Agalawatte new owners report massive mismanagement under Nonis-led Mackwoods

Furniture manufacture Damro Group has called an Extra Ordinary General Meeting (EGM) next month to reveal to shareholders that their new acquisition, Agalawatte Plantations PLC was mismanaged by its original owners, the Nonis family-led Mackwoods.
In a statement to the Colombo Stock Exchange (CSE), Damro has said that the re-audit that was directed by Sri Lanka Accounting and Auditing Standards ( SLAAMB) last year to Agalawatte Plantations PLC showed that the net assets of thecCompany  and its group as at 31st December 2014 had become negative by Rs. 215.87 million and Rs. 130.53 million, respectively. 
The quarterly financial statements of the company prepared and published by the previous management for the year ended 31st December 2015 show losses of Rs 450 million and Rs. 405 million for the company and the group, respectively, which is expected to increase further with the re-audited negative net assets position of the company as at 31st December 2014 together with un-accounted liabilities detected following the re-audit, Damro has said. The draft accounts for the financial year ended 31st December 2016 are expected to report a further loss of about Rs 550 million for the company  before adjusting for fair valuation on consumable biological assets, the impairment of un-economical assets and accrual of unaccounted surcharges on unpaid statutory dues such as Gratuity, EPF and ETF joint contributions.
This has arisen as a direct result of misappropriation of company’s assets by the previous management of and pure negligence in maintaining the state owned assets leased to the company, the statement says adding that the overwhelming task of resurrecting the company by taking control of all the assets of the company  sub leased to group companies of the previous ownership, rehabilitating the neglected unfertilized plantations, re-opening the closed down factories, replacing the redundant unusable transport vehicle fleet, using the company  assets for the best use of the company , honoring the unpaid staff/workers’ and financial institutions’ dues, etc, is now lying in the hands of Damro.

“You, as the shareholders of the company would no doubt agree that the support of the regulators (i.e. the Ministry of Plantations Industries, Golden Shareholder and the Commissioner of Labour), lending institutions, the employees and the shareholders is imperative to make it a success. Therefore, the Directors of the company are proposing a debt: equity restructuring plan to resurrect the company, bearing in mind their responsibility for the livelihood of the 5,000 employees of the company and the 15,000 dependent families of those employees who solely depend upon the continuance of this company and the social responsibility towards protecting the public assets entrusted with the private sector.” 

Further, the value of certain assets appearing in the financial statements of 2014 need to be impaired in 2016 as these assets do not accrue any economic benefits to the company, the statement says.

“The cost of construction of a helipad at Labookellie Estate to accommodate the visit of a VVIP, which was never used by the company, at a value of Rs. 18 million, cost of construction of a Tea Museum at Labookellie to exhibit the private assets of the former chairman of the company, which has not given any economic benefit to the company, at a cost of Rs.106 million and cost of constructing a villa complex at Culloden Estate, which was never used for any economic benefit of the company  at a cost of Rs. 105 million by 31st December 2016 – all these did not accrue any economic benefit to the company. The accumulated losses of the company based on the draft financial statements as at 31st December 2016 is expected to be over Rs. 1.2 billion," the statement to the CSE says.

It adds that the total outstanding statutory liabilities, amounts due to banks and other financial institutions and the amounts due to trade and other creditors as at 31st December 2016 is expected to be over Rs. 3.3 billion.(DE)