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An improved performance
The improvement in the profitability of the Company from a loss of Rs. 847 Mn to a profit of Rs. 512 Mn is a testimony to the extent of change within the Group.

As another financial year comes to an end, I am pleased to present to you, on behalf of the Board, the Annual Report and Financial Statements of CIC Holdings PLC. for the year ended 31st March 2015.

Performance for the year
It is my pleasure to report that the CIC Group has recorded a Profit after tax of Rs. 1,040.84 Mn for the year ended 31st March 2015. The Group has delivered revenue growth of 3% and a profit before tax of Rs. 1,423.12 Mn which is a complete turnaround in performance. You may recall that the Company and Group reported a loss of Rs. 847.25 Mn and Rs. 1,089.55 Mn (restated as Rs. 1,126.84 Mn) respectively for the year ended 2013/14. In that light, it is significant that the total equity of the Group also recorded a growth of 8% to Rs. 8,843.25 Mn during the year under review, thereby strengthening its’ financial position. The vastly improved financial performance which has been delivered is the result of the new course charted for the Group by the Board as was adverted to in my report last year. Following the first loss in the history of the Group recorded in 2013/14, the Board restrategised and embarked on a much needed restructuring programme and during the period under review, focused on businesses with the potential to deliver sustainable growth and returns over the long term. Details of the performance of the constituent business units are provided in the CEO’s report.

This past year has not been easy and the Board as well as the Senior Management had to make many a painful decision in implementing the new strategies and the consequent restructuring programme which tested the resilience of the Company and the Group. However, there was commendable commitment to the process shown by all employees ably led by the senior management who worked closely with the Board, which enabled the Company and the Group to achieve the transformation and the turnaround in the results.

The improvement in the profitability of the Company from a loss of Rs. 847.25 Mn to a profit of Rs. 512.55 Mn and the turnaround of the Agriculture segment which recorded a profit of Rs. 336 Mn in 2014/15 compared to a loss of Rs. 915 Mn in the previous year, is testimony to the extent of change within the Group.

Similarly, through sharper focus on profitable lines and the adoption of deeper market penetration strategies, the Consumer and Pharmaceuticals business also delivered a profit after tax of Rs. 272 Mn for 2014/15 recovering from a loss of Rs. 851 Mn in the previous year.

The operations of all Companies were the focus of deep deliberations by the Board and going forward will remain so. Business rationalisation as well as resource allocations in targeted businesses enabled the turnaround of the Company within this short time frame as was envisaged by the Board last year. As the new business strategies get further embedded and the positive effects of the restructuring and transformation programme mount, I am confident that your Company will grow in strength and deliver sustainable growth in revenue and profit in the years ahead and cement its position as a preeminent corporate in this country.

Governance

In order to give full effect to the new direction of the Board, one of the key initiatives implemented during the 1st half of the year was the reconstitution of the Board to include the heads of the three key subsidiaries of the Group. We were of the view that their inclusion to the Board would bring about a better control of the key businesses and encourage more direct intervention in policy making. Accordingly, we welcomed to the Board, Dr. Devapriya Nugawela, Chairman of Link Natural Products, Mr. A.V.P. Silva, Managing Director of the Feeds cluster and Mr. Keerthi Kotagama, Managing Director of Agri Businesses. The Board had identified these clusters as the key drivers of growth for the Group in the coming years.

Their inclusion would have the added advantage of the Board establishing close links with the business clusters of the Group thereby facilitating greater understanding of these businesses which in turn will help the Board to drive a unified strategy consistently across the Group.

In the second half of the year, we were extremely happy to welcome to the CIC Group, two eminent personalities in the mercantile sector renowned for their professionalism and business acumen. Mr. Dinesh Weerakkody joined the Board of CIC Holdings PLC and Mr. Amal Cabraal assumed the role of Chairman of the CIC Feeds cluster. I have no doubt that the Group as a whole will benefit greatly by the contributions that they would make to the continued growth of your Company.

Engaging with Stakeholders

The restructuring process and many of the radical changes made across the Group impacted several stakeholders quite significantly and it was therefore imperative that we kept those stakeholders properly informed of the reasons for such changes and the progress being made subsequent to such changes. Keeping that in mind, I kept our shareholders appraised of the changes and the need for such changes in quite explicit terms in my report last year as well as verbally at the Annual General Meeting. In the same vein, we kept our bankers, strategic partners and principals also appraised of the ongoing developments and I am grateful that we received, during this last year, their total support and cooperation.

Most importantly, the senior management led by the Managing Director kept the lines of communications with the employees open as they were quite obviously the ones most impacted by the changes. I, and on several occasions the Board, conferred regularly with the Senior Management to ensure that all the business units pursued the delivery of the business goals and plans unwaveringly, and made sure that the mood and morale of staff at all levels were maintained at the optimum. At the beginning of the financial year, each of the business segments, after a rigorous process, set themselves ambitious targets. I am pleased to report that other than the Feeds cluster, which underperformed the budget, most of the other segments achieved and in certain cases, exceeded their budgets. In that context, I wish to convey the appreciation of the Board to the staff at all levels for the commitment and dedication shown during what was undoubtedly a difficult year. Many of our employees are acknowledged experts in their respective fields, and this knowledge bank which is available within the Group is a critical factor for both financial success as well as to the value creation process that we have embarked on.

Looking Ahead

Your Board is confident that the hard decisions taken during the past two years have set the Group on the path to performing at a higher level with the ability to compete effectively in an increasingly challenging environment. Internal governance structures, policy frameworks and business processes have been streamlined and strengthened to deliver value to stakeholders.

CIC’s portfolio is largely made up of essential products that are trusted by Sri Lankans. Many of them play a role in key national initiatives such as food security, nutrition, health and well-being of the people which also has great potential for growth both locally and globally. Additionally, our supply chains support an island-wide network of farmers and distributors who are key stakeholders of the Group. These collaborative win-win partnerships that have been developed over decades in line with our corporate values give CIC Group a unique position of strength. Your Board believes that there are many other avenues for the Group to explore and further enhance synergies across the Group and create greater value for which resources will be allocated in the coming year. It is our plan to continue to drive performance in order to deliver sustainable growth with sharp and focused strategies in the coming year. In order to do so, the Company would continue to invest to upgrade the quality of leadership within the Group.



By reason of the turnaround achieved during the year, the Board would now look favorably at new investment opportunities, be it within the Group’s existing portfolio or even in new fields of business provided the opportunities meet the investment criteria and cross the financial hurdle rates of the Group as has been decided by the Board.

Acknowledgements

The Board joins me in thanking Mr. Franklyn G. Amerasinghe who resigned from the Board in January 2015 having served as an Independent Non-Executive Director for over 12 years. His wise counsel rooted in strong principles contributed to enrich the Board discussions and enhanced the objectivity and the independence of the Board. His contribution to the Company during the re-structuring process has been immense and he will be greatly missed.

The urgency of the transformation process necessitated a high level of involvement from the Board in rigorously evaluating the progress made on structural changes and reviewing results to ensure that performance was on target. Yardsticks for measuring performance set in the previous year with the assistance of MTI Consulting were used to evaluate progress on deliverables for each business unit and subsidiary. Inevitably, there were many issues that arose during the year which were resolved effectively and efficiently to clear potential blocks with, where necessary, the intervention of the Board. The considerable collective expertise of the Board with its combination of executive and non-executive members ensured that domain knowledge and passion were tempered with objectivity in the evaluations and reaching agreement on solutions. Whilst acknowledging that we have more milestones to reach, I am pleased to note that the Board has been able to broaden its agenda beyond the austerity measures implemented to more forward looking strategies and actions – a sign of our positive recovery.

In the light of the aforesaid, I wish to thank my colleagues on the Board for their unstinting support, advice and for the contribution made during the deliberations of the Board. CIC is fortunate to have a Board which consists of proven leaders in a cross section of fields and they have over this last year made themselves available in order to pilot the restructuring process from what was stormy seas to what is now much calmer waters and I am deeply grateful to them for their time as well as for the support extended.

We are also grateful to the understanding extended by our strategic business partners for their continued confidence in the Group. Our Bankers have supported the transition and maintained a positive outlook of the Group which is greatly appreciated by the Board.

I congratulate the Managing Director, Mr. Samantha Ranatunga and the members of the Management Team who have led their respective teams through a difficult restructuring and transformation process and delivered a commendable performance.

In conclusion, I thank our shareholders, particularly our controlling shareholder, Paints and General Industries Limited for their understanding and continued support. The Board was mindful of the fact that there was no dividend declared in the previous year due to the losses and therefore two interim dividends of Rs. 1/- per share had been paid in September 2014 and March 2015. The Board has also recommended a final dividend of a further Rs. 1/- per share for approval at the Annual General Meeting.
Harsha Amarasekera
Chairman
22nd May 2015
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