Introduction to this Report - John Keells Holdings PLC...4 eells Hlis PLC Aal Reprt 2016/17...
Transcript of Introduction to this Report - John Keells Holdings PLC...4 eells Hlis PLC Aal Reprt 2016/17...
4 John Keells Holdings PLC | Annual Report 2016/17
Introduction to this Report
We are pleased to present our second Integrated Report in accordance with the Integrated Reporting Framework of the International Integrated Reporting Council (IIRC).
This report reflects on:
• The value creation model of the Group which combines different forms of Capital in the short, medium, and long term
• Governance, risk management, and sustainability frameworks entrenched within the John Keells Group
• Financial, operational, environmental, and social review, together with the results of the Group
In keeping this Report concise and pertinent to the year under review, whilst being comprehensive and detailed, we have ensured that the commentaries in certain sections are limited to a helicopter view of the events and progress within the year, whilst the Group’s standard policies, operating guidelines and management approaches are available on the corporate website.
Scope and BoundaryThe John Keells Annual Report 2016/17 is a reflection of the Group’s integrated approach of management (during the period from 1 April 2016 to 31 March 2017), and strives to deliver a balanced and relevant report that will bring clarity and detail to the complex task of reporting a year of diverse business operations across multiple industry groups. Material events post this reporting period, up to the sign off date by the Board of Directors on 26 May 2017, have been included in this Report, ensuring a more relevant and up to date Report.
All Group subsidiary and equity accounted investees were considered in capturing its financial performance. For the purpose of reporting its sustainability performance, the Group has considered the companies in its sphere of influence which are the legal entities for which the Group remains accountable and has direct control. The companies not included for reporting on sustainability performance are companies in which the Group does not exercise significant management control, non-operational companies, investment companies, and companies owning only land. Such companies have been clearly
identified in the reporting boundary specified in the Group Directory 2016/17. In expanding its sustainability scope, going forward, the Group will also seek to report on companies over which it does not exercise significant management control, where relevant.
Adoption of the Integrated Reporting GuidelinesIn keeping with our attempts to achieve a more cohesive and efficient approach to corporate reporting, the Group voluntarily adopted the Integrated Reporting Framework of the IIRC. Given the complex task of reporting a year of operations of a conglomerate, the Group has strived to deliver a comprehensive, balanced and relevant Report, while adhering to the recommendations of the IIRC.
The seven guiding principles in integrated reporting; strategic focus and future orientation, connectivity of information, stakeholder relationships, materiality, conciseness, reliability and completeness, consistency and comparability; have been given due consideration when preparing and presenting this Report.
Standards and PrinciplesReporting• Integrated Reporting Framework of the International Integrated Reporting
Council (IIRC)
Governance, Risk Management and Operations• Laws and regulations of the Companies Act No. 7 of 2007• Listing Rules of the Colombo Stock Exchange (CSE) and subsequent revisions to
date• Code of Best Practices on Corporate Governance jointly advocated by the
Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)
• UK Corporate Governance Code (formerly known as the Combined Code of 2010)
Financial Reporting• Sri Lanka Accounting Standards (SLFRS/LKAS) issued by the Institute of
Chartered Accountants of Sri Lanka (CA Sri Lanka)
Sustainability and Corporate Social Responsibility Reporting• 'in accordance' -core option of the Global Reporting Initiative GRI G4 Sustainability
Reporting Guidelines• United Nations Sustainable Development Goals• United Nations Global Compact Active Principles
G4 - 17 G4 - 18 G4 - 23
The seven guiding principles in integrated reporting; strategic focus and future orientation, connectivity of information, stakeholder relationships, materiality, conciseness, reliability and completeness, consistency and comparability; have been given due consideration when preparing and presenting this Report.
Group Highlights | Governance | Management Discussion & Analysis | Financial Statements | Supplementary Information 5
Information VerificationThe accuracy and reliability of information contained in this report has been reviewed, as applicable, by:
• The Board of Directors• The Group Executive Committee• Audit Committee of the Company• An independent auditor confirming the accuracy of the annual financial statements• An independent assurance engagement for the non-financial information
prepared 'in-accordance' -core option on GRI G4 guidelines
Determining MaterialityMateriality analysis is a key process that enables the Group to define key triple bottom line issues that are of greatest significance to our businesses and stakeholders, both internal and external, in the short, medium and long term. Our focus on materiality, through emphasis on 26 material aspects recognised by both internal and external stakeholders, is vital as we drive performance, improve our sustainability framework, and institutionalise the Group’s corporate governance philosophy at all levels.
The Group conducts an independent external stakeholder engagement every three to four years to ascertain aspects material to its significant stakeholders. In addition, materiality is also assessed internally in ascertaining the aspects material to the Group and to fine-tune and streamline its strategy and processes to manage these material issues. The outcome of these studies are prioritised using a materiality matrix, representing the level of significance to the Group and its external stakeholders, and is then disclosed as per the clearly defined aspects under the GRI G4 guidelines, as further described in the Materiality and Stakeholder Relationships section of this Report.
While the matrix, as illustrated above, indicates the prioritisation of these material aspects, the Group continues to assess its internal and external materiality and disclose the performance of such aspects. Its reporting scope will be expanded as and when an aspect becomes material to the Group and its stakeholders.
Disclaimer for the Publication of Forecast DataThe Report contains information about the plans and strategies of the Group for the medium and long term, and represents the management’s view of the Group. The plans are forward-looking in nature and their feasibility depends on a number of economic, political and legal factors, which are outside the influence of the Group and Company, such as global and domestic financial, economic and political situations, the situation of key markets, changes in tax, customs and environmental legislation and so forth. Given this, the actual performance of
Contact with StakeholdersPreparation of this Report took place in cooperation with stakeholders in order to improve transparency, accountability and the process in which materiality of disclosed information is viewed. Feedback is gathered through questionnaires, a dedicated mail-box, one-on-one meetings and stakeholder engagement fora.
indicators in future years may differ from the forward-looking statements published in this Report. The reader is advised to seek expert professional advice in all such respects.
As you flip through the pages of this Report, we trust you will find a relevant, transparent and noteworthy value proposition entrenched within the John Keells Group that strives to achieve the highest form of stakeholder satisfaction.
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Included in this Report and/or Company website
G4 - 18
6 John Keells Holdings PLC | Annual Report 2016/17
Our Business Model
Vision: Building businesses that are leaders in the region
Values: Caring, Excellence, Trust, Innovation, Integrity
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INPUTS
OUTPUTS
Financial and Manufactured
Capital
Financial and Manufactured
Capital
Natural Capital
Natural Capital
Human Capital
Human Capital
Social and Relationship Capital
Social and Relationship Capital
Intellectual Capital
Intellectual Capital
| Corporate Governance
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IT G
overnance | Sustainability Framework | Human R
esource Man
agement | Corporate Social Responsibility
Corporate Governance | Corporate Social Responsi
bilit
yOur business activities: Transportation,
Leisure, Property, Consumer Foods and Retail, Financial Services, Information Technology,
and Other including Plantation Services
Strategy, Resource Allocation,
and Portfolio Management
Business Outlook
Financial and Non-Financial Performance
during the year
Risks and Opportunities
• Debt and equity• Cash flow from
operations• Fixed asset base
• Shareholder returns and dividends
• Payments to other stakeholders
• Share price appreciation
• Energy• Water• Other natural
resources
• Efficient disposal of effluent and waste
• Reduction of carbon footprint
• Reduced utility consumption
• Diversity• Experience
• Staff motivation • Talented, efficient
workforce • Job satisfaction • Career progression • Safe and equitable
environment
• Stakeholder engagement
• Relationship building
• Community skill development
• Well informed and sound investment decisions
• Better supplier/distributor and stakeholder relations
• Brand stewardship• Technological
expertise• Research and
development
• Intellectual property - Patents - Copyrights
Group Highlights | Governance | Management Discussion & Analysis | Financial Statements | Supplementary Information 7
Inputs Activities Outputs Outcomes
Financial and Manufactured Capital• Financial Capital: The pool of
funds that is available for use in the production of goods or the provision of services.
• Manufactured Capital: Manufactured physical objects that are available to the Group for use in the production of goods or the provision of services
• Shareholder funds and debt
• Cash flow from operations
• Land bank • Machinery and
equipment
• Effective and responsible investments of shareholder funds
• Business development activities • Cost reduction initiatives
• Shareholder returns and dividends
• Payments to other stakeholders
• Share price appreciation
• Financial stability • Financial growth• Creation of wealth
Natural CapitalAll renewable and non-renewable environmental stocks that provide goods and services for the Group
• Energy • Water • Other natural
resources
• Adoption of Global Goals • Environmental impact assessments
and mitigation of impact• Roll-out of carbon footprint and
energy initiatives • Strengthening of water and waste
management processes
• Disposal of all effluent and waste efficiently
• Reduction of carbon footprint
• Reduced resource consumption through better monitoring
• Sustainable natural resource utilisation
• Bio-diversity preservation
Human CapitalThe employees’ competencies, capabilities and experience, including their ability to understand, develop and implement the Group’s strategy. This encompasses their motivation for improving processes, goods and services, and their ability to lead, manage and collaborate
• Employee diversity
• Experience
• Channelling of employee skills and expertise for business growth
• Training and development of employee cadre
• Performance management and appraisals
• Employee survey initiatives• Structured career development
programmes
• Staff motivation • Talented and efficient
workforce • Job satisfaction • Career progression • Safe and equitable
environment
• Alignment of workforce with Group vision
• Profitable businesses through improved productivity and efficiency
Social and Relationship CapitalThe institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being. Social and relationship capital includes key relationships, and the trust and loyalty that the Group has developed and strives to build and protect with customers, suppliers and business partners
• Occupational health and safety initiatives
• Dedicated CSR team within the Group
• Community development
• Investor relations and stakeholder management
• Investment in community and livelihood development
• Regular dialogue with investors, analysts and other stakeholders
• Social impact assessments• Identification of key stakeholders and
material aspects in relation to them• Awareness creation and engagement
of suppliers through the Supplier Management Framework
• Social needs assessment based on Sustainable Development Goals (SDGs) /UN Global Compact/national agenda
• Community skill development
• Well informed and sound investment decisions
• Better supplier/distributor and stakeholder relations
• Brand visibility and reputation
• Strengthened supply chain
• Adherence to UN SDGs
Intellectual CapitalIntangibles that provide competitive advantage, including: • Intellectual property, such as
patents, copyrights, software systems, procedures and protocols
• The intangibles that are associated with the brand and reputation that the Group has developed over time
• Brand stewardship
• Research and development
• Technological expertise
• Development of intangible infrastructure, processes and procedures to improve efficiency
• New product development • Innovation
• Intellectual property products - Patents - Copyrights
• Evolving businesses to suit the ever changing, dynamic consumer
• An organisation better prepared to face disruptive business models
8 John Keells Holdings PLC | Annual Report 2016/17
INDUSTRY GROUPS, SECTORS AND PRIMARY BRANDS
TRANSPORTATION
Ports and Shipping Transportation
Centre Functions
Corporate Communications Group Human Resources Legal and Secretarial
Corporate Finance and Strategy Group Tax New Business Development
Group Business Process Review and Insurance
Group Treasury Strategic Group Information Technology
Group Finance John Keells Research Sustainability, Enterprise Risk Management and Group Initiatives
Organisational Structure
Property Development Real Estate
PROPERTY DEVELOPMENT
City HotelsSri Lankan Resorts Maldivian Resorts
Destination Management Hotel Management
LEISURE
Consumer Foods Retail
CONSUMER FOODS AND RETAIL
Information Technology Office Automation
IT Enabled Services
INFORMATION TECHNOLOGY
InsuranceBanking and Leasing
Stock Broking
FINANCIAL SERVICES
Plantation Services Other
OTHER INCLUDING PLANTATION SERVICES
John Keells Foundation
KRESTKREST
Group Highlights | Governance | Management Discussion & Analysis | Financial Statements | Supplementary Information 9
• JKH concluded the conversion of 57.4 million 2016 Warrants in to ordinary shares and received Rs.3.18 billion from 21.3 million 2016 Warrants that were exercised and accepted
December 2016• John Keells Research filed for its first
patent for a novel energy source material that was developed through a research project undertaken in collaboration with the National Metallurgical Lab of the Council for Scientific and Industrial Research (CSIR-NML) in India
• The premium ice cream range of Elephant House ice creams was relaunched as “Imorich”
• JKH was awarded the Gold award for “Overall Excellence in Annual Financial Reporting” at the 52nd Annual Report Awards Ceremony organised by the Institute of Chartered Accountants of Sri Lanka
June 2016• JKH announced a subdivision of shares,
whereby 7 of its existing shares were subdivided into 8 shares
• "John Keells X: Open Innovation Challenge 2016" was launched, creating a unique platform for disruptive and innovative solutions. The challenge provides the initial investments required for start-up businesses and technologies with the goal of empowering startups and local entrepreneurs
September 2016• The second residential tower of the
“Cinnamon Life” project, “The Suites at Cinnamon Life”, comprising of 196 apartment units was launched
November 2016 • In line with the succession plan of the
Group, Messrs. Krishan Balendra and Gihan Cooray were appointed as Executive Directors to the Board of John Keells Holdings PLC
January 2017• Union Assurance PLC launched “GOYO”,
an app based personal health advisor that provides rewards to customers for achieving fitness goals
February 2017• JKH emerged as the “Overall Sustainability
Reporting Award” winner at the ACCA Sri Lanka Sustainability Awards 2017
• SAGT was awarded "The Best Terminal in South Asia" by the Singapore based Global Ports Forum
March 2017• JKH conducted its first e-auction for
Group Initiatives on the newly launched online sourcing platform
• JKH Group revenue exceeded Rs.100 billion for the first time in the Company’s 147 year operating history
Year at a Glance 2016/17
Financial Achievements and Goals
Indicator (%) Goal Achievement
2016/17 2015/16 2014/15
EBIT growth >20 15.5 5.0 16.3
EPS growth (fully diluted) >20 12.6 (15.3) 15.7
Cash EPS growth (fully diluted) >20 (1.0) (6.2) 13.9
Long term return on capital employed (ROCE) 15 11.5 11.1 11.5
Long term return on equity (ROE) 18 9.8 9.6 11.0
Net debt (cash) to equity 50 (28.5) (30.8) (28.8)
10 John Keells Holdings PLC | Annual Report 2016/17
Year ended 31 March 2016/17 2015/16 (%) 2014/15
Earnings highlights and ratios
Group revenue - consolidated Rs. million 106,273 93,710 13 91,852
Group revenue - including equity accounted investees Rs. million 119,623 105,183 14 98,090
Group profit before interest and tax (EBIT) Rs. million 23,324 20,192 16 19,226
Group profit before tax Rs. million 22,888 19,198 19 18,557
Group profit after tax Rs. million 18,117 15,792 15 15,746
Group profit attributable to shareholders Rs. million 16,275 14,070 16 14,348
Dividends1 Rs. million 7,280 8,038 (9) 3,476
Diluted earnings per share Rs. 11.84 10.52 13 12.41
Cash earnings per share Rs. 13.89 14.03 (1) 14.96
Interest cover No. of times 52.8 51.5 3 27.7
Return on equity (ROE) % 9.8 9.6 2 11.0
Pre-tax return on capital employed (ROCE) % 11.5 11.1 4 11.5
Balance sheet highlights and ratios
Total assets Rs. million 277,272 240,975 15 218,086
Total debt Rs. million 22,766 20,750 10 23,934
Net debt (cash)2 Rs. million (55,309) (51,849) 7 (43,224)
Total shareholders' funds Rs. million 178,635 154,982 15 137,798
No. of shares in issue Millions 1,387 1,189 17 997
Net assets per share3 Rs. 128.75 111.70 15 99.32
Debt/equity % 11.7 12.3 (5) 15.9
Net debt (cash)/ equity2 % (28.5) (30.8) (7) (28.8)
Debt/total assets % 8.2 8.6 (5) 11.0
Market / shareholder information
Market price of share as at 31 March (actual) Rs. 137.90 148.00 (7) 199.40
Market price of share as at 31 March (diluted) Rs. 137.90 129.50 6 152.67
Market capitalisation Rs. million 191,332 176,032 9 198,899
Enterprise value2 Rs. million 136,022 124,182 10 155,675
Total shareholder return4 % 10.0 (12.2) - (12.0)
Price earnings ratio (PER) (diluted) No. of times 11.6 12.3 (6) 12.3
Dividend announced for the financial year Rs. 6.00 7.00 (14) 3.50
Dividend payout for the financial year1 % 45.9 46.7 (2) 33.5
Dividend paid per share1 Rs. 5.50 7.00 (21) 3.50
Dividend yield1 % 3.99 5.41 (26) 2.29
1 Cash dividends paid during the year 2 Customer advances in the Property Development sector and cash and cash equivalents relating to the UA Life fund has been excluded3 Net assets per share have been calculated, for all periods, based on the number of shares in issue as at 31 March 20174 Includes the proportionate impact arising from the ownership of the 2015 and 2016 Warrants
FINANCIAL HIGHLIGHTS - THREE YEAR PERFORMANCE
Performance Highlights
Group Highlights | Governance | Management Discussion & Analysis | Financial Statements | Supplementary Information 11
Indicator 2016/17 2015/16 2014/15
FINANCIAL CAPITAL
EC1 Economic value retained (Rs. million) 12,731 9,873 14,589
NATURAL CAPITAL
EN3 Energy consumption - non renewable sources (GJ) 220,911 213,7471 223,321
Energy consumption - non renewable sources (GJ) per Rs. million of revenue 2.05 2.26 2.40
Energy consumption - renewable sources (GJ) 101,112 111,061 130,067
Energy consumption - renewable sources (GJ) per Rs. million of revenue 0.94 1.18 1.40
Purchased energy - national grid 350,486 332,9611 311,263
Purchased energy - national grid (GJ) per Rs. million of revenue 3.24 3.521 3.4
EN15 Direct greenhouse gas emissions - scope 1 (MT) 16,134 15,6211 16,332
Greenhouse gas emissions from combustion of biomass 11,181 12,284 14,254
EN16 Indirect greenhouse gas emissions - scope 2 (MT) 66,359 63,0411 58,933
Total carbon footprint (MT) 82,492 78,6611 75,264
Total carbon footprint (MT) per Rs. million of revenue 0.76 0.83 0.82
EN8 Water withdrawal (m3) 2,021,739 1,995,0081 1,803,061
Water withdrawal (m3) per Rs. million of revenue 18.72 21.111 19.72
EN22 Water discharge (m3) 1,460,799 1,439,1381 1,390,650
EN23 Volume of hazardous waste generated (MT) 329 285 134
Volume of non - hazardous waste generated (MT) 8,517 7,967 7,669
Waste recycled/reused by Group companies and through third party contractors (%) 42 43 43
EN29 Significant environmental fines4 Nil Nil Nil
HUMAN CAPITAL
Total workforce (employees and contractors’ staff) 20,100 19,522 18,981
EC3 Employee benefit liability as of 31 March (Rs. million) 1,880 1,650 1,495
LA1 Total attrition (%) 24 21 24
New hires (%) 55 50 45
LA6 Number of injuries and diseases 213 217 199
Injury rate (number of injuries per 100 employees) 1.06 1.11 1.05
Lost day rate (%) 0.04 0.05 0.05
Number of people educated on serious diseases5 199,802 21,384 16,323
LA9 Average hours of training per employee 41 35 40
LA11 Employees receiving performance reviews (%) 100 100 100
HR5 Incidents of child labour (below age 16) Nil Nil Nil
Incidents of young workers (aged 16-18)2 Nil Nil Nil
HR6 Incidents of forced labour during the year Nil Nil Nil
SOCIAL AND RELATIONSHIP CAPITAL
EC7 Community services and infrastructure projects (Rs. million) 150 105 58
EC9 Proportion of purchases from suppliers within Sri Lanka (%) 83 81 81
SO1 Community engagement (number of persons impacted)3 1,010,200 855,364 59,278
Sustainability integration awareness (number of business partners) 80 80 80
Business partners screened for labour, environment and human rights 90 100 90
PR3 Proportion of labels carrying ingredients used (%) 81 81 80
Proportion of labels carrying information on disposal (%) 93 76 60
Proportion of labels carrying sourcing of components (%) 1 1 1
PR7 Voluntary standards relating to advertising Group policy based on ICC code
PR9 Significant fines for product/service issues4 Nil Nil Nil
SO2 Proportion of businesses analysed for risk of corruption (%) 100 100 100
SO8 Significant fines for violation of laws/regulations4 Nil Nil Nil
1 Figure has been restated2 Young workers are employed under the guidelines of the Employers’ Federation of Ceylon3 This excludes people impacted indirectly and includes the commuters using the Slave Island Railway Station4 Significant fines are defined as fines over Rs.1 million5 Significant increase due to islandwide awareness programme conducted by UA
NON FINANCIAL HIGHLIGHTS - THREE YEAR PERFORMANCE