01 - Gestetner of Ceylon PLC | Gestetner Sri Lanka | GCP · DNA, even as we focus on redefining...

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Gesterner of Ceylon PLC has always been renowned as a reliable, trustworthy and well governed office automation provider, with sound

fundamentals and a reputation forintegrity that is second to none. These valuable characteristics remain

inherent in our corporateDNA, even as we focus on redefining ourselves through a new strategy

designed to take us into the future. While we are proud of what we have achieved during the past years, these are mere milestones in our journey. Our vision is much more than what we have achieved thus far, our achievements up to now have simply been the punctuations in the story that we continue to tell. Headed by a resilient leadership team in

the industry, bringing fresh ideas and new perspectives to the work that we do and ensuring that your company remains vibrant, progressive

and relevant. We’re also focusing even more on being one of the most accessible and customer friendly document solution Companies in the

industry.

The expansion of out dealer network into the suburbs was yet another positive venture which we embarked on during the year under review; thus expanding our existing network to a total of 22 dealers scattered

around the country.

Our portfolio includes the world’s leading office automation brands, providing confidence, reliability and value for money. Its ever-expanding product portfolio includes Ricoh, BenQ, Fujitsu, Asus and PaperCut in

addition to services provided by Nashua Lanka (Pvt) Ltd. (Gestetner Offset) and Gestetner Printing Services (Pvt) Ltd. (Gestetner Outsource),

under the Gestetner of Ceylon PLC umbrella.

About TheCompany

ContentsGESTETNER DEALER NETWORK....02

GROUP HIGHLIGHTS...03

CHAIRMAN’S REVIEW...04

MANAGING DIRECTOR’S REVIEW...06

BOARD OF DIRECTORS...08

CORPORATE MANAGEMENT TEAM...11

MANAGEMENT DISCUSSION & ANALYSIS...12

HUMAN RESOURCES...15

CORPORATE GOVERNANCE...16

REPORT OF THE BOARD AUDIT COMMITTEE...19

ANNUAL REPORT OF THE BOARD OF DIRECTORS...20

STATEMENT OF DIRECTORS’ RESPONSIBILITIES...23

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT...24

INDEPENDENT AUDITORS’ REPORT...27

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME...28

STATEMENT OF FINANCIAL POSITION...29

STATEMENT OF CHANGES IN EQUITY...30

STATEMENT OF CASH FLOWS...31

NOTES TO THE FINANCIAL STATEMENTS...33

TEN YEAR SUMMARY...62

INVESTOR INFORMATION...63

NOTICE OF MEETING...64

FORM OF PROXY...65

CORPORATE INFORMATION...67

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G E S T E T N E R O F C E Y L O N P L C

AMPARA

MATALE

JAFFNA

VAVUNIYA

ANURADHAPURA

POLONNARUWA

KURUNEGALA

CHILAW

KANDY

BADULLA

MONARAGALAHATTON

RATNAPURA

GALLE

MATARA

TRINCOMALEE

BATTICALOA

AMPARA

MATALE

JAFFNA

VA

KILLINOCHCHI

VUNIYA

ANURADHAPURA

POLONNARUWA

KADANA

GAMPAHA

CHILAW

KANDY

BADULLA

MONARAGALAHATTON

RATNAPURA

GALLE

MATARA

TRINCOMALEE

BATTICALOA

GESTETNER DEALER NETWORK

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2016/2017 2015/2016Results for the year (Rs.Mn)Group revenue 745 618 Profit from operations 57 46 Profit before tax 61 48 Profit attributable to equity holders of the Company 43 35

As at 31st MarchTotal Assets (Rs Mn) 538 389 Total Liabilities (Rs Mn) 318 169 Current Ratio (times) 1.37 1.91 Return on Equity (%) 19% 16%

Per share (Rs.)Earnings per share 15.71 13.23 Dividend per share 15.00 1.00 Net asset value per share as at 31st March 82.91 82.82 Market price per share as at 31st March 118.80 120.00

GROUP HIGHLIGHTS

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CHAIRMAN’S REVIEW

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I have pleasure, on behalf of the Board of Directors, to present to you the Annual Report and Accounts of Gestetner of Ceylon PLC for the year ended 31st March 2017.

An OverviewThe Group’s turnover for the current financial year grew by 20% to Rs. 744.8 million. The 20% growth in profitability to Rs. 41.7 million was in proportion. These are commendable achievements given the difficult trading conditions that prevailed during the year.

DividendsDuring the course of the year under review two interim dividends of Rs. 5 and Rs.10 per share respectively were paid to the shareholders.

The Directors are not proposing the payment of any further dividends for the year under review.

ConclusionMy sincere thanks are due to the other Directors for support and assistance and to all the employees at all levels for their dedicated and committed service. I also wish to express my appreciation for the continued support from our shareholders, overseas principals, bankers, suppliers and other stakeholders.

S.J.M.Anzsar FCA

Chairman

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It gives me great pleasure to report to you the company performance for the financial year ending March 2017, with a note on another year of solid company performance. It is encouraging to see that the Company closed the year with positive momentum, paving the way for steady growth in years to come.

The year witnessed a weak pick up in consumption patterns, which was residual from the previous year. Performance of the office automotive sector was rather slow, with the market gaining slow growth from the previous year. However the copier segment continued its growth trajectory from the previous year. While the share of rented units and outright purchases grew at a positive pace. The Company leveraged on its extensive/island wide office automation dealer network and strong reputation for after sales services to increase penetration, maintain and build relationships with both existing and potential clients alike.

The turnover of the Group showed positive signs from the previous year from Rs.617.8 million, to Rs. 744.8 million recording a revenue growth of 20%. The corresponding profit before tax figures stood at, Rs.61.3 million this year against Rs. 48.1million in the previous year. The resultant net profit after tax of Rs.41.7 million, which is a 20% growth compared to previous year. The management is confident that the stable economic landscape which is prevalent in the country, would indeed trigger a substantial growth in the future too.

Each year is challenging in its own way and 2016/17 was no different. The Rupee depreciated to Rs.154.20 as at 31 March 2017 against the US Dollar compared to its closing rate of Rs.146.78 as at March 2016, this triggering adverse implications which rippled through all segments of business. While the Sri Lankan economy grew in comparison to the previous year, this growth was witnessed in the holistic corporate environment.

The year marked a significant change and realignment of strategy towards a more customer centric focus. This was

MANAGING DIRECTOR’S REVIEW

followed through with an aggressive marketing, communication campaign targeting both ATL and BTL segments. Our accomplishment as far as volume development was obviously clear and recognized by our principals, who in fact were a driving force of our success during the year. Our efforts were rewarded by awards which were added to our laurels. This year we managed to clinch an award from our Principal’ RICOH for the ‘Highest number of MFP units and Sales Revenue’, which was indeed a feat as we at Gestetner, were the only distributor to receive such an award from the Principal.

The renting business which has increased in momentum during the past few years, remained on a upward trajectory with new tie ups during the year. Further in order to service our customers better while providing them with the latest technology in office automation, the year saw the replacement of several existing machines with new machines with advanced technological features. The venture into integrated document solutions witnessed a twofold benefit – to the customer as well as to the Company and this lead the way to cost effective solutions to our customers. While office automation remains the core business of the Company, we do not restrict ourselves to one particular industry and are now looking at possibility to expand into other areas and sectors.

Our staff has been the life blood of the Company. We continuously encourage, motivate and train our cadre through numerous local and overseas training programs and workshops, ensuring that they remain at industry standards at all times. Their achievements were considered as our achievements and the celebrations and commemoration of these milestones enabled us to retain a high moral among the staff, resulting in better performance.

As we mark the conclusion of a successful year, I wish to acknowledge with gratitude the contribution and commitment of our employees during a year which saw many challenges

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and opportunities. Our employees are an integral part of our success and a key pillar of our Corporate Governance System. We will continue to implement processes by which we attract, and retain talent, as an employer of choice.

I wish to thank Chairman and the Board of Directors for their active participation and guidance to steer the Company forward. Our customers and business partners are core to our business, I thank them for their support and confidence placed by partnering with Gestetner I wish to convey my special gratitude to the team who have worked hard to deliver these results. Finally, my sincere thanks to all the shareholders for the faith they have placed in the Company and in our future endeavors.

Chandima PereraManaging Director

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BOARD OF DIRECTORS

S J M Anzsar - Chairman / Non - Executive Director

Mr. S J M Anzsar was appointed to the Board of Gestetner of Ceylon PLC on 7th January 1997 and as the Chairman on 12th December 1997.

He is a Chartered Accountant with a career span of over thirty-five years that included Partnership at an international professional firm; senior management roles at a UK based conglomerate specializing in Africa. Since the mid nineties he has been engaged in the private equity sector focusing in Africa and Sri Lanka.

L R Watawala - Non - Executive Director

Prof. L R Watawala was appointed to the Board of Gestetner of Ceylon PLC on 07th November 1996.

Prof. Watawala is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka (FCA), Fellow of the Institute of Certified Management Accountants of Sri Lanka (FCMA), Fellow of the Chartered Institute of Management Accountants of UK (FCMA UK) ,Chartered Global Management Accountant (CGMA) and Fellow of the Institute of Certified Professional Managers (FCPM).

He served his articles and as a Qualified Assistant at Turquand Youngs & Co.(Ernst & Young) ,Chairman and Managing Director of the Ceylon Leather Products Corporation, Chairman and Managing Director of the State Mining & Mineral Development Corporation, Chairman of the People’s Bank, Chairman of the People's Merchant Bank, Chairman and Director General of the Board of Investment of Sri Lanka (1991-1993) and (2005-2007), Advisor to the Ministry of Finance, Chairman of Pan Asia Bank Ltd, Director South Asia Informatics Computer Institute Ltd (Singapore) and Chairman of the National Insurance Trust Fund.

He currently serves on the Company Directorates of Richard Peiris PLC, Lanka IOC PLC, Abans Electricals PLC and Lake House Printers & Publishers PLC.

He is the President of the Institute of Certified Management Accountants of Sri Lanka (CMA), President of the Association of Management Development Institutes of South Asia (AMDISA), President Institute of Certified Professional Managers (CPM), Past President of the Institute of Chartered Accountants of Sri Lanka and South Asian Federation of Accountants (SAFA), Founder President of the Association of Accounting Technicians of Sri Lanka (AAT) and Past President of the Organization of Professionals Association of Sri Lanka (OPA).

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B C U Perera - Executive Director / Managing Director

Mr. B C U Perera was appointed to the Board of Gestetner of Ceylon PLC on 01st January 2014.

Mr. B C U Perera has over twenty five years of commercial experience in senior management capacity. He Joined the John Keells Group in 1992 seconded to John Keells Office Automation (Pvt) Limited and held the positions of Sales & Marketing Manager, Director Sales & Marketing, Director / General Manager and became the CEO / Vice President – John Keells Holdings in the year 2000.

In 2010 he moved to take up a challenging career in the F & B Sector within the same group. Mr. B C U Perera was in-charge of the beverage business where he held the position of Vice President John Keells Holdings / Head of Beverages Ceylon Cold Stores a public quoted company which had operated for over one hundred forty years.

D M R Phillips - Non - Executive Director

Mr. D M R Phillips, President’s Counsel, was appointed to the Board of Gestetner of Ceylon PLC on 07th November 1996.

He is a Attorney-At-Law and a Solicitor (England & Wales) and holds a Diploma in Intellectual Property (University of London- Queen Mary & West Field College). He currently serves as the Chairman of Intellectual Property Advisory Board and presently serves on the company Directorates of NDB Bank PLC.

S A J Goonetilleke - Non - Executive Director

Ms. S A J Goonetilleke was appointed to the Board of Gestetner of Ceylon PLC on 01st October 1997.

Ms. Goonetilleke is a Fellow Member of Chartered Accountants of Sri Lanka , Fellow Member of Chartered Institute of Management Accountants (UK) and holds a MBA from Postgraduate Institute of Management - Sri Jayewardenapura.

She started her career at Ernst & Young and then served in several companies such as Chemanex Ltd, GTE Directories (Pvt) Ltd and presently serves as a Director in Reditune Ceylon (Pvt) Ltd.

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A M G Gomez - Non - Executive Director

Mr. A M G Gomez was appointed to the Board of Gestetner of Ceylon PLC on 01st February 2007.

Mr. Gomez possesses extensive experience of over thirty-five years in the Private Sector in Sri Lanka in Finance and General Management with wide exposure in many industry segments. He served the Bartleet Group of Companies for twenty-four years as CEO / Director of several Companies within the Strategic Business units of Transportation, Financial Services and Information Technology. During this period he was also appointed to the Board of Directors of the Holding Company.

At present Mr. Gomez functions as the Executive Director / General Manager of Geveo Australasia (Pvt) Ltd., a BOI registered Software Development Company with Australian investment. He is also a Director of several other Companies in the capacity of Non Executive Independent Director.

S T P Kahawela - Executive Director

Mr. S T P Kahawala was appointed to the Board of Gestetner of Ceylon PLC on 15th March 2016.

Mr. Kahawela is an incorporated engineer (Engineering Council, UK) and holds a Diploma in Professional Business and Technical Management, with a career span of over thirty years.

He served as an Electronics Engineer (Service in-charge) at Al-Futtaim Group Doha, Qatar from 1983-1992.

He joined the John Keells Group in 1992 seconded to John Keells Office Automation (Pvt) Limited and served as the Head of Services.

In year 2000 he was appointed as the Assistant Vice President – John Keells Group before joining Gestetner.

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Seated from left to right : Chandima Perera-Managing Director, Anusha Geethanjalee - Deputy General Manager - Fin & Admn,

Shivantha Kahawela - Executive Director

Standing from left to right : Wasantha Ruberu - Manager - Technical Services, Subramaniam Sanjeewan - Manager - Product Marketing,

Nanda Hewavithanage - Manager - Technical Support Services, Susiri Perera - General Manager - P2P, Navaratnam Jeyaraj - Manager - MIS,

Manjula Jayasinghe - Sales Manager - Post Sales Revenue, Naushan Rafeel - General Manager - Sales

CORPORATE MANAGEMENT TEAM

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MARKETOffice automation is a growth market in Sri Lanka, aided and abetted by both the public and private sectors. Gestetner derives most of its revenues from the domestic market and consequently, the country’s socio economic performance has a significant impact on the performance of the Company. We are also exposed to currency fluctuations as products are sourced from overseas principals/suppliers. Labour markets play a key role in determining the availability of talent, enabling growth and value creation.

Keeping pace with the changing technologies and the concepts of modern business, Gestetner has a diverse portfolio of products, making them well-equipped to handle state-of-the-art automation for offices to the Sri Lankan market. Our services offered optimize and manage a company’s document output to certain objectives, such as driving down costs, improving efficiency and productivity, and reducing the IT support workload. The comprehensive range of products offered has allowed the Company to maintain its market stature. Evolving with technology, the Company has proved its revolutionary operational power in the local market with the introduction of many pioneering products.

Our brand portfolio includes some of the top notch global brands, such as Ricoh, BenQ, Fujitsu, Asus and PaperCut Document Management Solution, in addition to services provided by Nashua Lanka (Pvt) Ltd. (Gestetner Offset) and Gestetner Printing Services (Pvt) Ltd. (Gestetner Outsource), under parent Company Gestetner of Ceylon PLC. Our core business products are of Japanese origin. While Ricoh retains one of the leading positions in global market share, Fujitsu occupies the top laptop brand slot in Japan and BenQ projectors are within the top three in terms of global market share. The Company also sells and rents equipment in addition to undertaking high quality digital printing and offset printing.

While its products are represented in all provinces of Sri Lanka, Gestetner of Ceylon PLC, is also represents in the Maldives market and it has nearly 10,000 satisfied customers both here and in the Maldives. The Company has won large projects in the Government sector, has industry experienced staff covering island-wide sales and service, enjoys close partnerships with multinational companies spanning over 15 years and offers backup consumables for uninterrupted operation of products, ensuring efficiency and productivity.

HISTORYGestetner has a history which dates back over five decades rich in inspiring growth.

From that point forward, the brand has advanced in its item offering – from standalone products to comprehensive integrated solutions

MANAGEMENT DISCUSSION & ANALYSIS

for the working environment. Its most noteworthy interest remains the unwavering quality and assume that it has earned among clients in the corporate world. In a bid to reflect the vital role played by Gestetner in the workplace, a change was influenced to the brand's personality in 2015. A new corporate logo was propelled, anticipating a crucial defining moment in the Company's history and proclaiming another time of record answers for the general population. This was upheld by a thorough advertising correspondences battle. From that point forward, the brand has advanced in leaps and bounds, while creating to the ever revolving needs of the market.

DEVELOPMENTSWith intentions of expanding the existing product portfolio, several rounds of discussions were held with potential principles, who have been encouraging in helping out in this process. These discussion which are at its final stage will further strengthen our market position. The expansion into production printers is yet another venture which we embarked on during the current year, which will take off ground during the next year. The initial ground work which comprised of a market survey was conducted in order to ascertain the potential of this market. This data has been passed onto the principals who are eager to commence these operations.

Our dealer network too witnessed growth during the year under review, with the appointment of dealers in the suburbs which was a new foray to our existing outstation dealer network. Our renting business which has seen significant growth during the year came under a holistic overhaul with the existing machines been replaced with state-of-the art machines. This was a collaborative effort of Gestetner and our suppliers.

ECONOMIC OUTLOOKAmidst moderate levels of economic activity in the global economy and the socio-political and economic uncertainties within the domestic front, the Sri Lankan economy remained subdued, with real GDP growing by 4.4 percent in 2016, below the growth of 4.8 percent in 2015. The GDP per capita stood at USD 3,835, just below the level achieved in the previous year. In terms of sector performance, the industry and service sectors led the economy in the year. The service sector, taking up the largest share of GDP, recorded a growth of 4.2 percent, down from 5.7 percent in the previous year. This performance was supported by the increased level of activity within the financial services and transport sub-sectors. The industry sector which posted a growth of 6.7 as against 2.1 percent in the previous year was buoyed by the recovery in the construction sub-sector along with mining and quarrying. However, the manufacturing sub-sector growth declined to 1.7 percent. Dampened by adverse weather, the agriculture sector contracted, posting a negative growth of 4.2 percent.

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INFLATION Spurred by supply-side disruptions due to adverse weather, the upward tax revisions, rising global commodity prices, particularly, from the second half of the year, along with the demand pressures, the price levels in the year trended upwards. To ease out the inflationary pressures, the Central Bank of Sri Lanka adopted a tighter stance in monetary policy. This supported to curtail the excessive growth in private sector credit to some extent and control the demand pressures; thereby, supporting the price levels to settle at mid-single digit levels. Headline inflation measured by the Colombo Consumers’ Price Index (CCPI) (2013=100) settled at 4.5 percent at the end of 2016 whilst the annual average rate of inflation stood at 4.0 percent compared to 2.2 percent in 2015. With greater fiscal consolidation, the fiscal position improved in the year 2016. The emphasis was on broadening the tax base and structural reforms in tax administration which supported to increase revenue and grants to 14.3 percent of GDP.

FINANCIAL REVIEWDuring the year, the Company placed emphasis on growing the Company’s market share further, through a strong marketing communication strategy which covers all stakeholders and business partners. Expansion of business volumes was paramount in this exercise while making the Company’s name ‘top of the mind’ to people of all walks of life. The turnover of the Group saw an increase of 20% to Rs. 744.8 million from the previous years Rs. 617.8 million. While profit from operation grew by 24% ending the year at Rs. 56.8 million. The positive impact on the revenue was mainly due to Machine sales which represent over 45% of the total revenue. While post sales revenue grew by 22%. These positives were trickled down to the shareholders who received a Rs. 15/- of dividend per share during the year – this was done in two stage of an initial Rs. 5/- followed by and additional Rs. 10/-

The Groups asset base grew by 38% ending the year with Rs. 537.9 million from the previous reporting years 389.0 million, comprising of non-current assets of Rs.160 million and current assets of Rs.377.5million. The non-current asstes grew by 67% compared with previous year. This was mainly impacted by the investment made to replace existing outsourced customer machine base, to facilitate them with latest technology. Investment on machinery for the expansion of outsource business to new locations also was another contributory factor for the above increase. The current assets of the Group grew to Rs. 377.5 million compared to Rs. 293.3 million in previous year. The current ratio for the year under review reduced to 1.37 from the previous years 1.91. However, the Group always continues to maintain a sound asset base to match its liabilities.

HUMAN CAPITALThe Company's human capital is the essential part of its gaining potential, profitability and long haul maintainability. The Company's all encompassing way to deal with the administration of its Human Capital envelops guaranteeing differing qualities, worker fulfillment and nonstop engagement, stringent arrangements on wellbeing and security, ability administration, profession improvement, preparing

However, the gross profit margin decreased from 33% to 31%, due to reasons such as the continuous depreciation of the Sri Lankan Rupee, the increased machine depreciation cost due to replacing exiting outsourced machine base, further the growth in regional business also a contributory factor which effected if over the years.

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what's more, improvement. Building a solid team, therefore, is at the core of our human resources (HR) strategy. We are consistent and focused in our efforts to enable a progressive work environment within our businesses and support our team to learn, develop and be empowered.

Our engagement with our team is focused, pragmatic and interactive. Upholding the Gestetner’s ‘Human Resources Policy’ and following best practices, we are an 'equal opportunity employer’. Impartial in our management approach, we look to nurture a performance oriented and a collaborative work culture. Our recruitment seeks to attract the right-profiled candidates and we take care and invest well to retain them - give fair compensation, reward performance, extend learning and development opportunities and ensure employee wellbeing.

SUSTAINABILITYThe Group pursues its business goals under a stakeholder model of business governance. As per this model, the Group has taken specific steps, particularly in ensuring the conservation of natural resources and environment. While striving to support the communities we serve, and take pride in the special relationships we have built in every corner of the island. Working tirelessly every day to maintain that relationship and ensure that the Company provides them with the products and information they need. This objective is achieved by leveraging on ecofriendly operations that minimize wastage and optimize natural resources.

CORPORATE GOVERNANCEWe have in place an internal governance structure with defined roles and responsibilities. Through this structure, the Board balances its

role of providing oversight and guidance to the management in strategy implementation, risk management and meeting stakeholder expectations. The governance structure provides for delegation of authority whilst enabling the Board to retain effective control. The Board delegates authority to relevant Board committees and to the management with clearly defined mandates and authorities.

The Board operates on the firm belief that sound governance practices are fundamental to earn stakeholder trust which is critical to sustaining performance and enhancing shareholder value. The Board perceives its role not only to ensure that the Company succeeds well beyond their term, but that it can prosper through economic cycles and changing market conditions and is sustainable into the future.

FUTURECelebrating 53 years in business, it is time to look back in retrospect of our journey, our milestones and our accomplishments. It is also time for us to re-commit to our corporate ideals, gear our operations to meet the challenges ahead, secure the opportunities and look forward to reach greater heights. We will consolidate our businesses and progressively and strategically tap the growth potential to reap optimum returns. We intend to strengthen our principals, enter into new partnerships, explore new markets, divest underperforming ventures and collaborate with relevant stake holders to iron out pressing issues at an industry level.

The year ahead has many new ventures in the pipeline, amongst which is the expansion of the existing product portfolio. This will indeed help the company in increasing profit while making the company a holistic office automation provider.

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HUMAN RESOURCES

Human Capital ReviewHuman Capital is the crucial component of the Company’s earning potential, productivity and long term sustainability. Gestetner, through the years has been founded on the core building blocks of inspiring people and leadership; ensuring diversity, encouraging and facilitating innovation and excellence whilst always maintaining the integrity of the Company’s values.

Employee DiversityAs an equal opportunity employer the Company encourages workplace diversity in all its forms; it promotes and celebrates innovative thinking whilst raising the bar in everything they do. Keeping abreast with evolving trends it creates an environment which promotes a content and productive workforce.

Employee Gender Analysis as at 31st March 2017

The workforce as at the concluding financial year was 140. The diversity of its workforce based on gender as illustrated in the above diagrams. The Group has seen the demographics of the workforce changing over the years bringing with it the opportunity, dynamism and challenges.

Employee Composition As at 31st March 2017, the number of employees of the company was sited as 140, consisting of 115 males and 25 females.

Employees 2016 2017Male 103 115Female 20 25Total 123 140

As an equal opportunity employer, the overall Non-Discrimination Policy, which commits to maintaining a workplace that is free from physical and verbal harassment and discrimination on the basis of race, religion, gender, age, nationality, social origin, disability, political affiliation or opinion, is practiced through all tiers of employment levels.

Talent ManagementThe Group continuously monitors its employee retention and, in particular, seeks to address staff attrition in typically high attrition industry groups through proactive initiatives that engage employees.

Learning and DevelopmentThe Company’s learning and development programs are key policy components of talent retention ensuring a sustainable competitive advantage, provided to employees. Each year, training for employees are determined on a needs basis, aligning the business specific requirements. As part of its career development strategy, the Company also carries out leadership development programs and management development programs. Many engaging and stimulating activities too were included into these sessions, making it an insightful learning outcome which helped staff members to boost self-confidence while overcoming their personal barriers and fears. In order to better interact with the participant the secession was conducted in two groups. The first being for the Marketing & Technical Teams, and the second covering the rest of the staff.

The Company conducted its staff awards ceremony for the second successive year. This been as part of the annual meeting commencing this year. The best performing employees and those who go the ‘extra mile’ were among the award recipients. HR personnel take an active role in driving many initiatives that promote work life balance. With events such as the monthly birth day bash celebration, annual kick off, new year and year end celebrations been sought after events among the employees.

As an organization and a sport loving nation we understand and value the advancement of sports in all our employees, while we try to foster a balance in work and sports. It’s our understanding that sports not only provides a person with physical agility but also fosters certain attributes such as team work, which can be transferred into day-to-day work life. The cricket, athletics and newly added rugby tournaments organized by Gestetner Sports Club enhance employee satisfaction, while helping us to identify those with special talents.

Category Wise Composition Category wise

Employment as at 31st March 2017

Age Wise Composition

Employee Age Analysis as at 31st March 2017

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CORPORATE GOVERNANCE

Board of Directors The Board consists of five Non-Executive Directors including the Chairman. Non-Executive Directors are Messrs. S J M Anzsar (Chairman), L R Watawala (Deputy Chairman), Dinal Phillips, A M G Gomez, and Ms. S A J Goonetilleka. Mr. B C U Perera who is a Director is also the Managing Director of the Company and Mr. S T Kahawela is an Executive Director. A brief description of each of the Directors is set out from pages 8 to 10.

The Board meets regularly to take decisions effectively and ensure that the operations of the Company are satisfactorily carried out and special Board Meetings are also held whenever necessary. In the year under review four (04) meetings were held and Directors’ attendance thereat was as follows :

Name of Director Category Attendance

Mr S J M Anzsar Chairman 02Prof L R Watawala Deputy Chairman 04Mr B C U Perera Managing Director 04Mr D M R Phillips Director 02Ms S A J Goonetilleke Director 02Mr A M G Gomez Director 04Mr S T P Kahawela Executive Director 04

Compliance with Rules on Corporate Governance contained in the Listing Rules of the Colombo Stock Exchange:

Subject Requirement Extent of Compliance

Non – Executive Directors At least one third of the total number of Directors should be Non- Executive Directors

Other than Mr. B C U Perera and Mr. S T P Kahawela, all Directors are Non-Executive Directors.

Independent Directors Two of the Non –Executive Directors, should be Independent

All Non Executive Directors have served on the Board continuously for over nine years and, the Board having taken into consideration all relevant circumstances, is of the opinion that the said Directors are independent since all other criteria for defining “independence” set out in the Listing Rules of the Colombo Stock Exchange have been satisfied.

The policy of the Company is to manage its affairs in accordance with appropriate standards for good Corporate Governance. Implementation of policy and strategy is done in a framework that requires compliance with existing laws and regulations as well as establishing best practices in dealing with employees, customers, suppliers and the community.

The Company currently complies with the requirements set out in the Code of Best Practices for Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the Rules on Corporate Governance contained in the Listing Rules of the Colombo Stock Exchange.

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The Non - Executive Directors of the Company have submitted declarations pertaining to their independence/non-independence as required by Listing Rules of the Colombo Stock Exchange.

Appointments At each Annual General Meeting one third of the Directors for the time being, except the Managing Director retire from office. The Directors to retire at each Annual General Meeting are those who being subject to retirement by rotation, have been longest in office since their last election. A retiring Director is eligible for re – election.

Responsibility of the BoardThe Company’s business and Group operations are managed under the supervision of the Board and include :

n Providing entrepreneurial leadership to the Company

n Evaluating, reviewing and approving corporate strategy and performance

n Approving and monitoring financial reporting of the Company

n Recommending the appointments and fee of the External Auditor

n Ensuring compliance with all relevant laws, regulations and codes of business practice.

Compliance with Rules of Corporate Governance


Composition Should comprise of Non- Executive Directors majority of whom shall be Independent

All Members are Non-Executive Directors who are not independent and the Board is of the opinion that such Directors are “independent” having taken into consideration all the circumstances relating thereto.

Chairman One Non-Executive Director should be appointed as the Chairman

This requirement has been complied with.

Membership in a recognized Accounting Body

The Chairman or one Member should be a Member of a recognized Accounting Body

Two Members of the Committee are Members of the Institute of Chartered Accountants of Sri Lanka.

Financial ReportingThe Company makes available all the financial reports to shareholders in a timely manner, providing information as per the Colombo Stock Exchange requirements and prepares the Financial Statements as per Sri Lanka Accounting Standards (LKASs/SLFRSs) and guidelines issued by the Sri Lanka Institute of Chartered Accountants.

Adequate internal control systems are in place to ensure compliance with regulatory requirements.

Board Audit CommitteeThe Board Audit Committee consists of three Non - Executive Directors. They are Prof L R Watawala (Chairman), Ms S A J Goonetilleke and Mr A M G Gomez .

The Committee examines any matters relating to the financial affairs of the Company, compliance with accounting standards and laws as well as internal control policies and procedures. The Committee is also responsible for the consideration and appointment of External Auditor, the maintenance of a professional relationship with them and reviewing Accounting Principles, Policies and Practices adopted in the preparation of public financial information.

The Audit Committee held four (04) meetings during the financial year ended 31st March 2017. The detailed Report of the Audit Committee is given on page 19 of the Annual Report.

18



Composition Should comprise of Non- Executive Directors majority of whom shall be Independent.

All Members are Non-Executive Directors who are not independent and the Board is of the opinion that such Directors are “independent” having taken into consideration all the circumstances relating thereto.

Compliance with Rule of Corporate Governance

Senior ManagementSenior Management meets regularly with Departmental Heads to review progress, discuss and resolve issues concerning the operations of the Company as well as to compare performance with budget and management information that contains explanations for any variances and recommendations.

Remuneration CommitteeThe Remuneration Committee appointed by the Board comprise of three Non- Executive Directors who are not independent and the board is of the opinion that such Directors are “independent” having taken into consideration all the circumstances relating thereto.

The Committee is headed by Prof L R Watawala and the members include Ms S A J Goonetilleke and Mr A M G Gomez.

The Remuneration Committee reviews the performance of the Managing Director and recommends appropriate remuneration benefits and other payments based on the remuneration policy of the Company, which has been formulated on market and industry factors and performance of the Managing Director.

The Committee also approves the remuneration of the members of the Senior Management Committee on the recommendations made by the Managing Director.

The proceedings of the Committee are reported to the Board of Directors who will in turn make the final determination based on the recommendations of the committee.

All Non-Executive Directors receive a fee for serving on the Board and serving on sub-committees. They do not receive any performance related incentive payments. The Directors’ emoluments are disclosed in note 8 on page 43.

The Committee meets as and when the need arises. The remuneration committee met twice during the year ended 31st March 2017.

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REPORT OF THE BOARD AUDIT COMMITTEE

The Audit Committee is responsible to the Shareholders and other stakeholders regarding the integrity of the Company’s Financial Reporting Process in accordance with Sri Lanka Accounting Standards and other legislations. The Audit Committee also ensures the Company’s internal control and procedures and compliance with legal regulatory requirements.

COMPOSITION OF AUDIT COMMITTEEThe Board Audit Committee comprises three Non Executive Directors. The Members of the Committee are Prof. L R Watawala (Chairman), Mr A M G Gomez and Ms S A J Goonetilleke, who are individuals with extensive experience and expertise in the fields of Finance, Corporate Management and Marketing.

MEETINGS OF THE AUDIT COMMITTEEDuring the year there were four Meetings and all the Members of the Committee attended the meetings. The Managing Director and DGM-Finance and Administrations, attended these meetings by invitation.

TERMS OF REFERENCEThe terms of reference clearly define the role, responsibilities and powers of the Audit Committee and ensures that the composition and the activities of the Audit Committee are in line with International Best Practices and Corporate Governance Rules applicable to listed companies.

SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEARThe main responsibilities of the Audit Committee.

n Reviewing and monitoring the integrity of the Financial Statements

n Reviewing the Management Letter of External Auditor and Management Response

n Reviewing the progress of management actions to resolve highlighted significant internal controls issued by External Auditors

n Reviewing Interim Financial Statements for purpose of quarterly announcement of financial results

n Reviewing of Business Risk and Mitigation Plans

n Reviewing and monitoring compliance with Companies Act No 07 of 2007

n Reviewing and monitoring the effectiveness of the Internal Controls

n Reviewing and monitoring Statutory and Regulatory Compliance Processes.

EXTERNAL AUDITORThe Audit Committee evaluates the external audit functions and establishes the independence and objectivity of the external audit functions. The Audit Committee has recommended to the Board that Messrs KPMG, Chartered Accountants, be reappointed as External Auditors of Gestetner of Ceylon PLC for the financial year ending 31st March 2018, subject to approval by the Shareholders at the Annual General Meeting.

L R Watawala

Chairman – Audit Committee

20


ANNUAL REPORT OF THE BOARD OF DIRECTORS

The Board of Directors of Gestetner of Ceylon PLC is pleased to present the Annual Report together with the Audited Financial Statements of Gestetner of Ceylon PLC and the Audited Consolidated Financial Statements of the Group for the year ended 31st March 2017.

This report contains information required by Section 168 of the Companies Act No.07 of 2007 and other necessary information required by the Listing Rules of Colombo Stock Exchange.

PRINCIPAL ACTIVITIES OF THE GROUPThe core business of the Company is the import and sale of Digital Copiers, Digital Duplicators, Duplicators, Laser Printers, Projectors and Laptops.

Nashua Lanka (Pvt) Limited, which is a fully owned subsidiary of the Company, imports and markets Copiers, Consumables and manages an Offset Printing Press and a Copy Bureau.

Gestetner Printing Services (Pvt) Limited, which is also a fully owned subsidiary of the Company is engaged in the provision of Outsourced Photocopying / Printing Services and also IT Solutions.

Gestetner Manufacturers (Pvt) Limited, the other fully owned subsidiary of the Company was engaged in manufacturing ink and currently it is not operating.

CHANGES TO THE NATURE OF THE BUSINESSThere were no changes to the principal activities of the Company during the financial year ended 31st March 2017.

TURNOVER ANALYSISThe turnover of the Group for the year Rs. 744,844,409/- (2015/16 - Rs. 617,793,819/-) analysed among the group is as follows.

2016/17 2015/16Rs. Rs.

Gestetner of Ceylon PLC 705,440,252 543,045,744 Subsidiaries 124,013,044 141,343,591

829,453,296 684,389,335 Less: Intra Group Sales (84,608,887) (66,595,516) 744,844,409 617,793,819

RESULTS AND APPROPRIATIONSGross Profit 228,110,096 205,941,668 Other Income 16,438,253 22,161,630 Administrative Expenses (129,762,435) (125,423,942)Selling & Distribution Expenses (54,373,113) (50,741,951)Other Operating Expenses (3,566,162) (6,105,726)Net Finance Income 4,521,987 2,322,784 Profit Before Tax 61,368,626 48,154,463 Income Tax Expense (19,617,106) (13,353,781)Profit for the Year 41,751,520 34,800,682 Other Comprehensive Income for the Year , net of Tax 999,015 - Accumulated Profit B/F 123,166,007 112,285,633

Dividend Paid (42,524,992) (23,920,308)Profit Available for Appropriation 123,391,550 123,166,007

Earnings Per Share 15.71 13.23 Figures in brackets indicate deductions

FINANCIAL STATEMENTSThe Financial Statements of the Group and the Company are set out from pages 28 to 60 of the Annual Report.

DIRECTORATEThe Board of Directors of the Company as at date is set out on page number 67 titled " Corporate Information". The Directors of the Company who held office during the year under review are indicated below.

- Mr Sayed Jemaldeen Muhammad Anzsar

- Prof Lakshman Ravendra Watawala

- Mr Dinal Mario Rex Phillips

- Ms Sita Anne Juliana Goonetilleke

- Mr Annesly Michael Godfrey Gomez

- Mr Bulathsinghalage Chandima Upul Perera

- Mr Shivantha Tissa Perera Kahawela

In terms of Article 85 of the Articles of Association of the Company, Mr Sayed Jemaldeen Muhammad Anzsar and Mr Dinal Mario Rex Phillips retire by rotation and being eligible is recommended by the Board for re-election.

The qualifications and experience of the Directors are given from pages 8 to 10 of the Annual Report.

DIRECTORS' INTEREST IN CONTRACTSThe Company maintains an Interest Register in compliance with the requirements of the Companies Act No 7 of 2007.

Directors' Interest in Contracts are disclosed under related party transactions in Note 31 to the Financial Statements.

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Audit Committee Remuneration Committee Related Party Transaction Review Committee

Prof L R Watawala - Chairman Prof L R Watawala - Chairman Prof L R Watawala - ChairmanMs S A J Goonetilleke Ms S A J Goonetilleke Ms S A J GoonetillekeMr A M G Gomez Mr A M G Gomez Mr A M G Gomez

DIRECTORS’ SHAREHOLDINGSShareholdings of Directors of the Company are as follows.

Name of The Directors As At 31.03.2017 As At 31.03.2016

Mr S J M Anzsar 66,070 66,070Prof L R Watawala 1,892 1,892Mr D M R Phillips 326,005 13,500Ms S A J Goonetilleke 6,959 6,959Mr A M G Gomez Nil Nil Mr B C U Perera 276,325 266,325Mr S T P Kahawela Nil Nil

The public shareholding of the Company is 413,905 shares which amounts to 15.95% of the issued capital and thenumber of public shareholders of the company is 710 as at 31st March 2017.

BOARD SUB- COMMITTEESThe following Board Sub-Committees have been established by the Company :

DIRECTORS' FEE AND EMOLUMENTSDirectors’ Fee and Emoluments paid during the finacial year ended 31st March 2017 amounted to Rs.18,947,281/-

TWENTY MAJOR SHAREHOLDERSThe total shareholder base of the company as at 31st March 2017 is 718 and the twenty (20) Major Shareholders of the Company as at the said date are indicated below:

No. of Shares Percentage of Holding (%)

1 GESTETNER (EASTERN) LTD 1,210,195 45.532 MR A A N DE FONSEKA 356,461 13.413 MR D M R PHILLIPS 326,005 12.274 MR B C U PERERA 276,325 10.405 MR S J M ANZSAR 66,070 2.486 MS C S DE FONSEKA 38,970 1.477 MR A R RASIAH 36,374 1.378 DR H S D SOYSA 20,177 0.769 MR M N MOHIDEEN 18,378 0.69

10 DR (MRS) V SIVAPRAKASAPILLAI 17,500 0.6611 MR J N PHILLIPS 16,200 0.6112 MR M A T RAAYMAKERS 12,552 0.4713 MR A SITHAMPALAM 10,989 0.4114 PAN ASIA BANKING CORPORATION PLC/MR S GOBINATH 9,400 0.3515 MR K S D SENAWEERA 8,210 0.3116 MRS S A J GOONETILLEKE 6,959 0.2617 MRS E R WIKRAMANAYAKE 6,750 0.2518 MR K M S M RAZEEK 5,603 0.2119 SHALSRI INVESTMENTS (PVT) LTD 5,596 0.2120 COLOMBO INVESTEMENT TRUST LIMITED 5,150 0.19

22


DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe Directors are respnosible for preparing and presenting the Financial Statements as set out on page 23. The Financial Statements have been prepared in conformity with the Sri Lanka Accounting Standards as laid down by the Institute of Chartered Accountants of Sri Lanka, Companies Act No. 7 of 2007 and the Listing Rules of the Colombo Stock Exchange.

ACCOUNTING POLICIESThe accounting policies adopted in the preparation of the Financial Statements are given on pages 33 to 41 and these accounting policies have been consistently applied to all the years presented in these Financial Statements.

PROPERTY, PLANT AND EQUIPMENTDetails of the movement in the Property, Plant and Equipment of the Group and the Company are given in Notes 12 and 13 to the Financial Statements.

STATED CAPITALThree hundred & seventy nine thousand six hundred & eighty seven (379,687) Shares were Issued by way of a Right Issue on 24th April 2015 in the Proportion of One ( 1 ) Share for every Six ( 6 ) Shares held.

The current stated capital of the Company is Rs.91,965,565/- comprising of 2,657,812 Ordinary Shares.

PROVISION FOR TAXATIONProvision for Taxation has been computed at the rates given in Note 9 to the Financial Statements.

DONATIONSNo donations were made by the Company during the year ended 31st March 2017.

STATUTORY PAYMENTSThe Directors to the best of their knowledge and belief are satisfied that all statutory payments in relation to the Government and the Employees have been made to date.

CORPORATE GOVERNANCEA description of the Company's Corporate Governance practices is set out from pages 16 to 18.

RELATED PARTY TRANSACTIONSThere were no non-recurrent Related Party Transactions which exceeded the threshold of 10 percent of the equity or 5 percent of

the total assets stipulated by the Listing Rules of Colombo Stock Exchange.

"The Related party transaction review committee report is set out in page no 24. Any other transaction that could be classified as Related Party Transactions in terms of LKAS 24 - 'Related Party Disclosures', are given in Note 31 to the Financial Statements.

GOING CONCERNThe Board of Directors is satisfied that the Group has adequate resources to continue its operation in the foreseeable future. Accordingly, the Financial Statements are prepared based on the "Going Concern Concept".

DIVIDENDA First and Final Dividend of Rs.1/- per Share for the financial year ended 31st March, 2016 has been paid to the Shareholders of the Company on 07th October 2016.

The Board of Directors has recomended and paid First Interim Dividend of Rs.5/- per share (on the 2,657,812 shares) and Second Interim Dividend of Rs.10/- per share ( on the 2,657,812 shares) on 21st December 2016 and 30th March 2017 respectively for the year ended 31st March 2017.

The Directors have complied with the Provisions of Section 56(2) of the Companies Act No.07of 2007 (the Act) by obtaining from the Company’s Auditors a report confirming that the Company will, immediately after the payment of the Dividend, satisfy the Solvency Test, as required by the said Section.

AUDITORSThe Financial Statements for the year have been audited by Messers. KPMG, Chartered Accountants, who have expressed their willingness to continue as Auditors of the Company and a resolution proposing their reappointment as Auditors and authorising the Directors to fix their remuneration will be submitted at the forthcoming Annual General Meeting.

Audit fee payable in respect of the Group and Company are Rs.845,700/- and Rs.537,000/- respectively. (2015/16- Rs.804,600/- (Group) and Rs.510,850/- (Company).

AUDITORS’ RELATIONSHIP WITH THE COMPANYThe Company did not have any relationship with the Auditors other than that of the Auditor, during the financial year ended 31st March 2017.

By Order of The Board

B C U Perera Director

SecretaryJacey & Company-Secretaries

Colombo - 14th August 2017

S T P Kahawela Director

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STATEMENT OF DIRECTORS’ RESPONSIBILITIES

This Statement of Directors' Responsibilities is to be read in conjunction with the Auditor’s Report and is made to distinguish the respective responsibilities of the Directors and of the Auditors in relation to the Financial Statements contained in this Annual Report.

The Directors of the Company are required by the Companies Act No. 07 of 2007 to prepare Financial Statements which give a true and fair view of the state of affairs of the Company and of the Group as at the end of the financial year.

The Directors confirm that the Financial Statements of the Company for the year ended 31st March 2017 presented in the Report have been prepared in accordance with the Sri Lanka Accounting Standards and the Companies Act No 07 of 2007. In preparing the Financial Statements, the Directors have selected appropriate accounting policies and have applied them consistently to all periods presented in the Financial Statements, unless otherwise indicated. Reasonable and prudent judgments and estimates have been made and applicable Accounting Standards have been followed and the Financial Statements have been prepared on a going concern basis.

The Directors are of the view that adequate funds and other resources are available within the Company for the Company to continue in operation in the foreseeable future.

The Directors have taken all reasonable steps expected of them to safeguard the assets of the Company and of the Group and to establish appropriate systems of internal controls in order to prevent, deter and detect any fraud, misappropriation or irregularities.

The Directors have also taken all reasonable steps to ensure that the Company and its subsidiaries maintain adequate and accurate accounting books of record which reflect the transparency of transactions and provide an accurate disclosure of the Company’s financial position.

The Directors are required to provide the auditors with every opportunity to take whatever steps and undertake whatever inspection they consider appropriate for the purpose of enabling them to give their Audit Report.

As per the provisions of the new Companies Act No. 07 of 2007 the Board of Directors of the Company shall cause the Notice of Meeting to be sent to every shareholder of the Company not later than fifteen working days before the date fixed for holding the Annual General Meeting.

The Directors are of the view that they have discharged their responsibilities as set out in this statement.

COMPLIANCE REPORTThe Directors confirm that, to the best of their knowledge, all taxes and levies payable by the Company and all contributions, levies and taxes payable on behalf of the employees of the Company, and all other known statutory obligations as at the reporting date have been paid or provided for in the Financial Statements.

By Order of the Board

SecretaryJACEY & COMPANY - SecretariesColombo. 14th August 2017

24


RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORTThe Board established the Related Party Transaction Review Committee in term 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 (CSE). The primary purpose of the Committee is to evaluate and consider all transactions with related parties of the company, in order to ensure that related parties are treated on par with other shareholders and constituents of the Company.

In accordance with the Section 9.2.2 of the Listing Rule of Colombo Stock Exchange, the Related Party Transaction Review Committee comprises three non executive directors who are not independent, namely, Mr L R Watawala (Chairman), Mr A M G Gomez and Ms S A J Goonetilleke.The board is of the opinion that such Directors are “independent” having taken into consideration all the circumtances relating thereto. During the year committee has met four (4) times.

Scope of the Committee:

• Reviewing in advance all proposed Related Party Transactions of the Company.

• Adopting policies and procedures to review Related Party Transactions of the Company and reviewing and overseeing existing policies and procedures.

• 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.

• If Related Party Transactions are ongoing (Recurrent Related Party Transactions) the Committee establishes guidelines for senior management to follow in its ongoing dealings with the relevant related party.

• Ensuring that no Director of the Company

shall participate in any discussion of a proposed Related Party Transaction for which he or she is a related party, unless such Director is requested to do so by the Committee for the express purpose of providing information concerning the Related Party Transaction to the Committee.

• If there is any potential conflict in any Related Party Transaction, the Committee may recommend the creation of a special committee to review and approve the proposed Related Party Transaction.

• Ensuring that immediate market disclosures and disclosures in the Annual Report as required by the applicable rules/regulations are made in a timely and detailed manner.

The Committee is entrusted with evaluating and considering all transactions with related parties of the Company except the exempted transactions as per the Listing Rules of the CSE in order to ensure the related parties are treated on par with other shareholders and constituents of the Company and related party transactions are evaluated according to the applicable rules and regulations. To this end the Committee shall ensure that necessary processes are in place to identify, approve, disclose and monitor Related Party Transactions according to the provisions contained in the Related Party Transactions Policy pertaining to the company and its subsidiaries. The Committee is required to carry out the aforementioned approval of the related parties and Related Party Transactions in line with the regulations issued by the Colombo Stock Exchange and Securities and Exchange Commission of Sri Lanka.

During the year under review, the committee reviewed and pre-approved all proposed Related Party Transactions. The activities and views of the Committee, have been communicated to the Board of Directors quarterly.

In the financial year 2016/17, there were no non- recurrent Related Party Transactions that exceeded the respective thresholds mentioned in the Listing Rules of the Colombo Stock Exchange.

Recurrent Related Party Transactions that exceeded the respective thresholds mentioned in the Listing Rules of the Colombo Stock Exchange are disclosed below.

• Name of the Related Party - Gestetner Printing Services (Pvt) Ltd• Relationship - Fully owned Subsidiary• Nature of the Transaction - Sale of goods and services• Aggregate value of the Related Party Transactions

entered into during the financial year - Rs. 91,783,201/-• Aggregate value of the Related Party

Transactions as a % of Net revenue/income - 14.85%• Terms and conditions of the Related Party

Transactions -Transactions are entered in the normal cause of business

Details of other Related Party Transactions entered into by the Company during the financial year is disclosed in note 31 to the financial statements.

L R WatawalaChairman – Related Party Transaction Review Committee

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TO THE SHAREHOLDERS OF GESTETNER OF CEYLON PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of Gestetner of Ceylon 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 March 31, 2017, and the statements of profit or loss and other comprehensive income, changes in equity and, cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information set out on pages 28 to 60 of the annual report.

Board’s Responsibility for the Financial Statements The Board of Directors (“Board”) is responsible for the preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and

fair view 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at March 31, 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion and scope and limitations of the audit are as stated above.

b) In our opinion:

- 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,

- The financial statements of the Company, give a true and fair view of its financial position as at March 31, 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

- The financial statements of the Company, and the Group comply with the requirements of sections 151 and 153 of the Companies Act No. 7 of 2007.

INDEPENDENT AUDITORS’ REPORT

CHARTERED ACCOUNTANTSColombo14th August 2017

28


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEAll amounts are in Sri Lankan Rupees

GROUP COMPANY For the Year Ended 31st March, Note 2017 2016 2017 2016Revenue 4 744,844,409 617,793,819 705,440,252 543,045,744 Cost of Sales (516,734,313) (411,852,151) (500,570,142) (376,963,577)Gross Profit 228,110,096 205,941,668 204,870,110 166,082,167 Other Income 5 16,438,253 22,161,630 19,433,294 26,713,949 Administrative Expenses (129,762,435) (125,423,942) (107,814,377) (100,828,001)Selling & Distribution Expenses (54,373,113) (50,741,951) (48,740,015) (46,433,509)Other Operating Expenses 6 (3,566,162) (6,105,726) (3,590,908) (5,635,612)Results from Operating Activities 56,846,639 45,831,679 64,158,104 39,898,994 Net Finance Income 7 4,521,987 2,322,784 4,115,135 1,939,772 Profit Before Tax 8 61,368,626 48,154,463 68,273,239 41,838,766 Tax Expense 9 (19,617,106) (13,353,781) (18,778,353) (9,958,456)Profit for the Year 41,751,520 34,800,682 49,494,886 31,880,310

Other Comprehensive IncomeActuarial Gain on Employee Benefit 27 1,387,521 - 1,387,521 - Tax on Other Comprehensive Income (388,506) - (388,506) - Other Comprehensive Income for the Year , net of Tax 999,015 - 999,015 - Total Comprehensive Income Attributable to Owners of the Company 42,750,535 34,800,682 50,493,901 31,880,310

Earnings Per Share 10 15.71 13.23 18.62 12.12

Figures in brackets indicate deductions.The accounting policies and notes from pages 33 to 60 form an integral part of these Financial Statements.

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STATEMENT OF FINANCIAL POSITIONAll amounts are in Sri Lankan Rupees

GROUP COMPANY As at 31st March, Note 2017 2016 2017 2016ASSETSNon-Current AssetsProperty, Plant & Equipment 12/13 122,284,803 57,778,765 114,076,471 47,365,482 Intangible Assets 14/15 2,308,578 2,130,628 2,300,515 2,108,225 Investments In Subsidiary Companies 16 - - 26,999,960 26,999,960 Other Investment 17 35,796,800 35,796,800 35,796,800 35,796,800 Total Non-Current Assets 160,390,181 95,706,193 179,173,746 112,270,467

Current AssetsInventories 18 81,254,152 71,562,670 79,929,409 70,739,975 Trade & Other Receivables 19 192,234,850 133,400,177 171,394,036 108,229,815 Amounts Due from Related Companies 20 - 95,000 - 95,000 Cash & Cash Equivalents 21 104,038,879 88,288,023 98,093,030 76,054,754 Total Current Assets 377,527,881 293,345,870 349,416,475 255,119,544 Total Assets 537,918,062 389,052,063 528,590,221 367,390,011

EQUITYStated Capital 22 91,965,565 91,965,565 91,965,565 91,965,565 General Reserve 23 5,000,000 5,000,000 5,000,000 5,000,000 Retained Earnings 123,391,550 123,166,007 99,489,610 91,520,701 Total Equity Attributable to Owners of the Company 220,357,115 220,131,572 196,455,175 188,486,266

LIABILITIESNon-Current Liabilities Deferred Tax Liabilities 24 7,678,173 1,133,547 7,925,708 1,827,222 Deferred Income 25 22,176,897 - 22,176,897 - Interest Bearing Borrowings 26 2,109,422 2,915,408 2,109,422 2,915,408 Employee Benefits 27 10,736,362 11,297,583 10,736,362 11,297,583 Total Non-Current Liabilities 42,700,854 15,346,538 42,948,389 16,040,213

Current LiabilitiesInterest Bearing Borrowings 26 805,987 735,038 805,987 735,038 Trade & Other Payables 28 237,626,146 142,659,559 233,581,947 134,959,883 Amounts Due to Related Companies 29 2,063,449 - 21,098,348 17,695,894 Current Tax Liabilities 30 9,260,553 7,026,638 9,468,372 6,319,999 Bank Overdrafts 21 25,103,958 3,152,718 24,232,003 3,152,718 Total Current Liabilities 274,860,093 153,573,953 289,186,657 162,863,532 Total Liabilities 317,560,947 168,920,491 332,135,046 178,903,745 Total Equity & Liabilities 537,918,062 389,052,063 528,590,221 367,390,011 Net Assets Per Share (Rs.) 82.91 82.82 73.92 70.92

The accounting policies and notes from pages 33 to 60 form an integral part of these Financial Statements.I certify that these Financial Statements have been prepared and presented in compliance with the requirements of the Companies Act No. 07 of 2007.

Head of Finance - A. P. G .A. P .GeethanjaleeThe Board of Directors is responsible for the preparation and presentation of these Financial Statements. Signed and approved for and on behalf of the Board by,

Director - B C U Perera Director - S T P Kahawela 14th August 2017 Colombo.

30


STATEMENT OF CHANGES IN EQUITYFor the Year Ended 31st March,

Stated Capital

General Reserve

Retained Earnings Total

Balance as at 1st April 2015 46,403,125 5,000,000 112,285,633 163,688,758

Comprehensive Income for the Year Profit for the Year - - 34,800,682 34,800,682 Other Comprehensive Income (net of tax) - - - - Total Comprehensive Income for the Year - - 34,800,682 34,800,682

Transactions with owners of the Company recognized directly in equityIssue of Rights 45,562,440 - - 45,562,440 Dividend Paid - (2014/2015) - - (23,920,308) (23,920,308)Balance as at 31st March 2016 91,965,565 5,000,000 123,166,007 220,131,572 Balance as at 1st April 2016 91,965,565 5,000,000 123,166,007 220,131,572

Comprehensive Income for the Year Profit for the Year - - 41,751,520 41,751,520 Other Comprehensive Income (net of tax) - - 999,015 999,015 Total Comprehensive Income for the Year - - 42,750,535 42,750,535

Transactions with owners of the Company recognized directly in equityFinal Dividend Paid - (2015/2016) - - (2,657,812) (2,657,812)Interim Dividend Paid - (2016/2017) - - (39,867,180) (39,867,180)Balance as at 31st March 2017 91,965,565 5,000,000 123,391,550 220,357,115

Stated Capital

General Reserve

Retained Earnings Total

Balance as at 1st April 2015 46,403,125 5,000,000 83,560,699 134,963,824

Comprehensive Income for the Year Profit for the Year - - 31,880,310 31,880,310 Other Comprehensive Income (net of tax) - - - - Total Comprehensive Income for the Year - - 31,880,310 31,880,310

Transactions with owners of the Company recognized directly in equityIssue of Rights 45,562,440 - - 45,562,440 Dividend Paid - (2014/2015) - - (23,920,308) (23,920,308)Balance as at 31st March 2016 91,965,565 5,000,000 91,520,701 188,486,266 Balance as at 1st April 2016 91,965,565 5,000,000 91,520,701 188,486,266

Comprehensive Income for the Year Profit for the Year - - 49,494,886 49,494,886 Other Comprehensive Income (net of tax) - - 999,015 999,015 Total Comprehensive Income for the Year - - 50,493,901 50,493,901

Transactions with owners of the Company recognized directly in equityFinal Dividend Paid - (2015/2016) - - (2,657,812) (2,657,812)Interim Dividend Paid - (2016/2017) - - (39,867,180) (39,867,180)Balance as at 31st March 2017 91,965,565 5,000,000 99,489,610 196,455,175

Figures in brackets indicate deductions.The accounting policies and notes from pages 33 to 60 form an integral part of these Financial Statements.

All amounts are in Sri Lankan Rupees

GROUP

COMPANY

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STATEMENT OF CASH FLOWSAll amounts are in Sri Lankan Rupees

GROUP COMPANYFor the Year Ended 31st March, Note 2017 2016 2017 2016Operating Activities (A)Cash Generated from Operations 138,869,366 91,308,161 145,221,737 87,645,084 Exchange Gain 2,413,365 2,762,645 2,370,152 2,689,899 Interest Received 7,481,406 4,795,378 7,002,699 4,454,745 Interest Paid (2,652,397) (2,231,604) (2,580,542) (2,273,983)Employee Benefits Paid (2,372,531) (5,027,935) (2,372,531) (5,027,935)Tax Paid (11,227,071) (13,871,925) (9,920,000) (8,516,047)Net Cash Generated From Operating Activities 132,512,138 77,734,720 139,721,515 78,971,763

Investing ActivitiesPurchase of Property, Plant & Equipment & Intangible Assets (95,415,581) (27,546,957) (95,415,581) (27,454,957)Proceeds from Disposal of Property, Plant & Equipment 270,110 2,725,225 220,108 2,725,225 Net Cash Used in Investing Activities (95,145,471) (24,821,732) (95,195,473) (24,729,732)

Financing ActivitiesDividend Paid (42,524,992) (23,920,308) (42,524,992) (23,920,308)Re-Purchase of Shares - - - 4,200,000 Lease Rentals Paid (1,042,059) (694,706) (1,042,059) (694,706)Issue of Rights - 45,562,440 - 45,562,440 Net Cash from / (Used) in Financing Activities (43,567,051) 20,947,426 (43,567,051) 25,147,426

Increase / (Decrease) in Cash & Cash Equivalents (6,200,384) 73,860,414 958,991 79,389,457

Movements in Cash & Cash EquivalentsAs at the Begining of the Year 85,135,305 11,274,891 72,902,036 (6,487,421)Increase in Cash & Cash Equivalents (6,200,384) 73,860,414 958,991 79,389,457 Cash & Cash Equivalents as at 31st March 21 78,934,921 85,135,305 73,861,027 72,902,036

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GROUP COMPANYFor the Year Ended 31st March Note 2017 2016 2017 2016(A) CASH GENERATED FROM OPERATIONSProfit Before Tax 61,368,626 48,154,463 68,273,239 41,838,766

Adjustments;Depreciation of PPE & Amortisation of Intangible Assets 30,611,593 25,422,116 28,392,302 21,656,527 Provision of Impairment on PPE 1,200,000 3,772,368 1,200,000 3,616,222 Gain on Disposal of PPE (150,110) (900,225) (100,110) (900,225)Provision for Related Party Receivables - - 52,742 99,323 Capital Gain - - - (1,200,000)Exchange Gain (2,413,365) (2,762,645) (2,370,152) (2,689,899)Interest Income (7,481,406) (4,795,378) (7,002,699) (4,454,745)Interest Expenses 2,959,419 2,472,594 2,887,564 2,514,973 Provision for Impairment of Debtors 178,990 591,781 150,994 178,490 Reversal of Provision for Inventories (293,680) (200,032) (297,083) (161,953)Employee Benefits 3,198,831 3,320,272 3,198,831 3,320,272

Changes in Working Capital- Trade & Other Receivables (59,013,663) 27,542,635 (63,315,214) 32,017,009 - Inventories (9,397,802) (13,880,060) (8,892,351) (13,586,303)- Trade & Other Payables 93,766,587 2,665,272 97,422,064 (3,033,087)- Other Non-Current Liabilities 22,176,897 - 22,176,897 - - Related Party 2,158,449 (95,000) 3,444,713 8,429,714

Cash Generated from Operations 138,869,366 91,308,161 145,221,737 87,645,084

Figures in brackets indicate deductions.

The accounting policies and notes from pages 33 to 60 form an integral part of these Financial Statements.

GROUP COMPANYFor the Year Ended 31st March Note 2017 2016 2017 2016Cash & Bank Balances 21 104,038,879 88,288,023 98,093,030 76,054,754 Bank Overdrafts 21 (25,103,958) (3,152,718) (24,232,003) (3,152,718)

78,934,921 85,135,305 73,861,027 72,902,036

CASH & CASH EQUIVALENTS For the purpose of the Statement of Cash Flows,the year end cash equivalents comprise the following Cash & Cash Equivalents

STATEMENT OF CASH FLOWS (contd)All amounts are in Sri Lankan Rupees

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1. REPORTING ENTITY

1.1. Domicile and Legal formGestetner of Ceylon PLC (the “Company”) is a Quoted Public Company with limited liability incorporated in Sri Lanka under the provisions of the Companies Act No. 17 of 1982 and re-registered under the new Companies Act No. 7 of 2007. The registered office and the principal place of business of the Company is situated at Gestetner Centre, No. 248, Vauxhall Street, Colombo 02.

The consolidated financial statements of the Company, as at and for the year ended 31st March 2017 comprises the Company and its Subsidiaries (together referred to as the "Group" and individually as “Group entities”).

1.2. Subsidiariesa). Gestetner Printing Services (Pvt) Limited is a Private Company

with limited liability incorporated in Sri Lanka under the provisions of the Companies Act No. 17 of 1982 and re-registered under the new Companies Act No. 7 of 2007.

b). Nashua Lanka (Pvt) Limited is a Private Company with limited liability incorporated in Sri Lanka under the provisions of the Companies Act No. 17 of 1982 and re-registered under the new Companies Act No. 7 of 2007.

c). Gestetner Manufacturers (Pvt) Limited is a Private Company with limited liability incorporated in Sri Lanka under the provisions of the Companies Act No.17 of 1982 and re-registered under the new Companies Act No. 7 of 2007.

1.3. Principal Activities and Nature of OperationsThe principal activity of the Company is import and sale of Digital Copiers, Digital Duplicators, Duplicators and Laser Printers and Laptops.

Gestetner Printing Services (Pvt) Limited which is a fully owned subsidiary, is engaged in provision of Outsourced Photocopying / Printing Services and also IT Solutions.

Nashua Lanka (Pvt) Limited which is a fully owned subsidiary which imports and markets Copiers and Consumables and manages an Offset Printing Press and a Copy Bureau.

Gestetner Manufacturers (Pvt) Limited which is a fully owned subsidiary, was engaged in manufacturing ink and currently it is not operating.The board of directors of the company is currently in the process of evaluating the various business opportunities, for this Company has ready access to financial resources from its parent entity and other related companies.

There were no significant changes in the nature of principal activities of the Company and the Group during the financial year under review.

2. BASIS OF PREPARATION

2.1. Statement of ComplianceThe Consolidated Financial Statements of the Group and seperate Financial Statements of the Company, as at 31st March 2017 and for the year then ended, have been prepared and presented in accordance with Sri Lanka Accounting Standards (SLFRSs and LKASs), laid down by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No. 07 of 2007, and the Listing Rules of the Colombo Stock Exchange.

These Financial Statements include the following components:

n Statement of Profit or Loss and Other Comprehensive Income providing the information on the financial performance of the Company and the Group for the year under review;

n Statement of Financial Position providing the information on the financial position of the Company and the Group as at the year-end;

n Statement of Changes in Equity depicting all changes in shareholders‘ equity during the year under review of the Company and the Group;

n Statement of Cash Flows providing the information to the users, on the ability of the Company and the Group to generate cash and cash equivalents and the needs of entity to utilise those cash flows ;and

n Notes to the Financial Statements comprising Accounting Policies and other explanatory information.

2.2. Basis of MeasurementThe Financial Statements of the Company and the Group have been prepared on the historical cost basis except for the following material items in the Statement of Financial Position.

The defined benefit liability is recognized at the present value of the defined benefit obligation computed based on Projected Unit Credit Method in accordance with Sri Lanka Accounting Standard 19 (LKAS 19) - “Employee Benefits”.

2.3. Directors’ Responsibility StatementThe Board of Directors is responsible for the preparation and presentation of these Financial Statements of the Company and the Group as per the provisions of the Companies Act No. 07 of 2007 and SLFRSs and LKASs.

The Board of Directors acknowledges their responsibility as set out in the “Annual Report of the Board of Directors”, “Directors’ Responsibility for the Financial Statements” and in the certification on the Statement of Financial Position.

The Financial Statements of the Company and the Group for the

NOTES TO THE FINANCIAL STATEMENTS

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year ended 31st March 2017 were authorized for issue by the Board of Directors on 14th August 2017.

2.4. Functional and Presentation CurrencyThe consolidated financial statements are presented in Sri Lankan Rupees, which is the Group’s functional currency. All financial information presented in Sri Lankan Rupees have been rounded to the nearest Rupee.

2.5. Use of Estimates and JudgmentsThe preparation of the consolidated financial statements in conformity with Sri Lanka Accounting Standards 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.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the respective notes.

Note 24 – Deferred taxation

Note 27 – Employee benefits

2.6. Going ConcernThe Group’s management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for a foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on the going concern basis.

2.7. Comparative InformationThe accounting policies have been consistently applied by the Company and the Group with those of the previous year in accordance with the Sri Lanka Accounting Standard - LKAS 01 on ‘Presentation of Financial Statements’. The comparative information is re-classified wherever necessary to conform with the current year’s presentation in order to provide a better presentation.

2.8. Materiality & AggregationIn compliance with the Sri Lanka Accounting Standard - LKAS 01 on ‘Presentation of Financial Statements’, each material class of

similar items is presented separately in the Financial Statements. Items of dissimilar nature or functions too are presented separately, unless they are immaterial.

2.9. RoundingThe amounts in the Consolidated Financial Statements have been rounded-off to the nearest Rupees, except where otherwise indicated as permitted by the Sri Lanka Accounting Standard- LKAS 01 on ‘Presentation of Financial Statements’.

3. SIGNIFICANT ACCOUNTING POLICIESUnless otherwise indicated, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

3.1. Basis of Consolidation The Consolidated Financial Statements comprise of financial statements of the Company, and its subsidiaries for the year ended 31st March 2017. The financial statements of the Company’s subsidiaries are prepared for the same reporting year using consistent accounting policies.

3.1.1. Business Combination and GoodwillBusiness combinations are accounted for using the Acquisition method as per the requirements of Sri Lanka Accounting Standard - SLFRS 03 (Business Combinations).

The Group and the Company measure goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amount of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net amount of the identifiable assets, liabilities and contingent liabilities acquired.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the group’s cash–generating units (CGUs) or group of CGUs, which are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a CGU (or group of CGUs) and part of


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the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the CGU retained.

When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translation differences and goodwill is recognised in the Statement of Profit or Loss.

3.1.2 SubsidiariesSubsidiaries are entities that are controlled by the Group. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and continue to be consolidated until the date when such control ceases. The Company is presumed to control an investee when it is exposed, or has right, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Investments in subsidiaries are stated at cost, net of any impairment losses which are charged to the Profit or Loss in the Company’s Financial Statements and it is in accordance with the Sri Lanka Accounting Standard LKAS 27 on ‘Consolidated and Separate Financial Statements’.

3.1.3. Non-Controlling InterestsFor each business combination, the Group elects to measure any non-controlling interests in the acquiree either:

n at fair value; or

n at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Non controlling interest is measured at the minorities’ share of the post acquisition fair values of the identifiable assets and liabilities of the acquired entity, separate disclosure is made of non controlling interest.

Acquisition of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non- controlling interests are based on a proportionate amount of the net assets of the subsidiary.

3.1.4. Loss of Control On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control

is lost. Subsequently that retained interest is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

3.1.5. Transactions Eliminated on ConsolidationIntra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

3.2. Foreign Currency TranslationsTransactions in foreign currencies are translated to Sri Lanka Rupees at the exchange rates prevailing at the date of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Sri Lanka Rupees at the exchange rates at that date.

Non-monetary assets and liabilities which are stated at historical cost denominated in foreign currencies are translated to Sri Lankan Rupees at the exchange rate at the date of the transactions. Non monetary assets and liabilities that are stated at fair value, denominated in foreign currencies are translated to Sri Lanka Rupees at the exchange rate that the fair value was determined. Foreign exchange differences arising on translation are recognized in Profit and Loss.

The Foreign currency differences arising on retranslation are generally recognized in Profit or Loss.

3.3. Financial Instruments – Initial Recognition and Subsequent Measurement3.3.1 Date of Recognition All financial assets and liabilities are initially recognised on the trade date, i.e., the date that the Group and Company becomes a party to the contractual provisions of the instrument.

3.3.2 Classification and Initial Measurement of Financial InstrumentsThe classification of financial instruments at initial recognition depends on their purpose and characteristics and the management’s intention in acquiring them. All financial instruments are measured initially at their fair value plus transaction costs that are directly attributable to acquisition or issue of such financial instrument, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss as per the Sri Lanka Accounting Standard- LKAS 39 on ‘Financial Instruments: Recognition and Measurement’.


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3.3.3 Classification and Subsequent Measurement of Financial Assets At inception a financial asset is classified under one of the following categories:

i) Financial Assets at Fair value through profit or loss (FVTPL);

n Financial Assets - Held for trading or

n Financial Assets - Designated at fair value through profit or loss

ii) Loans and receivables (L&R);

iii) Financial Investments - Held to maturity (HTM); or

iv Available-for-sale (AFS) financial assets.

The subsequent measurement of Financial Assets depends on their classification.

3.3.3.1 Financial Assets Classified as Loans and Receivables

Financial assets classified as loans and receivables include non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:

n Those that the Group and Company intends to sell immediately or in the near term and those that, upon initial recognition, designates as at fair value through profit or loss

n Those that the Group and Company, upon initial recognition, designates as available for sale

n Those for which the Group and Company may not recover substantially all of its initial investment, other than because of credit deterioration

After initial measurement, ‘Loans and receivables' are subsequently measured at amortised cost using the EIR, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in ‘Interest income’ in the Profit or Loss. The losses arising from impairment are recognised in the Profit or Loss.

3.3.4 Classification and Subsequent Measurement of Financial LiabilitiesAt the inception the Group and Company determines the classification of its financial liabilities. Accordingly financial liabilities are classified as:

i) Financial liabilities at fair value through profit or loss (FVTPL)

n Financial liabilities held for trading

n Financial liabilities designated at fair value through profit

or loss

ii) Financial liabilities at amortised cost.

The subsequent measurement of financial liabilities depends on their classification.

3.3.4.1 Financial Liabilities at Amortised Cost

Financial Instruments where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares at amortised cost using the EIR method.

After initial recognition, such financial liabilities are substantially measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the EIR. The EIR amortisation is included in ‘interest expenses’ in the Statement of Profit or Loss. Gains and losses are recognised in the Statement of Profit or Loss when the liabilities are de-recognise as well as through the EIR amortisation process.

3.4. Cash and Cash Equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.

3.5. Stated CapitalOrdinary Shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary Shares are recognized as a deduction from equity, net of any tax effects.

3.6. Property, Plant and Equipment 3.6.1 Recognition and Measurement Items of Property, Plant and Equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets.

When parts of an item of Property, Plant and Equipment have different useful lives, they are accounted for as separate items


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(major components) of Property, Plant and Equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of Property, Plant and Equipment, and are recognized net within other income in profit or loss.

3.6.2. Subsequent CostsThe cost of replacing a 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 Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of Property, Plant and Equipment are recognized in profit or loss as incurred.

3.6.3. De-recognitionProperty, Plant and Equipment are derecognized on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in ‘Other income' in the Statement of Profit or Loss in the year the asset is de-recognised.

3.6.4. DepreciationDepreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of Property, Plant and Equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. 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. Land is not depreciated.

The estimated useful lives for the current and comparative years of Property Plant and Equipment are as follows:

Asset CategoryUseful Life

(Years) 2016/17

Useful Life (Years) 2015/16

Plant & Machinery 03-04 & 05 03-04 Furniture & Equipment 05 05Motor Vehicle 05 05

The above rates are consistently used by all the Group entities. The depreciation rates are determined separately for each significant part of an item of Property, Plant and equipment and commence to depreciate when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by the management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or the date that the asset is de-recognised. Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate.

3.7. Leased AssetsLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and, the leased assets are not recognized in the Group’s Statement of Financial Position.

3.8. Intangible AssetsAn intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group in accordance with the Sri Lanka Accounting Standard- LKAS 38 on ‘Intangible Assets’.

Itangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are stated in the Statement of Financial Position at cost less any accumulated amortisation and any accumulated impairment losses if any.

3.8.1. Subsequent expenditureSubsequent expenditure is capitalized if only it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss as incurred.

3.8.2. AmortizationIntangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are


38


available for use.

The estimated useful lives for the current and comparative years of Intangible assets are as follows:

Asset Category Useful Life (Years)Software 05

3.9. InventoriesInventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

3.10. Impairment

3.10.1. Financial AssetsA financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indicates that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

3.10.2. Financial Assets Measured at Amortised CostThe Group considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are than collectively assesses for any impairment that been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount

of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

3.10.3. Non-Financial AssetsThe carrying amounts of the Group’s non-financial assets, other than inventories are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest Group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or CGU”).The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (Company of units) on a pro rata basis.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would


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have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

3.11. Liabilities and ProvisionsA provision is recognized in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

3.12. Employee Benefits

3.12.1. Defined Contribution PlansA defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

Mercantile Service Provident Fund

The Company and employees contribute 12% and 10% / 8% respectively on the salary of each employee to the Mercantile Service Provident Fund .

Employees’ Trust Fund

The Group contributes 3% of the salary of each employee to the Employees’ Trust Fund.

3.12.2. Defined Benefit PlanThe Retirement Benefit Plan adopted is as required under the Payment of Gratuity Act No. 12 of 1983. This item is grouped under Employee Benefits Obligation in the Statement of Financial Position.

Provision for Gratuity on the employees of the Group has been determined based on Projected Unit Credit (PUC) method in accordance with Sri Lanka Accounting Standard 19 (LKAS 19) “Employee Benefits”. Actuarial gains / (losses) arising out of the retirement benefit obligation is recognized in Other Comprehensive Income immediately.

However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service. The liability is not externally funded.

3.13. Statement of Profit or Loss and Other Comprehensive Income3.13.1. Revenue Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards incidental to the ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

3.13.2. Other Income Other Income is recognized on accrual basis. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established, which, in the case of quoted securities, is the ex-dividend date. Foreign Currency gains and losses on reported on a net basis.

3.13.3. Deferred IncomeGrants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised.

3.13.4. ExpenditureAll expenditure incurred in running of the business and in maintaining the capital assets in a state of efficiency has been charged to profit or loss in arriving at the profit for the year.

Expenditure incurred for the purpose of acquiring, expanding or improving assets of a permanent nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure.

3.13.5. Finance Income and Finance CostsFinance income comprises interest income on funds invested recognized as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings recognized in profit or loss using the effective interest method.

3.13.6. Income TaxIncome tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the


40


extent that it relates to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

3.13.7. Withholding Tax on Dividends, Distributed by the Company and SubsidiariesWithholding tax on dividends distributed by the Company

Withholding tax that arises from the distribution of dividends by the Company is recognised at the time the liability to pay the related dividend is recognised.

Withholding tax on dividends distributed by the Subsidiaries and Associates

Dividends received by the Company from its Subsidiaries and Associates, have attracted a 10% deduction at source.

3.14. Related Party TransactionsDisclosure has been made in respect of the transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies/decisions of the other, irrespective of whether a price is being charged.

The relevant details are disclosed in the Note 31 to the Financial Statements.

3.15. Statement of Cash FlowsThe Statement of Cash Flows has been prepared using the “indirect method” of preparing cash flows in accordance with Sri Lanka Accounting Standard - LKAS 7 on “Statement of Cash Flow”.

3.16. Events after the Reporting DateThe materiality of the events after the reporting date has been considered and appropriate adjustments and provisions have been made in the financial statements wherever necessary.

3.17. Basic Earnings Per Share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year.

3.18. Contingent liabilitiesContingent 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 as defined in the Sri Lanka Accounting Standard- LKAS 37 on ‘Provisions, Contingent Liabilities and Contingent Assets’. Contingent liabilities are not recognised in the Statement of Financial Position but are disclosed unless its occurrence is remote.

3.19. SRI LANKA ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVEA number of new standards and amendments to standards, which have been issued but not yet effective as at reporting date, have not been applied in preparing these Financial Statements. Accordingly, the following Accounting Standards have not been applied in preparing these Financial Statements and the Group/Company plans to apply these standards on the respective effective dates.

SLFRS 9 “Financial Instruments”

SLFRS 9, issued in 2014, replaces the existing guidance in LKAS 39- Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of Financial Instruments, including a new expected credit loss model for calculating impairment on financial Assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instrument from LKAS 39.

SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018. The impact on the implementation of the above standard has not been quantified yet.


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SLFRS 15 - Revenue from contracts with customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including LKAS 18 on ‘Revenue’ and LKAS 11 on ‘Construction Contracts’.

SLFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018. The impact on the implementation of the above standard has not been quantified yet.

SLFRS 16 – Leases

SLFRS 16 eliminates the current dual accounting model for lessees which distinguishes between On Balance Sheet finance leases and Off-Balance sheet operating leases. Instead there will be a single On-Balance sheet accounting model that is similar to current finance lease accounting.

SLFRS 16 is effective for annual Reporting periods beginning on or after January 01, 2019. The impact on the implementation of the above standard has not been quantified yet.

Pending the completion of detail review, the financial impact is not reasonably estimable as at the date of these Financial Statements.

However the Group does not expect any significant impact to its Financial Statements from the above standards.


42


GROUP COMPANYFor the Year Ended 31st March, 2017 2016 2017 2016

4 REVENUEMachine Sales 337,144,763 243,112,958 337,144,763 243,112,958 Spares Sales 80,132,566 66,180,770 80,132,566 66,180,770 Consumables Sales 192,767,986 163,483,433 192,767,986 163,483,433 Export Income 16,144,564 12,787,159 16,144,564 12,787,159 Service Income 79,250,373 57,481,424 79,250,373 57,481,424

705,440,252 543,045,744 705,440,252 543,045,744 SubsidiariesGestetner Printing Services (Pvt) Limited 99,181,660 101,216,150 - - Nashua Lanka (Pvt) Limited 24,831,384 40,127,441 - - Inter Group Sales (84,608,887) (66,595,516) - -

744,844,409 617,793,819 705,440,252 543,045,744

5 OTHER INCOMEReversal of Provision for Inventories 293,680 1,183,447 297,083 1,145,368 Gain on Sale of Property, Plant & Equipment 150,110 900,225 100,110 900,225 Sundry Income 160,879 446,628 545,740 1,209,780 Dividend Income 644,342 - 3,344,332 2,699,992 Gain on Translation of Foreign Currency 2,413,365 2,762,645 2,370,152 2,689,899 Capital Gain - - - 1,200,000 Incentive for Target Achievement 12,775,877 16,868,685 12,775,877 16,868,685

16,438,253 22,161,630 19,433,294 26,713,949

6 OTHER OPERATING EXPENSESProvision for Inventories / Write off of Inventories - 983,415 - 983,415 Lease Receivable Written off - 218,295 - 218,295 Provision for / Write off of Impairment of Debtors 178,990 591,781 150,994 178,490 Provision for Related Party Receivables - - 52,742 99,323 Impairment Provision / Loss on Property,Plant & Equipment 1,200,000 3,772,368 1,200,000 3,616,222 Loss of KPO (Note : 6.1) 1,660,184 - 1,660,184 - Nation Building Tax 526,988 539,867 526,988 539,867

3,566,162 6,105,726 3,590,908 5,635,612

6.1 Loss of Knowledge Process Outsource (KPO) Other Income (2,951,739) - (2,951,739) - Administrative Expenses 3,947,927 - 3,947,927 - Selling & Distribution Expenses 660,058 - 660,058 - Finance Cost 3,938 - 3,938 -

1,660,184 - 1,660,184 -

Knowledge Process Outsource (KPO) Project , is an outsourced operational project carried out by Gestetner of Ceylon PLC along with Argyle X (Pvt) Limited for the purpose of providing data processing services to Quintiles, South Africa, one of the global contract pharmaceutical research organization. Gestetner of Ceylon PLC and Argyle X (Pvt) Limited share revenue and expenses relating to the KPO project based on agreed percentages by both Companies.

All amounts are in Sri Lankan RupeesNOTES TO THE FINANCIAL STATEMENTS

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A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7

GROUP COMPANYFor the Year Ended 31st March, 2017 2016 2017 2016

7 NET FINANCE INCOMEFINANCE INCOMEInterest Income 7,481,406 4,795,378 7,002,699 4,454,745 TOTAL FINANCE INCOME 7,481,406 4,795,378 7,002,699 4,454,745

FINANCE COSTLease Interest (307,022) (240,990) (307,022) (240,990)Finance Cost on Bank Charges & Bank Overdraft (2,652,397) (2,231,604) (2,580,542) (2,273,983)TOTAL FINANCE COST (2,959,419) (2,472,594) (2,887,564) (2,514,973)NET FINANCE INCOME 4,521,987 2,322,784 4,115,135 1,939,772

8 PROFIT BEFORE TAXProfit before tax is stated after charging all expenses including the following;Directors’ Emoluments 18,947,281 24,468,875 18,947,281 24,468,875 Auditor’s Remuneration - Statutory Audit 845,700 804,600 537,000 510,850 - Non Audit services 95,000 90,000 50,000 50,000 Depreciation & Amortisation 30,611,593 25,422,116 28,392,302 21,656,527 Provision for Inventories / Write off of Inventories - 983,415 - 983,415 Reversal of Provision for Inventories (293,680) (1,183,447) (297,083) (1,145,368)Provision for / Write off of Impairment of Debtors 178,990 591,781 150,994 178,490 Impairment Provision / Loss on Property, Plant & Equipment 1,200,000 3,772,368 1,200,000 3,616,222 Provision for Related Party Receivables - - 52,742 99,323 Defined Benefit Plan Cost -Employee Benefits 3,198,831 3,320,272 3,198,831 3,320,272 Defined Contribution Plan Cost (MSPS/ETF) 9,953,137 8,726,335 8,202,994 6,627,942 Salaries & Wages 76,068,538 70,598,448 63,137,850 54,205,222 No of Employees 140 123 140 123

9 TAX EXPENSE9.1 Current Tax Expenses

Current Tax (Note 9.2) 13,160,989 12,649,164 13,068,373 9,842,525 Dividend Tax @ 10% 299,997 299,997 - - Origination of Temporary Differences (Note 24.2) 6,156,120 404,620 5,709,980 115,931 Total Tax Expenses recognized in Profit or Loss 19,617,106 13,353,781 18,778,353 9,958,456 Tax recognized in Other Comprehensive Income 388,506 - 388,506 - Net Tax Expenses charged to Statement of Profit or Loss and Other Comprehensive Income 20,005,612 13,353,781 19,166,859 9,958,456


44


GROUP COMPANY For the Year Ended 31st March, 2017 2016 2017 2016

9.2 Reconciliation between Accounting Profit and Taxable ProfitProfit Before Income Tax Expense 61,368,626 48,154,463 68,273,239 41,838,766 Aggregate Disallowable Expenses 36,018,354 34,643,508 33,553,277 30,152,783 Aggregate Allowable Expenses (60,087,376) (42,373,144) (54,644,348) (34,682,701)

37,299,604 40,424,827 47,182,168 37,308,848 Less:Tax Loss Utilized (Note 9.3) (178,108) (83,511) - - Taxable Income 37,121,496 40,341,316 47,182,168 37,308,848 Tax Loss for the Year (7,844,897) (3,345,025) - -

Export Income at 12% 106,975 92,834 106,975 92,834 Balance Income at 28% 13,054,014 12,556,330 12,961,398 9,749,691 Current Tax Expense 13,160,989 12,649,164 13,068,373 9,842,525

9.3 Reconciliation of Tax LossesTax Loss Brought Forward (29,844,540) (26,583,026) - - Tax Loss Utilized 178,108 83,511 - - Tax Loss for the Year (7,844,897) (3,345,025) - - Tax Loss Carried Forward (37,511,329) (29,844,540) - -

10 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit for the year attributable to Ordinary Shareholders of Gestetner of Ceylon

PLC, by weighted average number of Ordinary Shares outstanding during the period.

GROUP COMPANY For the Year Ended 31st March, 2017 2016 2017 2016Profit Attributable to Ordinary Shareholders (Rs.) 41,751,520 34,800,682 49,494,886 31,880,310 Weighted Average Number of Shares 2,657,812 2,629,776 2,657,812 2,629,276 Earnings Per Share (Rs.) 15.71 13.23 18.62 12.12

As required by LKAS 33 - Earnings per Share, the weighted average numer of shares have been calculated in comparative figures to reflect the change occurred from the rights issued on 24th April 2015.

There were no potentially dilutive ordinary shares outstanding at the end of the year, hence, the dilutive Earnings Per Share is equal to basic Earnings Per Share for the year.

11 DIVIDEND PER SHARE GROUP COMPANY

For the Year Ended 31st March, 2017 2016 2017 2016 Dividends Paid 39,867,180 2,657,812 39,867,180 2,657,812 Dividend Per Share 15.00 1.00 15.00 1.00 The Board of Directors has recomended and paid First Interim Dividend of Rs.5.00 per share (on the 2,657,812 shares) and Second Interim Dividend of Rs.10.00 per share ( on the 2,657,812 shares) on 21st December 2016 and 30th March 2017 respectively for the year ended 31st March 2017.


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A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7

12 PROPERTY, PLANT & EQUIPMENTPlant & Furniture & Motor Lease Total Total

GROUP Machinery Equipment Vehicles Asset 2017 2016CostAs at 01st of April 130,901,342 18,084,019 839,597 4,104,162 153,929,120 159,175,594 Additions 90,646,438 3,737,418 165,000 - 94,548,856 31,081,858 Impairment Loss - - - - - (21,724,223) Disposal - - (625,250) - (625,250) (14,604,109)As at 31st March 221,547,780 21,821,437 379,347 4,104,162 247,852,726 153,929,120

Accumulated DepreciationAs at 01st of April 81,634,528 13,397,717 639,291 478,819 96,150,355 102,099,956 Charge for the Year 26,935,424 2,106,062 60,500 820,832 29,922,818 24,781,363 Impairment Loss - - - - - (17,951,855)Disposal - - (505,250) - (505,250) (12,779,109)As at 31st March 108,569,952 15,503,779 194,541 1,299,651 125,567,923 96,150,355

Written Down ValueAs at 31st March 112,977,828 6,317,658 184,806 2,804,511 122,284,803 57,778,765

13 PROPERTY, PLANT & EQUIPMENTPlant & Furniture & Motor Lease Total Total

COMPANY Machinery Equipment Vehicles Asset 2017 2016CostAs at 01st of April 82,638,699 16,951,750 676,972 4,104,162 104,371,583 98,216,148 Additions 90,646,438 3,737,418 165,000 - 94,548,856 30,989,858 Impairment Loss - - - - - (14,526,814) Disposal - - (462,625) - (462,625) (10,307,609)As at 31st March 173,285,137 20,689,168 379,347 4,104,162 198,457,814 104,371,583

Accumulated DepreciationAs at 01st of April 43,635,915 12,414,685 476,682 478,819 57,006,101 55,359,598 Charge for the Year 24,800,556 2,035,979 60,500 820,832 27,717,867 21,039,704 Impairment Loss - - - - - (10,910,592)Disposal - - (342,625) - (342,625) (8,482,609)As at 31st March 68,436,471 14,450,664 194,557 1,299,651 84,381,343 57,006,101

Written Down ValueAs at 31st March 104,848,666 6,238,504 184,790 2,804,511 114,076,471 47,365,482

Fully depreciated assets of the Group as at the year end is Rs. 35,777,353/- (2015/16 - 29,925,055/-) and that of the Company is Rs. 30,414,800/- (2015 /16- Rs. 25,154,337/-).No Property ,Plant & Equipment has been pledged as collateral as at 31st March 2017.


46


14 INTANGIBLE ASSETS Computer Total Total

GROUP Software 2017 2016 Cost As at 01st of April 4,886,606 4,886,606 4,317,345 Additions 866,725 866,725 569,261 As at 31st March 5,753,331 5,753,331 4,886,606

Amortisation As at 01st of April 2,755,978 2,755,978 2,115,225 Charge for the Year 688,775 688,775 640,753

As at 31st March 3,444,753 3,444,753 2,755,978 Written Down Value As at 31st March 2,308,578 2,308,578 2,130,628

15 INTANGIBLE ASSETS Computer Total Total

COMPANY Software 2017 2016 Cost As at 01st of April 4,659,579 4,659,579 4,090,318 Additions 866,725 866,725 569,261 As at 31st March 5,526,304 5,526,304 4,659,579 Amortisation

As at 01 of April 2,551,354 2,551,354 1,934,531 Charge for the Year 674,435 674,435 616,823 As at 31st March 3,225,789 3,225,789 2,551,354

Written Down Value As at 31st March 2,300,515 2,300,515 2,108,225

16 INVESTMENTS IN SUBSIDIARIES Percentage Holding COMPANYAs at 31st March, 2017 2016Gestetner Manufacturers (Pvt) Ltd-99,996 Shares @ Rs.10/- 100% 999,960 999,960 Gestetner Printing Services (Pvt) Ltd-999,996 Shares @ Rs.10/- 100% 9,999,960 9,999,960 Nashua Lanka (Pvt) Ltd-1,700,000 Shares @ Rs.10/- 100% 17,000,000 17,000,000 Provision for Investment in Gestetner Manufactures (Pvt) Ltd (999,960) (999,960)

26,999,960 26,999,960

GROUP COMPANYAs at 31st March, 2017 2016 2017 2016

17 OTHER INVESTMENTInvestment in Vauxhall Beira Properties (Pvt) Ltd 35,796,800 35,796,800 35,796,800 35,796,800 715,936 Shares @ Rs.50/= 35,796,800 35,796,800 35,796,800 35,796,800

18 INVENTORIESInventory 63,722,990 52,772,477 62,379,265 51,934,203 Goods in Transit 18,974,987 20,527,698 18,974,987 20,527,698 Less: Provision for Obsolete Stocks (1,443,825) (1,737,505) (1,424,843) (1,721,926)

81,254,152 71,562,670 79,929,409 70,739,975


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19 TRADE & OTHER RECEIVABLESTrade Receivables 104,369,871 91,884,464 85,512,934 67,246,002 Provision for Bad & Doubtful Debtors (2,078,841) (1,456,490) (1,607,484) (1,456,490)Trade Receivable after Provision 102,291,030 90,427,974 83,905,450 65,789,512

Deposits 1,039,259 1,014,179 647,041 544,581 Advances & Prepayments (36,123) 1,365,616 (128,230) 305,807 Staff Loans (Note 19.1) 2,286,688 2,684,264 2,286,688 2,684,264 Withholding Tax Recoverables 914,902 345,691 863,930 313,556 Other Receivables 85,739,094 37,562,453 83,819,157 38,592,095

192,234,850 133,400,177 171,394,036 108,229,815

19.1 Staff LoansBalance at the Beginning of the Year 2,684,264 116,730 2,684,264 116,730 Loans Granted During the Year 699,860 3,240,000 699,860 3,240,000 Recoveries made During the Year (1,097,436) (672,466) (1,097,436) (672,466)Balance at the End of the Year 2,286,688 2,684,264 2,286,688 2,684,264

20 AMOUNTS DUE FROM RELATED COMPANIESVauxhall Beira Properties (Pvt) Limited - 95,000 - 95,000 Gestetner Manufacturers (Pvt) Limited - - 427,068 374,326 Provision for Related Party Receivables - - (427,068) (374,326)

- 95,000 - 95,000

21 CASH AND CASH EQUIVALENTS GROUP COMPANYAs at 31st March, 2017 2016 2017 2016Favourable Balance Cash in Hand 168,705 85,000 51,000 65,000 Fixed Deposits 52,963,369 76,643,147 52,963,369 72,673,006 Cash at Bank 50,906,805 11,559,876 45,078,661 3,316,748

104,038,879 88,288,023 98,093,030 76,054,754 Unfavourable BalanceBank Overdraft (25,103,958) (3,152,718) (24,232,003) (3,152,718)Cash & Cash Equivalents for the purpose of Cash Flow Statement

78,934,921 85,135,305 73,861,027 72,902,036

22 STATED CAPITALIssued & Fully paid Shares2,657,812 Ordinary Shares 91,965,565 91,965,565 91,965,565 91,965,565

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 Company. All shares rank equally with regard to the Company’s residual assets.Three hundred & seventy nine thousand six hundred & eighty seven (379,687) Shares were Issued by way of a Right Issue on 24th April 2015 in the Proportion of One ( 1 ) Share for every Six ( 6 ) Shares held. The Company had 2,278,125 ordinary shares in issue prior to the said rights issue. The current Stated Capital of the Company is Rs.91,965,565/- comprising of 2,657,812 Ordinary Shares.


48


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16Te

mpo

rary

D

iffer

ence

R

s.Ta

x

Rs.

Tem

pora

ry

Diff

eren

ce

Rs.

Tax

R

s.

Tem

pora

ry

Diff

eren

ce

Rs.

Tax

R

s.

Tem

pora

ry

Diff

eren

ce

Rs.

Tax

R

s.D

effer

ed T

ax-L

iabi

litie

sPr

oper

ty,Pl

ant &

Equ

ipm

ent

38,

158,

407

10,

684,

354

39,

042,

462

10,

931,

889

15,

345,

965

4,2

96,8

70

17,

823,

376

4,9

90,5

45

38,

158,

407

10,

684,

354

39,

042,

462

10,

931,

889

15,

345,

965

4,2

96,8

70

17,

823,

376

4,9

90,5

45

Deff

ered

Tax

-Ass

ets

Empl

oyee

Ben

efits

(10,

736,

361)

(3,0

06,1

81)

(10,

736,

361)

(3,0

06,1

81)

(11,

297,

582)

(3,1

63,3

23)

(11,

297,

582)

(3,1

63,3

23)

(10,

736,

361)

(3,0

06,1

81)

(10,

736,

361)

(3,0

06,1

81)

(11,

297,

582)

(3,1

63,3

23)

(11,

297,

582)

(3,1

63,3

23)

Net

Def

erre

d Ta

x Li

abili

ties

27,

422,

046

7,6

78,1

73

28,

306,

101

7,9

25,7

08

4,0

48,3

83

1,1

33,5

47

6,5

25,7

94

1,8

27,2

22

49

A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7

24.2

Mov

emen

t in

Tem

pora

ry D

iffer

ence

sG

roup

2017

2016

Bala

nce

as

at 0

1.04

.201

6 R

s.

Rec

ogni

zed

in P

rofit

or

Loss

Rec

ogni

zed

in O

ther

C

ompr

ehen

sive

In

com

e

Bala

nce

as

at 3

1.03

.201

7 R

s.

Bala

nce

as a

t 01

.04.

2015

R

s.

Rec

ogni

zed

in P

rofit

or

Loss

Rec

ogni

zed

in O

ther

C

ompr

ehen

sive

In

com

e

Bala

nce

as

at 3

1.03

.201

6 R

s.Pr

oper

ty, P

lant a

nd E

quip

men

t 4

,296

,870

6

,387

,484

-

10,

684,

354

4,3

70,3

96

(73,

526)

- 4

,296

,870

Re

tirem

ent B

enefi

t Obl

igat

ions

(3,1

63,3

23)

(231

,364

) 3

88,5

06

(3,0

06,1

81)

(3,6

41,4

69)

478

,146

-

(3,1

63,3

23)

1,1

33,5

47

6,1

56,1

20

388

,506

7

,678

,173

7

28,9

27

404

,620

-

1,1

33,5

47

Com

pany

2017

2016

Bala

nce

as

at 0

1.04

.201

6 R

s.

Rec

ogni

zed

in P

rofit

or

Loss

Rec

ogni

zed

in O

ther

C

ompr

ehen

sive

In

com

e

Bala

nce

as

at 3

1.03

.201

7 R

s.

Bala

nce

as a

t 01

.04.

2015

R

s.

Rec

ogni

zed

in P

rofit

or

Loss

Rec

ogni

zed

in O

ther

C

ompr

ehen

sive

In

com

e

Bala

nce

as

at 3

1.03

.201

6 R

s.Pr

oper

ty, P

lant a

nd E

quip

men

t 4

,990

,545

5

,941

,344

-

10,

931,

889

5,3

52,7

60

(362

,215

) -

4,9

90,5

45

Retir

emen

t Ben

efit O

blig

atio

ns (3

,163

,323

) (2

31,3

64)

388

,506

(3

,006

,181

) (3

,641

,469

) 4

78,1

46

- (3

,163

,323

) 1

,827

,222

5

,709

,980

3

88,5

06

7,9

25,7

08

1,7

11,2

91

115

,931

-

1,8

27,2

22

24.3

Unr

ecog

nise

d D

efer

red

Tax

Asse

tsG

ROU

PC

OM

PAN

YAs

at 3

1st M

arch

2017

2016

2017

2016

Rs.

Rs.

Rs.

Rs.

Tax

Loss

es (3

7,51

1,32

9) (2

9,84

4,54

0) -

- De

ferre

d ta

x as

sets

hav

e no

t bee

n re

cogn

ised

for N

ashu

a La

nka

(Pvt

) Ltd

and

Ges

tetn

er M

anuf

actu

rers

(Pvt

) Ltd

in re

spec

t of t

he a

bove

item

bec

ause

it is

not

pro

babl

e th

at fu

ture

ta

xabl

e pr

ofit w

ill be

ava

ilabl

e ag

ainst

whi

ch th

e G

roup

can

utili

se th

e be

nefit

s th

eref

rom

.

50


GROUP COMPANYAs at 31st March 2017 2016 2017 2016

25 DEFERRED INCOME Balance at the begining of the Year - - - - Income deferred during the year 24,799,905 - 24,799,905 - Income amortised during the year (2,623,008) - (2,623,008) - Balance at the end of the Year 22,176,897 - 22,176,897 -

26 INTEREST BEARING BORROWINGS Amount Payable after one Year Finance Lease Obligations (26.1) 2,109,422 2,915,408 2,109,422 2,915,408

2,109,422 2,915,408 2,109,422 2,915,408 Amount Payable within one Year Finance Lease Obligations (26.1) 805,987 735,038 805,987 735,038

805,987 735,038 805,987 735,038

26.1 Finance Lease Obligations Balance at the begining of the Year 3,650,446 - 3,650,446 - Lease obtained during the Year - 5,123,458 - 5,123,458 Repayment made during the Year (1,042,059) (694,706) (1,042,059) (694,706) Balance at the end of the Year 2,608,387 4,428,752 2,608,387 4,428,752 Interest in Suspense 307,022 (778,306) 307,022 (778,306) Net Liability at the end of the Year 2,915,409 3,650,446 2,915,409 3,650,446

Payable within one Year 805,987 735,038 805,987 735,038 Payable after one Year 2,109,422 2,915,408 2,109,422 2,915,408

Details of all loans outstanding together with the related securities offerred as at the reporting date are set out below

Company

Institution & facility

Principal amount / Approved facility

Rs.

Amount outstanding

Rs.

Repayment terms &

interest rate Security offerred Bank overdraft Commercial Bank of Ceylon PLC 10,000,000 - AWPLR + 2% Stock & Debtors DFCC Vardhana Bank PLC 1,000,000 - AWPLR + 2.5% Stock & Debtors Nation Trust Bank PLC 15,000,000 15,364,796 AWPLR + 1.5% Stock & Debtors Bank of Ceylon 15,000,000 8,126,672 15.00% Stock & Debtors Hatton National Bank PLC 10,000,000 740,534 AWPLR + 3% Corporate Guarantee

from Vauxhall Beira Properties (Pvt) Ltd


51

A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7


27 EMPLOYEE BENEFITS At the beginning of the Year 11,297,583 13,005,246 11,297,583 13,005,246 Income Statement Charge 3,198,831 3,320,272 3,198,831 3,320,272 Actuarial Gain (1,387,521) - (1,387,521) - Benefits Paid (2,372,531) (5,027,935) (2,372,531) (5,027,935) At the end of the year 10,736,362 11,297,583 10,736,362 11,297,583

The movement in employee benefits over the year is as follows ; At the beginning of the year 11,297,583 13,005,246 11,297,583 13,005,246 Current Service Cost 2,069,073 2,019,747 2,069,073 2,019,747 Interest Cost 1,129,758 1,300,525 1,129,758 1,300,525 Benefits Paid (2,372,531) (5,027,935) (2,372,531) (5,027,935) Actuarial Gain (1,387,521) - (1,387,521) - Present Value Obligation as at the year end 10,736,362 11,297,583 10,736,362 11,297,583

The principle assumptions used in determining employee benefits liability were as follows: Discount Rate 12% 10% 12% 10% Salary Increment Rate 10% 10% 10% 10% Employees’ Turnover Ratio 15% 15% 15% 15% Retirement Age (Yrs) 55 55 55 55

The amount recognised in the profit or loss is as follows: Current Service Cost 2,069,073 2,019,747 2,069,073 2,019,747 Interest Cost 1,129,758 1,300,525 1,129,758 1,300,525

3,198,831 3,320,272 3,198,831 3,320,272

The amount recognised in Other Comprehensive Income is as follows: Actuarial Gain (1,387,521) - (1,387,521) -

This obligation is not externally funded. The Gratuity Liability of the Group has been determined based on the Projected unit credit method in accordance with LKAS 19-Employee Benefits.

Sensitivity of assumptions used If one percentage point change in the assumed discount rate and future salary increment rate would have the following effects:

As at 31st March 2017 GROUP COMPANY

Discount Rate

Future Salary Increment

Rate Discount

Rate

Future Salary Increment

Rate Increase in one percentage point (476,996) 510,558 (476,996) 510,558 Decrease in one percentage point 505,863 (489,735) 505,863 (489,735)


52


31 RELATED PARTY DISCLOSURES31.1 The Company carries out transactions with parties who are defined as related parties in Sri Lanka Accounting Standard LKAS 24

‘Related Party Disclosures’, the details of which are reported below.

Name of the CompanyNature of the Relationship

Name of the Director

Details of Transactions

Amount Received (Paid)

2016/2017

Amount Received(Paid)

2015/2016Gestetner Printing Services Subsidiary Mr S J M Anszar Expenses Transfers 17,278,753 19,888,816(Private) Limited Company Mr L R Watawala

Mr D M R PhillipsSale of Goods and Services

91,783,201 70,608,870

Ms S A J Goonatilleke

Salaries & Other Expenses Transfers

5,420,048 4,373,328

Mr A M G Gomez Settlements (108,555,993) (101,409,739)Mr B C U Perera

Date of the TransactionsThe transactions have been occurred through out the year.Rational of the TransactionsThe principal activity of the Gestetner Printing Services (Pvt) Ltd is providing of outsourced printing services.


28 TRADE & OTHER PAYABLES Trade & Other Payables 74,334,648 50,156,000 70,690,199 42,577,775 Import Creditors 143,207,345 73,449,508 143,207,345 73,449,508 Import Loan 15,000,000 15,000,000 15,000,000 15,000,000 MSPS/ETF Payable 1,774,117 1,392,189 1,774,117 1,392,189 Other Taxes Payable 3,310,036 2,661,862 2,910,286 2,540,411

237,626,146 142,659,559 233,581,947 134,959,883

29 AMOUNTS DUE TO RELATED COMPANIES Gestetner Printing Services (Pvt) Ltd - - 9,781,099 15,707,107 Nashua Lanka (Pvt) Limited - - 9,253,800 1,988,787 Vauxhall Beira Properties (Pvt) Ltd 2,063,449 - 2,063,449 -

2,063,449 - 21,098,348 17,695,894

30 CURRENT TAX LIABILITIES Balance at the Beginning of the Year 7,026,638 7,949,402 6,319,999 4,993,521 Tax Provision for the Year (Note 9.2) 13,160,989 12,649,164 13,068,373 9,842,525 Dividend Tax @ 10% 299,997 299,997 - -

20,487,624 20,898,563 19,388,372 14,836,046 Tax Paid During the Year (11,227,071) (13,871,925) (9,920,000) (8,516,047) Balance at the End of the Year 9,260,553 7,026,638 9,468,372 6,319,999


53

A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7

Name of the Company

Nature of the Relationship

Name of the Director Details of Transactions

Amount Received/(Paid) 2016/2017 (Rs.)


Nashua Lanka (Private)Limited

Subsidiary Mr S J M Anszar Expenses Transfers 2,097,862 4,533,218Company Ms S A J Goonatilleke

Mr A M G GomezPurchase of Goods and Services

20,916 (1,287,826)

Mr B C U Perera Salaries & Other Expenses Transfers

2,867,077 4,100,588

Settlements (11,169,142) (7,626,388)Sales of Goods and Services (1,081,727) 2,395,095

Date of the TransactionsThe transactions have been occurred through out the year.Rational of the TransactionsThe Nashua Lanka (Pvt) Ltd engages in import and selling of range of copiers and providing of printing services.

Name of the Company



Amount Received (Paid) 2016/2017 (Rs.)


Gestetner Manufacturers Subsidiary Mr S J M Anszar Audit & Taxation Fees Paid (52,742) (99,323)(Private) Limited Company Mr L R Watawala

Mr D M R PhillipsMr A M G GomezMs S A J Goonatilleke

Date of the TransactionsThe transactions have been occurred through out the year.Rational of the TransactionsThe Gestetner Manufacturers (Pvt) Ltd is currently not operating.

Name of the Company





Vauxhall Beira Properties Affiliate Mr S J M Anszar Obtained of Services 9,120,000 9,120,000(Pvt) Limited Company Mr D M R Phillips Settlements (320,138) (9,215,000)

Ms S A J Goonatilleke

This note should be read inconjunction with notes 20 and 29 to the Financial Statements.

31.2 Terms & Conditions of the Related Party TransactionsAll above transactions are carried out at arm’s length basis. The sales to and purchases from related parties are carried out at terms equivalent to those that prevail in any other arm’s length transaction with a party outside the group. There is no mortgage/ guarantee provided for outstanding balances as at any given time /date, accordingly all transactions are unsecured and no interest is charged at the time of settlement (interest free settlement). The above explanation is applicable to receivables and payables of all Related parties.

31 RELATED PARTY DISCLOSURES contd.


54


31.3 Rational for entering into Related Party Transactions.All Transactions refer to are either purchase of items or obtaining / provision of services. Accordingly above refer to transactions completed within the Group, at an arm’s length price.

31.4 Transactions With Key Management Personnel According to Sri Lanka Accounting Standard 24 - Related Party Disclosures, Key Management Personnel, are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the Board of Directors (including Executive & Non - Executive Directors) of the Company has been classified as Key Management Personnel of the Company. Compensation to key management personnel has been disclosed in Note 8.

31.5 Transactions, Arrangements and Agreements involving with Key Management Personnel (KMP) and their Close Family Members (CFM) CFM of a KMP are those family members who may be expected to influence , or be influenced by, that individual in their dealing with the entity. They may include; ( a ) the individual’s domestic partner and children; ( b ) children of the individual’s domestic partner ; and ( c ) dependents of the individual or the individual’s domestic partner CFM are related parties to the entity. There were no transaction with CFM during the year.

32 FINANCIAL INSTRUMENTS32.1 Financial Assets and Liabilities

The Financial Assets and Liabilities recognized in the Statement of Financial Position in accordance with LKAS 39.

GROUP COMPANY Financial Assets Loans and Receivables Loans and ReceivablesAs at 31st March 2017 2016 2017 2016Financial Assets not measured at fair valueTrade and Other Receivables 192,234,850 133,400,177 171,394,036 108,229,815 Amounts Due from Related Parties - 95,000 - 95,000 Cash & Cash Equivalents 104,038,879 88,288,023 98,093,030 76,054,754 Total Financial Assets 296,273,729 221,783,200 269,487,066 184,379,569

Financial Liabilities GROUP COMPANY As at 31st March 2017 2016 2017 2016Financial Liabilities not re-measured at fair valueTrade & Other Payables 237,626,146 142,659,559 233,581,947 134,959,883 Amounts Due to Related Parties 2,063,449 - 21,098,348 17,695,894 Current Tax Liabilities 9,260,553 7,026,638 9,468,372 6,319,999 Bank Overdrafts 25,103,958 3,152,718 24,232,003 3,152,718 Total Financial Liabilities 274,054,106 152,838,915 288,380,670 162,128,494

32.1.(a) The above table does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. The Group has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair values.

32.2 Financial Risk Management The Group has exposure to the following risks from it's use of financial instruments:

- Credit Risk

- Liquidity Risk

- Market Risk


55

A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7

This note represents qualitative and quantitative information about Group's exposure to each of the above risks, the Group's objectives, policies and procedures for measuring and managing risk.

Risk Management Framework

The Board of Directors has overall responsibilities for the establishment and oversight of the Group's risk management framework . The Group's risk management policies are established to identify and adherence to limits.

32.2.1 Credit Risk Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions.

The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all clients who wish to trade on credit terms are subject to credit appraisal. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

GROUP COMPANYAs at 31st March, 2017 2016 2017 2016Trade & Other Receivable 192,234,850 133,400,177 171,394,036 108,229,815 Amounts Due from Related Companies - 95,000 - 95,000 Cash & Cash Equivalents 104,038,879 88,288,023 98,093,030 76,054,754

296,273,729 221,783,200 269,487,066 184,379,569

Trade receivables GROUP COMPANYAs at 31st March, 2017 2016 2017 2016Past due neither not impairedPast due 1 - 30 days 77,879,432 59,104,826 65,924,331 43,072,961 Past due 31 - 60 days 14,345,818 16,903,279 11,003,272 14,605,147 Past due 61 - 90 days 1,839,020 6,399,428 1,463,721 4,787,642 More than 90 days 10,305,601 9,476,931 7,121,610 4,780,252

104,369,871 91,884,464 85,512,934 67,246,002 The requirement for an impairment is analysed at each reporting date on applicable basis. The calculation is based on actual incurred historical data.

32.2.2 Liquidity RiskLiquidity risk is the risk that the Group will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Group monitors its funds using a daily cash management process. This process considers the maturity of both the Group’s financial investments and financial assets (e.g. accounts receivable, other financial assets) and projected cash flows from operations. Net (Debt)/Cash GROUP COMPANYAs at 31st March 2017 2016 2017 2016Cash & Cash Equivalents 104,038,879 88,288,023 98,093,030 76,054,754 Total Liquid Assets 104,038,879 88,288,023 98,093,030 76,054,754

Bank Overdrafts 25,103,958 3,152,718 24,232,003 3,152,718 Total Borrowings 25,103,958 3,152,718 24,232,003 3,152,718 Net Cash 78,934,921 85,135,305 73,861,027 72,902,036


56


32.2 Financial Risk Management (Continued)32.2.3 Liquidity RiskThe following are the contractual maturities of financial liabilities as at 31 March 2017,Group Within Between Between Between Between More than Total

1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 yearsInterest-bearing borrowings 805,987 883,782 969,090 256,550 - - 2,915,410 Trade and other payables 222,626,146 - - - - - 222,626,146 Short term borrrowings 15,000,000 - - - - - 15,000,000 Amount due to related companies 2,063,449 - - - - - 2,063,449 Bank overdraft 25,103,958 - - - - - 25,103,958

265,599,540 883,783 969,090 256,550 - - 267,708,963

The following are the contractual maturities of financial liabilities as at 31 March 2016Group Within Between Between Between Between More than Total

1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 yearsInterest-bearing borrowings 735,038 805,985 883,783 969,090 256,550 - 3,650,446 Trade and other payables 127,659,558 - - - - - 127,659,558 Short term borrrowings 15,000,000 - - - - - 15,000,000 Bank overdraft 3,152,718 - - - - - 3,152,718

146,547,314 805,986 883,783 969,090 256,550 - 149,462,722

The following are the contractual maturities of financial liabilities as at 31 March 2017,Company Within Between Between Between Between More than Total

1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 yearsInterest-bearing borrowings 805,987 883,782 969,090 256,550 - - 2,915,410 Trade and other payables 218,581,947 - - - - - 218,581,947 Short term borrrowings 15,000,000 - - - - - 15,000,000 Amount due to related companies 21,098,348 - - - - - 21,098,348 Bank overdraft 24,232,003 - - - - - 24,232,003

279,718,285 883,783 969,090 256,550 - - 281,827,708

The following are the contractual maturities of financial liabilities as at 31 March 2016,Company Within Between Between Between Between More than Total

1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 yearsInterest-bearing borrowings 735,038 805,985 883,783 969,090 256,550 - 3,650,446 Trade and other payables 119,959,883 - - - - - 119,959,883 Short term borrrowings 15,000,000 - - - - - 15,000,000 Amount due to related companies 17,695,894 - - - - - 17,695,894 Bank overdraft 3,152,718 - - - - - 3,152,718

156,543,533 805,986 883,783 969,090 256,550 - 159,458,941


57

A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7

32.2 Financial Risk Management (Continued)32.2.4 Market Risk

Market Risk is the risk that changes in market prices, such as foreign exchanges rates, interest rates etc. will affect the Group’s income or the value of its holdings of financial instruments. The objective of the market risk management is to manage and control market risk exposures within acceptable parameters while optimizing the returns.

(a) Currency RiskThe Group is exposed to currency risk on purchases that are denominated in a currency other than the functional currency which is Sri Lankan Rupees.

Exposure to Currency Risk GROUP COMPANYAs at 31st March 2017 2016 2017 2016

USD USD USD USDTrade Payables - Foreign Creditors 925,932 487,457 925,932 487,457 Gross Statement of Financial Position Exposure 925,932 487,457 925,932 487,457

The following significant exchange rates were applicable during the yearAverage Rate Reporting Date Spot Rate

As at 31st March 2017 2016 2017 2016Rs. Rs. Rs. Rs.

USD 151.98 140.76 154.20 146.78

Sensitivity Analysis A strengthening of the Rs, as indicated below, against the USD at 31st March 2017 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.

Strengthening Profit or Loss

Rs.

Weakening Profit or Loss

Rs.31st March 2017USD (10% movement) (14,277,871) 14,277,871

31st March 2016USD (10% movement) (7,154,895) 7,154,895


58


(b) Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s Investments in securities and debt obligation .The Group utilises various financial instruments to manage exposures to interest rate risks .

At the reporting date, the Group’s interest-bearing financial instruments were as follows:Carrying Amount

As at 31st March 2017 2016Rs. Rs.

Fixed Rate InstrumentsFinancial AssetsFixed Deposits 52,963,369 76,643,147

52,963,369 76,643,147 Financial LiabilitiesFinance Lease Obligations 2,915,409 3,650,446

2,915,409 3,650,446 Variable Rate InstrumentsFinancial LiabilitiesBank Overdrafts 25,103,958 3,152,718

25,103,958 3,152,718

At the reporting date, the Company’s interest-bearing financial instruments were as follows:Fixed Rate InstrumentsFinancial AssetsFixed Deposits 52,963,369 72,673,006

52,963,369 72,673,006 Financial LiabilitiesFinance Lease Obligations 2,915,409 3,650,446

2,915,409 3,650,446 Variable Rate InstrumentsFinancial LiabilitiesBank Overdrafts 24,232,003 3,152,718

24,232,003 3,152,718


59

A N N U A L R E P O R T 2 0 1 6 | 2 0 1 7

(c) Capital Management The Board’s policy is to maintain a strong capital base so as to maintain shareholder, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital and level of dividends to ordinary shareholders.

The Group’s Net Debt to adjusted Equity ratio at the end of the reporting period was as follows:

GROUP COMPANY 2017 2016 2017 2016

As at 31st March, Rs Rs Rs RsTotal Liabilities 317,560,947 168,920,491 332,135,046 178,903,745 Less: Cash and Cash Equivalents (104,038,879) (88,288,023) (98,093,030) (76,054,754)Net Debt 213,522,068 80,632,468 234,042,016 102,848,991 Total Equity 220,357,115 220,131,572 196,455,175 188,486,266 Net Debt to Equity Ratio 97% 37% 119% 55%

The Group is not subject to externally imposed capital requirements.

33 CAPITAL COMMITMENTSThere were no significant capital commitments outstanding as at the reporting date.

34 CONTINGENT LIABILITIESThere are no material contingent liabilities outstanding as at the reporting date other than disclosed below. The following Arbiration Case was pending against the Company as at 31st March 2017.”Case No. A3511 - All Ceylon Commercial & Industrial Workers’ Union (ACC & IWU) on behalf of 28 employees Vs Gestetner of Ceylon Plc”

Due to circumstances beyond control, it is unable to predict the outcome of this Case.

35 EVENTS OCCURRING AFTER THE REPORTING DATE35.1 Dividend

Subsidiary - Gestetner Printing Services (Pvt) Ltd

The Board of Directors have approved a first and final dividend of Rs. 13.00 per share (on the 1,000,000 shares now in issue) for the year ended 31st March 2017 which is to be approved by the Shareholders at the Annual General Meeting. No events other than the above, have occurred since the reporting date which would require adjustment to, or disclose in, Financial Statements.


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36 COMPARATIVE FIGURESComparative figures of the Financial Statements have been reclassified to conform with current year’s presentation. The following reclassifications have been made for comparative figures for better presentation of the Financial Statements of the Company and its subsidiaries.

Reclassification of comparative information Group Company2016 2016 2016 2016

Rs. Rs. Rs. Rs.Current

PresentationAs Reported

PreviouslyCurrent

PresentationAs Reported

PreviouslyReclassified in to Other Income 2,762,645 - 2,689,899 - Net Finance Income - 2,762,645 - 2,689,899

2,762,645 2,762,645 2,689,899 2,689,899

37 GOING CONCERN OF SUBSIDIARYGestetner Manufacturers (Pvt) Limited The Company has incurred a Net Loss of Rs.56,742/- for the financial year ended 31st March 2017 (2016 - Rs. 104,323/-) and its accumulated loss as at that date stands at Rs. 1,752,299/- (2016 - Rs. 1,695,557). Further, as at the reporting date its total liabilities exceeded total assets by Rs. 752,299/- (2016 - Rs. 695,557) and the current liabilities exceeded its current assets by Rs. 752,299/- (2016 - Rs. 695,557).However, the Financial Statements of the Company has been prepared on going concern basis without making any adjustment to the recorded asset amounts & classifications of liabilities which may be required when the Company is unable to continue as a going concern. The Directors are confident that the Company will be able to continue to operate as a going concern with the continuous support from its parent and other related companies.


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Year Ended 31st March 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10 2008/09 2007/08Rs 000’ Rs 000’ Rs 000’ Rs 000’ Rs 000’ Rs 000’ Rs 000’ Rs 000’ Rs 000’ Rs 000’

Operating ResultsRevenue 744,844 617,794 630,434 543,383 457,214 462,033 410,056 356,181 380,471 337,439 Profit before tax 61,369 48,154 73,384 45,383 42,546 39,365 26,079 14,775 2,112 2,268 Income Tax (19,617) (13,354) (21,054) (14,078) (13,198) (9,131) (9,796) (5,732) (5,961) (651)Profit for the year 41,752 34,801 52,330 31,305 29,349 30,234 16,283 9,044 (3,849) 1,617

Capital EmployedStated Capital 91,966 91,966 46,403 46,403 46,403 46,403 46,403 46,403 46,403 46,403 Reserves 128,392 128,166 117,286 76,372 54,474 31,162 2,959 (13,246) (16,979) (13,130)Total Equity 220,357 220,132 163,689 122,775 100,877 77,565 49,362 33,157 29,424 33,273

Represented By ;Non-Current Assets 160,390 95,706 95,075 88,281 53,982 60,353 63,210 59,937 65,275 72,077 Current Assets 377,528 293,346 240,402 138,151 137,388 108,068 103,137 80,640 98,319 117,410 Total Liabilities (317,561) (168,920) (171,788) (103,657) (90,493) (90,856) (116,985) (107,420) (134,169) (156,214)Net Assets 220,357 220,132 163,689 122,775 100,877 77,565 49,362 33,157 29,424 33,273

Key IndicatorsEarnings/(Loss) per share (Rs.) 15.71 13.23 22.54 13.74 12.88 13.27 7.15 3.97 (1.69) 0.71 Net assets per share (Rs.) 82.91 82.82 71.85 53.89 44.28 34.05 21.67 14.55 12.92 14.61 Market value per share (Rs.) 118.80 120.00 129.20 129.90 160.00 297.40 129.90 41.00 36.00 50.00 Dividend per share (Rs.) 15.00 1.00 9.00 5.00 4.00 3.00 1.50 - - - Dividends approved (Rs.’000) 39,867 2,658 23,920 11,391 9,113 6,834 3,417 - - - Annual sales growth (%) 20.57 (2.01) 16.02 18.85 (1.04) 12.68 15.13 (6.38) 12.75 12.63 Equity to total assets ratio (%) 40.96 56.58 48.79 54.22 52.71 46.05 29.67 23.59 17.99 17.56 Dividend cover (no of times) 1.05 13.23 2.50 2.75 3.22 4.42 4.77 - - -Price earnings ratio (no. of times) 7.56 9.07 5.73 9.45 12.42 22.41 18.17 10.33 (21.31) 70.43 Current Ratio (no. of times) 1.37 1.91 1.52 1.50 1.75 1.39 1.01 0.95 0.90 0.83

TEN YEAR SUMMARY

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INVESTOR INFORMATION

Gestetner of Ceylon PLC., is a public quoted company, the issued ordinary shares of which are listed on the Colombo Stock Exchange.

Distribution of Shares

2016/2017 2015/2016 2014/2015Highest 124.50 141.00 197.10 Lowest 96.00 100.00 127.00 Closing 118.80 120.00 129.20

Shareholder Category 31st March 2017 31st March 2016

No.of Shareholders

No.of Shares %

No.of Shareholders

No.of Shares %

1 1,000 643 96,311 3.62 642 97,240 3.66 1,001 10,000 62 163,180 6.14 66 170,218 6.40

10,001 100,000 9 229,335 8.63 11 277,268 10.43 100,001 1,000,000 3 958,791 36.07 3 902,891 33.97

Over 1,000,000 1 1,210,195 45.53 1 1,210,195 45.53Total 718 2,657,812 100.00 723 2,657,812 100.00

Market Value

Earnings2016/17 2015/16 2014/15

Earnings Per Share - Basic (Rs.) 15.71 13.23 22.54 Price Earning Ratio (P/E) (Times) 7.56 9.07 5.73

Net Assets Per Share2016/17 2015/16 2014/15

The Group (Rs.) 82.91 82.82 71.85 The Company (Rs.) 73.92 70.92 59.24

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NOTICE IS HEREBY GIVEN THAT the Fifty Third Annual General Meeting of Gestetner of Ceylon PLC will be held at No. 248, Vauxhall Street, Colombo 02 on Friday, 29th September, 2017 at 2.00 p.m. for the following purposes :

1. To receive and consider the Audited Financial Statements for the year ended 31st March 2017 together with the Report of the Auditors thereon and the Annual Report for the said year.

2. (i) To re-elect Mr Sayed Jamaldeen Muhammed Anzsar who retires by rotation in terms of Article 85 of the Articles of Association.

(ii) To re-elect Mr Dinal Mario Rex Phillips who retires by rotation in terms of Article 85 of the Articles of Association.

3. To authorise the Directors to determine and make donations.

4. To re-appoint the retiring Auditors Messrs. KPMG, Chartered Accountants, to hold office until the conclusion of the next Annual General Meeting and to authorise the Directors to determine their remuneration.

By Order of the BoardJACEY & COMPANYSecretaries

Colombo,14th August 2017.

NOTE:

(1) A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE IN HIS/HER STEAD.

(2) A PROXY NEED NOT BE A MEMBER OF THE COMPANY.

(3) THE COMPLETED FORM OF PROXY MUST BE DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANY AT NO.248, VAUXHALL STREET, COLOMBO 02 NOT LATER THAN 48 HOURS BEFORE THE TIME FIXED FOR THE MEETING

NOTICE OF MEETING

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I/We the undersigned ……………….…………………………………………………….……...............……………………..............................................................................................................................................................................................of.

being a member/members of Gestetner of Ceylon PLC do hereby appoint ..................................................................................................................................................................................................................................................................of

………………………………………………………………………………………………………….................................………

whom failing SAYED JEMALDEEN MUHAMMED ANZSAR whom failing LAKSHMAN RAVENDRA WATAWALA whom failing DINAL MARIO REX PHILLIPS whom failing SITA ANNE JULIANA GOONETILLEKE whom failing ANNESLEY MICHAEL GODFREY GOMEZ whom failing BULATHSINGHALAGE CHANDIMA UPUL PERERA whom failing SHIVANTHA TISSA PERERA KAHAWELA as my/our Proxy to represent me/us and *………………. to vote on my/our behalf at the FIFTY THIRD ANNUAL GENERAL MEETING of the Company to be held on 29th September, 2017 and at any adjournment thereof, and at every poll which may be taken in consequence thereof. I /We the undersigned hereby authorise my/our proxy to vote on my/our behalf in accordance with the preference indicated below:-

1. To receive and consider the Audited Financial Statements for the year ended 31st March, 2017 together with the Report of the Auditors and the Annual Report for the period.

2. (i) To re-elect Mr Sayed Jamaldeen Muhammed Anzsar who retires by rotation in terms of Article 85 of the Articles of Association.

(ii) To re-elect Mr Dinal Mario Rex Phillips who retires by rotation in terms of Article 85 of the Articles of Association.

3. To authorise the Directors to determine and make donations.

4. To re-appoint the retiring Auditors Messrs KPMG, Chartered Accountants, to hold office until the conclusion of the next Annual General Meeting and to authorise the Directors to determine their remuneration.

AgainstFor

As witness my/our hand this ……………day of ………………..Two Thousand and Seventeen

…………………………. Signature of Shareholder

Notes:

If you wish your Proxy to speak at the Meeting you should insert the words “to speak and” in the place indicated with an asterisk and initial such insertion.

Please indicate with an "x" in the space provided how your Proxy is to vote. If there is in the view of the Proxy holder doubt (by reason of the way in which the instructions contained in the Proxy have been completed) as to the way in which the Proxy holder should vote, the Proxy holder shall vote as he thinks fit. A Proxy holder need not be a Member of the Company. Instructions as to completion appear on the reverse hereof.

FORM OF PROXY

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INSTRUCTIONS AS TO COMPLETION

1. To be valid this Form of Proxy must be deposited at the Registered Office of the Company at No.248, Vauxhall Street, Colombo 02 not later than 48 hours before the time appointed for the holding of the Meeting.

2. The instrument appointing a Proxy shall in the case of an individual be signed by the appointor or by his Attorney and in the case of a Company/Corporation, the Form of Proxy must be executed under its Common Seal, which should be affixed and attested in the manner prescribed by its Articles of Association or other constitutional documents.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney, or a notarially certified copy thereof, should also accompany the completed Form of Proxy if it has not already been registered with the Company.

4. The full name and address of the Proxy holder and of the Shareholder appointing the Proxy holder should be entered legibly in the Form of Proxy.

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NAME OF THE COMPANY Gestetner of Ceylon PLC

COMPANY REGISTRATION NO. PQ 215

LEGAL FORM A Public Quoted Company with limited liability, incorporated in

Sri Lanka in 1964. The Shares of the Company are listed on the Colombo Stock Exchange.

BOARD OF DIRECTORS Seyed Jemaldeen Muhammed Anzsar - Chairman

Lakshman Ravendra Watawala - Deputy Chairman Bulathsinghalage Chandima Upul Perera - Managing Director

Dinal Mario Rex Phillips Sita Anne Juliana Goonetilleke

Annesly Michael Godfrey Gomez Shivantha Tissa Perera Kahawela

COMPANY SECRETARY Messrs Jacey & Company. No.9/5,Thambiah Avenue, Colombo 07.

AUDITORS Messrs KPMG, Chartered Accountants,

32A,Sir Mohamed Macan Markar Mawatha, PO Box 186, Colombo 03.

BANKERS Commercial Bank of Ceylon PLC

Bank of Ceylon Hatton National Bank PLC Standard Chartered Bank

DFCC Vardhana Bank Union Bank of Sri Lanka Nations Trust Bank PLC

REGISTERED OFFICE Gestetner Centre, No. 248 , Vauxhall Street, Colombo 02

Tel: + 94-11-2323826 / + 94-11-4725500 Fax: + 94-11-2541351

E-mail: [email protected] Web: www.gestetnersl.com

CORPORATE INFORMATION

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