Milestones/ Mentions

ISO Certification for India Warehousing Sector

It was an extremely proud moment for EFL India when we received the ISO 9001:2015 Certification for 3PL, Warehousing and Distribution Services, covering all our facilities in Chennai, Mumbai, Bangalore and New Delhi.

Qatar Awards

In view of their long-standing partnership with EFL, Qatar Airways presented two awards of appreciation. The awards symbolize a strengthened partnership between the two parties and continues to pave the way for an extensive future for EFL’s business growth.

LMD Brands Annual 2019

Conglomerate Brands - Expolanka reaches 11th place based on potential brand value.

EFL opens new office in Malaysia

EFL set up its 18th overseas operation in the October 2018 regional hub of Malaysia.

EFL facilitates significant cross-border trade between Bangladesh and India

EFL achieved a significant milestone in cross-border trade by acting as the key facilitator for the very first bonded Cross-Border Land-Air Transshipment, on behalf of a leading European retail brand. EFL trucks from Bangladesh crossed into India with the transshipment to reach Kolkata within the stipulated time-frame.

For this transshipment, the EFL offices in Bangladesh and India collaborated to affect the transfer of cargo weighing 4.1 tonnes from Bangladesh trucks into Indian trucks, which took place at the Benapole (Dhaka) – Petrapole (India) border. The freight was moved in GPS enabled trucks to the Kolkata airport and were airfreighted to reach the final destination in Europe within the stipulated time-frame.

EFL Further Expands Operations In South Africa

EFL South Africa opened their second branch in Port Elizabeth. Since the city is a hub for a range of industries including automotive, shoes, metal, timber and general trade, the Port Elizabeth team looks forward to strengthening their business prospects within this region.

New Shanghai Office

To renew our presence in the largest export market in the world, EFL China recently opened a new office in Shanghai.

Mumbai team begins operations in a New Office

Our Mumbai team recently moved to a new workspace.

Opening of Classic Travel Beruwala Branch

New Kenya Office

EFL Kenya moved to a new office in Nairobi.

Relocation of EFL GO

EFL Global Operations relocated from the EFL Freight office premises to a new space located in Colombo 03, Sri Lanka. Group CEO, Hanif Yusoof was present at the opening.

EFL Relocates in Hong Kong

EFL Hong Kong expanded and moved to a new and more convenient location in Kowloon.

Emirates Recognises Indonesia Team

The Indonesian team was presented a special token of appreciation for the support extended towards the growth of Emirates in Indonesia. The Cargo Manager of Emirates Jawad Ahmed made the presentation to Samuel Hosea Tanoto, EFL’s Indonesian GM of Airfreight.

EFL awarded for Delivery Excellence by Huawei

EFL was recognised for its supply chain solution management and delivery excellence in addition to its ability to meet demanding project deadlines in a timely and flexible manner at the Huawei Annual Core Partner Convention 2018 held in New Delhi, India.

EFL Vietnam receives CX top cargo agent

EFL was awarded Cathay Airway’s Top Cargo Agent 2017 at the award ceremony held this year.

EFL wins Highest Foreign Exchange Earner for logistics services at Presidential Export Awards

Managing Director of EFL Sri Lanka Saif Yusoof received the award from the State Minister of National Policies and Economic Affairs at a gala ceremony. Evaluations for the award category won by EFL was based on foreign exchange earnings of the logistics companies that had applied in the financial year under review.

Won Great Place to Work - Sri Lanka EFL

Vietnam Receives BR Appreciation Award

The Vietnam team received an appreciation award from Eva Air at the agent award party that was held on the 14th of December at the SOL Rooftop in Ho Chi Minh.

Emirates Top Agent Award 2018 - Philippines

The Philippines team was awarded Emirates’ Top Agent Award for 2018 for the first time, at a ceremony held on the 27th of November at the Discovery Primea in Makati.

Satish Sethi, Emirates Country Manager of Philippines presented the award to the team.

9

USA-India Trade Lane Meeting

On the 2nd of August, Evan Rosen, Bill Wilkening, and Ray Luengo from EFL USA met with the management team from EFL India in the first collaboration meeting to discuss ocean/air/origin services/etc.

EFL Awarded Singapore Airlines Top Agent Award 2017/18 - Sri Lanka

The Sri Lankan team was awarded the Gold Award 2017/18 at the Top Agents Awards Ceremony of Singapore Airlines which was held on the 12th of October at The Hilton Colombo.

Hong Kong & Indonesia Go Live on CargoWise

During this quarter, Hong Kong and Indonesia made their transition into CargoWise.

EFL Vietnam receives SQ Top Agent

The Vietnam team was awarded Singapore Airline’s Top Agent Award 2017 at the annual awards ceremony held on the 18th of September.

Global Distribution Centre (EGDC) re-branded as ‘EFL Global Freeport’

EFL rebranded its Freeport operations under the new moniker: ‘EFL Global Freeport (Pvt) Ltd’.

It is the first private sector enterprise to be granted a license to operate as a freeport in Sri Lanka.

Group Strategy

The Expolanka Group has emerged from a comprehensive restructuring process which included the portfolio restructure of many subsidiary companies. This restructuring has resulted in a more streamlined business, which is focused strongly on the Group’s core competencies of logistics, involving the transportation and related services, for both cargo and persons.

The Group’s growth strategy is now mapped out clearly with the ultimate objective of becoming a total solutions provider in the area of logistics, with a global business scope. Therefore, over the coming years, we will continue to divest peripheral, non-core businesses and will focus on growing vertically and horizontally within our core field, by scaling-up the logistics and leisure businesses - EFL and Classic Travel Pvt Ltd.

Group Strategy

Financial Highlights

REVENUE

  • Logistics 95%
  • Investments 3%
  • Leisure 2%

EBIT

  • Logistics 105%
  • Investments -14%
  • Leisure 9%

NPAT

  • International 88%
  • Local 12%

REVENUE

LKR 95,455 MN

23%

Gross Profit

LKR 18,100 MN

32%

EBIT

LKR 3,313 MN

74%

PBT

LKR 3,073 MN

84%

PAT

LKR 1,309 MN

99%

Chairman's Message

Dear Stakeholder,

Over the next few years, we will continue to expand EFL’s geographic footprint as well as the service portfolio to encompass the full range of logistics services, to multiple industries, across all major global trade routes.

I am pleased to announce that with our consistent approach to growth, Expolanka Holdings has enhanced its global network of operations during the year by strengthening our presence in key growth markets such as China, Vietnam, Indonesia and many others in the Far East, and will continue to do so in the future. With our unwavering attention towards attaining our strategic objectives, we have been successful in mitigating risks and we are now in the verticals of the future. It is in this promising background, that I present the financial statements and annual report on Expolanka Holdings PLC, for the financial year 2018/19.

Our flagship brand EFL is now physically present in almost all key international trade routes, albeit at varying levels of strength. Penetrating the east-west trade traffic directly from the point of origin, the Strategy of expansion starting to provide increasing performance that have boosted our after tax profits by 99% year-on-year to Rs 1.91 Bn. This growth has also been supported by sustained growth on our home turf, the Indian subcontinent, and also in China and the other East Asian bloc in general.

Meanwhile, our leisure operations also made strong headway during the year as demonstrated by the sector profits increase of 24% year-on-year.

Beyond the numbers – growing sustainably

A few years ago, Expolanka Holdings made a commitment to advance along a sustainable path following the vision of becoming one of the leading sustainable organisations in the industry. At Expolanka, we believe a conscious effort at sustainable living and sustainable business practices are vital, not only to enhance our business but also to protect all life on this planet.

To demonstrate our commitment, we made a pledge to support the United Nation’s Sustainable Development Goals (UNSDGs). I am pleased to report that we have made tangible progress in translating our promise into action in the current financial year, through the Expolanka Global SDG Programme. I urge our stakeholders to please refer the Social and Environmental capital reports for details on how we have implemented our promise at ground level in the different countries in which we operate. In addition, during the year under review, we also became a signatory to the United Nations Global Compact, which helps us align our strategies and operations based on universal principles that advances societal goals.

Our social and environmental activities are formulated in accordance with the SDG goals and have been implemented through the adoption of the Expolanka Global Goals project that has been deployed with our usual efficiency across the globe. In ensuring the effectiveness and impact of our initiatives, the Group first identified the needs of each country and developed projects to support and uplift the diversified needs of the local communities. The projects executed so far aimed at promoting biodiversity, counteracting hunger and poverty, addressing special needs and differently abled children, and finally sustaining access to clean water and hygiene. To further ensure the success of each project, they were executed in partnerships with reputable local NGOs and other local organisations in each country, who best know and understand the needs of the local people and their environment.

Governance

Good governance is the foundation of a sustainable business. Therefore, we continued to strengthen our governance structures during the year. I believe we have strengthened our ability to drive the Company towards a global positioning through the right mix of international expertise at the helm.

The core of our operation is our system of governance that has been developed to reflect international best practices that support operational integrity at all levels. The culture of good governance is integrated into all activities, systems and processes and all personnel at all levels of the organisation to facilitate expansion within a strong framework of compliance and controls. Our systems have been continually improved to accommodate new compliance and governance standards while adopting legal standards of different countries and regions. The overall governance mechanisms have been enhanced, particularly with relation to Japan’s Financial Instruments and Exchange Act that dictates strict rules for the internal control of financial reporting. This ensures that our investors are protected through the accuracy and reliability of corporate disclosures, as our parent company is a Japanese listed entity.

As part of our sophisticated governance platform, all statutory payments are monitored through a dedicated system - a Compliance Management System (CMS). This is utilised for renewals of business licenses for our operating locations across the globe as we expand our footprint every year. Comprehensive full internal audits are conducted regularly in line with Japan’s Financial Instruments and Exchange Act.

Fully cognizant of the vital importance of strong governance we have given prominence to compliance within our management processes at all times and in all our activities. Authority matrices have been instituted throughout the Group. These define authority boundaries and cost limits, as well as responsibilities. Personnel held accountable and are empowered to provide leadership to act within clearly defined limits that have created an optimum balance in the speed and effectiveness of decision making. Together with the routine internal audits that are conducted periodically, the segregation of personnel duties are reviewed regularly and clarity of roles too are reviewed to address any ambiguities. This empowers our team to act with confidence and speed.

Clarity of understanding with regards to the different legal frameworks of the world are essential in our industry. Hence, we have enabled legal updates for our management to ensure adequate levels of awareness and knowledge is prevalent. The overall enterprise risk management systems were strengthened to ensure robust risk surveillance and rapid risk responses throughout the widespread network of our operations. Internal controls have been reviewed and strengthened with authority matrices implemented to ensure proper delegation with adequate levels of responsibility and authorisation. Station-wise, Board meetings were conducted regularly to ensure strict oversight and supervision of all operations. In addition, at risk management meetings, all operational aspects are scrutinised with subjects such as data protection, and internal audit related matters analysed in greater depth. A Specially Designated Nationals list screening initiative has also has been undertaken. Across the Group compliance awareness levels have been raised as a key component of our compliant expansion plan.

99%

Increase in profit after tax

23%

Increase in Economic
value among our stakeholders

Stakeholder returns

We view our stakeholders as partners in our sustainable growth model. During the current financial year we distributed in excess of Rs 94.09 Bn of economic value among our stakeholder groups, which is an increase of 23% year on year. We have also taken into consideration key stakeholder needs in our business activities. Please refer the Stakeholder Engagement and Capital Management Reports for information on how we have created value for different stakeholders during the year.

Strategy and resource allocation

Our objective is to become a global player in the international logistics supply chain through our subsidiary EFL. As an offshoot of our core business, we will also build an international leisure business through our travel agency Classic Travel (Pvt) Ltd.

By concentrating our resources and energies on our core business of logistics, we will foster a more specialised organisation supported by expert human capital, sophisticated systems and an expanding base of organisational knowledge. This will allow us to build an intellectual and partnership base that can be leveraged to create a sustainable competitive advantage.

Over the next few years, we will continue to expand EFL’s geographic footprint as well as the service portfolio to encompass the full range of logistics services, to multiple industries, across all major global trade routes.

Within the short to medium term, we will continue to expand and consolidate our operations. We will also diversify our industry/customer portfolio, which is skewed towards the apparel trade.

To achieve our strategic objectives, we will continue to allocate resources for geographic expansion and provision, including the acquisition of physical assets, human capital and technology systems whilst providing a full range of supply chain management services to our customers. A second area of significant resource allocation will be on technology and digitalisation. The CargoWise ERP system, which is now deployed across all EFL global operations, has definitely improved market/customer intelligence and operational visibility.

We are in the process of laying the foundation for digital transformation through digitalisation. In the new financial year, our plans encompass an increase to our technology allocation in order to support this goal.

Our people are an essential aspect of our competitive model in both logistics and leisure, representing a large base of market and industry knowledge and technical expertise. Going forward, we will continue to attract specialised expertise to help build our global footprint and we will also sharpen our human edge through continuous exposure and training.

Together with our organic growth model, we are also open to acquisitions that will support our global expansion.

The logistics industry is not only highly competitive at a global level, but also extremely dynamic with high levels of macro environmental unpredictability that imbues elevated risk aspects to our business. Within this turbulent milieu, our strength lies within our capacity to change swiftly in response to macro environmental changes and market trends that shift through the globe in varying degrees of intensity. We are also highly flexible in the face of change with the ability to adapt fast to external trends and developments. Therefore, with the high degree of future readiness imbibed within our operating structures, we are now geared to reap benefits moving forward, as all our business segments have the potential for strong and incremental growth.

Our future strategy is aimed at accelerating our rate of growth, whilst improving profitability, and simultaneously aligning ourselves with future demand patterns. We are also better prepared and equipped to face challenges due to the solid foundations we have established in the past. Therefore, we can look positively at the future, and as we continue our journey of growth we shall do so as a responsible corporate orgasation.

Appreciations

The Board and I wish to extend our sincere appreciations to Mr. Osman Kassim, Mr. Tomoki Sano and Mr. Toji Shiho for their contribution and guidance to the Company during their tenure. On the same note, I thank the members of the Board for their dedication in guiding the Group during the year and for their support extended to me at all times.

The achievement of our vision lies in the hands of our people, and I fully acknowledge the contributions by the Executive Management and the entire Expolanka team, for a successful year. I have full confidence in our people to drive the many initiatives envisaged for the future. I also extend my sincere gratitude to our valued customers, investors, bankers, suppliers and business associates for their loyalty and patronage. I look forward to your continued support as we move forward.

Naosuke Kawasaki Chairman

Group CEO’s Review

During the year, we achieved a marked increase in business volumes, particularly from the Far East and Indian subcontinent markets, attributable to our continuous efforts to gain market share in these regions. Our business growth translated into robust growth in gross profits that outpaced overhead investments for the year.

Group CEO’s Review

I am extremely pleased to report a year of excellent progress for the Expolanka Group. Our flagship brand EFL, which is our core business and is the largest contributor to our group performance made strong headway towards the realisation of its global strategy of expansion, consolidation and returns. Furthermore, our leisure brand, Classic Travel continued to make good progress, delivering a strong year of performance. More importantly, the Expolanka Group is now aligned to a growth path that is focused on driving sustainable growth coupled with strong financial returns whilst operating in a fairly dynamic operating environment impacted by constant changes in demand & supply dynamics and geopolitical uncertainty.

The industry we operate in continues to evolve, with seasonality being replaced by fast turnaround, constant capacity challenges, rising competition with digital technologies being integrated into supply chain creating value for customers. As a forward-looking organisation, we have embraced this change, looking at new markets, new opportunities, and new solutions. Remaining flexible has been a key ingredient to our success and we will continue to evolve to meet the opportunities presented to us and create value to all our stakeholders.

Financial performance

Our performance in a nutshell, was driven by 23% growth in Group revenue year-on-year, pushing the topline over Rs 95 billion in the financial year 2018/19. This is indeed an exceptional achievement, as this is a remarkably rapid growth in revenue within one year in an extremely competitive industry and can be directly attributed to the focused strategy adopted by our business operations.

This growth is a reflection of a continuing strategy adopted at Expolanka, where we have focused on growing market share & topline over the last several years. Reflecting back to FY 2012/13, we have grown from a revenue of Rs. 50 Bn by a compounded annual growth rate (CAGR) of 11%. This growth in revenue was supported by the logistics sector CAGR of 19% from FY 2012/13 and was achieved despite the Group divesting certain non-core international trading operations throughout the years. This affirms the success of our focused approach to growth.

During the year, we achieved a marked increase in business volumes, particularly from the Far East and Indian subcontinent markets, attributable to our continuous efforts to gain market share in these regions. Our business growth translated into robust growth in gross profits that outpaced overhead investments for the year.

Together with well-planned growth in revenues, we also focused on enhancing our operational efficiencies that contributed towards improved capacity management which resulted in improvements in yields together with streamlined operational processes enabling improvement in our efficiencies and operating margins. The combined efforts above have enabled the company to achieve a commendable growth of 74% in operating profits compared to the previous year.

In terms of our financial standing, I am pleased to report as a direct result of our efforts on restructuring and consolidation, the Group balance sheet is strong and provides stability and strength for future growth. It is noteworthy that we are a Company with very low leverage and also have at our disposal balance sheet strength as well as avenues to access funds efficiently, with ease. Our stability is further augmented by the reliable backing of our main shareholder, and we also have at our disposal growing financial reserves. Therefore, our shareholders and other stakeholders can be confident of our financial capabilities and stability as we continue to expand, which augurs well for our future.

Performance in brief

Our encouraging financial results for 2018/19 have been derived from operational level improvements across the board.

The growth during the year was led by a concentrated effort in expanding our trade lane performance, enhancing our product portfolio and growing our core customer base both in terms of increased performances from our existing customers and servicing new strategic accounts.

Furthermore, EFL also strengthened its new market segments of electronics and retail. These new segments performed admirably during the year, by building capacity enabling us to create a platform to expand these segments in the future. Please refer to the logistics sector review for details on EFL’s performance during the year.

EFL plans to leverage on our freight forwarding expertise by augmenting and providing services across the customer’s supply chain and position ourselves as a key partner of our customer’s growth.

In terms of brand visibility and brand equity, the year under review has been exceptionally positive for Expolanka. We believe our brands are our collective personality, our character and our visage, by which our clients build relationships with us. Therefore, we make immense effort to position our brands as not only professional experts, but also as ethical and value


23%

Growth in group revenue

Over

Rs.95Bn

Revenue


driven. I believe our exceptional growth during the current year is indicative of our international reputation in our business sectors and our rapid operational and business expansion is the best barometer of our clients trust us and reliance on us.

A significant development in our brand positioning has been our increased commitments towards sustainable business growth. As an entity with a rapidly growing global footprint, we are cognizant of our wider accountability and we have formally made commitments towards the United Nations Sustainable Development Agenda. I am proud to report that we have already taken concrete steps towards implementing our promises through our global network of offices that have operationalised many social welfare programmes in line with different Sustainable Development Goals (SDGs).

I am pleased to report that we have also moved closer towards our vision of becoming a total supply chain solution provider. During the year, we have continued to develop and build EFL’s supply chain infrastructure globally to support this objective by investing in warehouses across geographic locations, container freight stations in key localities, expanding our trucking facilities, managing charters, and strengthening our relationships with carriers.

Our advancement in logistics has been supported by the CargoWise ERP system. The new system has now been deployed across a majority of EFL operating points across the world.

The platform has helped integrate all aspects of the logistics business and improve supply chain visibility, decision making, and response time. It is also easier for customers to link-up with our systems across the globe, which has enhanced customer convenience and trust. Furthermore, the deployment of the CargoWise system will generate process improvements across the value chain and enhance cost efficiencies by eliminating nonvalue adding and repetitive processes, automating data entry, ensuring workflow benefits for customers and suppliers.

In line with Expolanka’s more focused vision of growth, the leisure sector operations have become more focused with a view to expanding its core operations of corporate travel & ticketing. Whilst doing so, we were able to develop both outbound and inbound business operations during the year. This approach is our starting point to become a full-service leisure operation and will augment our core business. We believe that we have great growth opportunities in our chosen market and while experiencing some industry related challenges particularly in the procurement function, our leisure operation has recorded a commendable performance for the year under review.

Profits from the leisure sector grew by 24%, accounting for 11% of total Group profit after tax. This growth is again, from the expansion of existing business and the addition of new business. In addition, Classic Travel also entered the inbound tourism market. Again, we have been able to leverage our network and tacit knowledge.

Meanwhile, continuing our sustainable growth objectives, Classic Travel has opted to become carbon neutral by purchasing Sri Lanka Certified Emission Reduction (SCER’s). This move supports our obligations under the UNSDGs.

Classic Travels’ unique selling proposition is its wide service portfolio which includes augmented services such as visa solution, insurance solutions, and other services, which offers the highest efficiency and convenience for business travellers. I believe we have been quite successful in this regard as we have been designated ‘official travel partner,’ by some large corporate customers in Sri Lanka. Please refer to the leisure sector review for further performance details.

Our investment sector operations have performed reasonably well, with our export operation consolidating its business across its portfolio, whilst the IT services & the corporate office functions focused on value creation across the group.

Future outlook and plans

Advances in global trade generally align with global GDP growth, which is expected to be modest in the new financial year as well. According to the World Bank’s Global Economic Prospects published in January 2019, global GDP growth is expected to moderate to 2.9% during 2019, from the 3.0% growth of 2018. However, regional variations in growth are anticipated, with the Far East and the Indian subcontinent leading the thrust of this forward momentum. However, protectionist policies and trade tensions are elevated, particularly between the US and China. Although trade tariffs are a threat to global growth, our geographical diversification and strong presence in various jurisdictions allow us to take advantage of the possible shifting in manufacturing of certain countries. However, the tangible effects of these shifts may take years to witness. In all probability, we may observe more regionalisation with products being manufactured closer to the end market opening up opportunities for regional and domestic logistics services.

Air and sea freight will continue to face challenges in the new financial year. In addition, new regulations on ship emissions that are pending for 2020 will add to cargo transport costs, on top of volatility in oil prices. However, I believe EFL’s strategic global locations will allow us to capture a share of any fallout from the main trade routes.The air freight market is also expected to grow at a slower pace in 2019. EFL will be monitoring these external developments and will leverage its supply chain relationships to maintain competitive pricing and flexible facilities.

Expolanka remains optimistic about its future in navigating through these challenges due to its nimble and efficient organisation culture. Diversification of geographical exposure, strong customer relationships, in-depth local knowledge in respective stations, and focused verticals, will provide us with a strong framework to face any challenge.

Backed by the strong gains that have cumulated from our global presence during the current financial year, we are poised for sustained growth in the new financial year. We are now ready to step up our business to the next level and are equipped with the correct combination of skills, technologies, and supply chain improvements to drive a faster pace of growth. During the new financial year, we will leverage our ERP system for operational efficiencies, cost benefits, and customer convenience and we will continue to invest in extending and enhancing the level of sophistication of our technologies to carve out a solid competitive advantage.

A key strategic priority for the new year will be to leverage our technological capabilities to support business growth to become a total logistics service provider, based on a digital platform. Ongoing investments into our systems and processes, years of experience, and international brand recognition within the global logistics sector, makes this a viable proposition in the short term.

We at Expolanka are acutely aware of the rapid pace of innovation taking place in the logistics space that we operate in. As a forward-looking organisation, we understand the importance of being nimble, agile, and innovative. The key drivers of change that will impact our industry in the future, we believe, are technological innovations. Therefore, we need to understand these and adopt them into our business model, transforming them into enablers that strengthen us with competitive advantages.

Considering the operating environment, customer requirements, and our own strategic goals, our digital strategy should prioritise increased visibility, improved efficiencies, process automation, increased intelligence, and supply chain integration and optimisation.

Therefore, Expolanka is undertaking in-depth research into aligning our digital strategy with the priorities discussed above. We believe this will make us a far more efficient, global, and competitive logistics solutions company.

Business expansion in terms of establishing a strong presence in key growth markets across the globe will remain a priority in the new financial year and will contribute towards our competitiveness and operational efficiencies. We are already present in most major trade centres in the world and will continue to establish our presence in emerging locations based on the dynamics of global trade.

We further hope to undertake market diversification initiatives which will continue, to enhance revenues and also to realign the risk portfolio by diluting EFL’s concentration on the apparel sector. Hence, we are strengthening our network and building competencies to support the verticals of the future.

Procurement would be focused on further to unlock the efficiencies and economies of scale we possess. We will continue to improve on our carrier space procurement and pricing efficacy.

I believe our leisure venture Classic Travel is also poised for strong growth over the medium term as we expand into new markets and consolidate in existing markets. A number of new markets have been earmarked and will be developed within the new two years. The B2B focus will be retained as we offer a specialised product tailored for business travellers. Marketing our unique value offering will be a priority to raise awareness about the extent of value-added services offered by Classic Travel.

Despite the foreseeable challenges, we have the capability to unlock value in the future by utilising the key strengths of our global network, our management personnel and their expertise, diversity of people, a diverse product range which include air freight, sea freight, transport, brokerage, and other specialised services. These strengths will enable us to provide unique and customized solutions for our customers that will support continued value creation into the future.

Appreciations

As we continue to forge ahead towards our collective vision, I would like to record my appreciations for the year we have concluded so successfully. Throughout the ups and downs of the year, the Chairman and Board have maintained confidence in me to extend all the support they can, while also strengthening our decision making with unique insights. I appreciate this leadership and I look forward to their continued support in the new financial year. The management and staff have been my strength and ensured that our strategies are deployed at ground level to achieve our targets. I fully acknowledge their hard work at all levels and I look forward to another productive year with all of you. I also extend my appreciation to our customers, investors, bankers, suppliers, and business associates for their support during the year and I hope to serve you better in the new financial year.

Hanif Yusoof Group CEO

Group Performance

Group Performance

2018/19 Rs. Mn. 2017/18 Rs. Mn. % Change
Revenue from contracts with customers 95,455 77,533 23.1%
Earnings Before Interest and Taxes (EBIT) 3,313 1,901 74.3%
Finance Cost (240) (232) 3.3%
Profit Before Tax(PBT) 3,073 1,669 84.1%
Profit After Tax(PAT) 1,909 962 98.5%
Total Assets 33,597 28,708 17.0%
Total Equity 15,787 14,028 12.5%
Total Debt 5,332 4,204 26.8%
Return on Capital Employed (ROCE) 10.17% 6,55% 3.6%
Return on Equity (ROE) 12.09% 6.85% 5.2%

Contribution to the Group

Turnover EBIT Capital Employed Equity
Logistics 95% 105% 83% 90%
Leisure 2% 9% 6% 5%
Investment 3% -14% 11% 5%
100% 100% 100% 100%

Sustainability Strategy

Expolanka Group Sustainability Strategy

The Expolanka Group sustainability strategy has been developed in line with the Group’s vision for the future and also to accommodate the UN SDG expectations from corporates. Our key objective is to ensure sustained and sustainable value creation for all stakeholders through greater accountability, not only towards financial growth, but also towards the environment and wider society. The Group vision is cascaded down to all the companies in the Expolanka Group and is also operationalised at all operational locations through a framework of strategic drivers.

As our core business and the largest economic entity within the Expolanka Group with a growing global footprint, EFL plays a key role in operationalising our sustainability strategy. Therefore, the sustainability focus for the financial year was to operationalise SDG’s at different EFL locations while responding better to customer perceptions and expectations of sustainability.

Following an in-depth study to identify what customers consider as material sustainability issues for their freight partner, the EFL materiality map was reconstituted, with a stronger stakeholder and sustainable growth perspective.

Sustainability Governance [GRI 102-18]

In addition to our policies, we also have in place an integrated sustainability governance model to strengthen our overall framework. At the highest-level, the Chairman and CEO provide sustainability stewardship and guidance, while the Sustainability and CSR team identifies, assesses and implements Expolanka’s corporate sustainability agenda and ensures best practices are followed in the day-to-day execution of these strategies.

Spearheaded by the Chief Administration Officer along with the Sustainability Lead, the team is also tasked with maintaining a transparent reporting framework that provides stakeholders with information regarding the progress made in achieving sustainability goals.

Committed to our teams and communities

  • Ensure our employees are dedicated and engaged
  • Ensure the health and safety of our employees
  • Support employee diversity and inclusion

Delivering with the highest standards

  • Protect data privacy
  • Uphold social and environmental standards with our suppliers
  • Uphold the highest ethical standards in the way we operate

Logistics sustainable and simplified

  • Offer green solutions to our customers
  • Reduce our own and freight Green House Gas Emissions

SECTORS | Logistics

Product Mix Highlights 2017/18 Strategy
  • Air Freight
  • Sea Freight
  • Logistics
  • Warehousing
  • Transportation
  • General Sales Agents (GSA)
  • Strong Growth in volume across all key products
    • Air Exports - 10%
    • Air Imports - 18%
    • Ocean Exports - 18%
    • Ocean Imports - 9%
  • Expanding operations in all trade lanes
  • Full deployment of the ERP system across the largest entities
  • Further value additions to customers
  • Harness technology solutions for business expansion
  • Expand existing customer wallet share
  • Acquire new customers
  • Diversify by expanding our vertical portfolio
  • Optimise Supply chain
  • Optimise trade lane performance to drive profitability

Revenue

  • 100,000
  • 80,000
  • 60,000
  • 40,000
  • 20,000

EBIT & NP

  • 4,000
  • 3,500
  • 3,000
  • 2,500
  • 2,000
  • 1,500
  • 1,000
  • 500
  • EBIT
  • Profit for the Year

EFL operates as a freight forwarder and competes in the logistics industry.

As one of the fastest growing logistics services providers in South Asia, EFL’s global footprint is expanding rapidly every year and currently encompasses 60 + locations in 18 countries. Our growth has created value to communities across the globe through direct employment generation, indirect livelihoods and logistics connectivity for buyers and manufacturers. As at end March 2019, the logistics sector workforce comprised of 2,578 employees with many more support service providers. Our operations ensure uninterrupted trade connectivity between major consumer markets in the US and Europe, and manufacturing centres in Asia, Africa and the Middle- Eastern regions.

As we continue to expand our presence, we have upgraded our systems and skill base to bring us closer towards our objective of evolving into a global fourth-party (4PL) logistics services provider through expansion of our physical infrastructure, service portfolio and global reach.

EFL Global

Industry Performance

The financial year 2018/19 saw EFL expand and consolidate its operations across its global network with volume growth in air freight and sea freight across almost all major trade lines, despite a fairly volatile year for global trade.

The International Air Transport Association (IATA ) stated that global air freight markets, measured in Freight Tonne Kilometers (FTKs), grew by 3.5% compared to 2017/18. EFL managed to increase its volumes by approximately 10% & 18% for Air Freight Exports and Imports respectively. Air cargo demand lost some momentum towards the end of 2018 in the face of weakening global trade, lower consumer confidence and geopolitical headwinds. Freight capacity, however, grew by 3.8%. This was the tenth month in a row that year-on-year capacity growth outstripped demand growth at 3.5% compared to 2017/18. However, IATA is optimistic that demand will grow in the region of 3.7% in 2019.

Airlines in all regions, with the exception of Africa, reported an annual increase in demand in 2018. Asia-Pacific carriers posted the weakest growth with a decrease in demand by 4.5% compared to the same period a year earlier, while capacity increased by 2.6%. North American airlines posted the fastest growth for the seventh consecutive month in December 2018 with an increase in demand of 2.9% year-on-year and had a capacity increase of 4.5%. European airlines posted a 1.9% year-on-year increase in freight demand in December 2018 and a capacity rise of 3.7%. Weaker manufacturing conditions for exporters, particularly in Germany, one of Europe’s key export markets, along with mixed economic indicators impacted demand in 2018. Meanwhile, in the Middle East, air freight volumes increased 0.1% year-on-year in December and capacity increased 4.5%. This contributed to an annual increase in demand of 3.9% in 2018 - the third fastest growth rate of all the regions.

Trade wars between the USA and a few countries and blocs prompted the WTO to revise the world merchandise trade volume’s growth forecast to 3.9% in 2018. China, Republic of Korea and Japan led the world’s shipbuilding activities accounting for around 90.5% of global deliveries. Greece, Japan, China and Germany led the world in terms of fleet ownership, together accounting for around 44.2% of the world’s fleet. India, Bangladesh and Pakistan continue to lead the world in the dangerous and labour intensive work of ship scrapping. North America had the fastest export growth in global trade in 2018, Asia had the strongest import growth while resource-based economies faced a struggle.

World seaborne trade is projected to expand at a rate of 3.8% between 2018 and 2023 as volumes across all segments are set to grow, with containerised and dry bulk commodities trade expected to be the best performers. As per WTO reports, trade volume growth should slow down to 3.7% in 2019 as global GDP growth dips to 2.9%. While rising trade tensions pose the biggest risk to the forecast, monetary policy tightening and associated financial volatility could also destabilise trade and output. Current trade-related indicators show a loss of momentum, including global export orders and economic policy uncertainty. The industry may face some volatility from uncertain Brexit negotiations, and Indian sub-continent geo-political regional instability. Also certain disruptions may occur from e-commerce and digitalisation.

Logistics Performance

The current financial year saw our logistics sector surge ahead carving through global turbulences to achieve highly commendable financial results across the network. The sector recorded a revenue of Rs. 90.95Bn, which is a growth of 25% year on year demonstrating the effectiveness of the sector blueprint in driving the topline, while containing the middle-line through efficiency and productivity gains that have cumulated through years of investments into digitalisation and supply chain optimisation.

With regards to import and export trade volumes, EFL recorded a 18% year on year growth in both sea exports and air imports, while air exports and sea imports have increased by 10% and 9% respectively. Against this growth, the sector achieved a gross profit growth of 26%, while sea imports achieved a 35% growth in gross profit. Air imports also recorded a 24% growth in gross profits while sea exports recorded a 6% increase.

While pushing its business volumes, EFL also maintained exceptionally high standards of customer care, reliability and convenience that has enhanced the EFL brand visibility among US apparel brands.

EFL’s Trade Lane-wise performance

The logistics sector has in the current financial year, recorded robust growth from its business activities across its global footprint, while also extending its reach further into key international markets.

Business volumes have increased from almost all of trade lanes, amply demonstrated by the growth in import and export trade volumes. Exports from Asia and the Middle East grew by 17% and exports to Europe, increased by 3%. Exports to other markets on the other hand experienced a 30% growth to a total 21% growth in exports year on year. When it comes to imports, Asia and the Middle East, which accounts for the majority 83% of value in terms of share of gross profit, surged ahead by 38% year on year and imports into Africa moved up by 19% for an average 28% growth in imports across all trade lines.

Strategy and Focus

In line with the long term vision of becoming a global 4PL player, EFL continued to strengthen its strategic location of offices, while acquiring new customers and also gaining wallet share from existing customers. Our global customer base has both expanded, to include new customer and market segments, and deepened by capturing a larger share of business volumes from existing international brands, particularly from the Far East. The strategy for EFL’s stronghold in South Asia remained unchanged, where the focus was to strengthen core capabilities and enhance the Company’s profile in the integrated logistics sphere. Advances in these targets have opened up opportunities into other fast-growing verticals, including Technology, and retail.

While enjoying a highly successful year in its Far East operations, EFL’s solid reputation for reliability was used to attract new businesses and expand market share. Country-specific strategies were deployed in other East Asian origin markets where EFL already has a presence, namely the Philippines, Vietnam and Indonesia. In these countries, the main strategic thrust was to develop the existing customer base for higher volumes of frequency of business. In addition, the company continued to open new stations in strategic trade locations across the globe for a stronger foothold on existing and emerging trade routes.

Overall, the expansion efforts by the logistics sector has contributed towards positive gains in brand recognition and brand visibility, positioning EFL on a more competitive footing at a global scale. The logistics sector’s business growth during the current year is indicative of its international reputation, which is backed by a long standing reputation for reliability and trustworthiness in the logistics trade and among apparel brands.

A strategic imperative during the year was to extend the logistics sector supply chain infrastructure globally and to support this objective the sector invested in accessing warehouses across geographic locations, setting up container freight stations in key localities, expanding trucking facilities, managing charters, and strengthening relationships with carriers. In Sri Lanka, EFL’s Global Freeport facility played a key role in driving regional gains, while supporting the country’s international trade development plans as well.

A major boost for the logistics sector’s future growth was the global deployment of the CargoWise ERP system in the current year. The system offers an integrated ICT platform across the diverse logistics functions covering all operational locations which has significantly enhanced supply chain visibility. This has in turn, translated into better and more informed decision making and faster response times that will make EFL even more flexible towards customer requirements. The uniform system across all EFL offices also makes it easier for customers to communicate with EFL locations and to access relevant data regarding their shipments. Therefore, the system will provide a strong competitive advantage for the logistics sector through enhanced customer convenience and trust. The impact of the CargoWise system will be felt across the value chain by leading to process improvements and significant cost savings by eliminating non-value adding and repetitive processes, automating data entry, ensuring workflow benefits for customers and suppliers and also opening up the possibility of offshore processing centers. The greater visibility afforded through a single integrated system will contribute towards optimising data more effectively to support market trend analysis and decision making. Cost benefits will also accrue through the potential to control the rapid increase in staffing needs and by making it possible to reduce information and technology application costs.

Surging forward with its expansion strategy during the year, EFL also strengthened its new market segments of electronics and retail. These segments could provide rapid growth in the new financial year with the backend support systems now coming into operation.

Outlook and Prospects

Our carefully selected geographical operational locations, strong customer relationships have been built on tried and tested trust, in-depth local knowledge in respective stations, and focused verticals, provide us with a strong framework that is both resilient and hardy. Through our ubiquitous ability to evolve and our nimble and efficient organisation culture, EFL has emerged stronger and better equipped to surmount any challenges that may arise as we continue forward in our strategic route map. We are now poised and ready to step up our business to the next level and we are equipped with the correct combination of skills, technologies and supply chain improvements to drive a faster pace of growth.

Focused on our end objective and looking forward at our future journey, we understand the importance of being nimble, agile and innovative. In this context, the revolutionary force driving industry change in a global scale, is technology. Therefore, our logistics operation will continually monitor technology trends and will emphasize technology adaptation into the logistics business model with a strong future sustainability focus. During the new financial year, we will leverage our ERP system for operational efficiencies, cost benefits and customer convenience and continue to invest in extending and enhancing the level of sophistication of our technologies to carve out an unparalleled competitive advantage at a global scale. Considering the operating environment, customer requirements and strategic goals, our digital strategy will prioritise increased visibility, improved efficiencies, process automation, increased intelligence and supply chain integration and optimisation.

Operating within a global paradigm, we will focus on leveraging our technological capabilities to strengthen our offerings in consultancy based logistics, on a digital platform. We are confident of achieving this objective significantly rapidly due to the ongoing investments into systems and processes, years of experience and international brand recognition within the global logistics sector.

Our logistics business has already made a mark in most major trade centres in the world. As we accelerate our growth strategy deployment, we will strengthen our presence in emerging trade hubs based on the dynamics of global trade, which will contribute towards our competitiveness and operational efficiencies.

Managing our external market risk elements is essential to sustain long term growth and in this regard the logistics sector will continue to diversify its business portfolios in order to reduce concentration risk in the apparel sector. We have already made headway in this regard and will continue to expand our non-apparel portfolio by growing the technology and retail customer segments.

Sustaining topline growth is highly dependent on procurement speed and efficiency and we will target growth over the next year. The effectiveness of our procurement strategy will be key to support volume growth and business diversification into providing logistics services for technology brands.

While pushing ahead with our strategic objectives, we will remain continually vigilant of new and emerging opportunities in the logistics industry that would add to customer value and extend EFL’s service portfolio. With our sights firmly set on our goals and a clear strategic route map charted, the Group’s logistics sector is gearing for growth that will create value for all stakeholders concerned.

EFL’s warehousing operation is an essential component of the company’s logistics business in providing secure, safe and economical storage of goods, inventory and information. It has been an area of focus for strategic realignment with the aim of optimising the sector’s contributions towards the overall long terms vision for EFL as an emerging global logistics brand.

Strategy and Focus

With its value proposition clearly defined during the current year, the warehouse sector continued to consolidate on its existing strengths, while also expanding warehouse space in new locations in strategically important points of the logistics chain.

The warehouse sector holds the key strategic objectives of supporting the overall logistics operation by expanding existing customer wallet share via ensuring storage for higher volumes, increased frequency of services, and through the provision of customised storage services. An additional sector priority is to accommodate new customer segments to enhance overall revenues through new revenue generating opportunities.

Digital technologies and automation are changing the face of the logistics sector globally, and the warehousing sub-sector is an integral aspect of this digital supply chain. EFL warehousing is fully cognisant of the immense efficiency gains that can be unlocked through the correct technology applications which has led to us continuing to improve our technology platforms.

Warehousing Performance

The sector maximized benefits from the Tier 1 Highjump software and warehouse management system, which was rolled out fully across all five facilities already on the network in the previous year, by recording continued efficiency improvements. One of the best warehouse management platforms in the market, the advanced visibility dashboards offered by the Tier 1 Highjump software has enhanced service visibility and convenience for customers and enabled improved cost efficiencies, while also facilitating the delivery of a range of value-added services to customers.

As the apparel industry is the largest customer of the logistics sector and is one of the biggest industries within the region, the warehousing sector was mainly active in providing warehousing solutions for apparel brands. However, warehousing services to other sectors such as Retail and Technology sectors also made clear advances during the year and the successful handling of these goods have now established the EFL brand within a broader clientele. The portfolio diversification contributes towards rebalancing the sector risk profile, while creating a scalable platform to position EFL as a fully-fledged 4PL service provider.

The EFL Global Freeport, the country’s first free port operation made strong progress during the year with a 32% increase in revenue.

Outlook and Prospects

The growth in global trade, coupled with our strategic locations, technological systems, specialised services and growing customer base, has created a highly conducive environment for growth of the warehousing sector. The diversification of customer and market segments to cater to other segments as well as the existing apparel customer base, has opened up new revenue streams that can be expected to grow in the new financial year. To accommodate this we have built strong teams with technical skills to focus on a solution driven service. We are confident of achieving this target through our asset light model, which enables greater flexibility and better risk management.

While pushing organic growth, the cluster will seek to grow inorganically, tapping into opportunities to widen its reach in other fast-growing sectors of the economy, while maintaining unwavering focus on productivity and efficiency gains.

AIRLINE GSA

EFL is a designated general sales agent (GSA) for a number of top airlines in the region and has built up strong relationships on the air carrier front to support logistics expansion and efficient and fast cargo delivery for clients positioned throughout the globe.

GSA Performance

The Airline GSA segment saw strong growth during the year with revenues moving up, under EFL’s multi-country GSA model. The sector achieved a bottom line growth with a sustained emphasis on streamlined cost management and efficiency gains through system improvements.

We continued to consolidate existing partnerships in key markets, namely Sri Lanka, Pakistan, Bangladesh, the Maldives and India. In addition, brand visibility was enhanced across regions to enhance overall competitiveness and brand awareness.

Outlook and Prospects

EFL’s airline GSA business is a growing component of the logistics value chain with high growth potential and has continually strengthened its operational base to support overall corporate vision. We are now a more streamlined and focused operation with the requisite support infrastructure implemented to sustain strong growth by enhancing scalability of the operations. We already have a customer base in South Asia with long standing relationships which will be leveraged in the new financial year for business volume growth, while in tandem, expanding the global footprint in partnership with reputed carriers who are increasingly seeking GSA partners with a proven track record. We will also develop customised solutions and greater value added services to maintain strong growth of the topline.

Logistics 2018/19 Rs. Mn. 2017/18 Rs. Mn. % Change
Revenue 90,953 72,996 25%
Earnings Before Interest & Taxes (EBIT) 3,472 2,152 61%
Finance Cost 162 145 11%
Profit Before Tax 3,311 2,007 65%
Profit After Tax 2,207 1,350 63%
Total Assets 29,366 24,650 19%
Total Equity 14,262 12,394 15%
Total Debt 3,411 3,087 11%
Capital Employed 17,674 15,481 14%
Return on Equity 15.5% 10.9% 42%
Return on Capital Employed 13.4% 9.7% 39%

Turnover 95%

EBIT 105%

Capital Employed 84%

SECTORS | Leisure

Product Mix Highlights 2018/19 Strategy
  • Outbound Corporate Travel & Leisure
  • Inbound Leisure and Corporate Travel
  • Destination Management Services
  • Revenue and profit growth
  • Expanding operating base and reach
  • New products and services
  • Increase value added service portfolio
  • Continued brand enhancement
  • Expand from outbound to full service provider for B2B category
  • Explore market expansion initiatives
  • Expand business volumes
  • Improve cross selling opportunities.

Revenue

  • 1,500
  • 1,200
  • 900
  • 600
  • 300

EBIT & NP

  • 350
  • 300
  • 250
  • 200
  • 150
  • 100
  • 50
  • EBIT
  • Profit for the Year

Since its origins in 1994 Classic Travel has built a solid market reputation as a specialist in corporate travel in Sri Lanka and the region. With a proven track record for holistic end-to-end solutions designed for the corporate sector, Classic is a premier corporate travel agency in Sri Lanka with a large and growing clientele of top blue chip corporates. The company has now expanded its business scope into inbound as well as outbound travel, MICE tourism and also offers a range of services in project management, logistics, accommodation, and event management.

Strategy and Focus

A large player in the leisure segment in the country, Classic Travel, leverages on core strengths of brand reputation and market experience, while also expanding the growth horizon into a full service leisure operation by growing both outbound and inbound tourism within the Corporate travel segment. Customer services is and has always been given prominence in our Leisure sector. Within this much broader strategy map, Classic Travel has recorded a robust performance for the year despite a challenging environment that caused some obstacles on the procurement end.

We have continued to focus and grow, expanding our operations during the year. Our focus is the Corporate travel business, and we have re-allocated resources to more profitable and suitable businesses.

Performance

The sector reported a revenue growth of 9% year on year, from Rs 1.26 Bn to Rs 1.38 Bn which by the astute expansion of top line by capturing more business from existing customers and also rapidly growing the customer portfolio for a large slice of new customer revenues. Total turnover was boosted by Classic Travel’s focused approach adopted throughout. With this upward trajectory in topline, the profits from the leisure sector grew by 24%, reaching Rs 208 Mn from Rs 169 Mn in the previous year.

While maintaining a well targeted branding and marketing drive, a highlight of the year was the launch of a customised and highly specialised travel product for government servants under the sub-brand Kalaguna. This an innovative product under the Classic brand and is designed to provide customised travel services for all Sri Lanka government personnel. The unique feature of the product is that it provides access to a bundle of travel services on the basis of a valid ministry identification card and eliminates all red tape and hassle generally associated with travel procedures, which saves both time and money and enables rapid movement.

The Corporate business travel segment meanwhile, was broadened and deepened through a well structured communications strategy to raise awareness among the business sector regarding the exceptional value created for businesses by the company. Classic offers a full range of services for Corporate business clients that ensures the most convenient flights and connections and takes on all visa procedures to ensure a safe and easy trip for business travellers.

Following these awareness raising activities, some large corporate customers in Sri Lanka have already designated Classic Travel their ‘official travel partner’.

The company continued to add value to its service portfolio to differentiate the “Classic” product from the competition and the VIP customer service center at the BIA for Classic’s outbound travelers, has been highly appreciated by our clients.

The increased technology focus was extended to the leisure sector to increase competitiveness through cost efficiencies and higher levels of customer convenience in both inbound and outbound travel segments

Outlook and Prospects

As the global tourism landscape becomes even more competitive, we are optimistic regarding the growth possibilities of our leisure sector business where we can leverage our core strengths and expertise to the maximum to capture market opportunities. While remaining within the Corporate category of travel and tourism, we will continue to develop our businesses within this category by enhancing scalability through technology integration, business volume growth and process improvements. Whilst technology may play a leading role in our business, the personalised touch and customer care which are our main strengths would help us thrive and be relevant in the industry.

Leisure 2018/19 Rs. Mn. 2017/18 Rs. Mn. % Change
Revenue 1,375 1,262 9%
Earnings Before Interest & Taxes (EBIT) 303 247 23%
Finance Cost 25 39 -36%
Profit Before Tax 279 209 34%
Profit After Tax 208 169 24%
Total Assets 1,769 1,557 14%
Total Equity 734 620 18%
Total Debt 429 205 110%
Capital Employed 1,164 825 41%
Return on Equity 28.4% 27.2% 4%
Return on Capital Employed 20.1% 25.1% -20%

Turnover 2%

EBIT 9%

Capital Employed 6%

SECTORS | Investments

Product Mix Highlights 2018/19 Strategy
  • Export of
    • Desiccated coconut
    • Selected fruits and vegetables
  • Value added processing
  • IT Solutions
  • Consolidate multi sector sourcing model for coconut.
  • Re-organise organic fruit operations to reduce risk concentration
  • Enhance value adding.
  • Harness new technologies
  • Optimise operation with enhanced business model
  • Consolidate value added process operation
  • Confine restructure of non-core investments.

Revenue

  • 3,500
  • 3,000
  • 2,500
  • 2,000
  • 1,500
  • 1,000
  • 500

EBIT & NP

  • (100)
  • (200)
  • (300)
  • (400)
  • (500)
  • (600)
  • EBIT
  • Profit for the Year

Our Investment sector performance improved during the year, due to lower administration costs being recorded, mainly in the Holding company. The Investment sector includes Holding company costs as well as the Export & IT businesses.

Performance Summary

Total export buiness revenues increased by 3% to Rs 3.08 Bn from Rs 3.00 Bn in 2017/18 and sector profitability increased to Rs 61Mn from Rs 29 Mn.

Desiccated coconut (DC) production decreased by 16.7% in 2018/19 against 2017/18 and exporters were unable to harness the full benefit of increased prices due to lower domestic production, as reflected by the decline of around 28% in DC exports during 2018/19. However, the company’s multi-origin sourcing model was extremely successful in cushioning this downturn by obtaining DC from other sources such as Indonesia, which made it possible to meet demand growth.

The Organic coconut export segment, which exports mainly ‘Organic’ coconut-based products including Virgin Coconut Oil, Coconut Milk, Cream etc. continued to benefit from premium prices and the segment recorded modest revenue growth.

Strategy and Focus

Our highly effective multi-origin trading model was further streamlined and expanded during the year to address potential market risk factors and to enable sustainable growth in supplies.

The rationalisation of the fresh fruits and vegetable product portfolio by limiting exports to a few high demand products has been most effective in optimising cost-benefit aspects of this category.

The “Tropikal” range of organic dried fruits have done significantly well in the US and European markets and will be promoted further in the new financial year.

The dedicated Coconut Water processing plant in Seeduwa came into full commercial operation during the current year contributing towards overall sector topline. As an essential aspect of good agricultural practices, we continued to research on new techniques and approaches to strengthen our agricultural management system.

A significant improvement has been to obtain the ISO 22000, FSSC 22000 and BRC Global Standard which demonstrates our international quality standards and food safety standards.

Outlook and Prospects

The ban on fresh coconut exports was lifted in September 2018 which has once more improved the outlook for coconut exports. The forecast for the DC trading operation remains optimistic, particularly given the encouraging signs seen towards the end of the current financial year indicating a greater availability of DC in Sri Lanka. Nonetheless going forward, the prospects of the trading segment would largely depend on the successful management of the multi-origin sourcing model, for both export of fresh coconut and DC exports.

While the fruit and vegetable (fresh as well as dried) export business is set projected to maintain growth into the future on the back of global demand for organic and high quality natural produce, we will continue to incorporate new technologies and modern methodologies to improve our systems and ensure gains on scalability while benefiting from efficiency gains and ensuring the highest standard of food safety.

ITX 360

Operating Context

Inflows to computer and information services in Sri Lanka grew from US dollars 786 million in 2017 to US dollars 848 million in 2018.

In a landmark move, Sri Lanka unveiled the national brand for the Sri Lankan Information and Communication Technology and Business Process Management (ICT/BPM) sector with the tagline, “Island of Ingenuity - Sri Lanka Knowledge Solutions” in April 2018. This move showcases commitment at national level to support the development of the ICT sector in Sri Lanka. The national vision is to make Sri Lanka the ‘Digital Gateway to Asia’.

Performance

Profitability impact of this unit on the total investment sector is minimal as Revenues and profits are minor.

The Expolanka Group’s IT arm ITX360 made strong advances during the year towards supporting the Group’s strategic objectives by providing highly specialised ICT technical support services for the logistics, leisure and investment sector companies. Through its strategic connections and partnerships within leading players in the global IT industry, the Company maintained its uniquely insightful position on the pioneering edge of the software with access to the latest cutting edge software advances and applications, and also cost benefits on proprietary software. Backed by an unparalleled knowledge of the latest advances in software systems, ITX360 was able to retail exceptionally high quality and customised software solutions for the market that summoned premium prices.

Investments 2018/19 Rs. Mn. 2017/18 Rs. Mn. % Change
Revenue 3,126 3,275 -5%
Earnings Before Interest & Taxes (EBIT) (463) (499) -7%
Finance Cost 53 48 11%
Profit Before Tax (516) (547) -6%
Profit After Tax (506) (557) -9%
Total Assets 2,462 2,501 -2%
Total Equity 791 1,014 -22%
Total Debt 1,491 912 63%
Capital Employed 2,282 1,926 -18%
Return on Equity -64.1% -54.9% 17%
Return on Capital Employed -19.9% -26.4% -25%

Turnover 3%

EBIT -14%

Capital Employed 11%