Trade Payables - Foreign
Creditors - - - 70,199,215 - - - -
Gross Statement of Financial
Position Exposure - - - 70,199,215 - - - -
The following significant exchange rates were applicable during the year 2020/21 and 2019/20
group/ Company Average Rate Reporting date spot RateAs at 31 March, 2021 2020 2021 2020 LKR LKR LKR LKR
GBP 274.06 231.41 269.88 232.67
USD 199.83 182.38 197.62 188.62
SGD 148.16 130.53 145.62 132.47
JPY 1.81 1.68 1.80 1.74
Sathosa Motors PLC Annual Report 2020/21176
sensitivity AnalysisA strengthening or weakening of the Rupee as indicated below, against the USD,THB, JPY, GBP would have increased/ (decreased)
the equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that
the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in
particular interest rates, remain constant.
group Company strengthening Weakening strengthening Weakening profit or Loss profit or Loss profit or Loss profit or Loss LKR LKR LKR LKR
31 March 2021
USD (10% movement) (383,619) 383,619 -
THB (10% movement) (5,440,054) 5,440,054 - -
JPY (10% movement) (12,626,733) 12,626,733 (12,626,733) 12,626,733
GBP (10% movement) (1,183,613) 1,183,613 - -
31 March 2020USD (10% movement) (5,184,320) 5,184,320 - -
THB (10% movement) - - - -
JPY (10% movement) - - - -
GBP (10% movement) (5,500,509) 5,500,509 - -
35. Capital management
The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
deployment of the business. The Group's management and Board of Directors monitors the return on capital, as well as the level of
dividends to ordinary shareholders.
In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets financial
covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the
financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches of the financial
covenants of any interest-bearing loans and borrowing in the current period.
NoTEs To ThE fINANcIAL sTATEMENTs
Sathosa Motors PLC Annual Report 2020/21177
The Group’s Net Debt to adjusted Equity ratio at the end of the reporting period was as follows:
Carrying amount group CompanyAs at 31 March, 2021 2020 2021 2020 LKR LKR LKR LKR
Total Liabilities 1,711,431,891 4,376,220,888 1,252,121,716 3,202,095,585
Less: Cash and Cash Equivalents (129,812,340) (62,960,694) (43,769,541) (45,878,676)
Net Debt 1,581,619,551 4,313,260,194 1,208,352,175 3,156,216,909
Equity attributable to owners of the company 1,651,121,328 1,653,284,784 1,607,101,623 1,600,493,109
Net Debt to Equity Ratio 96% 261% 75% 197%
There were no changes in the Group’s approach to capital management during the year and the Group is not subject to externally
imposed capital requirements.
36. Comparative Information
Except for the adoption of new accounting standards and interpretations (as disclosed in Note 4 to these financial statements) with
effect from 01 April 2020, the Group has consistently applied the accounting policies with those adopted in the previous financial year.
The presentation and classification of the financial statements of the previous period, have been adjusted, where relevant, to conform
to current year's presentation and classification.
37. Directors Responsibilities
The Board of Directors is responsible for the preparation and presentation of the Financial Statements in accordance with Sri Lanka
Accounting Standards.
38. Net Assets Per Share
group CompanyAs at 31 March 2021 2020 2021 2020
Net assets attributable to ordinary shareholders (LKR) 1,651,121,328 1,653,284,784 1,607,101,623 1,600,493,109
Weighted average number of ordinary shares in issue 6,033,622 6,033,622 6,033,622 6,033,622
Net assets per share (LKR) 273.65 274.01 266.36 265.26
Sathosa Motors PLC Annual Report 2020/21178
sML BRAnCh netWoRK / LoCAtIons
7 Branches of Island wide reach
1. Colombo - Head Office : No. 25, Vauxhall Street, Colombo 02.
2. Panchikawatta Branch : No. 42, Panchikawatta Road, Colombo 10.
3. Peliyagoda Branch : No. 25/11, New Nuge Road, Peliyagoda.
4. Negombo Branch : No. 231, Nalallawatta, Pitipana North, Negombo.
5. Matara Branch : No. 679, Galle Road, Walgama, Matara.
6. Kurunegala Branch : N0. 78. Colombo Road, Dambokka, Kurunegala.
7. Ratnapura Branch : No. 1/1, Colombo Road, Weeragoda, Hidellana, Ratnapura.
* For other main cities, we have appointed dealers.
* Sathosa Motors PLC has been investing extensively in workshop facilities and by setting up new branches in strategic locations in
selected cities. During the year, a new branch opened in Negombo focusing on inboard marine engines and spare parts sales.
Based on your need;
7. Ratnapura
1. Colombo (Head Office) 2. Panchikawatta 3. Peliyagoda
4. Negombo 5. Matara 6. Kurunegala
1. Colombo (Head Office) 2. Matara 3. Kurunegala
1. Colombo (Head Office) 2. Peliyagoda 3. Matara
4. Kurunegala
1. Negombo
Vehicle Sales Showrooms
Spare Parts Outlets
Marine Engine Operations
Workshop Operations
Sathosa Motors PLC Annual Report 2020/21179
deCAde At A gLAnCe
Sathosa Motors PLC Group
ten Year summary 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Statement of Profit or Loss and
Other Comprehensive Income Highlights
Revenue LKR Mn 1,883 2,311 3,041 3,503 4,048 5,221 8,177 11,126 4,196 3,882
Gross Profit LKR Mn 342 404 847 849 967 897 1,497 1,320 795 636
EBITDA LKR Mn 249 294 449 433 557 416 759 732 367 290
EBIT LKR Mn 242 286 424 401 491 309 635 595 195 111
Net Finance Income/(Cost) LKR Mn - - (9) (19) (28) 1 (105) (299) (337) (140)
Profit / (Loss) after tax LKR Mn 173 206 288 270 327 234 384 176 (80) (13)
Profit Attributable to Owners of
the company LKR Mn 173 206 260 261 321 263 388 135 (81) (4)
Statement of Financial Position Highlights
Property Plant and Equipment LKR Mn 39 45 173 332 513 549 973 1,251 1,315 1,853
Total Non Current Assets LKR Mn 39 67 247 451 1,318 1,250 1,686 1,911 1,626 2,134
Cash and Cash Equivalent LKR Mn 536 101 6 45 (229) (19) 19 363 (31) 123
Total Assets LKR Mn 1,416 1,443 2,014 2,485 3,197 3,900 5,382 7,014 6,547 3,872
Stated Capital LKR Mn 116 116 116 116 116 116 116 116 116 116
Retained Earnings LKR Mn 324 655 884 1,115 1,283 1,365 1,481 1,616 1,537 1,535
Equity Attributable to Owners of
the company LKR Mn 595 771 1,000 1,231 1,399 1,481 1,597 1,731 1,653 1,651
Loans and Borrowings LKR Mn - - - 213 368 631 2,127 3,307 3,039 816
Total Non Current Liabilities LKR Mn 25 28 32 113 225 183 173 155 346 285
Statement of Cash Flow Highlights
Cash Flows from/ (used in)
Operating Activities LKR Mn 234 (405) 17 142 460 69 (792) (565) (166) 2,374
Cash Flows From / (used in)
Investing Activities LKR Mn 23 1 (197) (208) (788) 126 (395) (272) (125) 44
Cash Flows From/(used in)
Financing Activities LKR Mn (30) (30) 84 105 54 15 1,225 1,180 (103) (2,264)
Key Financial Ratios
EPS LKR 28.68 34.10 43.09 43.32 53.22 43.51 64.32 22.32 (13) (0.62)
DPS LKR 5.00 5.00 5.00 7.00 12.00 30.00 45.00 0.00 0.00 0.00
Net Assets Per Share LKR 98.64 127.76 165.76 204.02 231.82 245.46 264.70 286.97 274.01 273.65
Dividend Payout % 17 15 12 16 23 69 70 0 0 0
ROE % 29.1 26.7 26.4 20.2 21.7 14.1 20.5 8.6 -3.7 -0.6
ROCE % 40.7 37.1 38.8 25.9 26.2 13.5 15.9 11.1 3.7 3.7
Gearing times - - - 0.2 0.4 0.4 1.2 1.7 1.4 0.4
Current Ratio times 1.73 2.14 1.99 1.96 1.28 1.29 1.11 1.06 1.22 1.22
Quick Ratio times 0.83 0.74 1.15 0.97 0.47 0.37 0.48 0.63 0.56 0.63
Price Per Share LKR 249.90 229.20 240.00 275.10 300.00 300.00 440.00 457.90 260.20 225.00
Investor Highlights
Total Number of Shareholders No. 1437 1296 1206 1196 1193 1173 1139 1147 1186 1236
Public Share Holdings % 22.78 15.57 15.54 15.48 15.46 15.46 15.46 15.54 15.54 15.56
Sathosa Motors PLC Annual Report 2020/21180
ABBReVIAtIons
Short form DefinitionAC Audit CommitteeACA Associate Member of the Institute of Chartered
Accountants of Sri Lanka AEL Access Engineering PLC AGM Annual General Meeting AWDR Average Weighted Deposit Rate AWLR Average Weighted Lending Rate AWPLR Average Weighted Prime Lending Rate Bn BillionBSc Bachelor of Science CA Chartered Accountants CCPI Colombo Consumer Price IndexCEO Chief Executive Officer CFL Compact Fluorescent LampCFM Close Family Members CFO Chief Financial Officer CGU Cash Generating Unit CISO Chief Information Security Officer COO Chief Operating Officer CSE Colombo Stock Exchange CWE Co-operative Wholesale Establishment DPS Dividend Per Share E-WASTE Electronic Waste EBIT Earnings Before Interest and Taxes
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
ECL Expected Credit LossED Executive Director EIR Effective Interest Rate EPF Employees’ Provident Fund EPS Earnings Per Share ERP Enterprise Resource Planning ESC Economic Service ChargeESG Environmental, Social and Governance ETF Employees’ Trust Fund FCA Fellow member of the Institute of Chartered
Accountants of Sri Lanka
FVOCI Fair Value through other Comprehensive Income FVTPL Fair value through Profit or Loss FY Financial Year GBP British Pound Sterling GDP Gross Domestic Product GM General Manager HR Human Resources IFRIC International Financial Reporting Interpretations
CommitteeIIA Institute of Internal Auditors IBR Incremental Borrowing Rate ICASL Institute of Chartered Accountants of Sri Lanka
Short form DefinitionIESL Institute of Engineers, Sri Lanka INED Independent Non-Executive DirectorIT Information Technology JPY Japanese YenKMP Key Management Personnel LED Light Emitting DiodeLKAS Sri Lanka Accounting Standards LKR Sri Lankan Rupee LTD Limited MBA Master of Business Administration MD Managing Director Mn Million MSc Master of ScienceN/A Not Applicable NBT Nation Building Tax NCI Non-Controlling InterestNCPI National Consumer Price IndexNED Non-Executive Director OCI Other Comprehensive Income OHTC Oman Hotels & Tourism Co. SAGOPAYE Pay As You Earn PLC Public Liability Company PMP Project Management Professional PIM Postgraduate Institute of Management PPE Property Plant and Equipment/Personnel
Protective Equipment PUC Projected Unit Credit ROCE Return on Capital Employed ROE Return on Equity RPT Related Party Transactions SDFR Standing Deposit Facility RateSEC Securities and Exchange Commission of Sri
Lanka SIC Standard Interpretations CommitteeSID Senior Independent Director SLAuS Sri Lanka Auditing Standards SLFRS Sri Lanka Financial Reporting Standards SLFR Standing Lending Facility RateSML Sathosa Motors PLC SPPI Solely Payments of Principal and Interest SRR Statutory Reserve RequirementTHB Thai Bhatt TOR Term of Reference USD United States Dollar USQ University of Southern Queensland VAT Value Added Tax WEF With Effect From WHT Withholding Tax
Sathosa Motors PLC Annual Report 2020/21181
gRI Content Index
GRI Standard Disclosure Page Number
GRI 102: General Disclosures 102-1 Name of the organisation Inner back cover
102-2 Activities, brands, products, and services 4
102-3 Location of headquarters Inner back cover
102-4 Location of operations 178
102-5 Ownership and legal form Inner back cover
102-6 Markets served 4 and 24
102-7 Scale of the organisation 7
102-8 Information on employees and other workers 67-70
102-9 Supply chain 80-87
102-10 Significant changes to the organisation and its supply chain N/A
102-11 Precautionary Principle or approach N/A
102-12 External initiatives 59-61
102-13 Membership of associations 73
102-14 Statement from Senior Decision-Maker 10-11
102-16 Values, principles, standards, and norms of behaviour 26-27
102-18 Governance structure 26-31
102-40 List of stakeholder groups 80-87
102-41 Collective bargaining agreements N/A
102-42 Identifying and selecting stakeholders 80-87
102-43 Approach to stakeholder engagement 80-87
102-44 Key topics and concerns raised 80-87
102-45 Entities included in the Consolidated Financial Statements 3
102-46 Defining report content and topic Boundaries 2
102-47 List of material topics N/A
102-48 Restatements of information N/A
102-49 Changes in reporting N/A
102-50 Reporting period 3
102-51 Date of most recent report 3
102-52 Reporting cycle 3
102-53 Contact point for questions regarding the report 3
102-54 Claims of reporting in accordance with the GRI Standards 3
102-55 GRI content index 181-185
102-56 External assurance 105-109
GRI 201: Economic
103-1 Explanation of the material topic and its boundaries N/A
Performance 103-2 The management approach and its components 12-15
103-3 Evaluation of the management approach 12-15
201-1 Direct economic value generated and distributed 64
201-3 Defined benefit plan obligations and other retirement plans 149-152
201-4 Financial assistance received from Government N/A
Sathosa Motors PLC Annual Report 2020/21182
GRI Standard Disclosure Page Number
GRI 202: Market Presence 103-1 Explanation of the material topic and its boundaries 10-15
103-2 The management approach and its components 10-15
103-3 Evaluation of the management approach 10-15
202-1 Ratios of standard entry level wage by gender compared to local
minimum wage
N/A
202-2 Proportion of senior management hired from the local community N/A
GRI 203: Indirect Economic
Impacts
103-1 Explanation of the material topic and its boundaries 10 -15 & 59- 61
103-2 The management approach and its components 10-15
103-3 Evaluation of the management approach 10-15
203-1 Infrastructure investments and services supported 75
203-2 Significant indirect economic impacts 10-15 & 59-61
GRI 204: Procurement
Practices
103-1 Explanation of the material topic and its boundaries 56-61
103-2 The management approach and its components 10-15
103-3 Evaluation of the management approach 10-15
204-1 Proportion of spending on local suppliers N/A
GRI 205: Anti-corruption 103-1 Explanation of the material topic and its boundaries 27
103-2 The management approach and its components 27
103-3 Evaluation of the management approach 27
205-1 Operations assessed for risks related to corruption N/A
205-2 Communication and training about anti-corruption policies and
procedures
27
205-3 Confirmed incidents of corruption and actions taken N/A
GRI 206: Anti-competitive
Behaviour
103-1 Explanation of the material topic and its boundaries 10-15 & 49-58
103-2 The management approach and its components 49-58
103-3 Evaluation of the management approach 49-58
206-1 Legal actions for anti-competitive behaviour, anti-trust, and
monopoly practices
N/A
GRI 302: Energy 103-1 Explanation of the material topic and its boundaries 76-79
103-2 The management approach and its components 76-79
103-3 Evaluation of the management approach 76-79
302-1 Energy consumption within the organisation 76-79
302-3 Energy intensity 76-79
GRI 201: Economic
Performance
103-1 Explanation of the material topic and its boundaries 62-66
103-2 The management approach and its components 62-66
103-3 Evaluation of the management approach 62-66
201-1 Direct economic value generated and distributed 64
201-3 Defined benefit plan obligations and other retirement plans 149-152
201-4 Financial assistance received from Government N/A
GRI coNTENT INdEx
Sathosa Motors PLC Annual Report 2020/21183
GRI Standard Disclosure Page Number
GRI 303: Water 103-1 Explanation of the material topic and its boundaries 76-79
103-2 The management approach and its components 76-79
103-3 Evaluation of the management approach 76-79
303-1 Water withdrawal by source 76-79
303-3 Water recycled and reused 76-79
GRI 304: Biodiversity 103-1 Explanation of the material topic and its boundaries 76-79
103-2 The management approach and its components 76-79
103-3 Evaluation of the management approach 76-79
304-1 Operational sites owned, leased, managed in, or adjacent to,
protected areas and areas of high biodiversity value outside protected
areas
N/A
GRI 305: Emissions 103-1 Explanation of the material topic and its boundaries 76-79
103-2 The management approach and its components 76-79
103-3 Evaluation of the management approach 76-79
305-1 Direct (Scope 1) GHG emissions N/A
305-2 Energy indirect (Scope 2) GHG emissions N/A
GRI 401: Employment 103-1 Explanation of the material topic and its boundaries 67-70
103-2 The management approach and its components 67-70
103-3 Evaluation of the management approach 67-70
401-1 New employee hires and employee turnover 67-70
401-2 Benefits provided to full-time employees that are not provided to
temporary or part-time employees
67-70
401-3 Parental leave N/A
GRI 402: Labour/
Management Relations
103-1 Explanation of the material topic and its boundaries 67-70
103-2 The management approach and its components 67-70
103-3 Evaluation of the management approach 67-70
402-1 Minimum notice periods regarding operational changes N/A
GRI 403: Occupational Health
and Safety
103-1 Explanation of the material topic and its boundaries 67-70
103-2 The management approach and its components 67-70
103-3 Evaluation of the management approach 67-70
403-2 Types of injury and rates of injury, occupational diseases, lost days,
and absenteeism, and number of work-related fatalities
N/A
Sathosa Motors PLC Annual Report 2020/21184
GRI Standard Disclosure Page Number
GRI 404: Training and
Education
103-1 Explanation of the material topic and its boundaries 67-73
103-2 The management approach and its components 67-73
103-3 Evaluation of the management approach 67-73
404-1 Average hours of training per year per employee 67-73
404-2 Programmes for upgrading employee skill and transition assistance
programmes
67-73
404-3 Percentage of employees receiving regular performance and career
development reviews
N/A
GRI 405: Diversity and Equal
Opportunity
103-1 Explanation of the material topic and its boundaries 67-70
103-2 The management approach and its components 67-70
103-3 Evaluation of the management approach 67-70
405-1 Diversity of governance bodies and employees N/A
405-2 Ratio of basic salary and remuneration of women to men N/A
GRI 406: Non-discrimination 103-1 Explanation of the material topic and its boundaries N/A
103-2 The management approach and its components N/A
103-3 Evaluation of the management approach N/A
406-1 Incidents of discrimination and corrective actions taken N/A
GRI 413: Local Communities 103-1 Explanation of the material topic and its boundaries 80-87
103-2 The management approach and its components 80-87
103-3 Evaluation of the management approach 80-87
413-1 Operations with local community engagement, impact assessments,
and development programmes
80-87
GRI 416: Customer Health
and Safety
103-1 Explanation of the material topic and its boundaries N/A
103-2 The management approach and its components N/A
103-3 Evaluation of the management approach N/A
416-2 Incidents of non-compliance concerning the health and safety
impacts of products and services
N/A
GRI 419: Socio-economic
Compliance
103-1 Explanation of the material topic and its boundaries N/A
103-2 The management approach and its components N/A
103-3 Evaluation of the management approach N/A
419-1 Non-compliance with laws and regulations in the social and
economic area
N/A
GRI coNTENT INdEx
Sathosa Motors PLC Annual Report 2020/21185
notICe Is heReBY gIVen that the Thirty Seventh (37th) Annual General Meeting of Sathosa Motors PLC will be held by way
of electronic means centered at the Board Room of Access Engineering PLC, No. 278, Union Place, Colombo 2 on the 15 day of
September 2021 at 1.00 p.m. for the following purposes:
1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and the Statement of Accounts
for the year ended 31 March 2021 with the Report of the Auditors thereon.
2. To re-elect Mr. M M N de Silva who retires by rotation in terms of Article 88(i) of the Articles of Association of the Company.
3. To re-appoint Messrs KPMG, Chartered Accountants as Auditors for the year ending 31 March 2022, and to authorise the Board of
Directors to determine their remuneration.
4. To authorise the Directors to determine contributions to charities and other donations for the year 2021/22.
By order of the Board
SATHOSA MOTORS PLC
p W CoRpoRAte seCRetARIAL (pRIVAte) LIMItedDirector / Secretaries
04 August 2021
Colombo
Notes
1. A member entitled to attend and vote at the meeting is entitled to appoint a Proxy to attend and vote instead of him/her.
2. A Proxy need not be a member of the Company.
3. A Form of Proxy is enclosed for this purpose.
4. The completed form of Proxy should be deposited at the Registered Office of the Company, No. 25, Vauxhall Street, Colombo 2, not
less than thirty six (36) hours before the time fixed for the commencement of the Meeting.
notICe oF AnnuAL geneRAL MeetIng
Sathosa Motors PLC Annual Report 2020/21186
notes
Sathosa Motors PLC Annual Report 2020/21187
FoRM oF pRoxY
I/We..……………………………………………………………………….......................................................................................................................................................
(NIC No. …………………….....................................) of .…………………………………………………………………………………………………………........................................
being a member/members of Sathosa Motors PLC hereby appoint;
…………………………………………………………………………………………………………….…of ………………………………………………………………………………………………....
(or failing him).
Mr. Sumal Joseph Sanjiva Perera of Colombo or failing him*
Mr. Joseph Christopher Joshua of Colombo or failing him*
Mr. Muthu Muni Nelson de Silva of Colombo or failing him*
Mr. Saumaya Dharshana Munasinghe of Colombo or failing him*
Mr. Dalpadoruge Anton Rohana Fernando of Colombo or failing him*
Mr. Wijesinghe Appuhamilage Chiran Okullo Wijesinghe of Colombo or failing him*
Mr. Ranjith Sepala Dahanayake of Colombo or failing him*
Mr. Manoaj Jayahsuriya of Colombo or failing him*
Mr. Kasthuri Arachchige Priyantha Perera of Colombo or failing him*
…………………………………………………………………………………..………………………………............................................................................................................ of
……………………………………………………................................................................. holder of NIC No……………….………………………….......................................
as my/our* Proxy represent me/us and vote for me/us* and on my/our* behalf at the Thirty Seventh (37th) Annual General Meeting
of the Company to be held on 15 September 2021 at 1.00 p.m. and at any adjournment thereof and every poll which may be taken in
consequence thereof.
Please indicate your preference by placing a against the following
For Against
1. To re-elect Mr. M M N de Silva who retires in terms of Article 88(i) of the Articles of Association of the Company.
2. To re-appoint Messrs KPMG Chartered Accountants as Auditors for the year ending 31 March 2022 and to
authorise the Board of Directors to determine their Remuneration.
3. To authorise the Directors to determine contributions to charities and other donations for the year 2021/22.
As witness my/our* hands this ……………. day of ……………. Two Thousand and One.
*Please delete as appropriate
…………………........................................ …………………………..................
NIC/REG.No. Signature of Member/s
Notes: 1. A Proxy need not be a member of the Company.
2. Instructions as to completion appear overleaf.
Sathosa Motors PLC Annual Report 2020/21188
INSTRUCTIONS FOR THE COMPLETION OF PROXy
1. The full name, National Identity Card number and the registered address of the shareholder
appointing the Proxy and the relevant details of the Proxy should be legibly entered in the Form of
Proxy which should be duly signed and dated.
2. The Proxy shall –
(a) In the case of an individual be signed by the shareholder or by his/her attorney, and if signed
by an Attorney, a notarially certified copy of the Power of Attorney should be attached to the
completed Proxy if it has not already been registered with the Company.
(b) In the case of a company or corporate / statutory body either be under its Common Seal or
signed by its Attorney or by an Officer on behalf of the company or corporate / statutory body
in accordance with its Articles of Association or the Constitution or the Statute (as applicable).
3. Please indicate with a ‘X’ how the Proxy should vote on each resolution. If no indication is given,
the Proxy in his/her discretion will vote as he/she thinks fit.
4. To be valid, the completed Form of Proxy must be deposited with the Company Secretaries, P W
Corporate Secretarial (Private) Limited at No. 3/17, Kynsey Road, Colombo 08, Sri Lanka or must
be emailed to [email protected] before the time fixed for the meeting.
foRM of pRoxy
Name of the Company
Sathosa Motors PLC
Registered Office
25,Vauxhall Street,
Colombo 02,
Sri Lanka.
Tel :- +94 112 432 858
Fax :- +94 112 446 129
Web :- www.sathosamotorsplc.com
E mail :- [email protected]
Legal Form
A public Limited Liability Company
incorporated in Sri Lanka on 11 March
1982 under the Companies Ordinance No:
51 of 1938 and re-registered under the
Companies Act No.7 of 2007. Listed on the
Colombo Stock Exchange on 07 November
1993.
Company Registration Number
PQ 105
Board of Directors
S J S Perera - Chairman
J C Joshua - Managing Director
M Jayahsuriya - Executive Director
S D Munasinghe - Director
D A R Fernando - Director
T A L Niroshan * - Director
M M N de Silva - Director
W A C O Wijesinghe - Director
R S Dahanayake - Director
K A P Perera - Executive Director –
Sales & Marketing
* Resigned w.e.f. 31 December 2020
Audit Committee
M M N de Silva - Chairman
W A C O Wijesinghe
R S Dahanayake
T A L Niroshan *
Remuneration Committee
S J S Perera - Chairman
M M N de Silva
W A C O Wijesinghe
Related Party Transaction Review
Committee
M M N de Silva - Chairman
W A C O Wijesinghe
R S Dahanayake
T A L Niroshan *
Strategic Planning Committee
J C Joshua - Chairman
M Jayahsuriya
K A P Perera
Bankers
Hatton National Bank PLC
Commercial Bank of Ceylon PLC
Bank of Ceylon
People’s Bank
DFCC Bank PLC
Sampath Bank PLC
National Development Bank PLC
Seylan Bank PLC
Auditors
Messrs KPMG
Chartered Accountants
32 A, Sir Mohomad Macan Marker
Mawatha,
Colombo 03,
Sri Lanka.
Tel: +94 112 426 426
Fax: +94 112 445 872
Secretaries & Registras
P W Corporate Secretarial (Private) Limited
No: 3/17, Kynsey Road,
Colombo 08,
Sri Lanka.
Tel: +94 114 640 360
Fax: +94 114 740 588
Lawyers
Nithi Murugesu & Associates
Attorney-at-Law, Notary Public,
Commissioner for Oaths,
No. 28 (Level 2),
W. A. D. Ramanayake Mawatha,
Colombo 02,
Sri Lanka.
Tel: + 94 11 2 302 900
Fax: + 94 11 2 302 911
CORPORATE INFORMATION
Name of the Company
Sathosa Motors PLC
Registered Office
25,Vauxhall Street,
Colombo 02,
Sri Lanka.
Tel :- +94 112 432 858
Fax :- +94 112 446 129
Web :- www.sathosamotorsplc.com
E mail :- [email protected]
Legal Form
A public Limited Liability Company
incorporated in Sri Lanka on 11 March
1982 under the Companies Ordinance No:
51 of 1938 and re-registered under the
Companies Act No.7 of 2007. Listed on the
Colombo Stock Exchange on 07 November
1993.
Company Registration Number
PQ 105
Board of Directors
S J S Perera - Chairman
J C Joshua - Managing Director
M Jayahsuriya - Executive Director
S D Munasinghe - Director
D A R Fernando - Director
T A L Niroshan * - Director
M M N de Silva - Director
W A C O Wijesinghe - Director
R S Dahanayake - Director
K A P Perera - Executive Director –
Sales & Marketing
* Resigned w.e.f. 31 December 2020
Audit Committee
M M N de Silva - Chairman
W A C O Wijesinghe
R S Dahanayake
T A L Niroshan *
Remuneration Committee
S J S Perera - Chairman
M M N de Silva
W A C O Wijesinghe
Related Party Transaction Review
Committee
M M N de Silva - Chairman
W A C O Wijesinghe
R S Dahanayake
T A L Niroshan *
Strategic Planning Committee
J C Joshua - Chairman
M Jayahsuriya
K A P Perera
Bankers
Hatton National Bank PLC
Commercial Bank of Ceylon PLC
Bank of Ceylon
People’s Bank
DFCC Bank PLC
Sampath Bank PLC
National Development Bank PLC
Seylan Bank PLC
Auditors
Messrs KPMG
Chartered Accountants
32 A, Sir Mohomad Macan Marker
Mawatha,
Colombo 03,
Sri Lanka.
Tel: +94 112 426 426
Fax: +94 112 445 872
Secretaries & Registras
P W Corporate Secretarial (Private) Limited
No: 3/17, Kynsey Road,
Colombo 08,
Sri Lanka.
Tel: +94 114 640 360
Fax: +94 114 740 588
Lawyers
Nithi Murugesu & Associates
Attorney-at-Law, Notary Public,
Commissioner for Oaths,
No. 28 (Level 2),
W. A. D. Ramanayake Mawatha,
Colombo 02,
Sri Lanka.
Tel: + 94 11 2 302 900
Fax: + 94 11 2 302 911
CORPORATE INFORMATION