Annual Report Annual Report 2016

158 Pages·2017·14.33 MB·English

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Attention
This report comprises the annual report of state trading organization plc prepared in accordance with the companies act of the republic
of maldives (10/96), listing rules of maldives stock exchange, the securities act of the republic of maldives (2/2006), securities continuing
disclosure obligations of issuers regulation 2010 of capital market development authority and corporate governance code of capital market
development authority requirements. Unless otherwise stated in this annual report, the terms ‘STO’, the ‘group’, ‘we’, ‘us’ and ‘our’ refer
to state trading organization plc and its subsidiaries, associates and joint ventures collectively. The term ‘company’ refers to STO and/or
its subsidiaries. STO prepares its financial statements in accordance with international financial reporting standards (IFRS). References to
a year in this report are, unless otherwise indicated, references to the Company’s financial year ending 31st december 2016. In this report,
financial and statistical information is, unless otherwise indicated, stated on the basis of the Company’s financial year. Information has been
updated to the most practical date. This annual report contains forward looking statements that are based on current expectations or
beliefs, as well as assumptions about future events. These forward looking statements can be identified by the fact that they do not relate
only to historical or current facts. Forward looking statements often use words such as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’,
‘plan’, ‘goal’, ‘believe’, ‘will’, ‘may’, ‘should’, ‘would’, ‘could’ or other words of similar meaning. Undue reliance should not be placed on
any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected
by other factors that could cause actual results, and STO plans and objectives, to differ materially from those expressed or implied in
the forward looking statements. There are several factors which could cause actual results to differ materially from those expressed or
implied in forward looking statements. Among the factors are changes in the global, political, economic, business, competitive, market and
regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. STO cannot
guarantee future results, levels of activity, performance or achievements.
CONTENTS
ENRICHING CUSTOMER CORPORATE GOVERNANCE &
6 63
EXPERIENCE COMPLIANCE REPORT
STO GROUP IN 2016 NOMINATION & REMUNERATION
7 65
COMMITTEE REPORT
CHAIRMAN’S MESSAGE 8 68 REMUNERATION
REPORT
MANAGING DIRECTOR’S AUDIT COMMITTEE
10 74
MESSAGE
BUSINESS ENVIRONMENT RISK COMMITTEE
14 76
FINANCIAL REVIEW RISK REPORT
36 77
STO FAMILY SUSTAINABILITY
40 80
BOARD OF DIRECTORS GENERAL INFORMATION
43 87
EXECUTIVE MANAGEMENT STO DIRECTORY
47 92
CORPORATE 51 95 INDEPENDENT AUDITOR’S REPORT
GOVERNANCE REPORT & FINANCIAL STATEMENTS
VISION
Enriching lives through
expansion and accessibility
VALUES
CARING ACCESSIBLE RESPECTFUL INNOVATIVE PROGRESSIVE
MISSION
Lead through expansion of existing businesses, diversification, exploring new
possibilities and entering into new ventures.
Explore beyond our borders, expand our markets and establish ourselves as an
international player, respected by the international business community.
Ensure accessibility with our presence nationwide; offer peace of mind and
assurance to the public of uninterrupted provision and affordability of essential
goods and services and those that contribute to a fulfilling modern lifestyle.
Build a skilled workforce by investing in human development; build our
competencies, to achieve sustainable and unhindered growth and fulfill our
vision.
ENRICHING
CUSTOMER EXPERIENCE
The STO Group operates nationwide with the long-term against manmade and natural disasters for the public by
commitment to contributing the country’s community the Allied Insurance Company. Overall, more than 15 new
by creating value and enriching the society’s livelihood brands and products were introduced within the year under
through the distribution of quality products and services. the trading segment.
The company has its presence at all inhabited islands
of the country and possesses the capability of reaching With its comprehensive customers and consumer insight,
out every citizen through its 54 distribution centers. The the Group aims not only to meet customers needs but to
close relationship developed by the frequent interaction go beyond and exceed their expectations. The customer
between the company and the customer provides valuable portfolio of the company is diverse, and it ranges from
information for the company to use as a foundation for the governmental departments, corporate organizations,
expansion and improvement of its product mix and offer resorts to wholesaling for sole proprietors. For instance,
new and innovative solutions. within the medical services segment, the company came
to an agreement with HEMAS Pharmaceuticals to acquire
One of the main reasons behind the effectiveness of quality products at a lower cost. The execution of this
the company’s sales and services strategies is the agreement will subsequently enhance the relationship
understanding of the customer’s needs, wants and developed between the company and pharmacies and
behaviors throughout all the segments. The company hospitals, leading to the public being able to acquire
conducted a number of customer on the products essential drugs at affordable rates.
and services supplied to customers. The results of this
survey provided the company with important data that The Group always gives priority in supplying sustainable
enabled the better understanding of customer needs, the products and services that promote prosperity to the
performance areas they value and where improvement is customer and their surrounding environments. Eco-friendly
required in the company’s services. air conditioners, refrigerators and other home appliances
are available at the company’s home improvement
To increase customer value and create demand, the outlets, educating customers to become more energy-
company focuses on delivering new and attractive efficient. Also, two major continuous medical programs
products and services. For example, elements from two were administered by the company towards healthcare
different trading segments, construction materials, and professionals by bringing in experts from the medical
home improvements combine to provide a much-required field from abroad. The incorporation of MIFCO appended
solution to the construction industry by the supply of sustainability targets of the STO Group, as the MSC certified
Kone elevators and the delivery of ready-mixed concrete frozen and canned tuna are high-quality sustainable
solution directly to the construction site. Additionally, the products produced from traditional pole and line fishing
identification of market pitfalls lead to the creation of tailor- methods that meet both local and international consumer
made insurance packages such as the specialized scheme needs and expectations.
for guesthouses was introduced which offered protection
Presence in
+250,000 19
Customers Atolls
7
STO GROUP
IN 2016
Revenue Earnings Per Share Operating Profit
6,939 378 580
(in millions) MVR MVR (in millions) MVR
Operating Cash Flow Profit for the Year Dividend Proposed
619 431 51
(in millions) MVR (in millions) MVR (per share) MVR
SHARE OF REVENUE BY SEGMENTS
Fuel and Lubricants
2016 56.5%
Trading
2016 33.8%
Gas
2016 2.5%
Insurance
2016 3.3%
Fisheries
2016 3.8 %
Other services 0.1%
CHAIRMAN’S
MESSAGE
On behalf of the board of directors, it is my pleasure to
present STO Group’s annual report for the financial year
ended 31st December 2016. I feel our report will provide you
a comprehensive understanding of our business, financial
results, current and future developments.
Towards our continuous focus in achieving better results, I
can proudly say that the management and the employees
of STO together have built an exceptional organization,
which has gained immense respect and trust of the
community. I can also assure you that our board has the
skills, experience, knowledge and the diversity to discharge
the company’s operations and responsibilities successfully,
and take the company to new heights.
Performance and Shareholder return
The Company generated a healthy result for 2016 in a
volatile market environment. We continued to advance on
our goals for a sustainable and profitable development;
which include stabilizing essential commodity prices,
offering new products, and providing excellent services to
our customers.

The Group has created numerous job opportunities in the
field of medical sector. Simultaneously, with the introduction
of power-mix concrete, STO has made a significant mark in
the construction industry.
The Group’s consistent performance, despite the
challenges in major markets, demonstrates the resilience
of our strategy. As we execute our long-term sustainable
business model, we are confident that we will continue to
meet the expectations of our stakeholders.
Our strategic actions during the year have significantly
enhanced our balance sheet, and efforts to decrease tied-
up capital in the working capital have contributed strong
net operating cash flow in 2016. The potential for profitable
growth is better than ever.