Annual Report - 2023/2024

NOTICE IS HEREBY given that the Annual General Meeting of The Swadeshi Industrial Works PLC will be held at Havelock City Club House, No. 324, Havelock

Road, Colombo 6, on Friday the 20th September 2024 at 3.00 p.m. for the following purposes: -

1. To resolve to receive and consider the Report of the Directors and the Audited Financial Statement of
   Accounts for the year ended 31st March 2024 and the Report of the Auditors thereon;
2. To resolve to declare that the age limit stipulated in Section 210 of the Companies Act No. 07 of 2007 shall not apply to Mrs. Amari Mandika Wijewardene who has attained the retirement age stipulated in Section 210 of the said Act and who has attained the age of 74 years and that her re-appointment for another one year in terms of Section 211 of the said Act be approved and to Resolve to re-elect her as a Director of the Company in terms of the said Section 211;
3. To resolve to re-electMr. Pravir Dhanoush Samaras- inghe who retires by rotation at the Annual General Meeting and has offered himself to be re-elected, as a Director;
4. To resolve to re-electMr. Thusantha Wijemanna who retires by rotation at the Annual General Meeting and has offered himself to be re-elected, as a Director;
5. To resolve to re-elect Mr. Maria Innasimuthu An- thony Manievannan who, having been appointed as a Director of the Company by the Board of Directors to fill a casual vacancy and retires in terms of Rule
   96 of the Articles of Association of the Company, has offered himself to be re-elected as a Director of the Company;
6. To resolve to re-appointM/s. Ernst & Young, Char- tered Accountants as the Auditors of the Company and to authorize the Board of Directors to determine their remuneration;

1. To resolve to declare a first and final Dividend of
   Rs. 1.50 per share as recommended by the Board of Directors on 29th July 2024; and
2. To consider any other business of which due notice has been given.

By order of the Board for and on behalf of

THE SWADESHI INDUSTRIAL WORKS PLC

M & A Company Secretaries (Private) Limited Secretaries to the Company

No. 28 (Level 2),

W.A.D. Ramanayake Mawatha,

Colombo 02.

06th August 2024

Name of the Company

The Swadeshi Industrial Works PLC

Legal Form

A Quoted Public Company

with limited liability incorporated in Sri Lanka in 1941

Stock Exchange Listing

Auditors

Messrs Ernst & Young

Chartered Accountants

Rotunda Towers

No. 109, Galle Road,

P.O. BOX 101

Colombo 03

Lawyers

The ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka.

Registered Office

No 57,

Colombo Road

Kandana

Factory & Office

No 57,

Colombo Road

Kandana

Secretaries

M & A Company Secretaries (Private) Ltd. No. 28(Level 2)

W.A.D Ramanayake Mawatha,

Colombo 02

Messrs D L & F De Saram

Attorney- at Law & Notaries Public

No 47, Alexandra Place

Colombo 07

Bankers

Peoples Bank

Commercial Bank of Ceylon PLC

Nations Trust Bank PLC

DFCC Bank PLC

Hatton National Bank PLC

National Development Bank PLC.

Board of Director

Mrs.A.M. Wijewardene (Chairperson)

Mrs. A.M. Wijewardene has over 39 years of Commercial, Genaral Management and export businesses.

Mrs.C.S.M.Samarasinghe

(Managing Director/Deputy Chairperson)

Mrs. Samarasinghe holds a BA Honours Degree and a Masters Degree from the University of Hull United Kingdom. She has more than 21 years of experience in General Management and Supply Chain Management and functions as Managing Director/ Deputy Chairperson of the Swadeshi Industrial Works PLC and its subsidiaries

Mr.V.M.J.A.Perera

(Non Executive Director)

(Resigned with effect from 29th July 2024)

Mr.Thusantha Wijemanna

(Non Executive Independent Director)

Mr. Wijemanna obtained the Bachelor of Laws degree (LLB) with first class Hons from the University of Colombo and Master of Laws Degree (LLM) from the University of London. He is an Attorney-at-Law, Notary Public and a Commonwealth and Chevening scholar of the United Kingdom. He is a Fellow of the Institute of Advance Legal studies, London, a Council member of the Open University of Sri Lanka and a Director of Sanasa Development Bank. Formerly, he was General Counsel of DFCC Bank, Legal Adviser to the Ministry of Foreign Affairs in Colombo and Director General of SAARC Arbitration Council in Islamabad. He was also Chairman of the National Institute of Business Management (NIBM) and Association of Corporate Lawyers, Sri Lanka. He counts over Forty years of experience as a Lawyer, Administrator and Banker.

Mr. Hugh Kavinda Dias - Abeyesinghe (Non Executive Independent Director)

Mr. Perera is a member of the Institute of Incorporated Engineers, Sri Lanka. He has more than Forty years experience in Mechanical Engineering, including General Management experience in Manufacturing and Factory Management.

Mr.P.D. Samarasinghe

(Non Executive Director)

Mr. Samarasinghe has over 35 years of professional and commercial experience and serves on the Board of Directors of several publicly listed and unlisted corporates. Mr. Samarasinghe was the Past Chairman of the Sri Lanka Institute of Directors, Employers' Federation of Ceylon, Industrial Association of Sri Lanka, Condominium Developers Association of Sri Lanka and EFC Affiliated Group of Companies. He was the Past President of the Chartered Institute of Management Accountants Sri Lanka Division and former Council Member, CIMA (UK). He served as a Board member of the Ceylon Chamber of Commerce and Sri Lanka Accounting and Auditing Standards Monitoring Board.

Mr. Samarasinghe is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and Chartered Institute of Management Accountants UK and holds a Master's Degree in Business Administration.

Mr. Abeyesinghe is an Honours Graduate in Law from the University of Hull, England, a Barrister of the Middle Temple, England and an Attorney-at-Law. Holds a Master's Degree in International Relations from the University of Colombo. A Senior Counsel with over 30 years of experience in Civil Litigation in the original and Appellate Courts of Sri Lanka who specialises in Banking and Commercial Law.

Mr. M.I.A Manievannan

(Non Executive Independent Director) (Appointed with effective from 29th July 2024)

Mr. Manievannan is the Managing Partner of Manievannan & Co., and Elizinn & Co., (Chartered Accountants) established in 2003 and 2006 respectively. He is the Precedent Partner of Saverimuttu & Co., a pioneering Firm of Chartered Accountants established in 1932. He is an Associate of the Institute of Chartered Accountants of Sri Lanka and the Institute of Certified Management Accountants of Sri Lanka. Having commenced his accounting and auditing career in 1994 with M/s. Kreston MNS & Co., (Chartered Accountants), he counts over 25 years of experience in finance and accounting. Presently he provides advisory services in Auditing, Tax planning, Business re-structuring, Outsourcing and Compliance.

It is with pleasure that I present the Annual Report and Audited Financial Statements of The Swadeshi lndustrial Works PLC for the year ended 31st March 2024. Please find below a brief review of the commercial environment in which the Company operated and the performance of the Group during the period under review.

External Environment

The economic landscape in Sri Lanka during the past year has been challenging, characterized fluctuating consumer spending, supply chain disruptions, and inflationary pressures. Despite these hurdles, Sri Lanka's gradual economic recovery has been supported by considerable agricultural output, foreign remittances and a rebound in the tourism sector, which together provided some relief to the broader economy.

Corporate Performance

The group turnover decreased by 1.6% to record Rs 4,743 Mn for the year ended 31st March 2024. This turnover decline was primarily due to a significant decrease in household consumption caused by a depletion of disposable income and price reductions. The group recorded an operating profit of Rs 240 million for 2023/2024, compared to Rs 384 million in the prior year. The Profitability decreased mainly due to the lower turnover and increased operating expenses during the year. The group profit before tax decreased to Rs 190 Mn for 2023/2024, compaired to Rs. 256 million in 2022/2023.

Future

Looking ahead, we remain cautiously optimistic about the future. While we anticipate continued economic challenges, we are confident in our ability to adapt and thrive. Our focus will remain on expanding our product portfolio, innovating our existing product range, enhancing our distribution network, and deepening our engagement with consumers. Our strategic priorities will include exploring new growth avenues, both locally and internationally, while maintaining our commitment to operational excellence and ethical business practices.

Acknowledgement

I extend my sincere appreciation to our valued customers and business partners for their continued loyalty, support and cooperation.

I wish to thank the members of the Board and Management team for their contribution and the Shareholders for the display of confidence.

A.M Wijewardene (Mrs)

Chairperson

31st July 2024

ENTERPRISE RISK MANAGEMENT PROCESS Overview

Risk arises in all our business activities. Risk, in our context, is the component, which has the potential to negatively affect business or an organization. Its' significance is measured in terms of the probability of occurrence.Therefore, an integrated risk management framework has become a mandatory existence, which provides the guideline for managing risks. Managing risk is a key aspect of the Board's stewardship obligations and a component of the 'performance' dimension of Enterprise Governance.

RISK MANAGEMENT FRAMEWORK

A risk cannot be viewed in isolation as it is interconnected, and one aspect might give rise to various other factors. The Swadeshi Industrial Works PLC group has a structured risk management process to address different risk categories: Strategic, Operational, Compliance and Financial. The Board is responsible for ensuring effective risk management and recognizes that the proper management of risk is a core leadership function that must be practiced throughout the Organization.

Internal Audit process coordinates the identification and documentation of control risk areas throughout the Group, enhancing the risk management system and monitoring its effectiveness at regular intervals.

PROCESSES

Identify, Evaluate, Treat

and Monitor

Risk Appetite

Oversight Review

Measurement Feedback

Feedback

STRUCTURE

Board of Directors

Audit Committee

Group Management

Committee

Head of Departments

Employees

Assurance

The risk management framework illustrates our approach to risk management, reflecting the risk management process, the structure in place to administer the process and sources of comfort with regard o its effectiveness.

In addition, during the year-end, the External Auditor issues a Management Letter and informs the Group Management Committee, Audit Committee and the Board of Directors of the outcome of these evaluations. These outcomes are taken into account in the continuing enhancement of our risk management system. Further the Audit Committee constantly evaluates risk, its impact and measures taken to manage risk. The principal aim of the Group's risk management governance structure and system of Internal Control is to manage business and operational risks, with a view to enhancing the value of shareholders' investments and safeguarding assets.We have put in place a number of key policies, processes and independent controls to provide assurance to the Board on the integrity of our reporting and effectiveness of our systems of Internal Control and risk management.

The Board of Directors of Swadeshi Industrial Works PLC is committed to maintain high standards of Corporate Governance.

The Directors recognize Corporate Governance as the systems employed to manage the business and affairs of the Company towards enhancing the objective of realizing Shareholder value, whilst taking into account the interest of all Stakeholders. This statement sets out the Corporate Governance policies, practices and processes adopted by the Board.

The Board and its Operations

Approving the interim and final financial statements of the Group; and

Determining and recommending dividends for the approval of the shareholders.

Sub Committees of the Board

In compliance with the requirement of the Code of Best Practice, the Board has delegated responsibilities to four Board Sub Committees which operate within clearly defined terms of reference.

Audit Committee

The Board of Directors of The Swadeshi Industrial Works PLC comprise six Directors. The Chairperson and the Managing Director are Executive Directors of the Company. The other four Directors are Non- Executive Directors of whom two are Independent Directors. Non-Executive Directors of the Company have made declarations of their independency or non- independency.

During the year the Board met on 12 occasions. Prior to each meeting, the Directors were provided with all relevant management information and background material relevant to the Agenda to enable informed decisions. Board Papers are submitted in advance on group performance, capital Investments, working capital and other issues which require specific Board approval.

The Board is responsible for:

Providing leadership, formulating, reviewing and monitoring the implementation of business strategy and policy;

Ensuring compliance with statutory regulations; Reporting on their stewardship to the shareholders; Managing risks;

Approving annual capital and operating budgets and reviewing performance against budgets;

The Audit Committee comprises of three Directors namely Mr. Thusantha Wijemanna, Mr. Hugh Kavinda Dias - Abeyesinghe and Mr. Pravir Samarasinghe and two of its members i.e. Mr. Hugh Kavinda Dias Abeyesinghe and Mr. Thusantha Wijemanna are Independent Directors. The Managing Director, Chief Executive Officer and the Finance Manager attend meetings on invitation.

The Audit Committee Report at page 11 describes the activities carried out by the Committee during the financial year.

Remuneration Committee

The members of the Remuneration Committee comprises of three Non-Executive Directors namely, Mr Mahinda Perera, Mr. Thusantha Wijemanna and Mr. Hugh Kavinda Dias - Abeyesinghe. Two of its members are Independent Directors.

The Report of the Remuneration Committee is on page 13 which highlights its main activities.

Nomination and Governance Committee

Nomination and Governance Committee comprises of three members namely Mr.Thusantha Wijemanna, Mr. Hugh Kavinda Dias - Abeyesinghe and Mr. Pravir Samarasinghe and two of its members i.e. Mr. Hugh Kavinda Dias - Abeyesinghe and Mr. Thusantha Wijemanna are Independent Directors. The Managing Director and Chief Executive Officer attend meetings on invitation. Nomination and Governance Committee Report on page 15 describes the activities carried out by the Committee during the financial year.

The Related Party Transactions Review Committee

The Related Party Transactions Review Committee (RPTRC) comprises of three members namely Mr. Hugh Kavinda Dias - Abeyesinghe, Mr.Thusantha Wijemanna and Mr. Pravir Samarasinghe and two of its members i.e. Mr. Hugh Kavinda Dias - Abeyesinghe and Mr. Thusantha Wijemanna are Independent Directors. The Managing Director and Finance Manager attend meetings on invitation.The Related Party Transactions Review Committee Report on page14 describes activities carried out by the committee during the year .

Internal Controls

The Board is responsible for instituting effective Internal control systems to safeguard the assets of the Company, and ensure that accurate and complete records are maintained from which reliable information is generated. The system includes controls including financial, operational and risk management.

Internal Audits are carried out by external Chartered Accountancy firms to ensure control systems are appropriately maintained. The findings are reviewed first by the Audit Committee and significant issues are thereafter reported to the Board of Directors.

A budgetary control system is in place, in which annual budgets identifying the critical parameters and functional objectives, are prepared and approved by the Board at the commencement of a financial year, and its achievement monitored through a monthly management reporting system.

Compliance

The financial statements of the Group are prepared in compliance with the guidelines of the Sri Lanka Accounting Standards and other statutory regulations. Financial statements are published quarterly in line with the Listing Rules of the Colombo Stock Exchange through which all significant developments are reported to Shareholders quarterly. The Board of Directors, to the best of their knowledge and belief are satisfied that all statutory payments have been made up to date.

Going Concern

The Directors have continued to use the 'Going Concern' basis in the preparation of the financial statements. After careful review of the financial position and cash flow status of the Group, the Board of Directors believe that the Group has adequate resources to continue in operation for the foreseeable future.