31. Cash Generated from Operations
Reconciliation of profit before tax to cash generated from operations:
| |
Group |
Company |
| |
2008 |
2007 |
2008 |
2007 |
| Profit before tax |
9,560 |
8,399 |
8,772 |
8,131 |
| Adjustments for |
|
|
|
|
| Depreciation (Note 15) |
10,431 |
10,220 |
8,210 |
8,884 |
| Amortisation of grants |
(7) |
(7) |
(7) |
(7) |
| Amortisation of intangible assets (Note 16) |
332 |
196 |
136 |
94 |
| Interest expense and finance costs (Note 10) |
2,130 |
2,232 |
1,202 |
1,363 |
| Interest income (Note 11) |
(1,279) |
(1,286) |
(1,208) |
(1,239) |
| Connection fees less amortisation (Note 24) |
(197) |
(446) |
(607) |
(681) |
| Profit on sale of property, plant & equipment |
(15) |
(15) |
(21) |
(15) |
Provision for insurance reserve net of
interest income (Note 27) |
32 |
21 |
32 |
21 |
Retirement benefit obligations net of benefits
paid (Note 26) |
(112) |
387 |
(128) |
369 |
| |
20,875 |
19,701 |
16,381 |
16,920 |
| |
|
|
|
|
| Changes in working capital |
|
|
|
|
| - receivables and prepayments |
(1,310) |
(86) |
(903) |
(216) |
| - inventories |
(1,107) |
(57) |
(957) |
(48) |
| - payables |
2,004 |
2,445 |
250 |
1,198 |
| Cash generated from operations |
20,462 |
22,003 |
14,771 |
17,854 |
| |
|
|
|
|
32. Commitments
Capital commitments
The Group/Company has purchase commitments in the ordinary course of business as at 31 December 2008 as follows:
| |
Group |
Company |
| |
2008 |
2007 |
2008 |
2007 |
| Property, plant & equipment |
|
|
|
|
| - approved but not contracted |
8,266 |
9,888 |
8,266 |
9,888 |
| - approved and contracted |
11,219 |
6,707 |
5,610 |
3,077 |
| |
19,485 |
16,595 |
13,876 |
12,965 |
Operating lease commitments
The future minimum lease payments under operating leases are as follows:
| |
Group |
Company |
| |
2008 |
2007 |
2008 |
2007 |
| Later than one year and not later than five years |
207 |
173 |
207 |
173 |
| |
|
|
|
|
Other financial commitments
Except for any regular maintenance contracts entered into with third parties in the normal course of business, there are no other material financial commitments that require separate disclosure.
33. Contingencies
(a) The Department of Inland Revenue issued assessments for the years of assessment 1993/94 and 1994/95 charging tax, on deemed dividend, based on book profits of the Company. The Company appealed against those assessments, on the ground that deemed dividend tax should be calculated on tax adjusted profits. The total liability for years of assessment 1993/94 and 1994/95 as per the said assessments, amounts to Rs. 643 million.
Accordingly, this appeal was referred to the Board of Review for hearing and the Board of Review confirmed these assessments. However, the Company has appealed against the Board determination to the Court of Appeal.
(b) Global Electroteks Limited has initiated legal action under High Court Case No. 20/2005 claiming damages of USD 12 million from SLT PLC for unlawful disconnection of interconnection services.
(c) Directories Lanka (Pvt) Limited (DLPL) filed case No. 2/2006 (3) in Commercial High Court against SLT claiming Rs. 250 million, damages for unfair competition with regard to Artwork on the cover page of SLT Directory Publication.
(d) With regard to cases detailed above, pending the outcome of the appeals, no provisions have been recognised in the financial statements up to 31 December 2008.
(e) In addition to the above referred cases, there are more litigation issues in relation to claims by employees and third parties for damages. In the opinion of the Directors none of these actions is likely to result in a material liability to the Company and its subsidiaries.
34. Business combinations
On 16 May 2008, the Company acquired 75% of the stated capital of Sky Network (Pvt) Limited,
a licensed company for the Wi-max operations in Sri Lanka. The acquired business made a loss of
Rs. 10,344,592 to the Group for the period from 16 May 2008 to 31 December 2008. If the acquisition had occurred on 1 January 2008, Group profit before allocations would have been Rs. 7,360 million.
These amounts have been calculated using the Group’s accounting policies.
Details of net assets acquired and goodwill are as follows:
Purchase consideration:
| - Cash paid |
108 |
| - Direct costs relating to the acquisition |
- |
| Total purchase consideration |
108 |
| Fair value of net assets acquired |
(102) |
| Goodwill (Note 16) |
6 |
| |
|
As per SLAS 25, Business Combinations (Revised 2004), the Company determined the fair values of identifiable assets and liabilities of the acquired company on a provisional value basis as at 31 December 2008 and the Company will recognise any adjustments to these provisional values as a result of completing the initial accounting, within twelve months of the acquisition date.
The goodwill is attributable to significant synergies expected to arise after the Group’s acquisition of
Sky Network (Pvt) Limited.
The assets and liabilities as of 16 May 2008 arising from the acquisition were as follows:
| |
Acquirees’ |
| |
Fair Value |
Carrying Value |
| Cash and cash equivalents |
- |
- |
| Licences (included under intangible assets) (Note 16) |
144 |
- |
| Trade and other payables |
(8) |
(8) |
| Net assets |
136 |
(8) |
| Minority interests (25%) |
34 |
|
| Net assets acquired |
102 |
|
| |
|
|
| Purchase consideration settled in cash |
108 |
| Cash and cash equivalents in subsidiary acquired |
- |
| Cash outflow on acquisition |
108 |
There were no acquisitions during the year ended 31 December 2007. |
