we’re doing more - walkers · pdf filethe new walkers cml brand, ... for a number of...

M T D WA L K E RS P LCA n n u a l Re p o r t 2 0 1 5 / 1 6

We’re doing more

Vision

Mission

To be Sri Lanka’s No. 1 Engineering and Infrastructure Solutions Provider.

We seek to enable and implement infrastructure projects, ranging from innovative design, to funding and development. Leveraging on our core capabilities in engineering, we seek to build mutually beneficial relationships with all our stakeholders, whilst acting in an environmentally and socially responsible manner.

• Integrity – above all, professional and personal • Innovation – combined with commercial acumen, as the

means to competitiveness • Excellence – striving to be the best-in-class in all our pursuits • Teamwork – working together towards a common vision • Recognition – giving due credit for staff and other stakeholder

contribution, as a means of motivation and building a healthily working relationship in a transparent manner

• Responsibility – for all actions that impact people, resources, society and the environment

Group Values

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For over 160 years, MTD Walkers has dominated the local engineering and construction industry by delivering innovative and agile infrastructure solutions to hundreds of clients in Sri Lanka and overseas. This year we move our own benchmarks of success a level higher, focusing on engineering synergies across our Group companies to drive creative collaborations and embed cross-functional patterns of work, as we pursue our vision of continuous improvement into the years ahead.

This year the Group has placed special attention to its triple bottom line, with a view of delivering value to all our stakeholders.

People lie at the heart of our success and the energy of our young team drives the good results recorded in this Annual Report. The year under review saw us strengthening our leadership, streamlining processes and training and developing innovative people at every level of the Company.

We have already achieved a lot. Yet we want to do still more, by inspiring our people,

enhancing our service delivery and holistically enriching our process of value creation.

We’re doing more

Who We AreMTD Walkers PLC is a pioneer in the engineering and infrastructure industry with a well-established track record in multidisciplinary engineering activities in Sri Lanka.

In operation since 1854, we are the seventh oldest company in Sri Lanka, and over the years we have created a portfolio of infrastructure-related businesses including civil engineering, mechanical engineering, electrical engineering, pile construction, power generation and real estate development.

During the year we launched our new corporate identity of Walkers CML, recognising the superior value of the Walkers and CML brands, to create a single uniform identity for all our business units. In line with the new Walkers CML brand, we have also realigned our operations to a cluster based organisational structure, positioning the Group to focus on the key areas of our business whilst enabling synergies across similar and related business operations.

Having its registered address at No. 18, St Michael’s Road, Colombo 03, MTD Walkers PLC is a public quoted company listed on the main board of the Colombo Stock Exchange, with a market capitalisation value of LKR 5.6 billion as at 31st March 2016.

MTD WALKERS PLC2

About UsWho We Are 1About this Report 3Our Founder 4Our History 5Year at a Glance 6-7Significant Achievements, Awards and Accreditations 8Group Organisation Structure 9Value Creation Diagram 10-11 Financial and Non-Financial Highlights 12-13Chairman’s Statement 14-17Group Executive Deputy Chairman’s Statement 18-21

Supplementary InformationShare Information 204-206Quarterly Analysis 207-208Decade at a Glance 209Assurance Statement on Non-Financial Information 210-212GRI G4 Content Index 213-215Group Directory 216-217Circular to Shareholders 218Notice of Meeting 219Form of Proxy 221-222Corporate Information IBC

Corporate GovernanceBoard of Directors 22-29Executive Committee 30-31Senior Corporate Management 32-35Corporate Governance 36-58Related Party Transactions 42-43Enterprise Risk Management 59-61Sustainability Integration 62-71

Contents

Financial StatementsAnnual Report of the Board of Directors 142-144Chief Financial Officer’s Responsibility Statement 145Statement of Director’s Responsibility 146Independent Auditor’s Report 147Statement of Financial Position 148Statement of Profit or Loss 149Statement of Comprehensive Income 150Statement of Changes in Equity 151Cash Flow Statement 152Notes to the Financial Statements 153-201

Management Discussion and AnalysisIntegrated Group Performance Review 72-91Group Synergy 92-93Civil Engineering Sector 94-109Heavy Engineering Sector 110-117Marine Engineering Sector 118-121Power Generation Sector 122-127 Real Estate Sector 128-133Trading and Other Sectors 134-139

Annual Report 2015/16 3

The MTD Walkers PLC 2015/16 Annual Report is its first integrated report based on the Integrated Reporting Framework of the International Integrated Reporting Council (IIRC), containing an overview of the Group’s triple bottom line performance for the financial year ended 31st March 2016. The Report covers the Group’s financial performance, its environmental and social performance as well as the corporate governance framework and risk management process, with each linked to addressing the significant impacts to the Group. The Group’s previous communication of its progress was its Annual Report 2014/15.

The Report highlights the Group’s overall value creation strategy with regard to its operations, through risk management, addressing of key sustainability concerns and corporate governance. The Report also provides an overview of the Group’s future strategies and integrated approach in managing its six capitals, risks, and opportunities through the utilisation of a comprehensive sustainability management framework introduced during the year.

Subsequent to the assessment of material aspects impacting the Group and its sectors, the Report provides information on the Group’s overall integrated performance, and further comments on the integrated performance of each of its sectors in the ‘Management Discussion Analysis’ section. The 15 legal entities of the Group (MTD Walkers PLC and its 14 subsidiaries), create the financial reporting boundary of this Report, while 12 legal entities form the sustainability reporting boundary of this Report. The reasons for such exclusion are detailed in the ‘Group Directory’ section of this Annual Report.

Reporting Standards, Assurance and Compliance

The information contained in this Report is in compliance with the laws and regulations pertaining to the financial reporting standards of the Institute of Chartered Accountants of Sri Lanka and complies with the laws and regulations of the Companies Act No. 7 of 2007, the Listing Rules of the Colombo Stock Exchange (CSE) and subsequent revisions to-date.

The Financial Statements in this report are prepared in accordance with the Sri Lanka Accounting Standards (SLFRS/LKAS) issued by the Institute of Chartered Accountants of Sri Lanka, and have been prepared on an accruals basis and under the historical cost convention unless otherwise specifically stated.

The sustainability information contained in this Report is prepared “In Accordance- Core” of Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines.

This Report has also successfully completed the GRI Materiality Disclosures Service.

Further, calculation methodologies, assumptions and estimations applied in the compilation of the sustainability indicators contained in this Report are also in accordance with indicator protocols provided under the GRI G4 Guidelines as well as standard industry practices. Specific details pertaining to the above are detailed in the ‘Disclosures of Management Approach’ section found online at the Group’s website on www.mtdwalkers.com/sustainability. The Group has also strived to incorporate the requirements of the International Integrated Reporting Council’s (IIRC)

Integrated reporting Framework in this Report. Being the first year of sustainability reporting, restatement of performance, and changes to aspect boundary and reporting scope is not applicable.

In order to secure the credibility and fairness of the writing process and contents of the sustainability information in this Report, a third-party assurance was conducted on the content of this Report by DNV GL, represented in Sri Lanka by DNV Business Assurance Lanka (Private) Limited, whose assurance report is available at the end of this Report.

About thisReport

G4 - 17; G4 - 22; G4 - 23

For inquiries on this report please contactMs. P. S. AttygalleCompany [email protected]

MTD WALKERS PLC4

OurFounder

John Walker

John Walker was born on 24th August 1819 in Doune, near Stirling in Scotland to a Cobbler, James Walker and his wife Christina Strang. He was the seventh child out of ten in the family.

John Walker attended school in Deanston and was later apprenticed in the engineering shop of a large cotton mill in the area.

In 1842 he signed a contract and travelled to Colombo in Ceylon to work as an engineer in a company named Messrs. Wilson, Ritchie and Co. Over the next 12 years John Walker worked as an engineer for a number of firms in Ceylon before returning to Scotland in 1854.

Back in Scotland John Walker met up with Mr. William Turner, an engineer whom he had known in Ceylon, who encouraged him to come back to Ceylon to work with his engineering business in Kandy.

Once back in Kandy, John Walker founded the firm John Walker & Co. – which would later become Walker Sons & Co. and rise to prominence as one of the most successful engineering firms in the country.

In 1862 his brother William became a partner in the company which was successfully designing and developing machinery for coffee plantations around the country.

John Walker founded a new company, Walker and Greig in 1873 to supply machinery to the new tea plantations after a blight destroyed most of the coffee plantations in the country.

John Walker retired to Scotland in 1880 but retained his business interests in Ceylon till his death in 1888. Following the death of John Walker, his son John, came out to Ceylon and took over the company.

In 1890 Walker & Co. moved to Colombo and became Walker Sons & Co. Ltd.


OurHistory

1840 - An enterprising Scotsman named John Walker attracted by the colonial outposts of the British Empire arrives in Ceylon.

1854 - John Walker founded the entity known as John Walker and Company, which specialised in mechanical engineering to service the plantation sector.

1891 - The firm assumed Limited Liability status in the United Kingdom as Walker Sons & Company.

1902 to 1975 - With major infrastructure development going on at the time, Walker Sons & Company established itself as an expert engineering firm.

1975 - Walker Sons & Company was transformed into a rupee company, in keeping with the Ceylonisation policy of the Government of Sri Lanka. Walker Sons & Company was involved in the installation of the first

touch button elevator in Sri Lanka, the Maskeliya Oya project and the mega Mahaweli Diversion scheme.

1979 - Rapid development at the Colombo Port provided opportunity for the firm to expand operations. Relocation was carried out moving operations from Kandy to Colombo allowing the Group to enter Marine Engineering and undertake some of the largest and most advanced ship repair work at the time.

1981 - Walkers Piling (Private) Limited enters the construction industry pioneering deep piled foundation technology in Sri Lanka, executing several high profile projects for both, the private and public sector.

2006 - MTD Capital Berhad acquires the Walkers Group of companies from Kapila Heavy Equipments, subsequently rebranding the Group as MTD Walkers PLC. MTD Capital Berhad acquired Northern Power

Company (Private) Limited and transferred the entity to MTD Walkers PLC in 2012.

2009 to 2010 - MTD Walkers PLC was restructured to become a fully integrated infrastructure solutions provider.

2012 - MTD Walkers PLC acquires Western Air Ducts Lanka (Private) Limited to enhance its engineering capabilities.

2013 - MTD Walkers PLC acquired Colombo Engineering Services (Private) Limited to re-enter the Marine Engineering sector.

2015 – MTD Walkers PLC forays into Real Estate sector by acquiring Wincon Development Ceylon (Private) Limited and establishes Walkers Equipment Limited to enter the Infrastructure Development Support Business.

MTD WALKERS PLC6

Year ata Glance

May 2015

Commenced piling work for Phase III of Havelock City

Commenced construction of the Group’s first

Shipyard at Mutwal Harbour

July 2015

Walkers CML Properties (Private) Limited launched

sales of its first project, Richmond Hills Residencies

Successfully completed the remedial work on

Nalanda Dam

August 2015

Partnered with John Keells Holdings PLC to

implement the Enterprise Resource Planning (ERP)

system, SAP, across the Group

September 2015

Completed piling work for Sri Lanka Institute of

Information Technology campus building in Malabe

October 2015

Launched the new corporate identity of the Group:

Walkers CML

Completed the construction and augmentation of

water supply schemes in Kolonna and Balangoda

November 2015

Won the Gold Award (Construction Sector) at the

National Business Excellence Awards held by the

National Chamber of Commerce of Sri Lanka.

Launched Walkers Colombo Shipyard to strengthen

presence in the Marine Engineering sector

December 2015

Completed piling work for Makola Yathama at Hyde

Park Corner

Completed reconstruction of Kumaragama –

Meegahajadura road (8.8 km)

MTD Walkers PLC was ranked amongst the Top 50

Companies in Sri Lanka by LMD Magazine.


January 2016

Commenced the Phase II construction of Sheraton

Hotel in Colombo

Acquired agencies of Wacker Neuson and Bobcat to

supplement the Trading arm of the Group

February 2016

Commenced construction and piling of JAT Holdings

Head Office building in Battaramulla

CML-MTD Construction Limited achieved the highest

grading, CS2, in line with the new grading scheme

introduced by Construction Industry Development

Authority.

March 2016

Commenced construction of the Wilgamuwa water

supply project

Restructured the Group to better align operations and

derive greater synergies

Commencement of piling work at Southern

Expressway extension from Matara to Hambantota

MTD WALKERS PLC8

Significant Achievements,Awards and Accreditations

Awards and Achievements

Sri Lanka Institute of Training & Development (SLITDA)

• People’s Development Award – Gold (for the second consecutive year)

The National Chamber of Commerce of Sri Lanka

• National Business Excellence Awards – Gold (Construction Sector)

Institute of Charted Accountant of Sri Lanka

• CA Sri Lanka 51st Annual Report Award - Silver (Construction and Engineering)

Accreditations

CML-MTD Construction Limited (CIDA Membership Number – 9393)

• Grade CS2 (CIDA) – Highway Construction and Building Construction

• Grade CI (CIDA) – Bridge Construction, Water Supply and Sewerage, Irrigation and Drainage, and Dredging and Reclamation

• ISO 9001:2008 (Quality Management System)

• ISO 14001:2004 (Environment Management System)

• OSHAS 18001:2007 (Occupational Health and Safety Management System)

• Green Contractor (Green Building Council of Sri Lanka) – Platinum Rating

Walkers Piling (Private) Limited (CIDA Membership Number – P/0005)

• Grade PB1 (CIDA) – Bored Cast in-situ Piling


• ISO 14001:2004 (Environment Management System)

• OSHAS 18001:2007 (Occupational

Health and Safety Management System)

Walkers Sons & Company Engineers (Private) Limited (CIDA Membership Number EM/0040)

• Grade EM1 (CIDA) – Heavy Steel Fabrication, Mechanical Ventilation and Air Conditioning, Electrical Installation (Low Voltage) and, Fire Detention and Suppression

• Grade EM4 (CIDA) – Refrigeration, Electrical Installation (Low Voltage) and Extra Low Voltage Installations


Memberships

Senior management personnel of the Group, hold positions of membership in the following professional and governance bodies and participate in various sub committees and projects initiated by such bodies. The Group views these memberships as a vital part of business given the ability of such bodies to recommend policy changes, address industry concerns and carry out necessary lobbying for the betterment of the industry as a whole.

• Chamber of Construction Industry (CCL)

• National Construction Association of Sri Lanka (NCASL)

• International Federation of Asian and Western Pacific Contractors Association (IFAWPCA)

• Institute of Engineers Sri Lanka (IESL)

• Construction Industry Development Authority (CIDA)

• Ceylon Chamber of Commerce (CCC)

• Business Councils under Ceylon Chamber of Commerce - Malaysia, Vietnam, Maldives and USA

• Manufacturing and Engineering Services Skill Council (affiliated to the National Apprentice and Industrial Training Authority (NAITA) and the Tertiary and Vocational Education Commission (TVC) of Sri Lanka)

• American Chamber of Commerce, Sri Lanka

• European Chamber of Commerce, Sri Lanka


Group OrganisationalStructure

The entities that fall within the sphere of influence of the Group are as follows:

Walkers Sons & Company Limited is an investment holding company and a business unit of MTD Walkers PLC, not shown above as no operations are undertaken. The centre functions of Group Human Resources, Corporate Finance, Internal Audit and Company Secretarial functions would fall under the direct supervision of the Group Executive Deputy Chairman and/or Board of Directors as applicable.

MTD Walkers PLC

Civil Engineering Cluster

Finance DivisionsCorporate Center Divisions

Group Human Resources and Administration

Heavy Engineering, Marine

Engineering, Power Generation, Real

Estate and Trading Cluster

Company Secretarial and Internal Audit

Divisions

Group Strategy and Business Development

Divisions

Corporate Finance

CML - MTD Construction

Limited

Walkers Colombo Shipyard (Private)

Limited

Group IT Group Finance and Compliance

Walkers Sons & Company

Engineers (Private) Limited

CML - MTD Joint Venture Limited

Colombo Engineering

Services (Private) Limited

Group Procurement

Group TreasuryWestern Air Ducts (Private) Limited

Walkers Piling (Private) Limited

Northern Power Company

(Private) Limited

Corporate Communications

Enterprise Risk Management

Walkers Equipment

Limited

Special Projects Company

(Private) Limited

Walkers CML Properties

(Private) Limited

Sustainability and CSR

MTD Walkers Infracon Limited

MTD Walkers Projects Limited

MTD WALKERS PLC10

Value Creation Diagram

To be Sri Lanka’s No. 1 Engineering and Infrastructure Solutions Provider

• Integrity Innovation• Excellence Teamwork

•

•••Recognition Responsibility

FINANCIALCAPITAL

• Cash flow generation capabilities

• Pool of funds available through capital and debt funding

• Fixed Assets

• Employee experience, expertise and integrity

• Organisational structure

• Organisational rights and bargaining agreements

• Ethical leadership• Occupational Health and

Safety practices

• Governance• Data management

• Licenses and software

• Knowledge on business operations

• Research and Development

• Natural resources used by Group:

- Water- Energy- Minerals - Raw Materials- Air- Land

• Manufactured assets

• Group - owned infrastructure

• Other infrastructure utilised by the Group

• Consistent stakeholder engagement

• Responsible Corporate Citizenship

• Supply chain management

• CSR initiatives

• Product and service stewardship

INPUTS

• Share price appreciation

• Shareholder returns and dividends

• Value added to other stakeholders

• Social license to operate• Management of

stakeholder relations • Community livelihood

development • Reliable supply chain• Quality product and

service delivery

• Skilled and capable employees

• Talent management • Safe working conditions

• Brand ambassadors

• Material usage efficiency

• Energy e�iciency

• Management of emissions and carbon footprint

• Management of e�luents and waste

• Environmental compliance

• Value added to shareholders

• Competitive advantage

• Innovation

• Operational effectiveness

• Scalability

We seek to enable and implement infrastructure projects, ranging from innovative design, to funding and development. Leveraging on our core

capabilities in engineering, we seek to build mutually beneficial relationships with all our stakeholders, whilst acting in an environmentally and socially responsible manner.

MISSION VALUESVISION

Pg

78-83MANUFACTURED CAPITAL

Pg

83INTELLECTUAL CAPITAL

Pg

83-84NATURALCAPITAL

Pg

84-88HUMAN

CAPITAL

Pg

88-90SOCIAL ANDRELATIONSHIP CAPITAL

Pg

90-91

FINANCIALCAPITAL

Pg


Pg


Pg

83-84NATURALCAPITAL

Pg

84-88HUMAN

CAPITAL

Pg


Pg

90-91

INPUTS

OUTPUTS OUTPUTS

Pg

94-109Civil EngineeringCorporate Communications

Pg

128-133Real Estate

Pg

122-127Power Generation

Pg

118-121Marine Engineering

Pg

134-139Trading and Others

Pg

110-117Heavy Engineering

Human Resources

Procurement

IT

Sustainability and Risk

Corporate Finance and Treasury

Internal Audit

Company Secretarial Services

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To be Sri Lanka’s No. 1 Engineering and Infrastructure Solutions Provider

• Integrity Innovation• Excellence Teamwork

•

•••Recognition Responsibility

FINANCIALCAPITAL

• Cash flow generation capabilities

• Pool of funds available through capital and debt funding

• Fixed Assets

• Employee experience, expertise and integrity

• Organisational structure

• Organisational rights and bargaining agreements

• Ethical leadership• Occupational Health and

Safety practices

• Governance• Data management

• Licenses and software

• Knowledge on business operations

• Research and Development

• Natural resources used by Group:

- Water- Energy- Minerals - Raw Materials- Air- Land

• Manufactured assets

• Group - owned infrastructure

• Other infrastructure utilised by the Group

• Consistent stakeholder engagement

• Responsible Corporate Citizenship

• Supply chain management

• CSR initiatives

• Product and service stewardship

INPUTS

• Share price appreciation

• Shareholder returns and dividends

• Value added to other stakeholders

• Social license to operate• Management of

stakeholder relations • Community livelihood

development • Reliable supply chain• Quality product and

service delivery

• Skilled and capable employees

• Talent management • Safe working conditions

• Brand ambassadors

• Material usage efficiency

• Energy e�iciency

• Management of emissions and carbon footprint

• Management of e�luents and waste

• Environmental compliance

• Value added to shareholders

• Competitive advantage

• Innovation

• Operational effectiveness

• Scalability

We seek to enable and implement infrastructure projects, ranging from innovative design, to funding and development. Leveraging on our core

capabilities in engineering, we seek to build mutually beneficial relationships with all our stakeholders, whilst acting in an environmentally and socially responsible manner.

MISSION VALUESVISION

Pg


Pg


Pg

83-84NATURALCAPITAL

Pg

84-88HUMAN

CAPITAL

Pg


Pg

90-91

FINANCIALCAPITAL

Pg


Pg


Pg

83-84NATURALCAPITAL

Pg

84-88HUMAN

CAPITAL

Pg


Pg

90-91

INPUTS

OUTPUTS OUTPUTS

Pg

94-109Civil EngineeringCorporate Communications

Pg

128-133Real Estate

Pg

122-127Power Generation

Pg

118-121Marine Engineering

Pg

134-139Trading and Others

Pg

110-117Heavy Engineering

Human Resources

Procurement

IT

Sustainability and Risk

Corporate Finance and Treasury

Internal Audit

Company Secretarial Services

AL

TE

RE

D C

AP

ITA

LS

, IM

AC

TS

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MTD WALKERS PLC12

HighlightsSLFRS/LKAS SLFRS/LKAS Percentage

Change SLFRS/LKAS

Year Ended 31st March 2015/16 2014/15 2013/14

Earning Highlights and Ratios

Group Revenue LKR Mn 11,964 14,025 (14.7) 10,092

Group Profit Before Interest and Tax (EBIT) LKR Mn 838 1,968 (57.4) 1,336

Group Profit Before Tax LKR Mn (62) 1,421 (104.4) 730

Group Profits Attribute to Shareholders LKR Mn (327) 766 (142.7) 480

Earning per Share LKR (2.0) 4.6 (142.7) 4.2

Interest Cover No. of times 0.9 3.6 (74.1) 2.2

Gross Profit Margin Percent 17.5% 22.3% (21.4) 20.9%

Operating Profit Margin Percent 7.0% 14.0% (50.1) 13.2%

Net Profit Margin Percent (1.0)% 7.9% (112.8) 6.0%

Return on Assets Percent (0.4)% 5.0% (108.4) 3.8%

Return on Equity (ROE) Percent (1.4)% 12.6% (111.1) 11.8%

Return on Capital Employed (ROCE) Percent 3.7% 11.2% (67.3) 12.8%

Financial Position Highlights and Ratios

Total Assets LKR Mn 29,003 22,256 30.3 15,651

Total Debt LKR Mn 14,277 8,841 61.5 5,296

No. of Shares in Issue No. 167,647,568 167,647,568 0.0 114,357,140

Net Assets Value per Share LKR 46.1 48.0 (4.0) 41.3

Current Ratio No. of times 1.5 1.4 7.9 1.2

Quick Assets Ratio No. of times 1.2 1.1 13.3 1.1

Gearing Ratio* Percent 62.3% 50.2% 24.1 50.9%

Market / Shareholder Information

Market Price of Share as at 31st March LKR 33.3 46.4 (28.2) 30.1

Market Capitalisation LKR Mn 5,583 7,779 (28.2) 3,442

Market Price per Share - Highest LKR 63.8 71.1 (10.3) 36.6

Market Price per Share - Lowest LKR 28.0 26.9 4.1 22.1

Market Price per Share - Closing LKR 33.3 46.4 (28.2) 30.1

Enterprise Value (EV) LKR Mn 13,901 8,669 60.4 5,200

EV/EBITDA No. of times N/A 6.6 N/A 6.5

Price to Earnings Ratio (diluted) No. of times N/A 7.8 N/A 7.2

Price to Book Value No. of times 0.7 1.0 (25.2) 0.7

Economic Value Information

Economic Value Generated LKR Mn 12,442 14,371 (13.4) 10,302

Economic Value Distributed LKR Mn 11,293 12,449 (9.3) 9,055

Economic Value Retained LKR Mn 1,148 1,922 (40.3) 1,247

* Gearing Ratio = Debt / (Debt + Equity)

Financial


Non-FinancialHighlightsGRI G4 Indicator

Non-Financial Performance Indicator 2015/16*

Economic Indicators

EC1 Direct Economic Value Added (LKR ‘000) (121,373)

EC3 Defined Benefit Plan Obligations (EPF and ETF Contributions) (LKR ‘000) 66.3

EC6 Percentage of Local Board Members and Senior Management Staff (Percent) 79 percent

EC9 Proportion of Local Purchases (Percent) 87 percent

Environmental Indicators

EN1 Materials Used by Volume / Weight

• Cement (MT) 7,235.9

• Tor Steel (MT) 11,722.2

• Ready Mix (m3) 31,953.0

• Sand (Cubes) 16,190.3

• Aggregates (Cubes) 57,185.6

• Bitumen (MT) 5,531.6

• Lubricants (l) 34,446.0

• Timber and Plywood (sq. ft.) 71,808.0

• Paint (l) 21,959.5

EN3 Energy Consumption (GJ) 145,927.0

EN8 Total Water Withdrawal (m3) 154,950.0

EN15 Direct Greenhouse Gas Emissions – Scope 1 Carbon Footprint (MT) 10,409.0

EN16 Direct Greenhouse Gas Emissions – Scope 2 Carbon Footprint (MT) 1,102.0

Total Carbon Footprint (MT) 11,511.0

EN22 Total Water Discharged by Quality and Destination (m3) 154,755.0

EN23 Total Weight of Waste Disposed (MT) 33,193.0

EN24 Number of Significant Spills None

EN29 Monetary Value of Significant Environmental Fines ** None

Labour Indicators

G4 - 10 Total Workforce Including Casual Workers 4,142

LA1 Total Attrition Rate (Percent) 15.1 percent

LA6 Injury Rate (Percent) 1.4 percent

Lost Day Rate (Percent) 0.04 percent

LA9 Average Hours of Training per Year per Employee 8.9

Human Rights Indicators

HR4 Areas Identified with Risk of Violation of the Right to Associate Freely None

HR5 Number of Identified Incidences of Child Labour None

HR6 Number of Identified Incidences of Forced Labour None

Social Indicators

SO1 Value of Community Engagement Activities (LKR ‘000) 14,000

SO3 Percentage of Operations Assessed for Risks Related to Corruption (Percent) 100 percent

SO8 Value of Fines for Non-Compliance with Laws and Regulations ** None

Product Responsibility Indicators

PR9 Fines Paid for Non-Compliance with Product Laws and Regulations ** None

* This being the first year of tracking non-financial performance indicators, prior year comparisons are not available** Instances of significant fines over LKR 1 million

MTD WALKERS PLC14

Chairman’sStatement

The Group’s performance is presented in an integrated manner to better address the requirements of all its diverse stakeholders. The Integrated Report details out efforts made by the Group to consistently deliver value to all stakeholders.

The Group has remained committed to bringing about a meaningful social change and to this extent is pleased to announce that steps are underway to set up a Foundation focused on allowing us to gain a social license to operate in areas that we are present in.

Tan Sri Dr. Azmil Khalili Bin Dato’ KhalidChairman


Dear Stakeholders,

On behalf of the Board of Directors, I am pleased to present the Group’s Integrated Annual Report and Operations Review for the financial year 2015/16.

In the year under review, the Group embraced the idea of sustainable growth in line with our vision to be Sri Lanka’s number one Engineering and Infrastructure Solutions Provider. The Group’s performance is presented in an integrated manner to better address

the requirements of all its diverse stakeholders. The Integrated Report details out efforts made by the Group to consistently deliver value to all stakeholders without compromising on sustainability, compliance of all laws and regulations, and ethical standards.

I take this opportunity to invite all our stakeholders to review the developments during the year under review and understand our strong commitment to create a shared value with all our stakeholders.

Economic Environment

Global growth again fell short of expectations in 2015, slowing to 2.4 percent from 2.6 percent in 2014. The disappointing performance was mainly due to a continued deceleration of economic activity in emerging and developing economies amid weakening commodity prices, global trade, and capital flows. Overall, global growth is projected by the World Bank to reach 2.9 percent in 2016, as a modest recovery in advanced economies continues

MTD WALKERS PLC16

Financial Performance

A challenging year for the construction industry led to the Group’s revenue decreasing by 14.7 percent Year on Year to LKR 12.0 billion. The Group further ended the financial year having made a loss of LKR 121 million against a profit of LKR 1,107 million recorded in the previous year. A review of Government spending on infrastructure by the current Government resulted in an unanticipated slowdown in the industry and adversely affected the top-line performance of the Group.

The Group further chose to maintain its idle capacity as we are confident in the imminent resumption of construction activity. This would enable the Group to be in a strong position to meet the forecasted demand in the industry albeit at the price of absorbing higher overheads during the financial year under review. The low generation of revenue coupled with the additional costs of maintaining excess capacity resulted in the Group posting a loss for the year.

Further, the Group in an effort to manage its loss of income and further consolidate its position, decided not to declare a dividend during the financial year under review.

Strategic Focus

Over the past year the Group entered a phase of consolidation as it geared itself for the resumption of large scale Government-led construction projects. The Group embarked on two initiatives during the period under review to better position itself for future growth. The first initiative brought all the Group’s business sectors under the newly introduced ‘Walkers CML’ brand identity, while the second initiative saw the Group restructuring to a cluster based organisational structure to better capitalise on Group synergies.

The diversification strategy employed by the Group over the previous years saw the Group gaining a presence in the Real Estate sector, and as of the last financial year Marine Engineering. Moving forward, the Group will leverage on its engineering capabilities to further strengthen its presence in all sectors. The Group is planning its maiden overseas expansion in the South Asian region and hopes to have an active overseas operation during the coming financial year.

Sustainability Integration

“Sustainability is a globally emerging trend that allows companies to better understand their impacts on the economy, environment and society they operate in. This allows companies to identify and address potential business concerns to achieve rapid and more inclusive growth.”

Social responsibility practices have always been a key component of the Group’s operations, and during the year under review the Group commenced the monitoring of sustainability performance indicators. As a first step towards becoming a more sustainable entity, the Group initiated an independent third party stakeholder review. This review allowed

Chairman’sStatement

and activity stabilises among major commodity exporters. Sri Lanka’s economic growth dropped to 4.8 percent in 2015, down from 4.9 percent in 2014. The country’s GDP amounted to USD 82.3 billion in 2015, compared to USD 80.0 billion in 2014, with GDP per capita at USD 3,800. Inflation remained at the low single digit level.

A Challenging Business Environment

The construction industry in Sri Lanka declined 0.9 percent during the year under review as the Government focused on policy reform and policy development. The Group hopes that both policy reform and policy development exercises will lead to further corporate stability, thereby creating a conducive business environment in the country. To this end, the Group looks forward to a consistent policy framework, which gives the private sector the freedom to operate and the guidance to plan ahead.

Moving forward, the Group is positive of a quick recovery in the industry as the current trend of low raw material prices combined with the Government’s commitment to the development of infrastructure, particularly roads, bridges, houses and water supply will provide a boost to the industry over the next few years.

Revenue

2013/14

11,964

14,025

10,092

LKR Mn

2014/15 2015/16

Gross Profit

2013/14

2,093

3,123

2,106

LKR Mn

2014/15 2015/16


the Group to identify and introduce processes to address the material concerns of all stakeholders.

This year, the Group in recognising the importance of monitoring non-financial performance introduced processes to allow the full impact of its operations to be captured. As this was the first year the Group tracked its non-financial performance, a comparative performance review was not possible. However, the initiation of the monitoring process has allowed the Group to preliminarily identify sources of wastage and created

awareness amongst employees on the importance of effective resource utilisation. All significant operating entities within the Group have continued to be re-certified with relevant ISO certifications relating to Environmental Management Systems (ISO 14001), Quality Management Systems (ISO 9001) and Occupational Health & Safety Management Systems (OHSAS 18001).

Social Responsibility

The Group has remained committed to bringing about a meaningful social change and to this extent is pleased to

The diversification strategy employed by the Group over the previous years saw the Group gaining a presence in the Real Estate sector, and as of the last financial year Marine Engineering.

12.0 bnRevenue

announce that steps are underway to set up a Corporate Social Responsibility Foundation focused on allowing us to gain a social license to operate in areas that we are present in. The focus areas of the Foundation would be aligned to the United Nations Sustainable Development Goals, which are also broadly in line with the National Developmental Agenda and the business goals of the Group.

Appreciation

On behalf of the Board, I would like to extend our appreciation to our stakeholders for your trust and confidence in the Group. I would also like to thank the management team and staff of MTD Walkers PLC and all its subsidiaries for their unconditional commitment and dedication in ensuring the success of the Group. Finally, I wish to thank my fellow board members for their wisdom and guidance during the financial year under review.

Tan Sri Dr. Azmil Khalili Bin Dato’ KhalidChairman

29th July 2016

MTD WALKERS PLC18

Jehan Prasanna AmaratungaGroup Executive Deputy Chairman

Group ExecutiveDeputy Chairman’s Statement

Although it was a challenging year for the industry, the Group continued to reaffirm its position as one of the key players in the Infrastructure Development sector.

In line with the restructure of the Group, MTD Walkers PLC launched the ‘Walkers CML’ brand bringing all our subsidiaries together under a single brand identity.


This year our Integrated Annual Report is aptly titled ‘We’re doing more’ to showcase our commitment in moving our benchmarks of success to level higher and driving creative collaborations across the Group.

broadly conducive, the growth in the construction industry suffered due to economic and policy reviews undertaken by the newly appointed Government. The gains witnessed at the start of the year due to falling commodity prices were partially offset by the Sri Lankan Rupee depreciating 12.0 percent against the United States Dollar.

A New Direction

The ensuing slowdown in operations as the Government cut back spending on

infrastructure was seen as an opportunity to regroup and evaluate the Group’s future growth strategy. As such, the Group engaged external consultants to help the Group re-strategise and gear for the anticipated increase in construction activity in the coming year.

One of the key components of the strategy was the restructure of the Group to a cluster based organisational structure to better capitalise on existing Group synergies. This period was further utilised

Economic Environment

The macroeconomic environment remained favourable during the year with the Sri Lankan economy growing at a satisfactory rate of 4.9 percent. Although the business environment remained

MTD WALKERS PLC20

to familiarise and settle into the new systems and processes with the view of increasing efficiency and moving toward lean operating practices.

Sustainability and Risk Management are viewed as the two key components complementing the operations of the Group and aiding in its long term growth. The Group formally commenced integrating sustainability within its business strategy, and during the year, commenced the monitoring and reporting of its sustainability performance through identified sustainability indicators subsequent to assessing the material impacts from an environmental, employee and social perspective. This performance is now tracked, monitored and reported quarterly along with other financial and operational Key Performance Indicators. The Group also implemented an Enterprise Risk Management process during the year under review with risk assessments undertaken for each subsidiary and for the entire Group. Complementing the Sustainability and Enterprise Risk Management drives, the Group further conducted an independent stakeholder engagement study to gain additional insight of its stakeholders’ interactions with the Group, and to introduce new processes to address their views in a bid to manage overall organisational risks.

In line with the restructure of the Group, MTD Walkers PLC launched the ‘Walkers CML’ brand bringing all our subsidiaries together under a single brand identity. Through this exercise we aimed to derive greater synergies from our diverse brand portfolio and reinforce Walkers CML as the preferred partner in the infrastructure development and engineering industry.

As part of the Group’s restructure and rebranding exercise the Group introduced a Management Trainee Program that would allow new recruits to gain exposure and understanding in multiple engineering divisions. As the only fully fledged infrastructure and engineering solutions provider in the country, this is the only programme of its kind that offers young

engineers the opportunity to experience and specialise in any one of multiple engineering disciplines within the same Group of companies. The Group hopes that this programme will help attract and retain new talent, while complementing its acclaimed apprenticeship training programmes.

Operational Highlights

Although it was a challenging year for the industry, the Group continued to reaffirm its position as one of the key players in the infrastructure development sector. CML - MTD Construction Limited, which leads our Civil Engineering sector was awarded the newly introduced CS2 grading by CIDA (Construction Industry Development Authority), in two categories. Walkers Piling (Private) Limited and Walker Sons & Company Engineers (Private) Limited continued to enjoy the highest grading in their fields of PB1 and EM1 respectively. The Group is pleased to be recognised in its efforts to be a sustainable and environmentally friendly constructor with CML - MTD Construction Limited being awarded the Corporate Platinum rating by the Green Building Council of Sri Lanka.

During the year the Group commenced the construction of its shipyard at Mutwal Harbour. The construction of the shipyard together with the installation of the ‘Shiplift and Transfer System’ is expected to be completed by November 2016 with full scale operations commencing in December 2016. The expansion into the Marine Engineering sector will be one of the

growth drivers of the Group in the future and we are pleased with the rapid progress in setting up our first shipyard.

The Group’s foray into the Real Estate sector was received well with the commencement of sales in its pilot project, Richmond Hill Residencies Galle. The sale of the 512 apartments has progressed at a satisfactory pace, with the apartments ready for occupation. The sector through Walkers CML Properties (Private) Limited, has secured a pipeline of exciting projects, with construction and marketing expected to commence shortly.

Financial Highlights

The Group reported a revenue of LKR 12.0 billion for the year under review down 14.7 percent Year on Year from the revenue of LKR 14.0 billion reported last year. Revenue generated by the Civil Engineering sector, which accounted for a majority of revenue during the previous financial year fell substantially during the year due to the slowdown witnessed in the construction industry at large. The Group reported a loss of LKR 121 million during the financial year down by 111.0 percent Year on Year from the profit of LKR 1,107 million reported last year. The loss is in part attributable to the higher than anticipated cost from the absorption of overheads. The Group significantly increased capacity during financial year 2014/15 to carry out several key infrastructure development projects that failed to commence as scheduled.

The expansion into the Marine Engineering sector will be one of the growth drivers of the Group in the future

Group Executive DeputyChairman’s Statement



As a part of formally adopting a sustainability framework to the Group operating practices, systems and initiatives were put in place to entrench sustainability in to the culture of the Group. As a first step each business unit nominated a Sustainability and Risk Champion who would be responsible for inculcating the sustainability best practices within that business unit. This enabled the Group to commence monitoring non-financial indicators such as the Group carbon footprint, waste generated, energy consumed, occupational health and safety incidents and training hours provided to employees. Some of the initiatives carried out by the Group included workshops for key operational staff, site audits to ensure compliance to internally mandated Standard Operating Procedures and internal communications to staff encouraging sustainable best practices.

For the financial year under review the Group’s carbon footprint was 11,511 metric Tons (MT). This corresponds to 0.51 metric Tons of carbon per million rupees of revenue generated. The waste generated and water consumed by the Group stood at 33,193 metric Tons and 154,950 cubic meters respectively. The Group consumed a total of 1.56 million kilo Watt hours of electricity and provided 8.9 hours of training per employee during the year. The injury rate of the Group stood at 1.4 percent, while the lost day rate was 0.04 percent during the year under review.

Further, this year’s Integrated Annual Report has been prepared “In Accordance - Core” of the Global Reporting Initiative (GRI) G4 Guidelines and has obtained the GRI Materiality Disclosures Check. The Report has also been independently assured by DNV GL represented in Sri Lanka by DNV Business Assurance Lanka (Private) Limited.


The Group continuously strives to leave positive impressions on all of its diverse stakeholders. To this effect the Group assess initiatives where its contributions,

expertise or policies can administer substantial social change and carries out numerous projects in these identified areas. A priority area of the Group’s focus is its policy of human capital empowerment, where the key beneficiaries are the Group’s own employees.

The Group is also in the process of establishing a Corporate Social Responsibility Foundation to carryout and drive its social responsibility programmes. It is intended that the Foundation would be aligned to the United Nations Sustainable Development Goals and will be funded by an annual contribution by each subsidiary based upon a percentage of the Group’s annual profit, with projects being undertaken with the participation of staff volunteers.

Awards and Accolades

During the financial year 2015/16 the Group received numerous awards reflecting our position as one of the leading entities in the industry. The Group is especially pleased to have won the Gold Award for the Construction Sector at the National Business Excellence Awards 2015 and the Gold Award at the SLITAD People Development Awards 2015. These two awards reflects the Group’s innovation led culture and people centric approach in conducting business. It is also an endorsement of our philosophy of sustainable operations and renewed commitment to embed better systems and procedures to render your Company a world class business.

Outlook for the Future

The Group has made use of a relatively quiet year to gear itself to benefit from the rebound in growth in the construction industry. The business climate in Sri Lanka is positive, with business activity picking up as the Government rolls out its economic policy. Sri Lanka’s potential as an attractive destination for Foreign Direct Investment has improved with better diplomatic and trade relations between Sri Lanka and other key markets.

The Group is pleased to announce that it has set up branches in both the Maldives and Bangladesh during the past year and is expecting to commence its maiden overseas operations during the coming financial year. The Group will initially leverage on its civil and mechanical engineering experience and focus on completing projects in these sectors. The Group’s growth prospects remain robust with the diversifications in to the Real Estate and Marine Engineering sectors and the commencement of several large scale infrastructure projects in Sri Lanka. The Group expects the Civil Engineering sector to continue to contribute the major part of Group revenue over the next few years, while the Group foresees its diversifications into the Real Estate and Marine Engineering sectors driving revenue growth.

Appreciations

I wish to express my sincere gratitude to the Chairman and the Board for their exemplary leadership during this difficult and challenging year experienced by the Group. I would also like to thank my staff at MTD Walkers PLC and its subsidiaries for their efforts in ensuring the Group remained the preferred partner for infrastructure development and engineering solutions during an uncertain year. To our customers, business partners and all our stakeholders, I thank you for your loyalty and support in the Group. Finally, I wish to thank our shareholders for the trust and confidence placed in the Group and seek your continued support in the years ahead.


29th July 2016

CorporateGovernance

Board of Directors 24-29Executive Committee 30-31Senior Corporate Management 32-35Corporate Governance 36-58Related Party Transactions 42-43Enterprise Risk Management 59-61Sustainability Integration 62-71

Driving creative collaborations and embedding cross-functional patterns of work

MTD WALKERS PLC24

Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid

ChairmanNon-Independent Non-Executive Director

Jehan Prasanna Amaratunga

Group Executive Deputy ChairmanNon-Independent Executive Director

Leong Yow Lee

Independent Non-Executive Director

Keith George Cowling

Non-Independent Non-Executive Director

1

Board of Directors

2

3 4

CorporateGovernance


Albert Rasakantha Rasiah


Niranjan Joseph de Silva Deva-Aditya


Hewawasamge Ravindranath Srilal Wijeratne


Prashanie Saroja Attygalle

Company Secretary

5 6

7 8

MTD WALKERS PLC26

2

Board of Directors


ChairmanNon-Independent Non-Executive Director


Group Executive Deputy ChairmanNon-Independent Executive Director

Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid was appointed as Chairman of MTD Walkers PLC on 23rd May 2007. He graduated with a Bachelors Degree in Civil Engineering and subsequently with a Masters in Business Administration. He began his career with a United Kingdom company, Tarmac National Construction, and upon his return to Malaysia worked for Trust International Insurance and Citibank NA. Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid is the President and Chief Executive Officer of AlloyMtd Group where he held the position of General Manager, Corporate Planning on joining MTD Capital Bhd in 1993 and assumed the helm as Group Managing Director in 1996. On 1st June 2009, he was redesignated as President and Chief Executive Officer. He concurrently holds the same position in the listed subsidiary of MTD Capital Bhd namely, MTD ACPI Engineering Berhad and is also the Chairman and Independent Non-Executive Director of another listed company namely, Daya Materials Berhad.

Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid holds directorships and is also the President and Chief Executive Officer in other public companies namely, MTD InfraPerdana Bhd and Metacorp Berhad, both are subsidiaries of MTD Capital Bhd; and ANIH Berhad, a toll concession company Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid is also a Director of Environment Idaman Sdn. Bhd., a solid waste concession company, a Trustee of the Perdana Leadership Foundation and Chairman of the Malaysian Philippines Business Council. Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid also sits on the Board of several other private limited companies.

Mr. Jehan Prasanna Amaratunga is the Executive Deputy Chairman of MTD Walkers PLC, Sri Lanka. He is a Fellow Member of The Institute of Chartered Accountants of Sri Lanka and a Fellow Member of the Chartered Institute of Management Accountants, United Kingdom. Mr. Amaratunga was awarded First in Order of Merit Prize at the Final examination of the Institute of Chartered Accountants of Sri Lanka.

Mr. Amaratunga currently serves as a Director of People’s Bank, People’s Leasing & Finance PLC, Sri Lanka, Institute of Information Technology (SLIIT) and JAT Holdings (Private) Limited. He is also the Chairman of People’s Insurance Limited and a Member of the Council of the University of Colombo. He counts over 25 years of experience in the fields of Finance and Management.

Mr. Amaratunga has served as a Consultant and Director to a number of corporations and private business entities. At the National Conference of the Institute of Chartered Accountants of Sri Lanka, he presented a paper titled “Value for Money Accounting” which is one of the many notable achievements that stand out in his career. He was also a member of the Governing Council of the Institute of Chartered Accountants of Sri Lanka.

1

CorporateGovernance


4Leong Yow Lee


Keith George Cowling


Mr. Leong Yow Lee was appointed as Director of MTD Walkers PLC on 23rd May 2007. Mr. Lee holds a Master in Business Administration (Finance) from University of Leicester, United Kingdom.

He joined AlloyMtd Group as Finance Manager of MTD Prime Sdn Bhd in August 1994 and was promoted to Group Financial Controller of MTD Capital Bhd in August 1997. He was appointed as General Manager, Head of Operations of AlloyMtd Group in October 2001, Executive Vice President, Head, Finance & Treasury Division in April 2009 till his retirement on 29th July 2011. In September 2011, he served as Executive Director, Special Projects of MTD Project Management Services Sdn Bhd under a two (2) year contract. Prior to joining AlloyMtd Group, he was with Citibank N.A., as Financial Controller, Bank Cards business and with Exxon group of companies in Malaysia heading various accounting sections in Controllers Department.

Mr. Lee is the Independent Non-Executive Director and a member of the Audit Committee of both MTD Capital Bhd and MTD ACPI Engineering Berhad, a listed subsidiary of MTD Capital Bhd. Mr. Lee is also a director of Touch ‘n Go Sdn. Bhd., an electronic toll collection operator.

Mr. Keith George Cowling was appointed as Director of MTD Walkers PLC on 23rd May 2007. He is a Chartered Engineer and holds a Bachelor in Civil Engineering from Dundee University, Scotland and is a member of the Institution of Civil Engineers, United Kingdom and a Fellow of the Institution of Engineers, Malaysia, where he served on committees including being the Chairman of the Tunneling and Underground Space Technical Division.

His experiences include service with the City of Dundee District Council (1972-1976) in Dundee, Scotland, Mason Pittendrigh & Partners (1976-1977) in Edinburgh, Scotland, Auscon Consultants (1979) and Petroleum Development Oman (1980-1981) in the Sultanate of Oman, and Maunsell Consultants Asia (1980-1984) in Hong Kong.

Mr. Cowling joined AlloyMtd Group in 1984 and has been serving in various capacities; from Engineer to Chief Engineer; General Manager, Head of Business Development; Executive Vice President, Head, Business Development & Manufacturing Division; Executive Vice President, Head, Manufacturing Division and his current position as Advisor, Business Development. He is the Non-Independent Executive Director of MTD ACPI Engineering Berhad since 15th August 2006 and also sits on the Board of several private limited companies.

3

MTD WALKERS PLC28

6

Board of Directors

Albert Rasakantha Rasiah


Niranjan Joseph de Silva Deva-Aditya


Mr. Albert Rasakantha Rasiah has over 40 years of experience in the financial sector; both locally and abroad. He holds Board positions of Ceylon Cold Stores PLC, Nations Trust Bank PLC, MTD Walkers PLC, Hela Clothing Company Ltd and E B Creasy Group of Companies. Mr. Rasiah, is the Chairman of Ceylon Pencil Company Limited; a Deputy President of the Institute of Directors and formerly a visiting lecturer in Finance at the Post Graduate Institute of Marketing (PIM). He was the Director Finance of Nestlè Lanka PLC for over a decade before retiring; and was also a visiting lecturer in Finance and Accounting for Nestlè SA (International) for Asia Oceanic region. Mr. Albert Rasiah is a Science Graduate of the University of Ceylon and a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, and a finalist of the Institute of Management Accountant of the United Kingdom.

Mr. Niranjan Joseph de Silva Deva-Aditya, who was appointed to the Board of MTD Walkers PLC in February 2012, is an aeronautical engineer, scientist and economist, a Conservative Member of the European Parliament elected from the SE England. He is the Vice President of the Development Committee; ECR Coordinator and Conservative Spokesman for Overseas’ Development and Cooperation. He was the Co Leader of the Parliamentary Delegation to the UN World Summit and General Assembly 2006, Chairman Working Group A of Development Committee overseeing Asia, Central Asia and Far East; Co Coordinator Assembly of 79 Parliaments of the EU-ACP 2004 and the President EU India Chamber of Commerce from 2005. In 2012 he stood for and came runner up, beating the Liberal candidate into third place to be the President (Speaker) to the European Parliament.

He was the first Asian to be elected as a Conservative Member of British Parliament, first Asian MP to serve in the British Government as PPS in the Scottish office and first Asian born MP to be elected to the European Parliament. He was nominated as a candidate to succeed Kofi Annan as Secretary General to the UN in 2006. He is a Hon. Ambassador without portfolio for Sri Lanka; the first Asian to be appointed as Her Majesty’s Deputy Lord Lieutenant for Greater London, representing the Queen on official occasions since 1985; awarded the honour “Viswakirthi Sri Lanka Abhimani” by the Buddhist Clergy for his Services to Sri Lanka and given the Knighthood with Merit of the Sacred Constantinian Military Order of St. George for his global work on poverty eradication. He is a Fellow of the Royal Society for Arts, Manufacture and Commerce (Est: 1765).

5

CorporateGovernance


8Hewawasamge Ravindranath Srilal Wijeratne



Company Secretary

Mr. Hewawasamge Ravindranath Srilal Wijeratne is the Chairman of the Rank Group of Companies, which has diverse interests in real estate development, finance, logistics, solid waste management, hydropower and wind energy and entertainment. Mr. Wijeratne owns the largest dry port in Sri Lanka, namely Rank Container Terminals Limited. His Group holds licenses for two gaming operations in Colombo and has successfully operated Sri Lanka’s largest casino for the past 18 years. Mr. Wijeratne gained his higher education from the London School of Accountancy and Management, United Kingdom.

Returning to Sri Lanka in the late 1980’s, he co-founded the Grayline Group in 1987. He entered the business of property development, which led to interests in a range of business sectors.

Ms. Prashanie Saroja Attygalle is a Chartered Secretary and has been the Group Company Secretary of MTD Walkers PLC and its subsidiaries since 2008. She is an Associate Member of the Institute of Chartered Secretaries and Administration; of the United Kingdom and a member of Chartered Corporate Secretaries of Sri Lanka.

Ms. Attygalle has more than 30 years of experience working as a Company Secretary in various multinational diversified groups including Sri Lanka Insurance Corporation Limited and KPMG Sri Lanka. During her service tenure, she has worked in the areas of Corporate Governance, Stakeholder/Shareholder Relations and Human Resource Management.

7

MTD WALKERS PLC30

Executive Committee

The new structure incorporating the Group Executive Committee will take effect from 1st April, 2016


Group Executive Chairman

Dian Nearcus Jayasuriya

President

Viraj de Silva

President and Group Chief Financial Officer

Tulsi Walloopillai

Executive Vice President Head of Group Business Development

Thilan Manjith Wijesinghe

Executive Vice President Head of Group Strategy

Lal Perera

Executive Vice President Head of Group Business Development

Chulendra de Silva

Executive Vice President Head of Corporate Centre

1 2 3

4 5 6

7

CorporateGovernance


1. Mr. Jehan Prasanna Amaratunga is the Executive Deputy Chairman of MTD Walkers PLC, Sri Lanka. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and a Fellow Member of the Chartered Institute of Management Accountants, United Kingdom. Mr. Amaratunga was awarded First in Order of Merit Prize at the final examination of the Institute of Chartered Accountants of Sri Lanka.

Mr. Amaratunga currently serves as a Director of People’s Bank, People’s Leasing & Finance PLC, Sri Lanka Institute of Information Technology (SLIIT) and JAT Holdings (Private) Limited. He is also the Chairman of People’s Insurance Limited and a Member of the Council of the University of Colombo. He Counts over 25 years of experience in the fields of Finance and Management.

Mr. Amaratunga has served as a Consultant and Director to a number of Corporations and Private Business entities. At the National Conference of the Institute of Chartered Accountants of Sri Lanka, he presented a paper titled “Value for Money Accounting” which is one of the many notable achievements that stand out in his career. He was also a member of the Governing Council of the Institute of Chartered Accountants of Sri Lanka.

2. Mr. Dian Jayasuriya is the Managing Director/CEO of CML-MTD Construction Ltd, a member of Alloy-MTD Group – a Malaysian Company considered to be amongst the top construction companies in Sri Lanka. Mr. Dian Jayasuriya has over 35 years of extensive experience in management and has served in the capacity of Company Director in several esteemed blue-chip private and public quoted companies.

He also functions as a Director of National Construction Association of Sri Lanka the principal body responsible for the development and

growth of Sri Lanka’s Construction Industry and Individual Contractors. A member of the Chartered Institute of Marketing, United Kingdom. Mr. Dian Jayasuriya is also an avid Golfer.

3. Mr. Viraj de Silva started his career at Asia Capital Limited and rose to the position of Asst. Vice President in the Corporate Finance Division of the Company. He then joined MTD Walkers PLC in year 2009 as the Group Chief Financial Officer. He was also appointed as a director for several companies namely Walkers Piling (Private) Limited, Walkers CML Properties (Private) Limited and Walkers Colombo Shipyard (Private) Limited.

He graduated from the University of Durham with a Bachelor of Arts (Hons) Degree in Business Finance and is also a Member of the Chartered Institute of Management Accountants, United Kingdom.

4. Mr. Tulsi Walloopillai has served as a Managing Director of Hypower Engineering (Private) Limited from year 1998 to 2009. He then joined MTD Walkers PLC as a Director Infrastructure of MTD Walkers Projects Ltd.

He graduated from MBA City University in 1984 and University College of London. His specialist areas are structural infrastructure projects and arranging financing internationally using ECA’s and financial instruments.

5. Mr. Thilan Wijesinghe, is currently the Chairman and CEO of TWCorp (a real estate focused investment bank and development management company). He is also the Chairman and investor in several pioneering start-up ventures in Sri Lanka: namely, Sapphirus Lanka and Digital Commerce Lanka. Mr. Wijesinghe briefly functioned as Group Managing Director of Overseas Realty (Ceylon) PLC and was responsible for co-founding Ceylon Tea Trails one of Sri Lanka’s most successful resort hotels.

Mr. Thilan Wijesinghe, a product of Ananda College, Colombo, graduated with honours from the State University of New York and Cornell University, USA, with three Bachelor of Science degrees in Business Administration, Industrial Engineering and Economics.

6. Mr. Omathage Don Nilanjan Lal Perera joined the Sri Lanka Air Force (SLAF) as a cadet in the Technical Engineering Branch in January 1972. On Completion of his branch training in Sri Lanka he was sent to Royal Air Force College, Cranwell, United Kingdom to complete his technical engineering officer training.

Mr. Perera is a graduate of the Air Command and staff College Maxwell Air Force Base Montgomery Alabama, USA. His career with the SLAF spans over a period of thirty four years and was retired on 15th March 2006, having held the appointed of Director Aeronautical Engineering of the SLAF for over ten years.

He is presently employed as a Director / Head of Operations at MTD Walkers PLC a public listed company in Sri Lanka involved in Major Engineering and Power projects

7. Mr. Chulendra de Silva currently heads the Sustainability, Enterprise Risk Management and Procurement functions of MTD Walkers PLC, which he joined in 2015. Up until June 2015, Mr De Silva headed the Sustainability, Enterprise Risk Management and Group Initiative Division of John Keells Holdings PLC as a Vice President of the Group.

He is a Certified Sustainability Practitioner and he also holds a first class honours degree in Science from the University of Colombo, is an Associate Member of the Chartered Institute of Management Accountants, United Kingdom, holds an MBA from the University of Southern Queensland, Australia and is a Chartered Financial Analyst (CFA) Charter holder.

MTD WALKERS PLC32

Senior Corporate Management

Hari Mahadewa

Executive Director/Chief Executive Officer – MTD Walkers Infracon (Private) Limited

Mahesh Yogarajan

Executive Director - Walkers Colombo

Shipyard (Private) Limited/Head of Corporate Finance and Treasury

7

5


Group Company Secretary and Head of Corporate Communications

8

Shiran Cabraal

Director - CML- MTD Construction Limited and Director - Walkers Piling (Private) Limited

1

D. D. Wijemanne

Managing Director - Walkers Piling (Private) Limited

2

Zainal Powzie

Executive Director - CML – MTD Construction Limited

3

Shanaka Cabraal

Group Head (Plant & Equipment) - MTD

Walkers PLC and Director - Walkers Equipment Limited

6

Sarath Obeysekera

Chief Executive Officer/Managing Director

- Walkers Colombo Shipyard (Private) Limited

4

CorporateGovernance


Lalith De Silva

Head of Operations – Northern Power Company (Private) Limited

Yung Sheng Tsung

General Manager – Walkers Equipment (Private) Limited

Lalinda Kalubowila

Chief Executive Officer/Deputy General

Manager - Quarry Operations - Special Project Company, Chief Executive Officer - Walkers CML Properties (Private) Limited

Indrajith Jayarathne

Group Head of IT

Lakmal Gunaratne

Group Head of Internal Audit

Douglas Wegiriya

General Manager - Walkers Piling

(Private) Limited

Nimal Perera

General Manager (Project Operations) –

CML - MTD Construction Limited

11

12

9

15

13 14

16

Susil Kumara Silva

Group Head of Human Resources and Administration

10

MTD WALKERS PLC34

Alex Duckworth

Deputy General Manager (Project Development) - CML - MTD Construction Limited

M F M Najab

Group Safety and Compliance Manager

Pulathisi Punchihewa

General Manager (Finance) - CML - MTD Construction Limited

Senior Corporate Management

Siraj Zakaria

Deputy General Manager (Finance) - CML

MTD Construction Limited

Rozan Jameel

Deputy General Manager (Finance) –

MTD Walkers PLC

Upula Dharmawardana

Deputy General Manager (Project

Division) – Walker Sons & Company Engineers (Private) Limited

2120 22

191817

CorporateGovernance


Pravin Pieris

Head of Operations – Walkers CML Properties (Private) Limited

25

L. A. Lalith Liyanaarachchi

Senior Manager (Building Construction) –

CML MTD Construction Limited

27

Jayantha Pushpakumara

Deputy General Manager (After Sales) – Walkers Equipment Limited

Ananda Gunathilake

Deputy General Manager (Safety Security and Logistics) - CML - MTD Construction Limited

Ishani Ranasinghe

Manager - Group Corporate

Communications

Bandula Amaratunga

General Manager (Wind & Solar Power)

– Northern Power Company (Private) Limited

2423

2826

MTD WALKERS PLC36

Governance Report

Corporate Governance Philosophy

The Corporate Governance philosophy of MTD Walkers PLC stems from the belief that Corporate Governance is a key element in improving efficiency and growth as well as enhancing investor confidence through transparent reporting and accountability.

The Corporate Governance philosophy that MTD Walkers PLC and its subsidiaries upholds is:

“As a good corporate citizen, the Group is committed to sound corporate practices based on conscience, openness, fairness, professionalism and accountability in building confidence of its various stakeholders, thereby paving the way for its long term success.”

It is against this backdrop that MTD Walkers PLC and its subsidiaries are pleased to state that it is fully compliant with all the mandatory provisions of the Companies Act, the Listing Rules of the Colombo Stock Exchange (CSE) and the Rules of the Securities and Exchange Commission of Sri Lanka (SEC). Our practices are in line with the Code of Best Practice on Corporate Governance; jointly advocated by the SEC and the Institute of Chartered Accountants of Sri Lanka (ICASL).

The sustainability information in this Report is ‘In Accordance’ with the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines - Core option, and this Report has successfully completed the Materiality Disclosure Service.

The information has been externally verified and assured through an independent assurance process undertaken by DNV GL represented in Sri Lanka by DNV Business Assurance Lanka (Private) Limited.

Corporate Governance Framework

The Group endeavours to balance both growth and efficiency with governance and ethics. Our Board of Directors, guided by the mission statement, endeavours to formulate strategies and policies that optimises the value for various stakeholders.

The Group’s Corporate Governance mechanism is based on the following three key elements;

1. Internal Governance Structure comprising of committees, systems and processes that inculcate a culture of good governance and ensure the sustainability of the organisation

2. External Governance Structure comprising of applicable laws, regulations and best business practices complied by the Group

3. Assurance, the supervisory module of the Group’s Corporate Governance framework that ensures integrity of operations

The Group endeavours to balance both growth and efficiency with governance and ethics.

Sta

keh

old

ers

Chairman

Board of Directors

Management Committee

Executive Deputy Chairman

Board Sub-Committees

Employee Empowerment

Compliance

Companies Act No. 07 of 2007

Code of Best Practice of Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka

Listing Rules of the Colombo Stock Exchange

Inland Revenue Act No. 10 of 2006 as amended Exchange applicable to MTD Walkers PLC

Assurance

Independent assurance to the Audit Committee (Internal Audit)

External Audit of Consolidated Financial Statements of MTD Walkers PLC and the Financial Statements of the Group subsidiaries

External Audit by the International Organisation for Standardisation on Quality, Environment, Occupational Health and Safety

External sustainability assurances undertaken by an independent assurance provider for the non-financial performance of MTD Walkers PLC

Governance Framework

CorporateGovernance


1. Internal Governance Structure

The Internal governance structure encompasses;

1.1 The Board of Directors (BOD)

1.2 Board Sub-Committees

1.3 Management Committees

1.4 Internal Policies,

The key components being:

Code of business conduct and ethics

Human capital management policy

Stakeholder management and policies pertaining to sustainability

1.5 Integrated Risk Management

1.6 Internal Structure

1.1 The Board of Directors

The Board of Directors sets the strategic objectives of MTD Walkers PLC and reviews the detailed planning and implementation of

1.1.3 Board Meetings and Participation The Internal guidelines designed for

Board Meetings facilitate informed and efficient decision making by the Board. Board Meetings are convened when business exigencies arise.

At each of these meetings the respective Chief Executive Officers/ Managing Directors of each subsidiary of the Group presents the Board with progress updates regarding the implementation of approved business strategies, operational performance and funding strategies. The Board also receives reports from the Board sub-committees and may also receive reports from the Company Secretary, who is also the Secretary of the Group Subsidiaries, on any relevant Corporate Governance matters.

1.1.4 The Chairman The Chairman provides leadership

to the Board and is responsible for the governance and the effective operations of the Board. The Chairman also sets the agenda, style and the tone of the Board deliberations and ensures that opinions of all Directors are

appropriately considered in decision making.

Key Responsibilities of the Chairman

Leading the Board for its effectiveness and setting the quality for the governance and ethical framework.

those objectives and policies, by the management committee, in accordance with the Board assigned risk parameters. The Board also monitors compliance with the policies and actual performance against set objectives through regular dialogue with management personnel.

1.1.1 Principle Responsibilities and Duties The Board’s main responsibilities and

duties are;

Providing direction and guidance to the Group in the establishment of its strategies, with an emphasis on medium and long term, in the pursuance of its operational and financial goals

Evaluating and approving annual budget plans

Reviewing Human Resources processes; with emphasis on top management succession planning

Appointing and evaluating the performance of Chief Executive

Attendance of Director’s at Board Meetings:

Names Attendance of Meeting

Number of Meetings Held 6

Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid 0/6

Mr. Jehan Prasanna Amaratunga 6/6

Mr. Keith George Cowling 6/6

Mr. Leong Yow Lee 5/6

Mr. Albert Rasakantha Rasiah 6/6

Mr. Niranjan Joseph de Silva Deva-Aditya 5/6

Mr. Hewawasamge Ravindranath Srilal Wijeratne 4/6

Officers (CEOs) of subsidiary companies in the Group

Monitoring systems of governance and compliance

Overseeing systems of internal control and risk management

Determining any changes to the discretions/authorities delegated from the Board to the executive levels

Evaluation and approving acquisitions, takeovers, disposals and capital expenditure, which can amount to a major transaction in terms of the Companies Act No. 07 of 2007

Approval of any material changes, which requires shareholder approval

1.1.2 Composition of the Board As at 31st March 2016, the Board

of MTD Walkers PLC consists of 07 Directors. The composition of the Board is as follows:

No. of Members

Executive Non- Executive IndependentNon-

Independent Gender

Representation Age Distribution

Male Female Below 50 50-60 61 -70

07 01 06 04 03 07 Nil Nil 04 03

MTD WALKERS PLC38

Guaranteeing that constructive working relations are maintained between the Executive and Non-Executive members of the Board.

Ensuring, with the aid of the Board Secretary that Board procedures are followed and information is distributed in a timely manner to the Board members.

1.1.5 The Executive Deputy Chairman

The Executive Deputy Chairman executes strategies and policies of the Board.

The Executive Deputy Chairman is also the head of the newly formed Group Executive Committee and guides and supervises the committee towards ensuring that the operating model of the Group is aligned to the short term and long term strategies of the Group.

1.1.6 Board Induction and Training New Directors are provided with

an induction on joining the Board; apprising them comprehensively on the values and culture of MTD Walkers PLC and its subsidiaries, the operations of the Group and its strategies, policies, governance framework and processes. In addition, their responsibilities as a Director in terms of the applicable rules and regulations are reiterated. The

Directors have access to information that is required to execute their duties as a Director. The Group has established procedures that enable Directors to seek information and advice of the Company Secretary, who is also the Company Secretary of other subsidiaries, and opinion of other Group independent professional bodies as required.

1.1.7 Board Responsibility of Financial Reporting

The Board has the overall responsibility in ensuring that MTD Walkers PLC and its subsidiaries maintains sound financial reporting standards. Regulatory reports, which should be submitted to the Department of Inland Revenue, Registrar of Companies, and the Colombo Stock Exchange have been submitted on due dates. In the preparation of quarterly and annual Financial Statements, the Group complied with the requirements of the Companies Act No. 07 of 2007 and prepared and presented in conformity with Sri Lanka Financial Reporting Standards (SLFRS) and Lanka Accounting Standards (LKAS).

The Board’s responsibility in respect of financial reporting is stated in ‘The Statement of the Directors- Responsibility for Financial Reporting’ on page 146 of this Annual Report.

1.1.8 Role of the Company Secretary The Company Secretary plays an

important role in ensuring that the Board procedures are followed and are regularly reviewed. Additionally, the Company Secretary ensures that all relevant information, details and documents are made available to the Directors and Senior Management for effective decision-making at meetings. To ensure healthy deliberation and optimum decision making, the Directors have access to the services of the Company Secretary ensuring that all regulations and statutory requirements are met. The appointment or removal of the Company Secretary is the responsibility of the Board.

Minutes of all physically held meetings are recorded by the Company Secretary, who also facilitates circular of resolutions sought for impromptu approvals from the Board. All these are promptly distributed among the Board by the Company Secretary.

1.2 Board Sub-Committees The Board has delegated certain

functions to Board sub-committees: Audit Committee and Remuneration Committee. The Board Sub-Committees comprises predominantly of Independent Non-Executive Directors. The reports of the two Board Sub-Committees are as below:

1.2.1 Report of the Audit Committee Please refer to page 40 on this Annual

Report

1.2.2 Report of the Remuneration Committee

Please refer to page 41 on this Annual Report

1.2.3 Report of the Related Party Transaction Review Committee

Please refer to page 42 on this Annual Report

Governance Report

The Board has the overall responsibility in ensuring that MTD Walkers PLC and its subsidiaries maintains sound financial reporting standards.

CorporateGovernance


Attendance of Committee Members at Meetings

Name Attended


Mr. Albert Rasakantha Rasiah (Chairman) 4/4


Mr. Keith George Cowling 4/4

Mr. Niranjan Joseph de Silva Deva–Aditya 3/4

Mr. Hewawasamge Ravindranath Srilal Wijeratne 2/4

The Composition of the Audit Committee

The Audit Committee of MTD Walkers PLC comprises of the following Directors of the Company:

Mr. Albert Rasakantha Rasiah (Chairman)


Mr. Leong Yow Lee


Mr. Keith George Cowling


Mr. Niranjan Joseph de Silva Deva–Aditya


Mr. Hewawasamge Ravindranath Srilal Wijeratne


Charter of the Committee

The Charter clearly defines the Terms of Reference of the Audit Committee. It demonstrates that the activities of the Audit Committee are in line with the Code of Best Practice on Corporate Governance,

issued jointly by the Institute of Chartered Accountants of Sri Lanka, and Securities and Exchange Commission.

The purpose of the Audit Committee is to assist the Board of Directors in its general oversight of financial reporting, internal controls and functions relating to internal and external audits.

Membership

The Members of the Audit Committee are appointed by the Board. Keeping in line with the Listing Rules of the Colombo Stock Exchange, the Audit Committee comprises of 01 Non-Independent/Non-Executive Director and 04 Independent/ Non-Executive Directors. The Chairman of the Committee is an Independent/ Non-Executive Director who has proven financial acumen in the fields of accountancy and audit.

The Duties and Responsibilities of the Audit Committee

The Committee has been mandated to carry out the duties mentioned here;

Financial Reporting

The Committee monitors the integrity of the Financial Information/ Financial Statements of MTD Walkers PLC, including its annual and quarterly reports and any other formal announcement relating to the financial performance of the Company and its subsidiaries (“the Group”). The Committee reviews significant financial reporting issues and decisions, any changes in accounting policies and practices, significant adjustments arising from the audits and the Going Concern assumptions.

The Committee verifies the Group’s compliance with financial reporting requirements, information requirements of the Companies Act No. 07 of 2007 and other relevant financial reporting related regulations and requirements.

Having assessed the prevailing internal controls and procedures, the Committee is of the view that adequate controls and procedures are in place to provide reasonable assurance that the financial position of the Group is well monitored and accurately reported.

Meetings

The committee held four meetings during the year under review.

Internal Audit

The Committee has established an Internal Audit Department for MTD Walkers PLC and its subsidiaries. The Internal Audit function is independent of the activities it audits and is performed with impartiality, proficiency, and due professional care.

Necessary Internal Audit Reports are tabled at the Audit Committee Meetings.

The Committee will review, assess and approve the internal audit plans and programmes.

The Committee also reviews and monitors the responsiveness of the management to significant audit findings and recommendations of the Internal Auditor.

Regulatory Compliance

The Committee closely monitors the Group’s compliance with mandatory finance and other statutory requirements, systems, and procedures to ensure the compliance with such requirements. The compliance reporting has been set up in such a way that the Company Secretary will apprise the Committee of compliance and regulatory material. The Committee has advised the Group Internal Audit Department to conduct compliance reviews on a regular basis in order to ensure compliance awareness.

REPORT OF THE AUDIT COMMITTEE

MTD WALKERS PLC40

Governance Report

External Audit

The Committee monitors independence, objectivity, and effectiveness of the audit process of the external audit in accordance with the applicable standards of best practice.

The Committee remains satisfied with the level of independence of the External Auditors and is of the view that they have not been impaired by any event or services that give rise to conflict of interest. Due consideration has been given to the nature of the services provided by the auditors and the level of audit fees received by the auditors from MTD Walkers PLC.

Re-Appointment of the External Auditors

The Audit Committee recommended to the Board that Messrs Ernst & Young; Chartered Accountants be re-appointed as External Auditors of MTD Walkers PLC for the financial year ending 31st March 2017, subject to approval by the Shareholders at the forthcoming Annual General Meeting.

Albert Rasakantha RasiahChairman - Audit Committee

Prashanie Saroja AttygalleSecretary - Audit Committee

29th July 2016, Colombo

REPORT OF THE AUDIT COMMITTEE

CorporateGovernance


The Remuneration Committee of MTD Walkers PLC is appointed by the Board of Directors and is governed by 03 Independent/ Non-Executive Directors.

The primary role of the Remuneration Committee is to approve appropriate remuneration to retain and motivate suitably qualified Executive Directors and Senior Management.

Chaired by Mr. Albert Rasakantha Rasiah, the Remuneration Committee is assisted by the Chief Finance Officer and Head of Human Resources in providing relevant information, as and when required.

The policy of the Group is to be consistently aware of prevailing market conditions in order to retain a highly qualified, competent and motivated workforce. The remuneration packages are aligned with the Group’s remuneration policy and are linked to individual and divisional performances; reflecting the time and effort required from the members in fulfilling their responsibilities.

During the year under review, the members of the Remuneration Committee convened on twice in order to decide on matters pertaining under their respective scope.

Albert Rasakantha RasiahChairman Remuneration Committee MTD Walkers PLC

29th July 2016

Prashanie Saroja AttygalleSecretary Remuneration Committee

29th July 2016

REPORT OF THE REMUNERATION COMMITTEE

Name Attended


Mr. Albert Rasakantha Rasiah (Chairman) Independent/Non-Executive Director

2/2

Mr. Niranjan Joseph de Silva Deva-Aditya Independent/Non-Executive Director

2/2

Mr. Hewawasamge Ravindranath Srilal Wijeratne Independent/Non-Executive Director

2/2

MTD WALKERS PLC42

The Composition of the Related Party Transaction Review Committee

The Related Party Transaction Review Committee of MTD Walkers PLC was constituted in March 2016 and comprises of the following Directors of the Company:

Mr. Albert Rasakantha Rasiah (Chairman) Independent Non-Executive Director

Mr. Leong Yow LeeIndependent Non-Executive Director

Mr. Niranjan Joseph de Silva Deva– AdityaIndependent Non-Executive Director

Mr. Jehan Prasanna AmaratungaNon-Independent Executive Director

The objective of the Committee is to ensure on behalf of the Board, that all Related Party Transactions of MTD Walkers PLC are consistent with the Code of Best Practices on Related Party Transaction issued by the SEC.

During the year under review, the members of the Related Party Transaction Review Committee convened once in order to decide matters pertaining under their respective scope.

Albert Rasakantha Rasiah Chairman Related Party Transaction Review Committee

29th July 2016

Prashanie Saroja AttygalleSecretary Related Party Transaction Committee

29th July 2016

Governance Report

REPORT OF THE RELATED PARTY TRANSACTION REVIEW COMMITTEE

Name Attended


Mr. Albert Rasakantha Rasiah (Chairman) 1/1


Mr. Jehan Prasanna Amaratunga 1/1

Mr. Niranjan Joseph de Silva Deva–Aditya 1/1

CorporateGovernance


Related Party Interest

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Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid X – – – – – x x – – – x –

Jehan Prasanna Amaratunga X – – X x – x x x x x x x

Keith George Cowling X – – – – x x x – x – – x

Leong Yow Lee X – – – – – – – – – – – –

Albert Rasakantha Rasiah X x X X x – – – – – – – –

Niranjan Joseph de Silva Deva-Aditya x – – – – – – – – – – – –

Hewawasamge Ravindranath Srilal Wijeratne x – – X – – – – x – – – –

X - Board Director but no related party interests– - Neither Board Director nor related party interestsBoard restructuring not effected during the respective financial year.

MTD WALKERS PLC44

1.3 Management Committee The Management Committee plays

an important role in the organisation as both leaders and decision-makers. MTD Walkers PLC Group’s Management Committee is formed at the management level to ensure the internal operations of the Company are in line with its vision, purpose, and aims. It also monitors and evaluates all areas of the organisation’s performance, whilst ensuring compliance with all relevant legal and regulatory requirements.

The Management Committee ensures that the Board is provided with timely and accurate information. The Management Committee makes aware of all important developments within the Company and further enquiries are made and responded to as necessary.

1.4 Group Executive Committee The Group Executive Committee

will consist of the Executive Deputy Chairman and President/Head of each Cluster/Function.

Under the leadership and direction on the Executive Deputy Chairman, the Group Executive Committee implements the policies and strategies determined by the Board and manages the business and affairs of the Group.

1.5 Internal Policies, Processes and Procedures

Internal policies, processes and procedures of MTD Walkers PLC and its subsidiaries are designed to support and maintain a transparent and effective internal control system, the institutionalisation of best processes for governance, and the management of risk and compliances across the organisation.

1.5.1 Code of Business Conduct and Ethics MTD Walkers PLC and all Group

subsidiaries strive to ensure that all operations are carried out to maximise

value creation for all stakeholders; shareholders, internal stakeholders (employees) and external stakeholders (clients), suppliers, and community. We strive to achieve this goal whilst maintaining our corporate integrity and ensuring we act with the utmost responsibility towards the community and environment we operate in.

The business ethics embedded in our corporate culture:

We are committed to carrying out business with integrity, allowing us to remain true to our ethics.

We actively comply with all legal and regulatory obligations, in order to conform to legal norm and to protect our interests and those of our stakeholders.

We provide a safe and healthy working environment for all employees, at all levels, and are committed to continued training and development to complement their current and future work plans and is governed by the Occupational, Health and Safety Policy adopted at Group level.

We are an equal opportunity employer without prejudice towards race, gender, nationality, religion, ethnic affiliation, political views or other distinguishing characteristics as mandated by the Diversity and Equal Opportunity Policy.

Governed by the Child Labour and Forced Labour Policy, we are committed to employing those who choose to work with us out of free will; and remain committed to not working with those who use: child labour, forced labour, slave labour or other forms of involuntary labour in the services or goods they supply. We do not allow any practice that would restrict free movement of employees.

We provide means for employees and other shareholders, involved

with MTD Walkers PLC and its subsidiaries, to report legitimate concerns and grievances in a manner that ensures proper review and action without repercussion.

We believe it is important for all staff to be able to share the benefits of the Group’s success in achieving its goals.

We shall not act contrary to applicable competition laws

We seek competitive proposals from suitable goods and services providers to meet the Group’s needs, this is mandated by the Group Procurement Policy and the Group Sourcing Drive.

We will remain open-minded in dialogue with those who are affected by our operations, or wish to raise concerns regarding our operations. We will respond to inquiries from external parties and communicate with affected parties in a timely and effective manner and always work towards amicable resolutions. We also initiated a stakeholder engagement carried out periodically for the Group.

We will not risk the Group’s reputation by knowingly associating with people, organisations, products or transactions that could potentially damage the corporate heritage MTD Walkers PLC has built over 160 years of operations. This is governed by the Anti-Corruption Policy that is in place.

We will adhere to environmental regulations and strive to develop methods to reduce our impact on nature and our carbon footprint. This will be implemented across all subsidiaries in all activities and in all finished products. All our environmental related policies mandates that the Group abides by all regulations and laws of Sri Lanka.

Governance Report

CorporateGovernance


We actively support local communities through charitable donations and gifts in kind; and encourage the involvement of our staff in volunteer initiatives for community development. This is further enhanced by our Social Responsibility Policy.

1.5.2 Human Capital Management 1.5.2.1 People and Talent Management MTD Walkers PLC believes that

shareholders’ long term interests are well served by involving employees actively in safeguarding the Group Corporate Governance framework. The employees are encouraged and empowered to positively contribute towards upholding the principles of Corporate Governance.

The Group is committed to hiring and developing individuals who possess the required competencies. As a result, policies, processes and systems have been put in place to ensure effective recruitment, development and retention of employees.

A safe, secure, and conducive environment for the employees is provided by the Group. The employees are allowed freedom of association, prohibits child labour, forced or compulsory labour and any discrimination based on gender, race or religion or other. The Group promotes workplaces that are free from physical, verbal and sexual harassment. To further ensure this, a formal policy was documented during the year under review and can be found online at www.mtdwalkers.com/sustainability.

1.5.2.2 Pay for Performance At MTD Walkers PLC, the employees

are rewarded with a performance based scheme that is determined as follows:

Manager level and above levels: The performance is measured annually on well-defined individual as well as organisational objectives and metrics which reflect, to the

objective of the Group, thereby aligning employee, management, and stakeholder interests.

Assistant Manager level and Executive level: Measured by the individual performance rating.

1.5.2.3 Equity Sharing Share options have been offered to

employees at defined career levels based on pre-determined criteria which are uniformity applied across the eligible levels. Such options are offered at the volume weighted market prices prevailing on the date of the offer.

1.5.3 Stakeholder Management MTD Walkers PLC Board views

effective stakeholder management as a vital aspect in safeguarding the MTD Walkers PLC Corporate Governance Philosophy.

1.5.3.1 Employee Relations Human resource units are designed in a

manner that enables high accessibility by any employee to every level of management. Constant dialogue and facilitation is also maintained relating to work related issues as well as matters pertaining to general interest that could affect employees and their families. The Group follows open-door policies for its employees and key stakeholders and this is promoted at all levels of the Group.

1.5.3.2 Dialogue with Shareholders

MTD Walkers PLC has a well-developed investor relation programme to address the information needs of investment institutions and analysts regarding the Company, its strategy, performance and competitive position.

1.5.3.3 Effective and Transparent Communication

(i) Employee Communication

The Group is continuously working towards introducing innovative and effective ways of employee communication and employee awareness.

The importance of communication – top-down, bottom-up, and lateral communication in gaining employee commitment to organisational goals and values has been conveyed extensively and intensively through various communiques issued by the Executive Deputy Chairman, CEO and the management.

Whilst employees have many opportunities to interact with senior management, the Group has also created formal channels for such communications through feedback such as:

Performance Evaluation: The employee is evaluated by their supervisor and when needed from their peers. The performance evaluation takes into consideration Key Performance Indicators that are both subjective and objective.

Direct E Mail Address to the Executive Deputy Chairman: Gives employees the opportunity to bring to the Executive Deputy Chairman’s notice any transgression of the Group values when other established avenues have not yet yielded results.

Exit Interviews: Mandated for all Executive and above levels. Carried out by the Human Resource Department and the results are forwarded to the Executive Deputy Chairman and the rest of the Board.

Corporate Communications: The primary goal of the Corporate Communications team is to enhance and safeguard the brand values of MTD Walkers PLC. Accordingly, it engages in activities to build the brand amongst both current and prospective employees in addition to creating awareness amongst the general public at large.

1.5.3.4 Stakeholder Engagement Review During the year under review a

Stakeholder Engagement Review was carried out by an independent third party for the Group. The review was done under the standard AA1000SES

MTD WALKERS PLC46

Governance Report

and will continue to be carried out periodically.

(ii) Investor Communications

The Corporate Finance Division of the Group is responsible for maintaining an active dialogue with shareholders, potential investors, investment banks, stock brokers and other interested parties, towards developing an effective investor communication channel.

The Corporate Finance Division of MTD Walkers PLC is responsible for

Staying visible and building relations

Focusing on the longterm view and strength of the Group’s financial position

Responding to queries and clarifying on concerns of investors

1.6 Integrated Risk Management Risk Management is an integral part

of the Group’s overall Corporate Governance Framework and during the financial year 2015/16 a risk management process, based on the guidelines of ISO 31000 was instilled throughout the Group including its subsidiaries.

The steps taken towards promoting the Group’s integrated risk management processes include;

Introduction of risk registers

Introduction of risk rating parameters to ensure consistency of risk ratings at all subsidiaries

Documentation of Group Risk Policy

1.7 Ownership Structure The right of shareholders to make

decisions is exercised at the Annual General Meeting of the Company in addition to Extraordinary General Meetings which are called as and when required. MTD Walkers PLC had a total number of 167,647,568 ordinary shares

as at 31st March 2016, of which MTD Capital Berhad, the largest shareholder of the Company accounted for 90.78 percent amounting to 152,183,583 ordinary shares as at 31st March 2016.

2. External Governance Structure The external governance structure of

MTD Walkers PLC and its Subsidiaries comprises of the laws, regulations and best practices listed below that enable the Group to operate within a sound Corporate Governance Framework.

Major External Regulations Applicable to MTD Walkers PLC and its Subsidiaries

Companies Act No. 07 of 2007

Code of Best Practice of Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka

Listing Rules of the Colombo Stock Exchange applicable to MTD Walkers PLC

Inland Revenue Act No. 10 of 2006 (as amended)

A detailed compliance report disclosing MTD Walkers PLC’s level of compliance with Codes of Best Practice of Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka and Listing Rules of the Colombo Stock Exchange is set out on pages 47 to 58 of this Annual Report.

3. Assurance Corporate Governance assurance at

MTD Walkers PLC and its subsidiaries is upheld by the Internal Audit Division and the External Auditors of the Group.

3.1 Internal Audit MTD Walkers PLC’ s Internal Audit

Division focuses on providing

independent supervision to the Audit Committee on the processes and controls within the Group and the level of compliance with laws and regulation. The Division plays a vital role in the governance structure of the Group.

3.2 External Audit External Audit Report enables the

Board to determine the adequacy and effectiveness of the Company’s Internal controls which form an essential part of the sound Corporate Governance mechanism.

Messrs Ernst & Young; Chartered accountants were the External Auditors of MTD Walkers PLC and its subsidiaries. They were responsible for auditing the consolidated financial statements of MTD Walkers PLC and the financial statements of the Group Subsidiaries.

Statement of Compliance under Section 7.10 of the Rules of the Colombo Stock Exchange (CSE) on Corporate Governance (Mandatory provisions – fully complied)

The Non-Financial Performance has been externally verified and assured through an independent assurance process undertaken by DNV GL represented in Sri Lanka by DNV Business Assurance Lanka (Private) Limited.

Code of Best Practice of Corporate Governance issued jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka

(Voluntary provisions – fully complied)

CorporateGovernance


Section 1- Board and CEO Functions

Principle Reference to the Code of Best

Practice issued by CA Sri Lanka & SEC

Reference to the Section 7.10 of

the Listing Rules of the CSE

Details of Compliance

Board of Directors

The Board should direct, lead and control the Company

A.1 - Refer to the MTD Walkers PLC Corporate Governance Section 1.1.

Board Meetings

Frequency of Board Meetings and Directors’ attendance at Board Meetings

A.1.1 - Refer to the MTD Walkers PLC Corporate Governance Section 1.1.3.

Board Responsibilities

Formulation and implementation of a sound strategy


Competency of the CEO and the Senior Managers to implement the Company strategy

A.1.2 - The Company does not carry the designation of CEO. The function of a CEO is carried out by the Group Executive Deputy Chairman. The Group Executive Deputy Chairman and the Senior Management Team of the Company possess extensive knowledge and skills with widespread experience in the industry in which the Company operates.

For further information please refer to the Board of Directors section of this Annual Report on pages 24 to 29.

Adoption of an effective CEO and Senior Management succession plan

A.1.2 - The Human Resources Division guided by the Board of Directors is in the process of carrying out the necessary requirements.

Effective systems to secure integrity of information, internal controls and risk management

A.1.2 - The Company has set up a fully-fledged Internal Audit Division which carried out four Internal Audits during the financial year under review.

For further information please refer to the Audit Committee Report on pages 39 to 40 and the Enterprise Risk Management section on pages 59 to 61 of this Annual Report.

Compliance with laws, regulations and ethical standards

A.1.2 - The Company practices and enforces the highest ethical standards and adheres to all stipulated laws and relevant regulations.

Moreover, the Company seeks independent professional advice when deemed necessary.

Consideration of stakeholder interests in corporate decision making

A.1.2 - All charters and policies of the Company have been developed to ensure that responsibilities to shareholders and other stakeholders are timely and appropriately discharged.

Moreover, in terms of Companies Act No. 07 of 2007, the approvals of the shareholders are sought where necessary.

Please refer to the Sustainability Integration section of this Annual Report on pages 62 to 71 for further information.

Adherence with the Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission (SEC) and the Listing Rules of the Colombo Stock Exchange(CSE) is tabulated below.

MTD WALKERS PLC48

Governance Report






Recognising sustainable business development in corporate strategy, decisions and activities

A.1.2 - Please refer to the Sustainability Integration section of this Annual Report on pages 62 to 71 for further information.

Adoption of appropriate accounting policies and fostering compliance with financial regulations

A.1.2 - The Company comprises of qualified accountants who report to the Group Chief Financial Officer who in turn reports to the Board of Directors regarding accounting policies and compliance with financial regulations that have to be adopted.

With this information, the Board of Directors advices the Senior Management in the appropriate adoption of polices and compliance of financial regulations.

Fulfilling the other Board functions relevant to the organisation

A.1.2 - During the year under review, every endeavour was made by the Board of Directors in order to fulfill its obligations.

Act in accordance with the laws and regulations relevant to the organisation and procedures to obtain independent advice

A.1.3 - The majority of the Board Sub-Committees comprise of Independent Directors which facilitate the Company to act in accordance with the relevant laws and regulations.

Further, the Board seeks independent professional advice when deemed necessary.

Access to the Company Secretary and functions of the Company Secretary


Independent judgment of Directors

A.1.5 - All Directors at the point of appointment disclosed their conflicts of interests or stated that they have no interest in business that the Group is involved in.

During their tenure on the Board they will disclose to the Board any new appointments, which may have a conflict of interest.

In the event a matter is discussed to which a Director has a conflict of interest, he will excuse himself from that discussion. If there is a vote where a Director has a conflict of interest they will abstain from voting.

Dedication of adequate time and effort for the matters of the Board and the Company


In addition, the Directors function as members of the Board Sub-Committees.

For attendance of Directors at Sub-Committee meetings refer to the MTD Walkers PLC Corporate Governance Section 1.2.1 and 1.2.2.

Further circular resolutions of the Board are passed in order to meet urgent business decisions.

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Board induction and training A.1.7 Refer to the MTD Walkers PLC Corporate Governance Section 1.1.6.

Chairman and CEO

Chairman and CEO A.2 The profile of the Chairman is set out on page 26 of this Annual Report.

The Company does not carry the designation of CEO.

Chairman’s and CEO’s Role A.3 The Company does not carry the designation of a CEO.

However, the Group Executive Deputy Chairman of the Company functions as the Chief Executive Officer of the Group. Refer to the MTD Walkers PLC Corporate Governance Section 1.1.4.

Key responsibilities of the Chairman


Financial Acumen

Availability of sufficient financial acumen and knowledge

A.4 - The Chairman is an engineer by profession and holds a Masters in Business Administration.

The Group Executive Deputy Chairman is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and CIMA, United Kingdom and possesses sound financial acumen and knowledge.

The Directors’ financial acumen and knowledge is more-fully described under the Board of Directors section of this Annual Report on pages 24 to 29.

Board Balance

Board Composition A.5 7.10.1, 7.10.3 (c) Refer to the MTD Walkers PLC Corporate Governance Section 1.1.2.

Balance of Executive and Non-Executive Directors

A.5.1 7.10.1 (a),(b),(c) Refer to the MTD Walkers PLC Corporate Governance Section 1.1.2.

Independent Directors A.5.2, A.5.3, A.5.5

7.10.2, 7.10.3 (a) 7.10.3 (b)

Refer to the MTD Walkers PLC Corporate Governance Section 1.1.2.

Submission of annual declaration of independence

A.5.4 - All Non-Executive Directors submit a signed and dated declaration of their independence on an annual basis.

Requirement to appoint Senior Independent Director

A.5.6, A.5.7,A.5.8 - The Company’s Board composition currently does not necessitate the requirement for a Senior Independent Director. The terms of reference will be disclosed in the Annual Report when the need for such a designation arises.

Meetings to be held with Non-Executive Directors only

A.5.9 - The Audit Committee is the only committee that comprises of only Non-Executive Directors. Refer to the MTD Walkers PLC Corporate Governance Section 1.2.1.

Unresolved matters A.5.10 - The Directors concerns pertaining to uncertain matters are discussed and documented accordingly in the Board Meeting minutes. Further discussions on these matters are pursued at the next Board Meeting with a view to resolve them.

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Supply of Information

Management obligation for providing information in a timely manner

A.6.1 - Refer to the MTD Walkers PLC Corporate Governance Section 1.3 and Refer to the MTD Walkers PLC Corporate Governance Section 1.1.7.

Adequate time for effective Board Meetings

A.6.2 - The date of the next Board Meeting is collectively decided by all Board Members present during the previous meeting, and the notice in terms of the Articles of Association is given to all Board Members when convening a Board Meeting.

Appointment to the Board

Appointment of new Directors to the Board

A.7 7.10.3 (d) All applications to the Board are approved by the Nomination Committee of MTD Capital Berhad. Malaysia. Re-election at MTD Walkers PLC takes place strictly in accordance with the Articles of Association; where one third of Directors retire annually.

During the financial year 2015/16 there were no new Directors appointed to the Board.

Requirement of a Nomination Committee

A.7.1, A.7.2 - The Company has not appointed a Nomination Committee as at the reporting date. However, as stated above, the performance of the Board is assessed to ensure that the Board is comprised of persons with adequate resources to represent the needs of the Company.

Re-election

Re-election at regular intervals and should be subject to election and re-election by shareholders

A.8, A.8.1,A.8.2 - The Board Members are appointed and recommended for re-election in terms of the Articles of Association of the Company until they reach the retirement age in terms of Companies Act No. 07 of 2007.

One third of the Directors retire by rotation on the basis prescribed in the Articles of Association of the Company.

A Director retiring by rotation is eligible for re-election by the shareholders at the Annual General Meeting by passing a resolution

Appraisal of Board Performance and Functions

Board Appraisal A.9, A.9.1,

A.9.2, A.9.3

- The Board appraisal mechanism is currently being implemented.

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Disclosure of Directors’ Information

Information in relation to each Director

A.10,

A.10.1

7.10.3 (C.)

7.10.4 (a.4)

The profiles of all Board Members are presented on pages 24 to 29 of this Annual Report.

Related party transactions are presented in Note 13 to the Financial Statements on page 177 of this Annual Report.


For attendance of Directors at Sub-Committee Meetings refer to the MTD Walkers PLC Corporate Governance Section 1.2.1 and 1.2.2.

Appraisal of CEO

Assessing the performance of the CEO

A.11 - The Company does not possess the designation of CEO as the Group Executive Deputy Chairman carries out executive functions and steers the Company towards its goals.

The Board collectively appraises the performance of the Group Executive Deputy Chairman on the basis of pre-agreed goals for the Group.

MTD WALKERS PLC52

Governance Report

Section 2 – Directors Remuneration






Directors Remuneration and Remuneration Committee

Directors Remuneration B.1. - No Director is involved in deciding his own remuneration.

Remuneration Committee and determining remuneration of the Directors

B.1.1, B.1.2, B.1.3, B.1.4, B.1.5

7.10.5 (a.1), (a.2) The Remuneration Policy for all levels of employees of the Group is reviewed and approved by the Remuneration Committee of the Company

The remuneration of the Executive Directors are decided by the Remuneration Committee and approved by the Board.

The remuneration of the Senior Management is decided by the Remuneration Committee subjected to the approval of the Board

The Level and Make up of Remuneration

Level of Remuneration and Executive Share Options

B.2, B.2.1, B.2.2, B.2.3, B.2.4, B.2.5, B.2.6, B.2.7, B.2.8,

B.2.9

- Refer to the MTD Walkers PLC Corporate Governance Section 1.2.2.

The Company has offered an Executive Share Option Plan during the financial year 2015/16. Please refer to the Share Information section of this Annual Report on pages 204 to 206 for more information.

Composition of Remuneration Commitee Members

2012/13 2013/14 2014/15 2015/16

Non Independent/Executive DirectorIndependent/Non Executive Director

75% 75% 100% 100%

25% 25%

Disclosure of Remuneration

Disclosure of remuneration B.3, B.3.1 7.10.5 (b), (c.1) Please refer to Note 30 to the Financial Statements on page 188 of this Annual Report.

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Section 3 – Relations with Shareholders






Relations with Shareholders

Constructive use of Annual General Meeting and conduct of General Meetings

C.1 - The Board uses an Annual General Meeting (AGM) to communicate the Group’s performance with shareholders and encourages their active participation.

In this regard, all shareholders of the Company receive the Notice of Meeting within the statutory period.

Consideration of proxy votes C.1.1 - As a matter of practice, proxy votes together with the votes of the shareholders present at the Annual General Meeting are considered for each resolution.

Separate resolutions on each substantially separate issue

C.1.2 - The Company proposes separate resolutions on each substantially separate issue, giving shareholders the opportunity to vote on each such issue separately.

Availability of Board Sub- Committee Chairman to answer queries

C.1.3 - If requested, the Chairman of the Audit Committee is available to respond to any queries at the Annual General Meeting.

Circulation of notice of Annual General Meeting

C.1.4 - The Notice of Meeting and related documents including a copy of the Annual Report, a Form of Proxy and other resolutions, if any, are circulated to the shareholders 15 working days prior to the Annual General Meeting in compliance with the Companies Act No. 07 of 2007 and the Article of Association of the Company.

Procedures governing voting at Annual General Meeting

C.1.5 - A summary of the procedure relating to voting at the AGM is set out in the ‘Notice of Meeting’ sent to each shareholder.

Communication with Shareholders

Official channel to reach all shareholders

C.2.1 The Company Secretary attends to all shareholder queries.

Disclose the policy and methodology for communication with shareholders

C.2.2 The Company Secretarial Department is headed by the Company Secretary, attends to all shareholders queries.

Disclose how they implement the above policy and methodology

C.2.3 The Company telephone number and address is published on the Colombo Stock Exchange (CSE) website. Any decision to convene an Annual General Meeting or Extraordinary General Meeting will be communicated to shareholders via circular or notice by the Company Secretary with proper approval by the Colombo Stock Exchange and the Board.

Disclose the contact person for such communication

C.2.4 Company Secretarial Division of the Company.

There should be a process to make all Directors aware of major issues and concerns of shareholders, and this process has to be disclosed by the Company

C.2.5 All major concerns raised by the shareholders are communicated to the Board at the Board Meeting, by the Company Secretary.

MTD WALKERS PLC54






The Company should decide the person to contact in relation to shareholders’ matters (Company Secretary or a Director from the BOD)

C.2.6 Company Secretarial Department of the Company.

The process for responding to shareholder matters should be formulated by the Board and disclosed

C.2.7 Shareholder queries are responded to via face to face meetings, telephone conversations or letters by the Company Secretarial Division.

Major Transactions

Disclosure of major transactions

C.3 - There were no major transactions during the financial year.

Disclosure of major transactions which change the Group composition

C.3.1 - There were no major transactions during the financial year that changed the Group’s composition.

Accountability and Audit

Financial Reporting D.1 The Financial Statements presents a balanced and understandable evaluation of the Company. The Company’s position, performance and prospects have been discussed in detail in the following reports;

• Chairman’s Statement on pages 14 to 17 of this Annual Report.

• Group Executive Deputy Chairman’s Statement on pages 18 to 21 of this Annual report

• Management Discussion and Analysis on pages 72 to 139 of this Annual Report.

• Financial Review on pages 78 to 83 of this Annual Report.

All Interim and Annual Financial Reports are submitted in terms of the listing rules of the Colombo Stock Exchange. Refer to the MTD Walkers PLC Corporate Governance Section 1.1.7.

Board responsibility in respect of Financial Reporting

D.1.1 - Refer to the MTD Walkers PLC Corporate Governance Section 1.1.7.

Directors’ Report D.1.2 Directors’ declaration on the Company’s Governance is discussed in the Annual Report of the Board of Directors on pages 142 to 144 of this Annual Report.

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Declaration of Going Concern by the Directors

D.1.5 - This information is provided in the Annual Report of the Board of Directors section of this Annual Report on pages 142 to 144.

Extraordinary General Meetings in the event the net assets of the Company fall below 50 percent of the value of the Company’s shareholders’ funds

D.1.6 - Not applicable as the Company has not faced such a situation during the financial year under review.

Extraordinary General Meeting held on 12th June 2015 to pass a special resolution to issue shares to employees by way of a Employee Share Option Plan.

The Board should adequately and accurately disclose the related party transactions in its Annual Report

D.1.7 The Company has adhered to the disclosure requirements as at 31st March 2016 in terms of the Securities Exchange Commission and Colombo Stock Exchange.

Internal Control

Implementation of sound system of Internal Control

D.2 - Internal Controls are closely scrutinised by the Internal Audit Division of the Group.

Review of effectiveness of the Group’s system of Internal Controls

D.2.1 - The Audit Committee reviews the Internal Audit Reports/findings and updates them periodically.

Need to have an Internal Audit function

D.2.2 - The Group Internal Audit Division has been set up as of April 2014. Prior to setting up the Group Internal Audit Division, the Internal Audit function was carried out by the Internal Audit Division of the Group’s Parent Company.

The Board should require the Audit Committee to carry out reviews of the processes and effectiveness of Risk Management and Internal Controls, and to document this to the Board. The Board takes the responsibility for the Disclosures on Internal Controls.

D.2.3 - The Audit Committee carries out the necessary requirements to comply with this rule.

Responsibilities of Directors in maintaining a sound system of Internal Control

D.2.4 These are being monitored and implemented by the Internal Audit Division of the Group and the Audit Committee.

The independent opinion of External Auditors is also sought when required.

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Audit Committee

The Audit Committee should be comprised of a minimum of two Independent Non-Executive Directors or exclusively by Non-Executive Directors, a majority of whom should be Independent, whichever is higher. The Chairman of the Committee should be a Non-Executive Director, appointed by the Board.

D.3.1 7.10.6 (a.1),(a.2) 7.10.6 (c.1)

The Audit Committee of the Company comprises 04 Independent/Non-Executive Directors, and 01 Non Independent/Non-Executive Director.


Composition of the Audit Commitee Members

2012/13 2013/14 2014/15

Percent

2015/16

Non Independent/Non Executive DirectorIndependent/Non Executive Director

60% 60% 60% 80%

40% 40% 40% 20%

Terms of Reference, Duties and Responsibilities

D.3.2, D.3.3 7.10.6 (b.1),(b.2),(b.3),

(b.4), (b.5)


Disclosures

Annual Report should contain a report by the Audit Committee setting out,

- The names of Directors comprising the Audit Committee should be disclosed in the Annual Report

- Determination of the independence of the Auditors Disclose use of the basis of such determination

- Compliance by the Company

D.3.4 7.10.6 (c.1), (c.2), (c.3)


Code of Business Ethics

Availability of Code of Business Conduct and Ethics

D.4 - Refer to the MTD Walkers PLC Corporate Governance Section 1.5.1.

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Corporate Governance Disclosure

D.5 - The Company has complied with the Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

Corporate Governance Report D.5.1 - This Report from pages 24 to 58 serves this requirement

Institutional Investors and Shareholder Voting

Encourage Institutional Shareholders to translate their voting intentions into practice

E.1 - All shareholders are encouraged to participate and vote at the Annual General Meeting.

Regular and structured dialogue with shareholders

E.1.1 - The Annual General Meeting is used to enable an effective dialogue with shareholders. Further the Board of Directors ensures the prompt release of material information to the public and the Colombo Stock Exchange. The Chairman ensures that views and queries of shareholders, as appropriate, are communicated to the Board as a whole, and addressed in a timely manner.

Evaluation of Governance Structure

E.2 - The Governance Structure presented on page 36 of this Annual Report is regularly reviewed by the Board of Directors.

Investing divesting decisions

Independent advice with regard to investing and divesting decisions

F.1 - The Annual Report is circulated to all shareholders in a timely manner and includes sufficient information to enable the shareholders to make decisions relevant to their investment in the Company. The following reports aim at providing an overall evaluation of the Company’s Activities and future prospects.

Description Reference Page

Chairman’s Statement 14 to 17

Group Executive Deputy Chairman’s Statement

18 to 21

Management Discussion and Analysis 72 to 139

Financial Statements 148 to 201

Individual shareholders are encouraged to carry out sufficient analysis or seek independent advice on investing, holding or divesting share of the Company.

Shareholder Voting

Encourage individual shareholders to participate in General Meetings

F.2 - The Company circulates the Notice of Meeting within the statutory timeline, thereby giving adequate time for shareholders to consider the matters to be taken up at all meetings. Shareholders are encouraged to participate at such meetings.

Sustainability Reporting

Disclosure on adherence to sustainability principles

G.1 Please refer Sustainability Integration section of this Annual Report on pages 62 to 71.

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Governance Report

Statement of Compliance under section 7.10 of the Listing Rules of the Colombo Stock Exchange on Corporate Governance

(Implemented on 1st April 2009 and subsequent amendments to date).

CSE Rule Compliance Status


7.10 Compliance

7.10.4 Criteria for defining independence

a. to h. Requirements for meeting the criteria to be an Independent Director

Please refer Annual Report of the Board of Directors on pages 142 to 144 in this Annual Report

7.10.5 Remuneration Committee

c.2 Statement of Remuneration Policy Remuneration Policy is decided by the Remuneration Committee.

c.3 Aggregate remuneration paid to Executive Directors and Non-Executive Directors

Decided by the Remuneration Committee and approved by the Board.

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Risk management is an integral part of the Group’s overall Corporate Governance Framework and is a continuously evolving and developing process. The Group’s Sustainability and Internal Audit functions also play a key role in risk identification, to ensure risks stemming from all aspects can be identified and managed.

During the year, a Group-wide risk management process based on the principles of ISO 31000 was adopted. The new process formalised the risk management procedure within the Group and introduced risk registers and risk rating parameters to ensure consistency of risk assessment. The Group is also in the process of documenting its Risk Policy.

The Group firmly believes that by the adoption of sound risk management practices, future risks and opportunities can be accurately recognised and dealt with in a timely manner. This in turn will aid the Group in achieving its goal of sustainable long term growth and reaching strategic and operational objectives.

The Group is committed to embedding effective and efficient risk management practices into its businesses, to ensure that risks, which may delay or prevent achievement of both strategic and operational objectives, are assessed and controlled in time.

The Group hopes to maintain an integrated risk management framework based on the ISO 31000 principles, and ensures that the Risk Management Framework is embedded into its organisational culture, governance and accountability arrangements, planning, reporting, performance review, business transformation and improvement processes.

The Group’s risk management process is a bottom-up approach, starting at the level of individual business units where risks are identified. Business units are the ultimate risk owners of their business specific risks and are responsible for complying with risk procedures and identifying, assessing and managing risks by ensuring that appropriate mitigation plans are put in place. All business unit risks are validated by the CEO of each subsidiary who in turn identifies the level of risk that can be taken within the risk appetite parameters set by the Executive Committee of the Group. The Executive Committee is responsible for determining the risk appetite and overall Risk Policy for the Group, and is also responsible for assessing risks on a Group-wide basis by considering the risks emanating from individual business units.

The Board of Directors are responsible for oversight on the risk management process and reviews the Group’s risk assessment outcomes on a bi-annual basis.

The Enterprise Risk Management Division is responsible for driving the culture of risk management across Group companies and acts as a facilitator to the risk process and as a resource point for risk management best practices and process improvements.

Once the Group has completed the identification of risks, the Group strives to mitigate, minimise or transfer the risk by adopting operational and management controls. These controls are reviewed bi-annually and verified by the Group Executive Committee. Highlights of the identified Group level risks, along with key impacts and opportunities, are outlined in this section.

Macro-Economic and Political Environment

Risk Rating:

FY 2015/16 Low

FY 2014/15 Moderate

The Sri Lankan economy has enjoyed robust growth in the recent past and is

The Group firmly believes that by the adoption of sound risk management practices future risks and opportunities can be accurately recognised and dealt with in a timely manner.

MTD WALKERS PLC60


among the better performing economies in the South Asian region. However, together with the prevailing downturn in global growth and the resulting slow growth experienced by the country’s key

export markets, the Sri Lankan economy is expected to grow moderately over the next year.

The new Government, supported by multiple international agencies has begun to outline its economic plan. The support and guidance provided to Sri Lanka, at what is a crucial juncture of its economic development allows the Group to remain confident of the long term resilience of the economy.

The Group has a planned strategy of expanding to overseas markets to minimise the risk of any adverse change in the local economic environment, while a Research and Development Lab is being set up to adopt and develop new technologies that allow the Group to remain competitive in the wake of increasing raw material and labour costs.

Government Policy, Regulatory Environment and Portfolio Management

Risk Rating:

FY 2015/16 Moderate

FY 2014/15 Moderate

As one of the largest infrastructure developers in the country the Group relies heavily on Government-led infrastructure projects to achieve growth. Unanticipated shifts in Government Policy and regulations could have an adverse effect on the Group’s ability to generate revenue at the planned pace. The Group Executive Committee and Members of the Senior Management Team regularly liaise with key Government Institutions and engage with policy making forums to stress the need for consistency in Government Policies and Regulations. The Group further enjoys a prominent position in multiple industry groups through which it has a degree of influence on Government Policy and Regulations.

The Group is actively diversifying its revenue composition to ease the reliance on Government infrastructure projects and reduce the impact from any adverse change in Government Policy or Regulations.

Financial Exposure

Risk Rating:

FY 2015/16 High

FY 2014/15 High

The Group Treasury Division together with the Group Chief Financial Officer is responsible for managing the financial and liquidity risks of the Group. The nature of the Group’s business requires large amounts of working capital to finance projects which exposes the Group to liquidity risks if payments are delayed. The Treasury Department has regular meetings to monitor the liquidity and financial requirements of the Group where interest rate and exchange rate movements are discussed and appropriate strategies adopted to minimise any adverse impacts.

Human Resources and Talent Management

Risk Rating:

FY 2015/16 Moderate

FY 2014/15 Moderate

The Group is recognised as a preferred employer within the industry and marketplace at large, and continues to attract top talent to its workforce. The Group employs a people-centric approach in the workplace and believes that effective talent management is a key to sustaining the growth trajectory of the Group. The Group culture of performance based rewards, rapid career progression and professional development has resulted in the Group retaining a high proportion of its best talent.

The Group is committed to embedding effective and efficient risk management practices into its businesses, to ensure that risks are assessed and controlled in time.

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The senior management of the Group regularly engage with all employees to ensure that both the expectations of the Group and the employee can be met while being mutually beneficial.

The Group recognises the importance of the role played by its employees in the overall operations of the Group, and in addition to having an effective grievance mechanism in place provides training to all employees to ensure development of skills. This in turn allows the Group to maintain and improve the quality of services offered, and continue to attract skilled individuals.

Health and Safety

Risk Rating:

FY 2015/16 Low

FY 2014/15 High

Maintaining a safe workplace for all employees, clients, customers and other stakeholders is a key aspect of the Group’s Standard Operating Procedures. All companies with significant operations maintain OSHAS 18001 at minimum, while all companies follow the Group’s internal Health and Safety Policy. The

Group Sustainability Division together with the Group Health and Safety Department track selected indicators throughout the year and conduct semi-annual audits to ensure compliance of all relevant Health and Safety standards. The Audit Report is reviewed by the Group Executive Committee and the Group Management Committee where new polices and recommendations are discussed and adopted.

Environmental Stewardship

Risk Rating:

FY 2015/16 Moderate

FY 2014/15 Moderate

While carrying out operations the Group strives to leave the least possible impact on the environment. The Group has a robust Environmental Policy in

place that is periodically reviewed and updated to reflect new developments in environmental management. Significant operating entities within the Group follow the ISO 14001 Environmental Management System and maintain the certification. All companies are required to obtain Environmental Protection Licences and scheduled Waste Disposal plans, Management licences (where applicable) at minimum to ensure compliance with local laws.

The Group Sustainability Division tracks selected indicators throughout the year and conducts annual internal assurance audits to ensure compliance of all relevant environmental policies of the Group. The Audit Report is reviewed by the Executive Committee of the Group where new polices and recommendations are discussed and adopted. Sustainability Champions attached to each business unit are responsible for driving sustainable practices within their respective units. Each business unit is encouraged to maximise resource utilisation by minimising wastage.

Service Quality

Risk Rating:

FY 2015/16 Moderate

FY 2014/15 N/A

As a Group focussed on engineering and the development of infrastructure, the quality and safety standards of its work are of vital importance. The future growth and sustained profitability of the Group rely on its reputation and brand as one of the leading entities in Sri Lanka. The Group has strict controls in place to ensure all work is carried out in a timely manner and to the highest standards of quality and safety, while all companies maintain the ISO 9001 certification. The Group has a Sourcing Policy in place to ensure all material is procured on time and meets the required minimum quality specifications. Monthly meetings between the Project Managers, Executive Committee and subsidiary CEOs take

place to ensure the Group meets its performance targets with regards to quality and timeliness. The Group further has an Employee Code of Conduct and Communications Policy in place to guarantee representatives of the Group and external communications by the Group conform to standards befitting its reputation.

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Growing global concerns on climate change, energy security, water scarcity, increased emissions, labour shortages, health and safety concerns, and impacts on human rights have brought about a focus on sustainable development within business operations and societal norms. As a leading Company in the fields of infrastructure development and engineering, many of these concerns directly affect the Group and the multiple sectors the Group operates in.

The Group, having recognised its socio-environmental impacts, places great importance on Sustainable Development and firmly believes that its financial performance and brand image are closely linked with sound corporate governance, product and service excellence and environmental stewardship. As an entity predominantly engaged in serviced-based industries, the Group focuses on maintaining a highly motivated and productive workforce while being a socially responsible corporate citizen that contributes effectively to the country’s economy.

The Group, has therefore, commenced its journey towards minimising its operational

impacts through the entrenchment of responsible business practices and the monitoring of key sustainability performance indicators. The following section of this Annual Report details the steps taken and methodologies adopted by the Group in embedding sustainability within its operations.

Sustainability Policy

The Group’s overarching Sustainability Policy has been developed after taking into account the results of an internal

materiality assessment and external independent stakeholder engagement exercise undertaken by the Group under the AA1000SES standard.

The Group Sustainability Policy, consisting of policies on environment, society and economy, are aligned to the United Nations Sustainable Development Goals, and has been ratified by the Executive Committee of the Group. Management Approaches to support such policy implementation are also currently in place. The Group is in the process of developing Standard Operating Procedures for each Management Approach to ensure consistency, accuracy and completeness. The Group hopes to complete drafting and implement these Standard Operational Procedures during the upcoming financial year.

Sustainability Management Framework

The Group has established a comprehensive Sustainability Management Framework as part of the Group’s commitment to integrating sustainability within its business strategy. This Framework has also become an integral part of the Group’s overall Risk Management Framework which allows the Group to identify and manage risks emanating from each of its stakeholder groups, in addition to the risks it identifies through its Enterprise Risk Management process.

The Sustainability Management Framework enables the translation of general principles of sustainability

The Group, having recognised its socio-environmental impacts, places great importance on Sustainable Development.

Group Sustainability Policy

The Group will strive to constantly improve the manner in which it conducts business operations to keep in line with the highest international standards for corporate best practice and compliance

The Group is mindful of any environmental impact caused as a result of its activities and continuously monitors all operations, while seeking new methods to minimise any adverse effects

The Group is dedicated to being transparent and open with respect to all business activities and is working toward establishing global best practices in partnership with all stakeholders

The Group places significant emphasis on maintaining a safe and secure work place for its employees and providing a non-discriminatory environment that offers equal opportunity for all

The Group aims to work with communities in areas of operations and establish lasting relationships to help improve their standard of living, while maintaining our social license to operate

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into corporate practice by providing a systematic, step-by-step guidance towards a more sustainable business. The Framework consists of a sustainability organisational structure supported by Senior Management, a team of Sustainability Champions representing each Company, an internally developed spreadsheet platform for data gathering, a quarterly reporting process of the Group’s sustainability performance, sustainability awareness creation, and internal and external sustainability assurance.

The sustainability management framework further includes the establishment of benchmarks and targets for identified sustainability indicators. As this is the first year of reporting, the Group intends to measure and assess performance initially, and subsequently establish targets and benchmarks in the forthcoming years. The Group believes that the information derived from this process can then be used to assess the sustainability performance of the Group and its subsidiaries, and further, identify potential risk areas and manage them through corrective action.

This sustainability management framework will be periodically reviewed and updated to meet the operational requirements of the subsidiaries within the Group.

The framework is further complemented by quality, environmental, health and safety management systems currently utilised by the Group, and the Group’s risk management, internal audit, compliance

and social responsibility processes. All of the Group’s entities with significant operations are certified under ISO 14001 (Environmental Management System), OHSAS 18001 (Occupational Health & Safety Management System), and ISO 9001 (Quality Management System), while the remaining entities have adopted the Group’s policies on quality, environment and health and safety. The Group’s sustainability performance has also been aligned to the United Nations Sustainable Development Goals and is carried in the GRI G4 Content Index.

Sustainability Organisational Structure

The Group’s sustainability strategy is formulated by the Sustainability and Risk Management Division, with direction from the Group Executive Deputy Chairman. The Sustainability and Risk Management Division is responsible for the operationalisation of the Group’s Sustainability Management Framework under which the Group and its subsidiaries carry out sustainability strategies and initiatives. The Division also identifies significant stakeholders, material issues, introduces global best practices to the Group, reviews and monitors the sustainability drive and carries out Group- wide risk reviews and compiles the Group risk grid. The Division also strives to instill a culture of sustainability within the Group through regular Group-wide awareness campaigns.

Sustainability Champions representing each of the Group’s companies are

responsible for introducing sustainability initiatives and overlooking their Company’s overall sustainability performance. Each Company identifies its material aspects and strives to amalgamate sustainability strategies with business strategies to drive the Group’s triple bottom line performance.

Risk and Opportunity Identification

The Group’s risk management process plays an integral part in effectively managing its operational activities and strategic decision making process, which seeks to identify, control and mitigate structural, operational, financial, and strategic risks that may prevent the Group from meeting its objectives. This process, which adopts a triple bottom line approach, simultaneously identifies opportunities for business success and assesses the value chain for any potential risks originating from it.

The Group identified global economic trends such as the weakened global economy and the increase of public debt acting as a constraint on fiscal and policy options, as well as local economic trends such as political instability, decline in construction and possible volatility in interest and foreign exchange rates as key economic risks of the Group. To mitigate these risks, the Group identified opportunities such as global rapid urbanisation, emerging economies exerting more influence on the global economy, construction boom in Asia, increasing local purchases through sustainable sourcing, and enhancing local infrastructure through community and government based initiatives. The ‘Precautionary Principle’ governs the Group’s operational decisions in order to prevent potential risks and impacts to stakeholders and the environment. The Group gives precedence to the prevention of environment degradation, pollution, climate change and any impacts on local communities around areas of operation. These aspects are identified as key macro risks with key risks being tracked through the sustainability performance indicators. As the Group’s key operations are highly dependent on energy

Sustainability Initiatives and External Reporting

Benchmarking and Variance Control

Data Tracking Mechanisms

Policy and Framework

Identify Stakeholder Concerns

Sustainability Management Framework

MTD WALKERS PLC64

and water resources, their conservation is seen as an opportunity for sustainable growth. Similarly, the Group identifies the health and safety of its employees as a key risk to be controlled and mitigated, and strives to provide a safe and secure workplace for all employees.

A comprehensive description on the Group’s Risk Management Policy and procedures are stated in the Enterprise Risk Management section of this Report.

Defining the Sustainability Content of the Report

The section ‘Significant Stakeholders and Aspect Boundary’ establishes the significant internal and external stakeholders based on their influence on the Group’s operations and how all parties are impacted by the actions of the other. Details of the frequency of engagement of these stakeholders, and of the independent third party

stakeholder engagement that was carried out to establish stakeholder concerns are contained in the ‘Stakeholder Engagement’ section.

The outcomes of the regular stakeholder engagements, the independent external stakeholder engagement and daily media monitoring reports have been considered in identifying the material sustainability aspects pertaining to the Group, which are highlighted in the ‘Key Sustainability Concerns’ section. These concerns, which are prioritised based on importance to external and internal stakeholders are illustrated in the section ‘Mapping of Material Aspects’.

The sustainability indicators identified for reporting are based on the material aspects that were identified to be of ‘High Importance’ to both external and internal stakeholders. The Management Approach adopted in ensuring the Group

performance in relation to the identified material sustainability aspects are summarised in the section ’Management of Material Aspects’ and also hosted online on the Group’s website at www.mtdwalkers.com/sustainability.

Significant Stakeholders and Aspect Boundary

The operations of the Group which span multiple sectors of the economy have resulted in a large and diverse range of stakeholders interacting with the Group on a day-to-day basis. Functioning with a large number of stakeholder groups translates to numerous and varying expectations from them, and while the Group is conscious of its diverse range of stakeholders it considers only the stakeholders that have a significant influence over the Group, or who would be significantly impacted by the Group’s operations in this Report. These significant stakeholder groups are illustrated in the forthcoming diagrams.


G4 - 18; G4 - 20; G4 - 21; G4 - 25

Material Aspects Internal Stakeholders External Stakeholders

Economic Performance All Group Sectors and Companies, Employees Investors, Community, Peers, Customers, Suppliers

Market Presence Civil Engineering Sector, Heavy Engineering Sector, Employees

Investors, Regulatory Bodies

Procurement Practices All Group Sectors and Companies Investors, Suppliers, Community

Materials All Group Sectors and Companies Investors, Suppliers

Energy and Emissions All Group Sectors and Companies Investors, Customers, Regulatory Bodies

Water, Effluents and Waste Civil Engineering Sector Regulatory Bodies, Media, Community

Environmental Compliance All Group Sectors and Companies Regulatory Bodies, Media, Community, Pressure Groups

Employment, Training, Occupational Health and Safety

All Group Sectors and Companies, Employees Community, Regulatory Bodies, Media

Prevention of Child Labour, Forced Labour and Compulsory Labour

All Group Sectors and Companies, Employees Regulatory Bodies, Media, Customers

Local Communities All Group Sectors and Companies Investors, Community

Anti-corruption and Regulatory Compliance

All Group Sectors and Companies, Employees Investors, Regulatory Bodies, Media, Customers

Disaster Preparedness, Emergency Planning & Response

Civil Engineering Sector (Special Project Company), Power Generation Sector (Northern Power), All Other Group Sectors and Companies, Employees,

Investors, Community

Customer Health & Safety, Product and Service Labelling

Civil Engineering Sector (CML MTD Construction), Real Estate Sector (Walkers CML Properties)

Customers

Access Power Generation Sector (Northern Power) Investors, Customers

Materials Stewardship Civil Engineering Sector (Special Project Company)

Investors

CorporateGovernance


Stakeholder Engagement

Stakeholder engagement remains a pivotal dimension in the Group’s sustainability strategy. The Group’s approach to managing identified significant stakeholders revolves around periodically engaging with these stakeholder groups to understand their perceptions on significant operational impacts and thereby establish significant sustainability aspects that impact the Group. These engagements include formal and informal consultations, negotiations, communications, mandatory and voluntary disclosures, certifications and accreditations.

During the year under review the Group proactively engaged with a diverse range

of stakeholders to assess the Group’s focus on, and responsiveness to, material issues The Group further commissioned an independent stakeholder engagement as part of the Sustainability Integration Drive. The independent stakeholder engagement exercise was carried out in accordance to the sustainability assurance standard AA1000SES. The Group will continue to periodically carry out a detailed independent stakeholder engagements study in the future to maintain its commitment to increasing stakeholder value. The AA1000SES standard is used to verify materiality, which defines the parameters for reporting on inclusivity, materiality and responsiveness.

The Group Human Resource Division also carries out a limited stakeholder engagement exercise amongst the Group’s employees – one of the most significant stakeholders of the Group to understand the pulse of employee groups. This is done at the end of training programmes conducted by the Group in the form of questionnaires circulated to receive feedback on the training programmes which include questions on employee motivation and morale.

The Annual Report is the Group’s primary method of communicating its responses to the material issues identified through the stakeholder engagement process in relation to core business operations.

G4 - 24; G4 - 26

Customers – B2C, B2B, B2G

Expectations: On-time delivery of tailor-made and premium quality products and services, in an environmentally and socially responsible manner.

Frequency of Engagement Method of Engagement

Annual/Bi-annual Trade fairs, road shows, conferences, site visits, discussion forums

Regular Regular progress review meetings, site visits

Ongoing Corporate communication (printed reports), direct dialogue (telephone, SMS, e-mail), corporate website, and other business development activities

Employees – Senior Management, Executives, Workers, Casual Workers

Expectations: Providing remuneration, benefits and equal opportunity in a safe and enabling workplace with a culture that promotes meritocracy and encourages work-life balance.


Annual Group-wide annual cricket encounter, performance reviews

Bi-annual Performance reviews, skip level meetings

Regular Internal memos, employee newsletter, corporate events

Ongoing Training and development, joint consultative committees, open door policy, social responsibility projects

Suppliers and Business Partners

Expectations: Longterm relationships through adherence to and renewal of agreements and contracts, timely settlements and knowledge sharing within the industry sector.


Annual Supplier evaluations, contract renewal mechanism, conferences, road shows,

Quarterly Supplier reviews

Regular One-on-one meetings, market reports

Ongoing Corporate website, calls, e-mails and circulars

MTD WALKERS PLC66

G4 - 24; G4 - 26


Community, Community Leaders, Society

Expectations: Livelihood development and social inclusion through direct and indirect employment and local sourcing, with minimal impact to shared resources.


One-off One-off meetings, forums or workshops prior to project commencement

Monthly Once project is commenced, monthly meetings, workshops and forums

Ongoing Social Responsibility programmes/projects

Investors and Lenders

Expectations: Economic value generation through consistent performance.


Annual Annual reports, disclosures and reviews, investor road shows

Ongoing Phone calls, e-mail, written communication, websites, one-on-one meetings

Legal and Regulatory Bodies

Expectations: Statutory compliance when carrying out operations.


Annual Senior management are members of Chambers and Industry Associations and meet at least on a quarterly or bi-annual basis.

Ongoing Periodic discussions through meetings and other correspondence

Government Institutions and Departments

Expectations: Stimulating the local economy through investments, employment generations and timely settlements of taxes.


Annual Senior management are members of Chambers and Industry Associations and meet at least on a quarterly or bi-annual basis

Ongoing Meetings, business forums, newsletters, circulars, presentations and briefings, advisory meetings of industry associates

Society, Media and Pressure Groups

Expectations: Being a responsible corporate citizen with sound governance practices which adhere to applicable laws and regulations and with minimal impact to society and environment in which it operates.


Ongoing Website, press releases, media briefings, correspondence and meetings, disclosures, media coverage, certification and accreditation

Industry Peers and Competition

Expectations: Ensuring that anti-competitive behaviour is discouraged and actively participating in industry organisations.


Quarterly Quarterly meetings at Chambers and Industry Associations

Ongoing Participation at Trade Associations, conferences and discussion forums

CorporateGovernance


Key Sustainability Concerns

The Group continuously monitors key media channels during reporting periods as a method of tracking risks. The Senior Management receives a media monitoring report on a daily basis from Nielsen Company Lanka (Private) Limited, which is the local arm of the Nielsen Company - a leading global information and measurement firm. According to these reports, the Group was not highlighted for any adverse reports relating to environmental and social concerns during the year under review.

During the year under review, the stakeholder engagements carried out by the Group highlighted a number of sustainability strengths and weaknesses. These included certain employee perceptions regarding communication and remuneration and other areas for improvement such as noise and dust pollution, and waste management. Lack of awareness on the Group’s key ‘Walkers CML’ brand, lack of communication on CSR activities conducted by the Group and peer perception of the Group as a smaller player in the market were among the other concerns highlighted during the stakeholder engagement exercise.

The strengths of the Group highlighted during the stakeholder engagement exercise included the Group’s emphasis on employee welfare, social responsibility initiatives, efforts to create a positive organisational culture and professionalism displayed when dealing with regulatory bodies. The Group was further perceived as a stable employer with a high degree of allegiance to the Group by senior and experienced employees.

The identified sustainability strengths and concerns were presented to the highest governing bodies within the Group for advice and action. As a step in the Group’s newly adopted Sustainability Management Framework, the Group has committed itself to make necessary changes to policies and management

approaches to address the identified stakeholder needs and related potential risks. The performance against the identified sustainability concerns will be detailed in this Report in the forthcoming year. The Group’s performance in relation to these sustainability concerns is reported through the tracking of key sustainability performance indicators, which is featured in this Report and would also be featured in subsequent years.

This being the Group’s first Integrated Sustainability Report, an assessment on the Group’s suppliers to identify issues deriving from the Group’s supply chain is yet to be conducted.

Identification of Sustainability Aspects

The Group aligns all identified key sustainability concerns of significant stakeholders to the relevant sustainability aspects of the GRI Framework. In defining report content, the Group prioritises material aspects according to their impacts and importance to significant internal and external stakeholder groups.

Significant stakeholder groups include internal stakeholders such as business units and employees, and external stakeholders such as shareholders,

investors, lenders, customers, suppliers, business partners, government and regulatory authorities, peers, pressure groups, media and the community. This identification and prioritisation of material aspects for reporting purposes is illustrated in the diagram in the ‘Mapping of Sustainability Aspects’ section of this report.

The Group aligns all identified key sustainability concerns of significant stakeholders to the relevant sustainability aspects of the GRI Framework.

G4 - 19; G4 - 27

MTD WALKERS PLC68


G4 - 19

Prioritised material aspects are colour-coded and categorised according to our Management Approaches as below:

Category Material Aspects Disclosure of Management Approach

Management of Capitals

Economy

Economic Performance

Economic PerformanceManagement of Financial and Manufactured Capitals

Market Presence

Procurement Practices

Environment

Materials

Environmental ResponsibilityManagement of Natural Capital

Energy and Emissions

Water, Effluents and Waste

Environmental Compliance

Workforce Employment , Training, Health and Safety Labour PracticesManagement of Human and Intellectual CapitalHuman Rights

Prevention of Child Labour, Prevention of Forced and Compulsory Labour

Human Rights

Society

Local Communities

Social ResponsibilityManagement of Social and Relationship Capital

Anti-corruption and Regulatory Compliance

Disaster Preparedness, Emergency Planning & Response

Product Responsibility

Customer Health & Safety, Product and Service Labelling and Product Compliance


Mapping of Sustainability Aspects

Economic Performance

Market Presence

Indirect Economic Impacts

Procurement Practices

Availability & Reliability

Demand Side Management

Research and Development

Plant Decommissioning

System E�ciency

Materials

Energy

Water

Biodiversity

Emissions

E�uents and Waste

Products and Services

Compliance - Environment

TransportSupplier Environmental Assessment

Environmental Grievance Mechanisms

Land Degradation, Contamination & Remediation Employment

Labour/Management Relations

Occupational Health and Safety

Training and Education

Diversity and Equal Opportunity

Equal Remuneration for Women and Men

Supplier Assessment for Labour Practices

Labour Practices Grievance Mechanisms

Investment

Non-discrimination

Freedom of Association and Collective Bargaining

Child Labour

Forced or Compulsory Labour

Security Practices

Indigenous Rights

Assessment

Supplier Human Rights Assessment

Human Rights Grievance Mechanisms

Anti Corruption

Anti Competitive Behaviour

Regulatory Compliance

Local Communities

Public Policy

Supplier Assessment for Impacts on Society

Grievance Mechanisms for Impacts on Society

Disaster/Emergency Preparedness & Response

Artisanal and Small Scale Mining

Resettlement

Low

High

External Stakeholder

Hig

h

Inte

rna

l Sta

ke

ho

lde

r

Low

Closure Planning

Customer Health and Safety

Product and Service Labelling

Marketing Communications & Provision of Information

Customer Privacy

Product Compliance

Access Material Stewardship

Economy Environment Workforce Human Rights Society Products Responsibility

CorporateGovernance


Summary of the Group’s ‘Disclosures of Management Approach’

Economic Performance:

Management of Financial and Manufactured Capital

The economic pillar of the Group’s Triple Bottom Line sustainability strategy is of utmost importance and plays a vital role in enabling the Group to consistently deliver economic value addition to all its stakeholders.

The Group’s economic policy which is adopted by all subsidiaries gives focus to sound financial management, stringent internal controls and risk management processes

Implementation of a triple bottom line performance management system is currently underway to inculcate a performance-centric compensation culture to encourage high levels of productivity

The Group’s Procurement and Sourcing Policy defines its commitment to support local organisations and entrepreneurs to optimise costs and stimulate local economies

The Group continuously partners with the Government of Sri Lanka in developing the country by undertaking infrastructure development projects, which empower local communities not only through improved infrastructure services but also through direct and indirect employment opportunities that in turn allows the Group to maintain its social license to operate

Environmental Responsibility:

Management of Natural Capital

As a leading integrated engineering firm, the Group is committed to protect and conserve the environment for current and future generations, and has therefore endeavoured to minimise the environmental impacts that occur due to business execution through the establishment of environmental management systems.

The Group complies with all applicable local environmental laws and regulations at a minimum, and most Group subsidiaries have established the ISO 14001 environmental management system to ensure its environmental impacts are minimised

The Group Environmental Policy is complemented by policies on energy use, water consumption, carbon emissions, waste generation and effluent discharge, to ensure the Group’s operations have minimal environmental impact

The Group’s Environmental Policy and other related policies are operationalised by the Group Sustainability & Risk Management Division through Sector Heads, CEOs, Managers and Sustainability Champions at each of the Group’s subsidiaries

The Group currently tracks its energy and water consumption, emissions, waste generation and fines on non-adherence to environmental laws, and hopes to manage the above aspect with internally established reduction targets, Standard Operating Procedures and other best practices in the forthcoming years

Management of Material Aspects

The Group manages its material aspects through a range of strategies and approaches defined collectively as Management Approaches. A summary of these Management Approaches specific to each of the material aspects are stated below. A full Disclosure of the Group’s Management Approaches can be accessed via the Group website on www.mtdwalkers.com/sustainability

MTD WALKERS PLC70


Labour Practices and Human Rights:

Management of Human Capital

Labour Practices and Decent Work

As an organisation that predominantly engages in the service industry, the Group understands the value of being people-centric, which is imperative to maintain a competitive advantage. In driving this strategy forward, the Group creates synergies by recruiting and efficiently managing local talent and, investing in furthering their capabilities.

The Group and its subsidiaries adhere to all relevant local labour laws and regulations which are based on ILO conventions and most subsidiaries have the OSHAS 18001 Health and Safety Management System in place

The Group benchmarks its Human Resources processes against peers and industry norms, and has in place Human Resources specific policies, covering the areas of recruitment, work hours and leave, performance evaluation, labour relations, training and development, equal opportunity and, health and safety of the workforce

The Group places emphasis on employee rights and does not discriminate its employees based on gender, race, nationality, age, social origin, disability, religion, political opinion or any other basis. The Group also has no restrictions in freedom of association and all employees are free to join Unions as per the laws of the country in order to resolve issues in a fair and transparent manner

Human Rights

The Group recognises the importance of respecting human rights of its stakeholders and upholds human rights across all operations.

The Group has in place policies governing areas such as child labour, forced labour, freedom of association and anti-corruption, which are based on the principles of compliance and good corporate citizenship

The Group and all its subsidiaries adhere to all local labour laws and regulations

The Group tracks incidents of child labour, forced labour and other related human rights violations through the Group’s sustainability performance evaluation of relevant GRI indicators

Management of Intellectual Capital

The Group’s Intellectual Capital plays an important role in strengthening the overall performance of the Group’s triple bottom line, allowing the Group to achieve truly sustainable earnings. The prudent management of Intellectual Capital enhances the Group’s ability to capitalise on its intellectual property, tacit knowledge, systems, processes and protocols.

The Group continuously assesses its brand value through engagement with relevant stakeholders and seeks to enhance such brand value through organisational process improvements, innovation, systems, improving the competency of its human capital and the distribution of tacit knowledge across the organisation

The Group rebranded as Walkers CML, and launched its new identify to unify all its subsidiaries under one brand in order to capitalise on the intrinsic value of its key brands to reinforce the Group’s position at the forefront of the infrastructure development and engineering industries

The Group introduced Brand Guidelines to enhance its new identity and to allow its subsidiaries to differentiate itself from each other while being a part of the Group brand

The Group undertook an organisation-wide restructure to streamline the business operations and processes with a view of synergising and capitalising on the vast experience available within the Group

The Group introduced Sustainability, Enterprise Resource Planning System (SAP) and an Enterprise Risk Management Framework during the year to further enhance and protect its Intellectual Capital

CorporateGovernance


Social Responsibility and Product Responsibility:

Management of Social and Relationship Capital


As a part of the construction industry, the Group facilitates infrastructure development, enabling sustainable development in communities around its operations. The Group values trust, integrity, commitment and care, and this is demonstrated by the Group’s commitment to respect all its stakeholders, including the communities in which its businesses operate.

All Group companies adhere to all relevant social regulations, and strive to manage the impacts of its operations on the communities and the environment

The Group’s sustainability performance management system tracks and monitors the Group’s social performance

The Group seeks to establish a ‘Foundation’ to give enhanced focus to the Group’s social responsibility initiatives. Initiatives of the Foundation will be aligned to the United Nations Sustainable Development Goals and structured based on a social impact assessment, while they will be funded by contributions from profits of Group companies and supported by employee volunteerism

The Group is committed to business integrity and openness, and carries out its business in an ethical manner, to protect its brand reputation. The Group has in place a policy governing anti-corruption, which is based on the principles of compliance and good corporate citizenship

All Group companies analyse and assess the risk of non-compliance and corruption related matters as part of their risk management process which includes the establishment of preventive and mitigatory action plans


The Group strives to offer superior quality products and services and meet optimal quality standards, while adhering to all relevant statutory regulatory requirement to ensure stakeholder satisfaction.

The Group’s Quality Policy, which is adopted by all Group companies ensure that all relevant quality standards are met when servicing customers

Most Group companies have the ISO 9001 Quality Management System in place, further complemented by the ISO 14001 Environmental Management System and ISO 18001 Health and Safety Management System, which establish a process and culture of compliance affecting the end product or service

Adoption of the above policies and management approaches allows the Group to develop and market products and services that meet customer requirements and the highest product quality standards while ensuring customer health and safety

The Group Sustainability and Risk Management Division carries out internal and external assurance on all business units and their permanent sites to assure consistency of processes and data accuracy. To further streamline this process and the Group’s overall sustainability drive, Sustainability Standard Operating Procedures will be established in the forthcoming years, and a more robust internal assurance process will be adopted to review compliance with the Standard Operating Procedures.

The Group’s management approaches will be reviewed and adjusted annually after carrying out an internal stakeholder engagement and external stakeholder reviews, while the Group’s sustainability performance will be reviewed against internally established benchmarks.

MTD WALKERS PLC72

ManagementDiscussion& Analysis

Integrated Group Performance Review 74-91Group Synergy 92-93Civil Engineering Sector 94-109Heavy Engineering Sector 110-117Marine Engineering Sector 118-121Power Generation Sector 122-127 Real Estate Sector 128-133Trading and Other Sector 134-139


We’re moving our own benchmarks of success to a higher level

MTD WALKERS PLC74

Management Discussion and Analysis

Integrated Group Performance Review

CML- MTD Construction Limited

Walker Sons and Company Engineers (Private) Limited

Walkers Colombo Shipyard (Private) Limited

Walkers CML Properties (Private) Limited


Northern Power Company (Private) Limited


Western Airducts Lanka (Private) Limited

Walkers Equipment Limited

Special Projects Company (Private) Limited

Colombo Engineering Services (Private) Limited

Our Companies Capabilities

Civil Engineering

Heavy Engineering

Marine Engineering

Real Estate

Trading

Power Generation

Hambantota Hub Road 16


The following section provides an overall performance review of the Walkers CML Group highlighting the Group strategy in response to the macro-economic environment and its long term growth objectives. It also provides an overview of its operations and performance on value creation within its Financial Capital, Manufactured Capital, Intellectual Capital, Natural Capital, Human Capital and Social Capital.

MACRO-ECONOMIC ENVIRONMENT

The Global Economy

Global growth during 2015 was largely disappointing with growth slowing to 2.4 percent in 2015 from 2.6 percent in 2014 as estimated by the World Bank.

A sustained slowdown in the growth of developing economies following a crash in commodity prices, weak capital flows and subdued global trade were a key factor in the global slowdown. Global growth is expected to recover during 2016 driven largely by a recovery in developed economies and stabilisation of commodity prices.

Sri Lanka’s Economy

During the year, Sri Lanka’s economy posted growth of 4.8 percent, maintaining the growth rate of 4.9 percent witnessed in 2014. The services sector of the economy led the growth following an uptick in consumer spending, as a result of greater disposable income stemming from low energy prices and a wage hike given to the public sector. Buoyed by low oil and commodity prices, rising tourism inflows and growing trade ties with India; the only BRICS member to not experience an economic slowdown, Sri Lanka’s economy is expected to enter a high growth phase in the medium term.

Inflation

Inflation in the economy continued to

remain in the low single digit level for most of the year under review, and averaged at 1.1 percent. Deflationary pressure was present during the first half of the year as the Government’s relief package together with the prevailing global condition of low oil and commodity prices took effect. Inflation picked up to 2.0 percent in

March 2016 as the base effect of lower commodity prices wore off. Inflation in Sri Lanka has remained broadly stable in the single digit range over the last six years and supported by low commodity prices is expected to remain in the mid-single digits over the coming year.

Interest Rates

Interest rates during the year saw a sharp increase of c.200-300 bps across the board. At the close of the financial year the 364-day Government Treasury Bill stood at 9.9 percent as compared to 6.8 percent at the close of the previous financial year. The Weekly AWPLR increased by 200 bps to 9.19 percent at the close of the financial year.

Private sector crowding out and rising interest rates are expected to continue as long as the Government looks to the domestic market to finance its budget deficit. If the Government gains access to cheap international finance the interest rates could settle at the current levels. However, following the US Fed hike of

During the year, Sri Lanka’s economy posted growth of 4.8 percent, maintaining the growth rate of 4.9 percent witnessed in 2014.

Inflation

-1

0

1

2

3

4

5

6

FY 2015/16 FY 2014/15

Percent

Ap

r

May Ju

n

Jul

Aug

Sep Oct

Nov

Dec Ja

n

Feb

Mar

Interest Rates

5

6

7

8

9

10

Ap

r-15

May

-15

Jun-

15

Jul-

15

Aug

-15

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb

-16

Mar

-16

AWPLR 1 Year T-Bill

Percent

MTD WALKERS PLC76



25 bp in late 2015, international finance will still be at a premium to the rate the Government borrowed at in the recent past.

Exchange Rate

The Sri Lankan Rupee depreciated against most major currencies during the year while depreciating c.12 percent against the United States Dollar. The decision by the Government of Sri Lanka to free float the Sri Lankan Rupee in September 2015, coupled with increased imports as a result of an effective increase in purchasing power has seen the rupee depreciate rapidly during the year. The Rupee is expected to stabilise at the current level with moderate depreciation of 3 to 5 percent forecast for 2016.

The Construction Industry

The construction industry in Sri Lanka, one of the major contributors to the rapid growth experienced by the country, recorded negative growth during the year. The construction industry contracted 0.9 percent during the year following the Government’s decision to pause key infrastructure projects and review economic and development policies. The Government has since begun to outline and roll out its economic plan, which has been accepted positively by the local business community and international lending agencies.

-5

0

5

10

15

20

25

30

Construction Industry Growth

26.3%

Percent

21.2%

7.5% 6.6%

(0.9)%

2011 2012 2013 2014 2015

The construction industry of Sri Lanka is expected to recover strongly during 2016 with the commencement of many large infrastructure projects including the Central Expressway, Phase III of the Outer Circular Highway, extension of the Southern Expressway to Hambantota and the expansion of the Bandaranaike International Airport. The Western Region Megapolis Plan proposed by the Government in order to help Sri Lanka transition in to a high income nation by 2030, is expected to further drive the growth in the industry.

Group Strategy

The strategy of the Group revolves around its vision ‘to be Sri Lanka’s No. 1 engineering and infrastructure solutions provider’. The Group enjoys the position of being the only fully fledged infrastructure developer in the country and is a leading player in each of its sectors of operation.

During its history of over 160 years, the Group has successfully navigated many challenges, including adverse economic conditions, natural disasters and the irrelevance of businesses to continue to thrive as a sustainable business entity. The Group’s primary strategy has revolved around enhancing its competencies in core engineering fields, diversifying in to other related engineering sectors and vertical integration. This strategy has helped the Group derive and capitalise on synergies available only to the Group.

Over the past few years this strategy has led to the Group significantly expanding its capacity and capability in the Civil Engineering and Heavy Engineering sectors, and more recently its entrance to the Marine Engineering and Real Estate sectors. As the Group expands its capabilities, a regional expansion too becomes a natural next step. In conjunction with its regional expansion plans, the Group is also in the process of expanding its service offering to include design and consultancy to increase its competitiveness as a fully-fledged infrastructure and engineering solutions provider.

0

2

4

6

8

10

GDP Growth

8.4%9.1%

3.4%

4.9% 4.8%

2011 2012 2013 2014 2015

Percent

The Group is further committed to enhancing the skill and technology base available in Sri Lanka. The Group actively works with many of the largest foreign engineering companies to aid in the transfer of technology, and utilises its

Exchange Rate

130

132

134

136

138

140

142

144

146

Ap

r-15

May

-15

Jun-

15

Jul-

15

Aug

-15

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb

-16

Mar

-16

USD/LKR


expertise and brand reputation to attract talented employees to the industry to strengthen available labour resources.

Process innovation, product and service research, and prudent cost control are among the other strategies employed by the Group to contribute to its long term sustainability. The Group actively integrates Risk and Sustainability Management Frameworks to its operations to aid in the identification of emerging risks and stakeholder concerns. The Group further understands the impact of effective stakeholder engagement and is committed to comprehensively report on each of its six capitals; Financial Capital, Manufactured Capital, Intellectual Capital, Natural Capital, Human Capital, and Social Capital.

OPERATIONAL REVIEW

After enjoying a CAGR of 15 percent over the last four years the construction industry experienced a slowdown and contracted by 0.9 percent during 2015. The slowdown was attributable to the Government embarking on a series of economic and policy reviews during the period. Many of the large scale infrastructure developments were put on hold while the future economic and development policy of the country was shaped and rolled out. The latter part of the year saw a pickup in construction activity as some infrastructure projects commenced, shifting construction back in to the limelight.

The Group posted revenue of LKR 12.0 billion for the year under review, down 14.7 percent Year on Year against LKR 14.0 billion reported during the last financial year. The year under review was a year of transition for the Group, marked by a Group-wide rebranding exercise, Group organisational restructure and diversification.

The rapid phase of infrastructure development seen over the last few years had allowed the Group to grow at a CAGR in excess of 35 percent over the

past six years. During this period the Civil Engineering sector grew to account for 88.3 percent of the revenue of the Group, with a majority of the growth in revenue attributable to Government infrastructure projects. The financial year under review was a challenging year for the Civil Engineering sector, with its revenue falling 13.4 percent Year on Year to LKR 10.6 billion due to a slowdown in Government infrastructure spending.

Throughout the accelerated growth phase of the Civil Engineering sector, the Group strategically diversified in to other related engineering fields to moderate its reliance on the Civil Engineering sector. This year the Group’s Non-Civil Engineering sector contributed LKR 1.4 billion to the top line of the Group.

Gearing for Growth

The Group utilised the year under review to gear itself for the anticipated growth in the Infrastructure Development sector by embarking on a number of key strategic actions (stractions), identified by strategy consultants engaged by the Group.

Under these stractions the Group was reorganised in to a cluster based hierarchy to better synergise the capabilities and experience available to each subsidiary of the Group. The Group operations were split into three primary clusters comprising a Civil Engineering cluster, a Diversified / Growth cluster and a Corporate Centre cluster. This reorganisation is expected to improve the coordination between subsidiaries and eliminate the duplication of work and resources to increase the efficiency of the Group.

The Group further introduced its new brand ‘Walkers CML’ as an umbrella brand during the year. Going forward all Group operations will carry the new brand, and is expected to provide a unified front to the Group’s diverse operations while building public awareness.

During the year the Group maintained its Capital Expenditure strategy, which

centres around deriving synergies through vertical integration, and invested LKR 1.7 billion in new property, plants and equipment (PPE) [FYE 2014/15: LKR 4.2 billion]. The major capital expenditure consisted of heavy machinery, machinery spares and the commencement of construction of the Group’s Shipyard in Mutwal Harbour in Colombo.

As part of the Group’s initiatives in gearing for growth a best-in-class Enterprise Resource Planning package, SAP, was acquired and rolled out across the Group. This application will allow the Group to gain real time access to data on project performance, material requirements and resource utilisation allowing for better project management and increased efficiency at project sites.

During the year, the Group issued a debenture of LKR 3.0 billion with the aim of capitalising on near all-time low interest rates. The Debenture Issue, rated BBB+ by ICRA Lanka, was oversubscribed on its opening day reinforcing the confidence placed by investors in the future growth prospects of the Group. The Group also embarked on a sourcing initiative to secure raw materials at the most competitive price. The sourcing contracts would further secure the supply of raw materials to the Group and reduce supply side risks.

The Group, in an attempt to reduce non-systematic risks and more comprehensively address stakeholder concerns, formally introduced and integrated a Sustainability and Risk Management Framework to its operating systems during the year. The Frameworks are structured to give the Group time to react to changing stakeholder sentiments and identify risks at their inception, ultimately resulting in the long term sustainability of the Group.

MTD WALKERS PLC78



FINANCIAL CAPITAL

Revenue

Group revenue fell 14.7 percent Year on Year to LKR 12.0 billion during this financial year [FYE 2014/15: LKR 14.0 billion]. The Civil Engineering sector contributed 88.3 percent of the Group revenue, while the Heavy Engineering and Power Generation sectors contributed 1.5 percent and 4.3 percent respectively. The balance sectors comprising of Real Estate, Trading and Other and Marine Engineering contributed 5.9 percent to the total revenue of the Group.

2013/14 2014/15 2015/16

0

3,000

6,000

9,000

12,000

15,000

Revenue

11,964

14,025

10,092

LKR Mn

During the year the Civil Engineering and Heavy Engineering sectors saw their revenue decrease by 13.4 percent and 57.7 percent respectively. The Marine Engineering sector’s revenue grew 71.5 percent Year on Year supported by revenue from the acquisition of Walkers Colombo Shipyard. Revenue from the Power Generation sector decreased by 59.3 percent during the year.

Revenue CompositionHeavy Engineering Sector

Marine Engineering SectorReal Estate Sector

Civil EngineeringSector

1.5%0.7%3.0%

88.3%

2.2%

4.3%Trade and

Other Sector

2016

Power GenerationSector

Gross Profit Margin

The Group recorded a Gross Profit margin of 17.5 percent for the year down 21.4 percent from the previous financial year. The Gross profit margins for the Civil Engineering and Heavy Engineering sectors were 16.6 percent and (78.5) percent respectively. The Gross profit margin of both sectors were adversely affected during the year due to increased competition in the sectors as the Government cut back on infrastructure spending during the year.

2013/14 2014/15 2015/16

0

5

10

15

20

25

Gross Profit Margin

17.5%

22.3%20.9%

Percent

The Group posted revenue of LKR 12.0 billion for the year under the review, down 14.7 percent Year on Year against LKR 14.0 billion.

Gross Profit Sector-wise Contribution to the Group

Heavy Engineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector

Trade and Other Sector

Power Generation

Sector

16.6%

(78.5)%

64.8%

28.2%

55.3%

15.2%

-100

-50

0

50

100

Percent


Operating Profit (EBIT)

For the financial year under review the Group recorded operating profit of LKR 838 million, down 57.4 percent Year on Year [FYE 2014/15: 1,968 million]. The largest contributor to Group EBIT was the Civil Engineering sector followed by the Heavy Engineering Sector.

2013/14 2014/15 2015/16

0

500

1,000

1,500

2,000

Operating Profit (EBIT)

838

1,968

1,336

LKR Mn

2013/14 2014/15 2015/16

0

3

6

9

12

15

Operating Profit (EBIT) Margin

13.2%14.0%

7.0%

Percent

During the year the combined selling, general and administrative expenses of the Group was LKR 1.5 billion, an increase of 10.9 percent Year on Year [FYE 2014/15: LKR 1.4 billion].

Finance Income

The Group recorded finance income of LKR 200 million during the year increasing 69.3 percent Year on Year [FYE 2014/15: LKR 118 million]. The finance income comprises of interest income of LKR 156 million and LKR 117 million from fixed deposits and saving deposits. The increase in finance income for the year is mainly due to interest income from unutilised funds of the Group’s LKR 3.0 billion Debenture Issue in October 2015. Further details on finance income can be found in Note 29 to the Financial Statements on page 188.

Finance Expenses

The Group finance expenses increased by 65.3 percent Year on Year to LKR 1.1 billion [FYE 2014/15: 665 million]. The increase in finance cost is in part due to the increase in interest rates during the year and the issuance of debentures to the value of LKR 3.0 billion. Interest expenses on loans and liabilities increased to LKR 409 million from LKR 288 million, while finance charges on lease liabilities decreased to LKR 53 million from LKR 78 million. The interest cover of the the Group reduced to 0.8x as a result of lower EBIT and increased finance cost.

2013/14 2014/15 2015/16

0

200

400

600

800

1,000

1,200

Finance Cost

1,099

665742

LKR Mn

Taxation

During the year under review, the Group tax expense decreased by 81.1 percent to LKR 59 million [FYE 2014/15: LKR 314 million]. The effective tax rate on the Group’s profit decreased to 7.1 percent as compared to the effective tax rate of 15.9 percent during the previous financial year. For further details on the Group’s tax impact refer to Note 31 to the Financial Statements on page 189.

EBIT Sector-wise Contribution to the Group

Heavy Engineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector

Trade and OtherSector

Power Generation

Sector

(27.6)%

(1.5)%

4.3%

(35.0)%

38.7%

121.1%

-60

-30

0

30

60

90

120

150

Percent

Finance Cost Sector-wise Contribution to the Group

Heavy Engineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector


Power Generation

Sector

67.4%

3.1%0.0% 0.5%

8.0%

21.0%

0

20

40

60

80

Percent

MTD WALKERS PLC80



Profit After Tax

The Group recorded a loss of LKR (121) million for the year down 111.0 percent Year on Year [FYE 2014/15: LKR 1,107 million]. The Civil Engineering sector and Real Estate sector contributed a profit of LKR 363 million and LKR 32 million respectively, while the Marine Engineering, Heavy Engineering and Trading sectors reported a loss of LKR (12) million, LKR (261) million and LKR (482) million respectively.

2013/14 2014/15 2015/16

-200

0

200

400

600

800

1,000

1,200

Profit After Tax

(121)

1,107

601

LKR Mn

Profit After Tax and Minority Interest (PATMI)

The profit attributable to equity holders of the Company was a loss of LKR (327) million [FYE 2015/15]. The minority interest component of the profit was a profit of LKR 206 million [FYE 2014/15: LKR 342 million]. The net profit margin of the Group was (1.0) percent [FYE 2014/15: 7.9 percent].

2013/14 2014/15 2015/16

-600

-400

-200

0

200

400

600

800

1000

PATMI

(327)

766

480

LKR Mn

Economic Value Statement

The Economic Value Statement illustrates how the Group generates economic value and distributes it amongst all its stakeholders. The Economic Value Statement is used as an indicator to assess the Groups’ sustainability and it further serves as a reflection of management performance.

During the year under review the economic value generated by the Group fell 13.4 percent Year on Year. The revenue of the Group which declined 14.7 percent during this period, as a result of the sustained slowdown witnessed in the construction

Return on Assets

For the year under review the Return on Assets (ROA) of the Group was (0.4) percent [FYE 2014/15 : 5.0 percent].

industry, was the primary cause of the fall in the Group’s economic value generated. This further transferred to the economic value distributed by the Group, which fell by 9.3 percent Year on Year. As the Group chose to maintain its capacity and increase investments during the year to capitalise on the resurgence in the construction industry, expenditure on employee benefits and wages increased by 50.4 percent Year on Year.

The fall in revenue coupled with increased costs resulted in the Group reporting a loss after tax, and a 40.2 percent fall in the Group’s economic value retained during the year.

FYE 2016 (LKR Mn)

FYE 2015 (LKR Mn)

Economic Value Generated 12,442 14,371

Revenue 11,964 14,025

Finance income 200 325

Profit on sale of assets and other income 278 21

Economic Value Distributed 11,293 12,449

Cost of material and services purchased 7,870 9,905

Employee wages and benefits 2,251 1,497

Payments to providers of capital 1,099 665

Payment to Government as tax 59 314

Community investments 14 11

Shareholders as dividends - 57

Economic Value Retained 1,149 1,922

Depreciation 898 651

Amortisations and Provisions 372 221

Economic value retained for future growth (121) 1,050

2013/14 2014/15 2015/16

-1

0

1

2

3

4

5

Return on Assets

(0.4)%

5.0%

3.8%

Percent


Return on Capital Employed

During the year under review the Group Return on Capital Employed (ROCE) reduced to 3.7 percent from 11.2 percent in the previous year. The Group completing a debenture issue of LKR 3.0 billion contributed to the decrease in ROCE.

2013/14 2014/15 2015/16

0

2

4

6

8

10

12

14

Return on Capital Employed

3.7%

11.2%

12.8%

Percent

Return on Equity

The Group’s Return on Equity (ROE) for the year under review was (1.4) percent, down from 12.6 percent reported in the previous year.

2013/14 2014/15 2015/16

-4

-2

0

2

4

6

8

10

12

14

Return on Equity

(1.4)%

12.6%11.8%

Percent

ROA Sector-wise Contribution to the Group

HeavyEngineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector


Power Generation

Sector

1.9%

(31.1)%

(2.4)%

1.3%

6.0%

(33.0)%-35

-30

-25

-20

-15

-10

-5

0

5

10

Percent

ROCE Sector-wise Contribution to the Group

7.5%

(117.8)%

(9.6)%

1.7%12.1%

(3.0)%

-120

-100

-80

-60

-40

-20

0

20

Heavy Engineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector


Power Generation

Sector

Percent

ROE Sector-wise Contribution to the Group

10.1%

248.9%

(9.7)%

1.4%9.2%

(8.2)%-50

0

50

100

150

200

250

Heavy Engineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector


Power Generation

Sector

Percent

MTD WALKERS PLC82



Financial Position

For the period under review the Group’s Total Assets increased to LKR 29.0 billion [FYE 2014/15: LKR 22.3 billion]. The increase is mostly attributable to the LKR 3.0 billion Debenture Issued by the Group.

2013/14 2014/15 2015/16

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Total Assets

29,003

22,256

15,651

LKR Mn

2013/14 2014/15 2015/16

0

2,000

4,000

6,000

8,000

10,000

Total Equity

8,641 8,770

5,102

LKR Mn

Total Equity Sector-wise Contribution to the Group

25.2%

(0.7)%

0.8%

15.2%18.2%

41.3%

-10

0

10

20

30

40

50

Heavy Engineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector


Power Generation

Sector

Percent

2015/162014/152013/14

0

5,000

10,000

15,000

20,000

25,000

Total Liabilities

20,362

13,485

10,549

LKR Mn

Total Liabilities Sector-wise Contribution to the Group

70.6%

2.7% 0.1% 1.1% 3.2%

22.4%

0

10

20

30

40

50

60

70

80

Heavy Engineering

Sector

CivilEngineering

Sector

Marine Engineering

Sector

Real Estate Sector


Power Generation

Sector

Percent

Total Assets Sector-wise Contribution to the Group

Heavy Engineering SectorMarine Engineering Sector

Real Estate Sector

Civil EngineeringSector

2.9%1.7%8.3%

67.7%

5.1%

14.1%Trade and

Other Sector

2016

Power GenerationSector


Cash Flow

Cash generated from the Group’s operations before working capital changes stood at LKR 1.8 billion during the year under review compared with LKR 2.6 billion in the previous financial year. Net cash generated from operations resulted in negative cash generation due to a negative impact arising from working capital changes.

Net cash used in investment activities amounted to LKR 2.1 billion during the financial year, as against LKR 2.7 billion in the previous financial year. This includes a total of LKR 1.7 billion invested in acquisition of property, plant and equipment as well as the purchase of bank deposits and investments amounting to LKR 904 million. Net cash generated from financing activities stood at LKR 4.9 billion compared to LKR 1.9 billion during the previous financial year. The cash generated from financing activities was utilised to finance the aforesaid investments in property, plant and equipment.

Capital Structure

The Group’s Total Assets of LKR 29.0 billion are funded through shareholder’s funds (26.6 percent), non-controlling interest (3.2 percent), current liabilities (47.1 percent) and non-current liabilities (23.1 percent).

Capital Structure

Non-current Liabilities

Shareholder's FundShareh

Current Liabilities

Non- Controlling

Interest

26.6%

3.2%

23.1%

47.1%

2016

During the year under review the non-current liabilities and current liabilities grew by 119.6 percent and 30.9 percent

respectively as a result of the LKR 3.0 billion debenture issue. The gearing ratio of the Group stood at 62.3 percent at the end of the financial year, compared to a gearing ratio of 50.2 percent in the previous financial year.

Credit Rating

The Group obtained a credit rating of BBB+ in January 2015 from ICRA ratings for its Debenture Issue of LKR 3.0 billion.

Ten Year Summary

The ten year summary of the financial performance of the Group can be found in the section Decade at a Glance on page 209 of this Annual Report.

MANUFACTURED CAPITAL

The Group’s primary sectors of operation of Civil Engineering, Heavy Engineering, Marine Engineering, Power Generation and Real Estate are both highly competitive and capital intensive. With the focus of adding greater value to its Manufactured Capital, the Group engages in a strategy of vertical integration for all its operations. This strategy has allowed the Group to emerge as the only fully fledged infrastructure and engineering solutions provider in Sri Lanka.

The Group’s Key Manufactured Capital consists of heavy machinery, quarries and asphalt plants, batching plants, pre-cast yards and mechanical workshops. These are responsible for generating over 90 percent of the Group’s revenue. In addition, the Group possess a state-of-the-art metal working facility in Sapugaskanda capable of manufacturing items to meet most civil engineering and mechanical engineering needs. Recent additions to the Group’s Manufactured Capital include the acquisition of Mutwal Harbour, where the Group is currently setting up a Shipyard and an ERP System (SAP) that is expected to increase the efficiency of the Group. The Group’s single largest piece of Manufactured Capital by value is a 30MW power plant in Chunnakkam, Jaffna.

INTELLECTUAL CAPITAL

Intellectual Capital is recognised as one of the most important strategic assets of organisations in knowledge based economies. The prudent management of Intellectual Capital enhances an organisation’s ability to capitalise on its intellectual property, tacit knowledge, systems, processes and protocols.

At MTD Walkers PLC our Intellectual Capital plays an important role in strengthening our Financial Capital to achieve truly sustainable earnings. The Group continuously asses its intellectual assets in order to fully capitalise on its value and adjusts strategies to reflect changes in the Group’s Intellectual Capital. One of the key strategies of the Group has been to enhance its brand equity, distribution of knowledge, operational performance and the competency of its human capital resources.

One of the cornerstones of the Group’s Intellectual Capital is its brand equity which is enriched by its heritage spanning over 160 years. The Group builds brand equity by increasing brand recognition amongst its stakeholders. The Group engages in strategic interviews with leading business magazines and newspapers, along with regular press releases highlighting different milestones. The Group’s brand is aligned with all press and partner events carried out by its subsidiaries allowing the brand to be further enhanced.

During the year, the Group rebranded as Walkers CML, and launched its new identity to bring all its subsidiaries under one umbrella. The rebranding was carried out with the view of capitalising the position of our key brands to reinforce the Group’s position at the forefront of the infrastructure development and engineering industries. The Group corporate profile and website were redesigned and launched to reflect the new brand identity of the Group and create further awareness among

MTD WALKERS PLC84



the Group’s stakeholders. The Group introduced Brand Guidelines to enhance its new identity and to allow its subsidiaries to differentiate itself from each other while being a part of the Group brand.

Adding to the Group’s Intellectual Capital are the awards received by the Group which includes the Gold Award (Construction Sector) at the National Business Excellence Awards organised by the National Chamber of Commerce of Sri Lanka and the Gold Award at the People’s Development Awards organised by the Sri Lanka Institute of Training & Development.

To support and enhance the Intellectual Capital of the Group, new processes and protocols were introduced to its operating practices. The Group undertook an organisation restructure to help streamline the Group businesses and its processes. It further allowed knowledge sharing to take place across the Group, allowing the Group to synergise and capitalise on the vast experience available. The introduction of sustainability, an Enterprise Resource Planning System and an Enterprise Risk Management Framework allowed the Group to enhance and protect its Intellectual Capital.

NATURAL CAPITAL

As a Group of companies predominately involved in infrastructure development and the provision of engineering services, Natural Capital forms the foundation of services offered by the Group. The Group is therefore mindful of the positive and negative impacts it can cause by its operations in the environment it operates in, and is committed to minimising its environmental footprint.

The Group has established policies and procedures on sustainability and environmental management to enable and encourage sustainable and efficient business operations. The Group’s overall triple bottom line performance strategy

Materials and Procurement

As a Group of companies that rely highly on natural resources to provide its services, the Group considers material use a significant aspect. The Group is committed to ensuring a continuous supply of raw material for its operations and has a Sourcing Policy in place to mitigate any risks related to obtaining the required material. The Sourcing Policy, in addition to reducing risk, is also positioned at enhancing the brand reputation of the Group and benefiting local businesses.

During the year under review the Group established a Group Sourcing Process to procure all major raw material items. The process is designed to select suppliers for each item based on responses to a formal Requests for Proposal (RFP), commercial evaluation and technical evaluation which include relevant terms and conditions on environment and other sustainability related clauses.

The most procured material types as listed under “Major Materials Procured by the Group”, are tracked for consumption, efficient utilisation and cost control. These are further categorised as renewable material, raw (natural) material and manufactured material.

Major Materials Procured by the Group

Raw Material Volume

Timber and Plywood (sq ft) 71,808

Aggregates (Cubes) 57,186

Sand (Cubes) 16,190

Tor Steel (MT) 11,722

Bitumen (MT) 5,532

Ready Mix (m3) 31,95

Lubricants (l) 34,446

Cement (MT) 7,236

Paint (l) 21,960

Renewable Materials Raw Natural Materials Manufactured Materials

ensures that day-to-day operations as well as new projects undertaken, are monitored and analysed for not only its financial feasibility, but also for opportunities and risks arising from its environmental and social impacts.

The Group places importance on the management of its inputs and outputs, while paying special attention to the management of aspects material to the Group. During the year under review the Group initiated tracking data related to such material aspects to help in managing the Group’s triple bottom line performance. In the forthcoming years this data will be used to establish internally generated reduction targets which will be achieved through the systematic introduction of global best practices and targeted sustainability initiatives. The Group has also established Management Approaches to ensure this process is followed consistently and constantly, which can be viewed on the Group’s website at www.mtdwalkers.com/sustainability.

All Group entities with significant operations have adopted the ISO 14001 Environmental Management System, while all Group companies have adopted the Group Environment Policy. During the year under review the Group through its Environmental Policy and Management Approaches focused on energy conservation, management of carbon footprint, conservation and optimisation of water usage, and waste management.

A Group-wide sustainability awareness campaign focusing on energy and water conservation, covering operational sites and office locations, was carried out by the Group Sustainability and Risk Management Division during the year. The campaign included informative posters encouraging efficient use of resources and, informal workshops with office employees and site personnel.


The Group’s seven suppliers of Tor Steel and Cement were assessed for sustainability qualities during the year under review. All materials listed under “Major Materials Procured by the Group” was purchased locally or through an agent after a local value addition process. The total percentage of cost spent on materials and services locally was approximately 87 percent during the year under review.

The Group’s material usage data for the financial year 2015/16 is listed under “Major Materials Procured by the Group”, while comparative data will be included from the next financial year.

Material Innovation

Large-scale uncontrolled river sand mining has been a pressing environmental issue in Sri Lanka for nearly a decade. River sand mining leads to the erosion of river banks, lowering of riverbed levels, salt water intrusion, and river bank collapses.

Over the last year the Civil Engineering sector of the Group undertook several studies and tests to ascertain the use of manufactured sand, a combination of aggregate quarry waste material, as

a substitute for river sand. The resulting ‘manufactured sand’ was tested for reliability and performance in reinforced concrete mixes with the support of leading industry professionals and academics. The Group succeeded in establishing a working concrete mix design and has been able to justify the use of a 100 percent manufactured sand concrete mix to be used in building construction, permanently reducing the Group’s dependency on river sand.


Energy security is one of the greatest challenges faced by society today in ensuring the sustainable development of Sri Lanka, with significant implications for the Group and its sustainability. The Group, recognising these circumstances initiated a process during the year under review to manage its carbon footprint and engage proactively to ensure efficient energy usage.

The Group’s Energy Management Policy, which is adopted by all Group subsidiaries, focuses on conserving energy and minimising the Group’s carbon footprint. The Group, as part of its Energy Management Policy commenced monitoring its carbon footprint through a comprehensive data collection and assessment process. The data collection process is further supported by internal assurance of energy and fossil fuel consumption

Energy consumption is monitored by meaningful segmentation while the measurement of the carbon emissions is carried out according to the Greenhouse Gas Protocol of the World Resources Institute and the World Business Council for Sustainable Development. Carbon emission factors found in the IPCC Guidelines for National Greenhouse Gas Inventories published by the Institute of Global Environmental Strategies has also been used for calculation purposes.

The Group’s energy usage data for the financial year 2015/16 is listed under Group Energy Consumption, while comparative data will be included from the next financial year

During the year under review, the Group’s total energy consumption was 145,927 gigajoules, which consisted of energy from non-renewable sources and the national grid. Total Group electricity consumption from the national grid was 1,564,211 kilowatt hours. The Group is currently investigating the feasibility of investing in renewable energy in the forthcoming years.

Group Energy Consumption

Energy Mix Power Consumed

(GJ)

Direct Energy 140,296

Fossil Fuel 140,296

Diesel 130,747

Petrol 1,741

Furnace Oil 7,209

LPG 599

Indirect Energy - National Grid 5,631

Hydro & Renewable 2,478

Thermal 3,153

Total Energy Consumption 145,927

The Civil Engineering sector was the largest consumer of energy, accounting for over 96 percent of the total energy consumption and 95 percent of the Group’s carbon footprint. The Heavy Engineering sector, Real Estate sector and Power Generation sector accounted for a total of 4.0 percent of the Group’s total energy consumption and 5.0 percent of the Group’s carbon footprint.

Power Consumption by Sector

Sector Power Consumed

(GJ)

Total Energy Consumption 145,927

Civil Engineering 140,609

Heavy Engineering 2,240

Power Generation 1,697

Real Estate 322

Trading and Other 1,059

Marine Engineering* -

* Marine Engineering operations are not within

the reporting boundary

The Group’s carbon footprint for the year under review was 11,511 meteric tons. The Scope 1 footprint, which includes emissions arising from the consumption of fossil fuel; including diesel, petrol, finance oil and liquid petroleum gas, was 10,409 meteric tons. The Scope 2 carbon footprint of 1,102 meteric tons, arose solely from the use of electricity obtained from the National Grid.

The Group’s Carbon Footprint

(MT)

11,511Total Carbon Footprint

Scope 2 (MT)

10,4091,102

Scope 1 (MT)

The sources of the carbon footprint of the Group during the year is shown on Sources of Carbon Footprint.

MTD WALKERS PLC86



Source of Carbon Footprint

ElectricityPetrol

Furnace Oil

LPG

Diesel

84.2%

1.1%

9.6%4.9% 0.2%

Current energy use intensity data together with the results of an energy audit to be carried out during the upcoming year will form the basis for internal reduction targets and energy conservation initiatives.

Water and Effluents

The Group gives special attention and consideration to sources of local water supply in all project sites to ensure minimum impact to the surrounding environment and community. The Group continuously identifies opportunities to improve its processes to manage water efficiently.

The Group has in place a Water Management Policy which requires all business units to optimise the use of water through reduction of consumption, reusing and recycling whenever possible. The policy also formalises discharge quality levels based on local laws and regulations.

The Group initiated tracking of data related to water consumption and effluent discharge during the year under review. Water related data is tracked and monitored with the use of water meters and where meters are unavailable, through estimations based on pump functional time. The Group plans to identify high usage sectors for potential efficiency improvements, while water intensity data of the Group will form the basis for water reduction targets in the forthcoming years.

Total Water Withdrawal

Source of Water Withdrawal Volume (m3)

Surface Water - Wetlands, Rivers, Lakes, Oceans 11,522

Ground Water 18,678

Rainwater Harvested 5,310

Waste Water from Another Organisation -

Municipality, Authority Water Sources 119,440

Total Volume of water Withdrawn 154,950

Total Water Withdrawal

Surface Water

Municipality,Authority Water Sources

Ground Water

RainwaterHarvested

7.4%

12.1%

3.4%

77.1%

(m3)

The total water consumption of the Group was 154,950 cubic meters, of which 77.1 percent was from the National Water Supply & Drainage Board, 12.1 percent was from ground water, 7.4 percent from rivers, lakes, and surface water sources, and 3.4 percent was from rainwater harvesting – making these the main sources of water of the Group.

Sector wise water withdrawal

Sector Volume (m3)

Civil Engineering 133,402

Heavy Engineering 3,582

Power Generation 10,800

Real Estate 3,374

Trading and Other 5,119

Marine Engineering* -

Total Volume of Water Withdrawn 154,950

* Marine operations are not within the

reporting boundary

The Civil Engineering Sector and the Power Generation sector were the largest consumers of water in the Group and were selected for several water conservation initiatives launched during the year under review.

Water used for washing of under carriages at the Group’s workshop in Sapugaskanda is reused for the same purpose by treating it at an Effluent Treatment Plant, reducing total water consumption at site

Special Projects Company utilised a natural rainwater harvesting mechanism at its Hambantota quarry site by using a large quarry pit at site to collect and store rain water for use at site. Special Projects Company also uses sprinklers for dust prevention, which consume less water than large water tankers.

Sector-wise Water Withdrawal

Heavy Engineering

Sector

Civil Engineering

Sector

133,402

3,58210,800

3,374 5,119 -

PowerGeneration

Sector

Real Estate Sector

Trading and OtherSector

Marine* Engineering

Sector

m3


Walkers Piling reuses the water it consumes during piling activities by routing the water discharged through a de-sander, thus only requiring water to be replenished due to evaporation and soakage to ground

Water conservation awareness campaigns undertaken at all sites of the sectors

During the year under review, the total effluent discharged by the Group stood at 154,755 cubic meters. Effluent released into the environment met the stipulated thresholds of the Environmental Protection License guidelines as mandated by the Central Environmental Authority and was of an acceptable standard. 92 percent of effluent was directed to soakage pits in line with the guidelines stipulated in the respective Environmental Protection License. 5 percent was discharged to municipality sewerage or drainage lines, and the remainder of 3 percent is the residual water that is directed back to the water pits at the Special Projects Company quarry sites, which is not connected to any surface water source accessible to the public. Waste water from the quarry sites are primarily a result of water used for dust control and as such it is believed that the effluent does not contain any pollutants.

During the forthcoming year, the Group intends to improve the data accuracy and water usage data at its sites by striving to implement flow meters at each site and reduce the data obtained through estimation. Standard Operating Procedures will also be introduced to ensure standardised data reporting at site level to ensure consistency and accuracy of data.

Waste Management

Waste Management plays a key role in increasing the efficiency of the Group’s operations and is a significant area of focus for the Group. The Group introduced a Waste Management Policy during the year under review, which requires all waste material to be reused and recycled where possible, or disposed of appropriately in an environmentally responsible manner. As an initial step to improving its waste management processes, the Group commenced tracking its waste data during the year under review.

The Group introduced a Group-wide waste management initiative to safely dispose of e-waste and recycle paper waste through third party contractors during the third quarter of the financial year under review. As these initiatives are yet to complete a full cycle, the performance of such initiatives would be reported in future reporting cycles.

Total waste generated across the Group was reported as 33,193 metric tons, of which 149 metric tons was classified as hazardous waste and disposed through specialised third party contractors. 23 percent of the Group’s total waste was managed through waste recycling and reusing, or through specialised third party contractors and on-site storage, while the rest was directed to landfill. The values listed under are based on site level estimations, and the normal practice of the waste disposal service providers. The Civil Engineering sector contributed primarily to the waste generated by the Group, with no significant quantum of waste being recorded in other sectors.

It is understood that as the data collection mechanism was established only during the year under review, gaps in defining types of waste and disposal methods would be present. The Group will strive to further improve the accuracy of data collected by introducing Waste Management Templates and Standard Operating Procedures for data capture, estimation and management by the next reporting cycle.


The Group’s commitment to continually improve its environmental compliance is demonstrated by its significant operating entities having obtained the ISO 14001 certification. The Group’s environmental management systems are audited by an independent certification body annually to verify conformance against the standard.

The Group strives to be in compliance with all environmental laws and regulations of the country at all times and tracks and monitors any environmental fines paid by its subsidiaries for spillages or any other non-compliance to Sri Lankan legislation.

No significant spills or fines worth over LKR 1 million were reported in the year under review. The Group intends to include practices to reduce the risk of spillages in the Standard Operating Procedures that are planned to be implemented during the upcoming year.

Water Discharge of the Group

Destination of Discharge Volume (m3)

To Municipality Sewerage, Drainage Lines 7,166

To ETPs and Recycled Completely -

To Rivers, Lakes after being treated by ETP/STP -

Direct to Rivers, Lakes, Wetlands, Marshes 5,260

To Ground through Soakage Pits etc 142,329

Provided to another Organisation (Outside the Group) -

Total Water Discharge 154,755

Waste Generated and Disposed

Disposal Method Volume (kg)

Total Hazardous Waste Generated and Disposed 149,420

Total Non-Hazardous Waste Disposed 33,043,289

Reuse 3,884,491

Recycling 19,703

Composting 1,928

Recovery 119,050

Incineration -

Deep Well Injection -

Landfill 25,268,394

On-Site Storage 3,749,722

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The Group’s significant business units have been certified for ISO 14001 and therefore have relatively lower levels of environmental risks. As part of the Group’s operating policies, each site comprises of an Environmental and Health and Safety Officer, or in his absence the Site Project Manager, who can be contacted by employees or members of the community in the event of any environmental grievances. All recorded grievances are initially recorded at site before escalation to the Senior Management of the Group for corrective action. No significant environmental grievances were reported during the year under review.

HUMAN CAPITAL

Employees are the driving force of the success of the Group and have a significant impact on the Group’s earning potential, productivity and long term sustainability, making Human Capital the most valuable resource of the Group. The Group strives to manage its Human Capital through continuous engagement, celebrating diversity, providing a safe work environment, effective talent management and career development, all of which create value for the Group’s employees.

The Group’s Human Resources Policy govern management of its Human Capital, while being in compliance with all labour laws including the Factories Ordinance, Shop and Office Employees Act and the Wage Board Ordinance. The Group also maintains the OSHAS 18001 Health and Safety Management System at all significant project sites.

Senior Group management personnel are active members of the Manufacturing and Engineering Services Skill Council, which is an organisation affiliated to the National Apprentice and Industrial Training Authority (NAITA) and Tertiary and Vocational Education Commission (TVC) of Sri Lanka, which work towards reducing the skill gaps in local industries.

The Group benefits from this affiliation by placing the Group’s brand at the forefront to attract potential talent, and offer training and skill development opportunities to the existing workforce.

In addition to the above mentioned policies and procedures, the Group has established Management Approaches on labour practices and decent work which can be found on the Group website at www.mtdwalkers.com/sustainability.

The following section outlines the Group’s Human Capital in terms of its composition, training and development initiatives, health and safety measures and the Group’s contribution to employee benefit plans. The section also entails information on compliance and human rights related aspects.

Employee Diversity

The Group’s recruitment process is designed to be fair and transparent where all applicants are provided with an equal opportunity. The Group also encourages workplace diversity in order to nurture innovative thinking while creating an enabling work environment that promotes high productivity.

The workforce as at 31st March 2016 was 4,142 of which 1,545 were employees of the Group. The workforce further comprised of 1,789 casual workers and 808 personnel from outsourced labour contractors, representing the employment generation created by the Group in areas of operations.

Total

Casual Workers

Employees

Outsourced Labour

4,142

1,789

1,545

808

The Workforce:

Employment

MTD Walkers PLC is a subsidiary of the AlloyMTD Group of Malaysia, and the Group’s board comprises of six Non-Executive Directors and one Executive Director. Of the six Non-Executive Directors, three are foreign nationals.

The newly appointed Executive Committee of the Group comprises of all Sri Lankan nationals, while all operational and site level management teams are Sri Lankan nationals. The total workforce was engaged in local operations with no employees based outside the country as at the end of the year under review.

Workforce by Type of Employment

Employees – Permanent 10.4%

Employees – Contract 26.9%

Casual Workers 43.2 %

Outsourced Contractors’ Personnel 19.5%

Workforce by Gender

Male 95.6 %

Female 4.4 %

Employees by Gender

Male 90.0 %

Female 10.0 %

Employees by Age Group

Less than 30 43.4 %

Between 30-50 46.2 %

Above 50 10.4 %

The age profile and gender diversity of the Group’s governance bodies are disclosed in the Profiles of the Board of Directors and the Executive Committee in the Corporate Governance section of this Annual Report.

Employee Benefits

All employees at the Group are based in Sri Lanka and are eligible for the Employees’ Provident Fund and the Employees’ Trust Fund contributions stipulated by law. As per Sri Lankan law, employees contribute 8 percent of


their salaries towards the Employees’ Provident Fund while the Group contributes 12 percent. The Group contributes 3 percent of an employee’s salary towards the Employees’ Trust Fund. The total contribution made by the Group to the Employees’ Trust Fund for the reporting year was LKR 14.2 million while the contribution made to the Employees’ Provident Fund was LKR 52.1 million. Employees are also entitled to retirement gratuity and the total benefit liability as at 31st March 2016 was LKR 34.9 million.

Performance Appraisals

The Group strives to build a culture that enables and rewards performance and therefore has in places a performance appraisal process to enhance employee performance management. Under this process, regular appraisals are conducted for all employees at the end of each financial year, creating an open platform for employees and their supervisors to discuss performance, understand areas of improvement, establish future goals and obtain feedback.

Training and Development

Under the Group’s people-first principle, the Group spares no effort in training and developing its employees and has strived to create value for its employees by investing in capacity building. Training and development is a key aspect of the Group’s Human Resources Policy governing talent retention. The Group also believes that these investments will ensure a sustainable competitive advantage.

During the year under review, a total of 13,679 hours of training were provided to the Group’s employees, centred on a needs analysis based on business requirements, gaps in employee skills and other requirements. On average, 8.9 training hours were provided per permanent and contract employee, while an average of 8.7 hours were provided for each male employee and 9.9 hours for each female employee.

Employee Grade Hours Hours per Person

Above Manager Grades 232 33.1

Managers 933 11.5

Assistant Managers 112 14.0

Executives 4,613 7.0

Non-Executives 7,789 9.9

Total Training Hours 13,679 8.9

Talent Management

Effective talent management plays a key role in the future sustainability of the Group, and as such the Group places great importance on ensuring the expectations of all employees are met and the Group’s expectations from employees are effectively managed.

The Group hired 390 employees; 321 male and 69 female, during the year under review, of which 55 percent were below the age of 30, while 39 percent were between 30-50 years of age, while the remainder were over 50 years of age.

Proactive initiatives are taken by the Group to continuously address issues such as attrition. Attrition amongst permanent and contract employees, and new hires are tracked and monitored according to composition by gender and age group. The Group’s total attrition rate was 15.1 percent during the year under review while the new hire attrition rate was 1.3 percent. The highest turnover was reported from the Civil Engineering and Heavy Engineering sectors.

New Hire Attrition by Age Group

New Hires who left during the period, aged below 30 10 0.6%

New Hires who left during the period, aged between 30-50 9 0.6%

New Hires who left during the period, aged above 50 1 0.1%

New Hire Attrition by Gender

Male New Hires who left during the period 17 1.1%

Female New Hires who left during the period 3 0.2%

Total Attrition by Age Group

Employees who left during the period, aged below 30 110 7.1%

Employees who left during the period, aged between 30-50 90 5.8%

Employees who left during the period, aged above 50 34 2.2%

Total Attrition by Gender

Male Employees who left during the period 193 12.5%

Female Employees who left during the period 41 2.6%

Total Training Hours by Employee Grade

Above Manager Grades

232933

112

4,613

7,789

Managers Assistant Managers

Executives Non- Executives

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Health and Safety

Occupational Health and Safety is given the utmost importance across the Group as it contributes both to employee well-being and heightened productivity. Most Group subsidiaries have adopted the OSHAS 18001 Occupational Health and Safety Management System and have obtained the certification, while all Group subsidiaries are required to adopt the Group Health and Safety Policy.

The Group tracks and monitors all Occupational Health and Safety related incidents across all subsidiaries. The Group’s occupational injury rate during the year under review was 1.4 percent, while its occupational disease rate was 0.7 percent. Of all injuries, 63 percent was as a result of moving objects and 35 percent was as a result of falling. The lost day rate for the Group was 0.04 percent, with all recorded injuries and diseases arising from its male workforce. The total absentee rate was zero.

Minor occupational injuries or diseases that cause absenteeism for less than one day have been excluded, although records are maintained for such injuries and diseases. There were no fatalities during the year under review.

Child Labour and Forced/Compulsory Labour

The Group has in place policies governing the aspects of Child Labour and Forced Labour and ensures that all Group companies adhere to all relevant laws and regulations. As a management practice, the Group requires all potential employees to produce valid identification during the recruitment process to ensure the minimum age requirement is met. At project sites, casual employees are required to produce valid identification to ensure they are above 18 years of age, prior to being granted access to the site.

No cases of child labour or forced labour were reported during the year under review, exemplifying the stringent policies and procedures adopted by the Group.


While there are no restrictions on freedom of association and all employees are free to join Unions as per the laws of the country, there are no formal Trade Unions in the Group. Employees engage with management every three months at Welfare Committee Meetings, which acts as a joint consultative committee and includes representatives from the workforce and the management, to promote the cooperative resolution of workplace issues.

The Group has employee grievance mechanisms in place where employees are able to anonymously communicate any grievances to the central Group Human Resources team via suggestion boxes available at all office and site locations. The Group practices an Open Door Policy, allowing employees at any level to communicate directly with the Senior Management. Any Human Resources process related improvements that are identified through this process are assessed for practicality, and implemented across Group companies.

SOCIAL AND RELATIONSHIP CAPITAL

As a Group of companies operating across a broad spectrum of sectors and based in diverse geographic locations, the social and relationship capital of the Group plays a vital role in its continued growth and success. The Group manages its social and relationship capital by proactively engaging with local communities, regulatory authorities and other stakeholders in its areas of operation, and further strives to provide services and products of the highest standards to meet the expectations of all stakeholders.

Local Communities

In its capacity as an integrated infrastructure and engineering solutions provider, the Group possesses many opportunities to facilitate infrastructure development in communities in the areas around its operations. The Group recognises that its operations may impact surrounding communities and strives to mitigate risks arising from such impacts, and support local livelihoods wherever possible. The Group carries out social responsibility initiatives such as community service programmes and infrastructure development projects on a pro bono basis. At the commencement of large scale projects, the Group engages with the local communities and informally assesses any community development requirements and philanthropic activities requested by the community. The Group invested approximately to LKR 14 million on social responsibility initiatives during the year, benefiting over 3,000 people directly and over 12,000 people indirectly.

The Group recruits locally, and directly supports over 4,000 families while indirectly supporting the livelihoods of over 50,000 families. During the year under review the Group spent LKR 4.7 billion in procuring goods and services locally, stimulating local economies and safeguarding the Group’s social license to operate.

The Group is also committed to supporting the United Nations Sustainability Development Goals, which will more broadly support the development of local communities. A Corporate Social Responsibility foundation with objectives aligned to the United Nations Sustainability Development Goals will be established in the forthcoming year to carry out the Group’s social responsibility initiatives. The Foundation will be financed by contributions from the Group’s subsidiaries and supported by employee volunteerism, to carry out its programs and initiatives.


Supply Chain Partners

Suppliers are vital stakeholders of the Group and engagement with significant suppliers occur regularly. The Group’s key suppliers of significant items are selected by the Sourcing Division based on price, commercial terms and their compliance to sustainability terms and conditions included in a formal Request for Proposals (RFPs).

The Group’s supply chain consists of 3,260 local and international partners, and the Group distributed over LKR 6.3 billion as payments to its supply chain partners during the year. Over the forthcoming years, the Group hopes to carry out internal assessments of supply chain partners, complemented with sustainability awareness programmes as part of its Sustainability drive, to ensure that they have in place safe and respectful working conditions and their operations are carried out in an environmentally responsible manner.

Regulators and Customers who are Governmental Bodies

As part of the Group’s initial external stakeholder engagement process, regulatory bodies were engaged to obtain their concerns on the Group’s regulatory performance. No significant concerns were highlighted from this exercise, demonstrating the professional approach and high ethical standards displayed by the Group when dealing with regulatory bodies. The Group adheres to all relevant local environmental laws including the National Environmental Act No. 47 of 1980 and the Mines and Minerals Act No. 33 of 1992, and further complies with all regulatory requirements mentioned in each Environmental Protection License issued to the Group. No significant fines over a value of LKR 1 million related to non-compliance were reported during the year under review.

During the year the Group assessed the risk of corruption as part of its risk management process at each of its subsidiaries, and introduced preventive and mitigatory measures to reduce

such risks. The Group also introduced a Whistleblowing Policy during the reporting year to support its efforts at being a responsible corporate citizen.


All Group companies with significant operations or engaged in infrastructure development have obtained ISO 9001 (Quality Management System), ISO 14001 (Environmental Management System) and OHSAS 18001 (Occupational Health and Safety Management System) certifications to ensure process excellence across all activities. The Group further strives to maintain the highest standards through compliance with all relevant statutory and regulatory requirements, as well as industry and corporate best practices.

A significant portion of the Group’s operations are public projects, making the Government of Sri Lanka one of the Group’s key customers. In line with the requirements of the Government and the relevant regulatory authorities all projects are assessed for its quality, and health and safety prior to receiving final approval, further ensuring the quality of services offered by the Group No significant fines related to non-compliance over a value of LKR 1 million were reported during the year under review.

The Group intends to conduct customer satisfaction surveys based on relevant sample sizes, on customers and end users in the forthcoming years, in order to help identify customer concerns and address any issues.

OUTLOOK

During the next few years the economic growth in Sri Lanka and the South Asian region is expected to enter a high growth phase. The Group plans to leverage its position as a leading infrastructure developer and engineering solutions provider to capitalise on this expected growth.

The Civil Engineering and Heavy Engineering sectors are expected to grow strongly as Government led infrastructure

development picks up over the coming year. The sectors are strategically positioned to benefit from the next phase of infrastructure development anticipated to focus on highway construction and water supply projects, as a result of partnerships with many of the world’s leading construction companies.

The Group has set up business units in Bangladesh and the Maldives, as part of its regional expansion strategy, to carry out civil and mechanical engineering activities. The Group is confident that this regional expansion will be successful and is currently in the process of commencing its pilot projects.

The Marine Engineering sector of the Group, which is in the process of building its first shipyard at Mutwal Harbour, is evaluating opportunities to construct its second shipyard at the Galle Harbour during the upcoming financial year. Sri Lanka is fast developing as a maritime hub and the Group expects this sector to drive the growth of the Group in the coming years.

As the urbanisation of Sri Lanka progresses, the demand for quality living spaces at affordable prices is expected to increase. The Group’s presence in the real estate industry will allow the Group to leverage on its expertise as an infrastructure developer to address this emerging market gap.

In line with the electricity generation plan of the country, the Group will be diversifying into renewable energy generation and is currently evaluating emerging opportunities in wind and solar power.

The Group, in its efforts to be sustainable, will continue to adopt and engrain sustainable business practices within its operations and will remain committed to safeguarding its environment by adopting energy conversation and efficient resource utilisation practices. The Group will further seek to nurture its employees and incorporate international standard occupational health and safety practices within its culture.

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Group Synergy

BUILDING CONSTRUCTION

As the newest sub-sector of our Civil Engineering portfolio, our Building Construction sub-sector benefits immensely from the

Group’s fully integrated position through our diverse expertise and sourcing advantages; benefits which we share with our clients

in terms of highly competitive, value for money pricing. With the Group’s capacity to design and build projects, construct deep

piled foundations, create access roads and implement solutions for building services, our Building Construction sub-sector is positioned to be a key revenue driver in the years to come.

HEAVY ENGINEERING AND MECHANICAL WORK

As the Group’s heritage sector, all Heavy Engineering and Mechanical Work is executed through our Heavy

Engineering sector. It comprises of the best engineering talent, geared to undertake some of the most complex

and challenging projects throughout Sri Lanka.

BUILDING SERVICES

The Building Services sub-sector has been developed to complement and enhance our mechanical, electrical

and plumbing capabilities along with the addition of heating, ventilation and air conditioning, ducting and fire

suppression systems. We expect the growing demand for housing and commercial Real Estate solutions to drive the

demand in this sub-sector.

POWER GENERATION

Established in Jaffna at the height of civil conflict in 2007, the Northern Power Company (Private) Limited (NPC) was the first non-emergency power supplier to the Jaffna peninsula.

After achieving National Grid connectivity in 2013, NPC continues to light the way for Sri Lanka in the years to come,

while exploring options in the area of renewable power generation Specifically in wind and solar energy.


REAL ESTATE

Our Real Estate sector offers affordable quality housing units for public sector employees. We look forward to

expand our existing portfolio (Galle and Habaraduwa) and provide similar opportunities across other Districts. Our Real

Estate sector is expected to encompass state-of-the-art technology in terms of construction and sustainable design while providing buyers housing with modern day facilities to

facilitate 21st century living.

ROADS AND HIGHWAYS

Over the past five years, our Roads and Highways sub-sector has been the Group’s primary revenue driver. Our commitment

to the Government’s initiative to advance infrastructure development has enabled us to improve the local road

network while developing ourselves as a premier road and highway contractor. Going forward, we expect to grow further

and undertake larger projects with a view of connecting Sri Lankan road networks.

PILING

As the pioneer in deep piled and heavy foundations in Sri Lanka, Walkers Piling (Private) Limited has been an integral part of Sri Lanka’s evolving skyline. The

company benefits from the Group’s integrated approach to construction and engineering by working in tandem with Group subsidiaries for the supply of materials and

resources including technical knowledge.

SHIPPING AND MARINE

Our engineering capacity in the Shipping and Marine industry is renowned for quality workmanship and

record breaking turnaround time. We look forward to expand our existing operations to build a larger array of services offered to commercial marine crafts entering

into Sri Lankan waters.

MTD WALKERS PLC94

Management Discussion and Analysis Integrated Performance ReviewCivil Engineering Sector

CML- MTD Construction Limited


Special Projects Company (Private) Limited

CML-MTD Joint Venture Limited

Companies Capabilities

Road and Highway

Piling

Irrigation and Water Supply

Building

Bridges

Land Reclamation and Port Construction

Total Carbon Footprint (MT)

1,155Number of Employees

2015/16

10,9342015/16

11,131Training Hours

2015/16

133,402Total Water Withdrawal (m3)

2015/16

Turnover and Segment Results

Revenue

Gross Profit

EBIT

Capital Employed

billion10.6

billion1.8

billion1.0

billion13.6

Hambantota Hub Road 16


OPERATIONAL REVIEW

During the financial year the sector recorded a revenue of LKR 10.6 billion and a gross profit of LKR 1.8 billion. The revenue of the sector fell 13.4 percent Year on Year while the gross profit fell 42.1 percent. This was mainly as a result of the slowdown in Government contracts, which is the backbone of the infrastructure development sector. The conscious decision to seek emerging opportunities in the private sector allowed the sector to minimise this impact in what was a challenging year for the infrastructure development industry. It also resulted in the sector securing several large scale private sector contracts, including the construction of Phase II of Sheraton Hotel and the Headquarters for JAT Holdings.

With the introduction of two superior grades to the existing system by the Construction Industry Development Authority, CML-MTD Construction Limited was Graded CS2, which is now the highest grade available, for Building Construction and Highway Construction. CML-MTD Construction is further graded C1 in four other categories, while Walkers Piling continued to hold the highest grading of PB1 throughout the year.

During the year, the Group commissioned an external stakeholder engagement subsequent to an internal materiality assessment to identify the material issues that are relevant to the Group and sector. The material issues identified were used

to derive the key material aspects based on the Global Reporting Initiative G4 Guidelines, which forms the basis of the sustainability strategy of the Group, and the Civil Engineering sector. The material aspects were then utilised to establish sustainability Key Performance Indicators for tracking and monitoring performance against such identified material aspects.

These material aspects identified are: Economic Performance, Procurement Practices, Materials, Energy and Emissions, Water, Effluents and Waste, Environmental Compliance, Environmental Grievance Mechanisms, Employment, Occupational Health and Safety, Training, Labour Grievance

Mechanisms, Child Labour, Forced Labour, Supplier Assessment – Environmental Impacts, Local Communities, Anti-corruption, Regulatory Compliance, Grievance Mechanisms for Impacts on Society and Emergency/Disaster Preparedness and Planning.

In line with the Group’s sustainable initiatives, CML-MTD Construction was accredited as a Green Contractor by the Green Building Council of Sri Lanka. This accreditation played a key role in the sector gaining overall stakeholder confidence and satisfaction.

CML – MTD Construction Limited was Graded CS2, which is now the highest grade available, for Building Construction and Highway Construction.

Piling Work at Havelock City Phase III

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PROJECTS

ROADS AND HIGHWAYS

INTERNAL ROADS IN THE MATARA DISTRICT: REHABILITATION AND IMPROVEMENT

Client Road Development Authority

Main Contractor CML-MTD Construction Limited

Location Matara District

Status Ongoing

Construction Period 24 months

Maintenance Period 36 months

Project Description Reconstruction and widening of 96.6 kilometres of internal roads in the Matara District. The existing 3 meter road was widened and it included the construction of 574 culverts. The total area of road constructed covered an area of 150 square kilometres.

During this period, the sector made a conscious effort to positively influence the lives of the residents in the area. The sector developed the access road to a Buddhist temple and partnered with the Helpage Society to carry out medical camps in the region.

INTERNAL ROADS IN THE HAMBANTOTA DISTRICT: REHABILITATION AND IMPROVEMENT



Location Hambantota District

Status Ongoing



Project Description Reconstruction and widening of 58.6 kilometres of internal roads in the Hambantota District. The roads were widened across four zones (Tangalle, Okawela, Beliatta and Angunakolapalassa). Covering a total geographical area of 1,195 square kilometres.

The sector, with a focus on contributing to the society, partnered with the Institute for Development of Community Strengths to carry out an HIV awareness campaign to participating residents during the project.

Transport infrastructure has a great impact in enabling a country’s sustainable economic growth. Transport assets such as roads and highways, improves business efficiency, the attractiveness of a country as an investment destination, and enables the smooth functioning of the labour market. The day to day lives of the general public also improves with increased access to education, healthcare and leisure services.


INTERNAL ROADS IN THE MATALE DISTRICT: REHABILITATION AND IMPROVEMENT



Location Matale District

Status Ongoing



Project Description Construction and widening of a 61.3 kilometre roadway across two zones in the Matale District covering an area of 1,525 square kilometres.

MIRIJJAWILA – SOORIYAWEWA ROAD/OUTER CIRCULAR ROAD OF HAMBANTOTA HUB (HR 01 AND 16): REHABILITATION AND IMPROVEMENT

Client Provincial Road Development Authority



Status Ongoing


Project Description Construction of a six lane, 6.6 kilometre Outer Circular Road in Hambantota as a part of the Hambantota Hub Development Project.

In an effort to uplift the community, the sector with the assistance of Helpage Society carried out a medical camp in Angunakolapalassa and established a dental clinic in Tharapeliya Galkema Purana Raja Maha Viharaya in Tangalle.

ELPITIYA - AWITHTHAWA ROAD TO LEWWANDUWA ROAD: REHABILITATION AND IMPROVEMENT

Client Provincial Road Development Authority



Status Completed


Project Description Rehabilitation and widening of Awiththawa to Lewwanduwa road (B114) from a two lane to a four lane road (9.8 kilometers to 27.2 kilometers).

NAGODA - NEBODA ROAD: REHABILITATION AND IMPROVEMENTS



Location Kalutara District

Status Completed


Project Description Rehabilitation and widening of Nagoda to Neboda Road (B209) from a two lane to four lane road (2.7 kilometers to 15.9 kilometers).

MEEGAHAJANDURA - KUMARAGAMA ROAD: REHABILITATION AND IMPROVEMENT


Main Contractor China National Aero Technology Import & Export Corporation (CATIC)

Subcontractor CML-MTD Construction Limited


Status Completed


Project Description Rehabilitation and widening of 8.8 kilometers of roadway from Meegahajandura to Kumaragama.

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URBAN REGENERATION PROJECT: 1,650 HOUSING UNITS - HENAMULLA

Client Urban Development Authority


Location Colombo District

Status Ongoing


Project Description Design and construction of 1,650 housing units for the underserved communities in Colombo. The project consisted of four, ground plus 14 storey apartment blocks with modern amenities and special design consideration given to safety features, lighting and spatial design.

URBAN REGENERATION PROJECT: 576 HOSING UNITS - ALUTHMAWATHA




Status Ongoing


Project Description Design and construction of 576 housing units for the underserved communities in Colombo. The project consisted of three, ground plus 11 storey apartment blocks with modern amenities and special design consideration given to safety features, lighting and spatial design.

URBAN REGENERATION PROJECT: 792 HOUSING UNITS - SALAMULLA




Status Ongoing


Project Description Design and construction of 792 housing units for the underserved communities in Colombo. The project consisted of two, ground plus 11 storey apartment blocks with modern amenities and special design consideration given to safety features, lighting and spatial design.

28 ROOM LUXURY HOTEL - KOSGODA

Client Beach Resort Kosgoda (Private) Limited


Location Galle District

Status Ongoing


Project Description Construction of a luxury hotel in Kosgoda. The project consists of the construction of 28 luxury rooms along with all the amenities of a luxury hotel. The hotel consists of a configuration of ground plus two floors along with roof top gardens and other service areas to be constructed within 4,100 square meters (44,400 square feet) of built up area.

WAREHOUSE AND OFFICE BUILDING - KELANIYA

Client Regency Tea (Private) Limited


Location Gampaha District

Status Completed


Project Description Construction of a commercial building complex consisting of a state-of-the-art storage facility in Wattala, for Regency Teas (Private) Limited, which consisted of three floors and 27,326 square feet of built-up area.

PROJECTS

BUILDINGS

Rapid urbanisation in Sri Lanka has seen an increased demand for high rise buildings, which also significantly increases the efficiency of space utilisation in crowded cities.


INTEGRATED WATER SUPPLY PROJECT - BUTTALA

Client National Water Supply and Drainage Board

Main Contractor Besix Sanotec

Subcontractor CML-MTD Construction Limited

Location Monaragala District

Status Ongoing


Project Description The construction of ground reservoir, intake well, transmission lines, distribution lines and filteration plant.

In an effort to contribute and assist in the education of the children in the community, the sector provided school supplies to the students of the Weliyaya Mayuragiri Junior School.

REMEDIAL WORKS FOR NALANDA DAM - NALANDA

Client Irrigation Department of Sri Lanka


Location Matale District

Status Completed


Project Description Reconstruction and rehabilitation of the Nalanda Dam, the first concrete dam to be constructed in Sri Lanka in 1960. The dam has a height of 35.7 meters and a length of 124.1 meters.

The sector, with a focus on contributing to the society partnered with the Helpage Society to establish a medical camp in the area and assisted in the education of the children in the area by providing them the needed school supplies.

WATER SUPPLY AND IRRIGATION

Access to safe drinking water and sanitation facilities is recognised as a basic human need and a pre-condition for economic and social development. Effective Irrigation also plays an important role in Sri Lanka’s agriculture based economy, and is vital for its sustainable growth.

Remedial Work at Nalanda Dam

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OTHER PILING PROJECTS

Sector Client Project Details Number of Piles

Housing MAGA Engineering (Private) Limited Urban Regeneration Project - Maligawatta (Apple Watta) 160

Housing Tudawe Brothers Urban Regeneration Project - Aluthmawatha 11

Housing CML – MTD Construction Limited Urban Regeneration Project - Modara 907

Building Tudawe Brothers (Private) Limited Automobile Engineering Training Institute - Peliyagoda 216

Building Prudential Shipping Lines (Private) Limited Office Tower for Prudential Shipping Lines - Rajagiriya 73

Building Tudawe Brothers (Private) Limited Office Tower for Lee Hedges - Colombo 162

Building Asian Superior Residence (Private) Limited Wetminister Residencies - Colombo 40

Bridge RR Construction (Private) Limited Bridge on Kirimetiya-Yala Road 9

MAKOLA YATHAMA OFFICE TOWER

Client Makola Yathama Holdings

Main Contractor Walkers Piling (Private) Limited

No. of Piles 352


Status Completed


Project Description Construction of foundation for a multi-storey building which included construction of 255 secant piles and 95 bored cast-in-situ piles with diameters ranging from 800 millimeters to 1,500 millimeters.

HAVELOCK CITY PHASE III

Client Mireka Homes


No. of Piles 242


Status Completed


Project Description Construction of foundation for a 22-storey residential apartment complex consisting of 240 bored cast-in-situ piles with diameters ranging from 800 millimeters to 1,000 millimeters.

SHERATON HOTEL PHASE II

Client Lanka Hotels and Residencies (Private) Limited


No. of Piles 350


Status Ongoing


Project Description Construction of foundation for a multi-storey hotel which included 220 secant piles and 130 bored cast-in-situ piles with diameters ranging from 800 millimeters to 1,500 millimeters.

SLIIT ACADEMIC BUILDING

Client Sri Lanka Institute of Information Technologies


No. of Piles 136

Location Malabe

Status Completed


Project Description Construction of foundation for a 12-storey building which included 136 bored piles with diameters ranging from 600 millimeters to 1,200 millimeters.

PROJECTS

PILE CONSTRUCTION

Pile construction allows infrastructure to be built in areas with poor soil conditions or susceptible to flooding. It enables the construction of super tall structures and enables the efficient use of congested city blocks.


FINANCIAL CAPITAL

The Group’s Civil Engineering sector experienced a drop in its performance and revenue in comparison to the most recent financial years. The revenue of the sector fell 13.4 percent Year on Year to LKR 10.6 billion [FY 2014/15: LKR 12.2 billion]. The lack of large scale infrastructure projects resulted in the sector performing below expectations.

Revenue

10,566

2013/14 2014/15 2015/16

12,194

7,995

0

3,000

6,000

9,000

12,000

15,000

LKR Mn

Operating Profit

1,015

2013/14 2014/15 2015/16

2,259

1,160

0

500

1,000

1,500

2,000

2,500

LKR Mn

Capital Employed

13,575

2013/14 2014/15 2015/16

10,508

5,881

0

3,000

6,000

9,000

12,000

15,000

LKR Mn

The gross profit margin of the sector fell from 24.9 percent to 16.6 percent compared to the previous financial year. Rising labour costs and increased competition resulted in the contraction of the sector’s gross profit margin.

The sector made a net profit of LKR 363 million during the financial year under review down 78.1 percent Year on Year [FY 2014/15: LKR 1,653 million]. The drop in profit was primarily due to the sector choosing to maintain its high operational capacity during the year to capitalise on the anticipated resurgence in the construction sector. During the year the sector reorganised its Procurement Division to improve overall operational efficiency. The sector is certain that these measures will positively affect its bottom line during the coming financial year.


The Civil Engineering sector of the Group, as one of the largest infrastructure development companies in Sri Lanka maintains an extensive construction related resource base which includes a fleet of over 500 plant and heavy machinery and equipment, 11 piling rigs, workshops, batching plants and quarries.

During the year, the sector invested in ‘roller cone bit drills’ to reduce noise pollution at piling sites while operating in close proximity to residential areas.

Workshop

Located in Sapugaskanda, the workshop carries out repairs and maintenance of the Group’s heavy machinery, equipment and vehicle fleet.

The workshop is equipped with an effluent treatment plant which recycles waste water that is then utilised for other tasks such as cleaning of its vehicle fleet.

The sector carried out a campaign to supply books to the residents in the Sapugaskanda area. The campaign was carried out to assist the education of children of employees and low income families in the area whilst also improving the social relationships the sector has with its employees and the surrounding community.

Quarry Operations

The sector operates six quarries across Sri Lanka to supply aggregate to projects carried out by the Group. The Sector is in the process of expanding its quarry operations to meet third party demands. The quarries are capable of producing up to 75,000 cubic meters of aggregate products per month.

Over the last year, the sector undertook several studies and tests to confirm the reliability and performance of manufactured sand and quarry dust as an alternative to river sand in reinforced concrete mixes. With the support of industry professionals and academics the sector has established a working concrete mix design approved by project consultants.

Batching Plants

The sector operates three asphalt batching plants and four concrete batching plants. The asphalt batching plants have a combined capacity of over 15,000 metric tons per month while the concrete batching plants have a combined capacity of over 10,000 cubic meters per month. The batching plants help streamline the supply chain activities for projects undertaken by the sector and enables their timely and efficient completion.

ERP Systems

The sector took steps to focus on improving its operational efficiency by making key investments in IT systems and implementing SAP (Standard Application Products) to improve the financial control and system efficiency within the sector.

MTD WALKERS PLC102



The Civil Engineering sector of the Group pays continuous attention to its Intellectual Capital as it understands the role it plays in enhancing the Financial Capital of the sector.

The Intellectual Capital for the sector includes its brand equity, people, expertise and its awards and accreditations.

Playing an important role in the brand equity of this sector is the brand name carried by CML-MTD Construction as one of the leading construction partners in Sri Lanka, and Walkers Piling as the pioneer piling company in Sri Lanka with the highest capabilities.

The Intellectual Capital of the sector is further enhanced by the expertise the companies in this sector bring as two of the most experienced operators in the industry, and is further complemented by its strategic partnerships with world renowned infrastructure development companies.

The awards and accreditations that have been received by the subsidiaries of the Group operating in this sector including the Corporate Platinum rating by the Green Building Council of Sri Lanka, CS2 Grading for CML-MTD Construction

and PB1 Grading for Walkers Piling by the Construction Industry Development Authority have played a key role in the sector’s Intellectual Capital.

NATURAL CAPITAL

The Civil Engineering sector of the Group carries out natural resource-intensive operations making it imperative to ensure environmental efficiency. The Sector endeavours to minimise its operational environmental impacts through the establishment of environmental management system – ISO 14001, and by complying with all applicable local laws and regulations. The sector’s Natural Capital is also governed by the overall Group Environmental and Sustainability Policies which are available on the Group website (www.mtdwalkers.com/sustainability).

The sector places great importance on the efficient management of materials, and strives to reduce the consumption of energy and water, while minimising its carbon footprint, waste generation and effluent discharge. To assist in this strategy, the sector initiated the monitoring of material aspects to generate reduction targets and strive towards global best practices.

To ensure consistency of processes and data that assists in managing the sector’s Natural Capital, the Group Sustainability and Risk Management Division carries out internal assurance of its current project sites. This is done in addition to the independent external sustainability assurance carried out by DNV GL Business Assurance Lanka (Pvt) Limited.

A Group-wide sustainability awareness campaign specifically focusing on energy and water conservation was undertaken by the Group Sustainability and Risk Management Division covering both operational sites and office locations of the sector through a poster campaign and interactions with relevant site level personnel during internal sustainability assurance programmes.


The sector’s procurement and sourcing processes are governed by the Group Procurement and Sourcing Policy which encourages the efficient sourcing of raw materials from local suppliers, to ensure a continuous source of raw materials. The policy which selects suppliers based on technical, commercial and sustainability evaluation ensures reduced risk and enhanced brand reputation to the Group while benefiting local suppliers.

140,609Total Energy Consumption(GJ)

1,142,508Total Electricity Consumption(kWh)

10,129804

Scope 1(MT)

Scope 2(MT)


Electricity

Furnace Oil

Petrol and LPG

Diesel

5%

87%

7% 1%

(MT)

10,934Total Carbon Footprint


During the year, the sector, as part of its drive to identify innovative solutions to one of its key sustainability challenges; the shortage of raw materials, sought to use manufactured sand for the purposes of producing concrete blocks. In addition, the sector also commenced the use of manufactured sand as an alternative to river sand.

During the year under review the sector assessed the seven suppliers for Tor Steel and Cement for sustainability qualities. All materials used by the sector are purchased locally or through an authorised local agent. The total percentage of Sri Lankan Rupees spending on local purchases were approximately 95 percent of total purchases during the year under review.

The data for the financial year 2015/16 is listed under ‘Major Materials Procured by the Sector’, comparative data will be included from the next financial year report.

Major Materials Procured by the Sector

Raw Material

Timber and Plywood (sq. ft) 71,615

Aggregates (Cubes) 57,186

Sand (Cubes) 16,190.3

Tor Steel (MT) 11,719.0

Bitumen (MT) 5,531.6

Ready Mix (m3) 31,953

Lubricants (l) 34,196.0

Cement (MT) 7,213.0

Paint (l) 19,015.0

Renewable materials Raw materials Manufactured materials


The sector’s energy use and emission generation is governed by the Group’s Environmental and Energy Management policies which focus on conserving energy and minimising the carbon footprint.

The sector monitors its electricity and fossil fuel consumption by meaningful segmentation through calibrated metering, to enable the overall monitoring of the carbon footprint within the sector and the Group. The measurement of carbon emissions are carried out according to the Greenhouse Gas Protocol of the World Resources Institute and the World Business Council for Sustainable Development. The Intergovernmental Panel for Climate Change guidelines are followed when calculating the carbon footprint. The carbon intensity factors mentioned below will form the base for carbon reduction targets in the forthcoming years.

Water and Effluent Management

The sector has adopted the Group’s Water Management Policy; which requires the constant optimisation of the use of water withdrawn from blue water sources. Reducing consumption, reusing and recycling are some of the key strategies in place to achieve this. The policy further specifies discharge quality levels of discharged waste water in line with the relevant country laws. Water consumption and discharge is monitored through the use of water meters and estimates are based on pump time where meters are unavailable.

Initiatives undertaken to conserve the use of blue water sources

Utilisation of quarry pits at the Hambantota quarry site to naturally harvest rainwater for use at site

Re-use of waste water used for cleaning vehicles after treatment at the Effluent Treatment Plant for the cleaning of vehicle undercarriages at the workshop in Sapugaskanda

Re-use of discharge water generated during pile construction (with the use of de-sanders) for all subsequent piles to reduce water consumption

Awareness campaign at all sites promoting water conservation

per LKR million revenue per cube of aggregate produced

per cubic meter of pile driven

0.8 (MT) 0.019 (MT) 0.07 (MT)

Construction Quarry Operations Piling

Carbon Footprint Per Intensity Factor

133,402Withdrawal of Water

(m3)

Water Withdrawal by Source

Ground water

Municipality,Water Sources Authority

Rainwater Harvesting

Rivers, Lakes and Surface

4%6%

81%

9%

MTD WALKERS PLC104


The data for the financial year 2015/16 is shown in this section, comparative data will be included from the next financial year report.

Total Water Withdrawn

Sources of Water Withdrawn Volume (m3)

Surface Water - Wetlands, Rivers, Lakes, Oceans 11,522

Ground Water 7,878

Rainwater Harvested 5,310

Waste Water from Another Organisation -

Municipality, Authority Water Sources 108,693

Total Volume of Water Withdrawn 133,402

The Sapugaskanda CML - MTD Construction workshop utilised an Effluent Treatment Plant to treat water which was being used for vehicle maintenance and reused it for vehicle undercarriage washing, thereby reducing its water consumption. All effluent and waste discharged during the year were as per Environmental Protection License guidelines.

Water Discharge of Sector

Destination of Discharge Volume (m3)

To Municipality Sewerage, Drainage Lines -

To ETPs and Recycled Completely -

To Rivers, Lakes after being treated by ETP/STP -

Direct to Rivers, Lakes, Wetlands, Marshes 5,260

To Ground through Soakage Pits 127,947

Provided to Another Organisation (Outside the Group) -

Total Water Discharged 133,207

Going forward the sector will be installing flow meters at all sites, allowing more accurate data to be gathered. Further, the sector will streamline data gathering processes to ensure consistency and accuracy of data.

Waste Management

Operations of the sector are also governed by the Group’s Waste Management Policy and the Hazardous Waste Management Policy, which encourages the efficient use of virgin material through reusing and recycling, and disposal of waste through licensed third party contractors.

During the year an awareness programme aimed at promoting suitable segregation of waste and appropriate disposal methods was carried out.

Waste generation data was monitored through dispatch and issue notes at security points and other estimates. During the coming year, the waste inventory management process will be streamlined with the introduction of waste management templates and Standard Operating Procedures for disposal of waste. Sites operated by the sector practice waste segregation methods, while hazardous waste material such as waste oil and sludge is sent to the workshop in Sapugaskanda to be disposed of through identified third party contractors approved by the Central Environmental Authority.

As mentioned previously, as part of its waste recycling efforts, the sector commenced the use of waste quarry dust for the production of concrete blocks and as an alternate to sand in its construction activities. Further, steel offcuts and non-hazardous demolition debris were reused in construction site landfills where allowed.

The data for financial year 2015/16 is listed under Waste Generated and Disposed, comparative data will be included from the next financial year report.

Waste Generated and Disposed

Disposal Method Volume

Total Hazardous Waste Created and Disposed (Kg) 149,420

Total Non-Hazardous Waste Disposed (Kg) 33,043,289

Reuse (Kg) 3,884,491

Recycling (Kg) 19,703

Composting (Kg) 1,928

Recovery (Kg) 119,050

Incineration (Kg) -

Deep Well Injection (Kg) -

Landfill (Kg) 25,268,394

On-Site Storage (Kg) 3,749,722


The sector tracked and monitored all fines paid, spillages and all other compliance related requirements as per Sri Lankan legislation. Standard Operating Procedures and secondary containment methods were used to minimise risk of spillages. No significant spills or fines worth over LKR 1 million were reported during the year under review.

The sector invested in roller bits to substitute bullet teeth for its piling rigs to minimise noise pollution and reduce disturbances to surrounding buildings and their occupants.



The sector maintains ISO 14001 certification in all operational sites resulting in minimum environmental risks. In addition, each site has its own Environmental and Health and Safety Officer who can be contacted by project staff and members of the community in the event of any environmental grievances and in his absence the site Project Manager is also available

HUMAN CAPITAL

The Human Capital of the sector is an integral part of its operations and is highly people-centric. The sector adopted the Group Human Resources Policy as well as policies governing areas such as Child Labour, Forced Labour, Freedom of Association and Anti-Corruption, which are embedded into the daily operations of the sector.

Further the sector endeavours to minimise operational impacts on its employees through the use of OHSAS 18001 management system and by complying with all applicable ILO Convention based local laws and regulations.

The sector tracks indicators including attrition, diversity, training hours, health and safety incidents, incidents related to child labour and forced labour through its sustainability performance management system. The Group Sustainability and Risk Management Division carry out internal assurance of a random sample from the permanent sites of the sector during the year under review to ensure consistency of processes and data accuracy.

Employment

All recruitment carried out in the sector is based on the Group’s Recruitment Policy which is complemented by policies on Equal Opportunity, Performance and

Talent Management. The sector also adheres to Group employee benefits, at a minimum, which are in line with the country regulations as mentioned in the Group performance review.

The diversity of the workforce is based on age and gender, and additionally new hires and attrition, are continuously monitored through the sustainability performance management system.

The sector has a welfare committee, which acts as a Joint Consultative Committee in place to continuously engage with employees to understand and manage their aspirations. Further, the sector has a benevolent fund that comprises of contributions from the staff and company which is used for staff welfare.

The sectoral workforce as at 31st March 2016 was 3,752 of which 1,155 were the sector’s own employees.

262During the Year

221

41Male

Female

Gender Mix Age DiversityAbove 50 years

Under 30 years

Between 30-50 years

54%

41%

5%

New Hires

Employees

Casual Workers

Outsourced Labour Contractors

1,155

1,789

808

The Workforce

Permanent

Contract

35.9%

64.1%

Contract TypeEmployment

Employee Age DiversityAbove 50 years

Under 30 years

Between 30-50 years

46%9%

45%

Workforce Gender Mix

3,621

131Male

Female

MTD WALKERS PLC106

All companies in the Civil Engineering sector are OHSAS 18001 certified and have the relevant management systems in place, which records and reports on rates of injury, occupational diseases, near misses, lost days, absenteeism and a total number of work-related casualties.

During the year under review, the sector carried out its annual health and safety programme aimed at promoting sound knowledge and training of Occupational Health and Safety (OHS) practices as well as fire and emergency evacuation drills. The site Health and Safety Officers continuously monitor Occupational Health and Safety practices at sites to ensure compliance with the Group’s Health and Safety Policy and the OHSAS 18001 management system. The Group’s Sustainability and Risk Management Division further conducted internal sustainability assurances at several operational sites.

As part of the Group’s recently introduced Enterprise Risk Management process, disaster preparedness and business continuity plans are being prepared.

The sector’s occupational injury rate during the year under review was 1.6 percent, while its occupational disease rate was 0.8 percent. Of all injuries, 63 percent was as a result of moving objects and 35 percent was as a result of falling. The lost day rate for the sector was 0.04 percent, with all recorded injuries and diseases arising from its male workforce. The total absentee rate was zero.

Minor occupational injuries or diseases that cause absenteeism for less than one day have been excluded, although records are maintained for such injuries and diseases. There were no fatalities during the year under review.


Of the total workforce, 100.0 percent was engaged in local operations without employees based outside the country.

The new hire attrition rate in the sector was 1.3 percent. The total attrition rate for the sector was 13.6 percent.

The data for the financial year 2015/16 is shown in this section, comparative data will be included from the next financial year report.

Training

The sector follows the Group policy of placing emphasis on capacity and skill development, and is governed by the Group’s Training and Development, Talent Management and Career Development Policies.

The Group provides training to sectoral employees on job skills, leadership and technical competency amongst other areas to develop and assist employees in reaching their potential. This is also complemented with the Group’s performance appraisal process, adopted by the sector where all employees undergo an annual appraisal, where a fair and balanced assessment is carried out, and employees are given feedback on their performance. This also provides a basis to identify training needs of employees. These training programmes are key components of talent retention

and in ensuring a sustainable competitive advantage for the sector.

During the year under review, a total of 11,131 hours of training were provided to the employees of the sector from topics such as lean practices, green building initiatives health and safety and various technical trainings related to the Civil Engineering sector. The sector continuously engaged with all its employees, providing feedback along with the annual performance review that was carried out at the end of the financial year in concern.

Labour Grievance Mechanisms

The labour grievance mechanisms of the Group are also adopted by the sector, which include an open door policy, direct e-mail access to the head of the Civil Engineering sector and the Executive Deputy Chairman of the Group, and periodic employee surveys to capture the view of casual employees. During the year under review the sector had no reports of any significant labour grievances.


The Civil Engineering sector has adopted the Group’s Health and Safety Policy, and placed emphasis on taking a proactive approach to the management of health and safety practices, while ensuring adherence to all relevant health and safety regulations.

9.5

11.5Male

Female

Average training hours by gender

9.6

Average number of hours of training per employee

Hours


Child Labour

The Group’s policy on child labour which mandates zero tolerance of child labour and prohibits any company from employing any persons below the age of 18 years, is also adopted by the sector. This policy is in line with all local laws and regulations and the ILO Convention on Minimum Age to Employment, 1973 (No.138) and Convention on the Worst Forms of Child Labour, 1999 (No.182). The sector requires all potential employees to produce valid identification during the recruitment process to ensure the minimum age requirement is met. During the year under review, the sector had no reports of child labour.

Forced Labour

The Group’s policy on forced labour has been adopted by the sector, and it further complies with all legal requirements and industry standards with respect to labour practices. Where applicable, the sector companies provided compensation or variable pay for employees working beyond normal working hours and provided them with meals and transport. During the year under review, the sector did not identify any areas of risk associated with forced labour.

Anti-Corruption

The Group’s policy on anti-corruption is adopted, which requires all employees to adhere the anti-corruption guidelines and the Code of Conduct provided by the Group. Further, in line with the policy, the sector is continuously assessed on risks related to corruption to develop mitigation plans to reduce such risks. The Group Internal Audit Division carries out periodical audits on the sector to ensure compliance with Standard Operating Procedures and best practices.

The introduction of SAP, to assist the Group and its business units in enterprise resource planning is expected to introduce international best practices to the sector and aid in creating greater transparency of operational transactions.


The Civil Engineering sector places great importance on enhancing its interactions with all its stakeholders and developing long lasting relationships. The sector carries out its operations in an open and ethical manner, engaging with stakeholders at various stages to ensure the alignment of mutual interests.

The brand of the Group is the first interaction stakeholders have with the sector, and as such brand reputation is a significant component of the Group’s stakeholder engagement strategy. The Group policies of social responsibility, anti-corruption, and compliance are adopted by the sector to incorporate principles of good corporate citizenship.

During the year the Group carried out a third party stakeholder engagement to better understand its relationships with its stakeholders and to formulate strategies to engage with stakeholders in a meaningful manner.

The sector further hopes to align its social responsibility initiatives with the Group and support the United Nations Sustainability Development Goals.

Significant stakeholders for the sector: Local Communities, Supply Chain, Investors, Regulators and Customers

Local Communities

The Civil Engineering sector of the Group carries out operations in dynamic environments amongst various community groups. The sector strives to establish strong relationships with local communities, to obtain its social license to operate.

Employees using protection equipment at Sapugaskanda Workshop

MTD WALKERS PLC108


During the year under review various social responsibility initiatives amounting to LKR 7,884,556 were carried out in order to enhance the Social and Relationship Capital of the sector.

MEDICAL CAMP CONDUCTED IN NALANDA

Partner Helpage Sri Lanka

No. of People Reached 384 Elders screened (279 for eye care and 155 for medical)

MEDICAL CAMP CONDUCTED IN MORAWAKA


No. of People Reached 350 Elders screened (274 for eye care and 76 for Medical)

WAYABA CHILDREN’S CHRISTMAS FESTIVAL

Partner Arundika Fernando - Deputy Minister of Tourism Development and Christian Affairs

No. of People Reached Approximately 1,000 children

INTERNATIONAL WHITE CANE DAY

Partner Sri Lanka Federation of Visually Handicapped - Gampaha District Branch

No. of People Reached Six persons

CONSTRUCTION OF TEMPLE ROAD IN BENGAMUWA

Partner Mr. MWSB Wijesingha – Project Manager Deniyaya

ANNUAL SEMINAR ON PLANNING, DESIGN AND CONSTRUCTION CHALLENGES IN PRESENT WATER RESOURCES PROJECTS

Partner Sri Lanka National Committee on Large Dams

CELEBRATION OF CHRISTMAS FESTIVAL

Partner Sri Lanka Welfare Organisation of Visually Impaired Women – Kuliyapitiya

No. of People Reached 18 visually handicapped women

MEDICAL CAMP IN DENIYAYA


No. of People Reached 364 persons screened (264 for eye care and 104 for medical)

MEDICAL HEALTH CAMP AND REPAIRING OF FENCE AT DEMADAOYA SCHOOL

Partner Nalanda Dam Project

No. of People Reached Approximately 150 persons

UDA GAMMANA HOUSING PROJECT (STAGE I AND STAGE II)

Partner Construction Industry Development Authority

No. of People Reached 25 Housing units

PUMPING TEST FOR EXISTING TUBE WELL IN NAGARPURA, MEDIRIGIRIYA

Partner National Water Supply and Drainage Board

MEDICAL CAMP IN ANGUNUKOLAPALESA - 28 FEB 2016


No. of People Reached 397 Elders screened (239 for Eye Care and 158 for Medical)

DENTAL CLINC AT ALUGMADUWA VIHARA TANGALLE

Partner Ministry of Health. Nutrition and Indigenous Medicine

No. of People Reached Approximately 175 persons

ASPHALTING AND WIDENING OF MADATIYAWELA – BASWATTE ROAD IN DIVLAPITIYA

No. of People Reached Approximately 250 villagers in Madatiyawela area

CONSTRUCTION OF DORMITORY FOR CANCER PATIENTS AT CANCER HOSPITAL IN MAHARAGAMA

Partner Lions Club of Kandana/Ja-Ela District. 306 B2

No. of People Reached Approximately 90 patients


The sector further hopes to align its social responsibility projects to the Group’s strategic initiatives that hope to support the United Nations Sustainability Development Goals, which will commence in the forthcoming years

Supply Chain

As a natural resource intensive sector, it relies heavily on its suppliers for the timely completion of its projects. The sector seeks to maintain strong relationships with existing and potential suppliers. The suppliers are selected based on its compliance with sustainable practices, in addition to commercial terms.

The sector obtains materials locally while its capital equipment are mainly imported through local agents. The sector also utilises outsourced labour contractors and subcontracts certain aspects of the project subsequent to a formal contract.

The sustainability of the sector’s key suppliers contributes to the sector’s ability to continue operations. As a part of the Group Sustainability Drive, the Group introduced minimum requisites for its suppliers to encourage them to adopt sustainable business practices. The Group plans to carry out assessments of supply chain partners in the forthcoming years, to ensure conformity to industry best practices, and conduct awareness programmes to mitigate any potential risks.

Regulators and Public Sector Customers

The sector’s relationship with regulators and Government bodies plays a strategic importance in the sector’s operations, as it engages predominately in infrastructure development. During the Group’s external stakeholder engagement, no concerns were highlighted from regulators and Government bodies. Further, no significant fines were reported for the year under review for the sector.

The sector obtains materials locally while its capital equipment are mainly imported through local agents.

OUTLOOK

The Civil Engineering sector will focus on capitalising its position as one of the largest infrastructure developers in the country to benefit from future infrastructure projects, including Government led initiatives such as the Accelerated Middle Income Housing Programme, the Central Expressway and the National Water Supply Master Plan. The sector will also participate in Public Private Partnerships (PPP) to increase its presence in the industry and, secure a wider spectrum of projects.

To cater to the ongoing private sector led construction boom in the country, the sector will broaden its customer base to include an increased number of private sector projects and enhance its capabilities in high rise buildings.

The sector will further pursue a regional expansion as it positions itself as a regional infrastructure developer and has set up representative offices in the Maldives and Bangladesh as an initial step.

Capital Equipment

Maintenance and Support Services

Subcontractors and Outsourced Labour

Material Suppliers

Significant Suppliers

MTD WALKERS PLC110

Management Discussion and Analysis Integrated Performance ReviewHeavy Engineering Sector

Walker Sons and Company Engineers (Private) Limited

Western Airducts Lanka (Private) Limited


Heavy Engineering

Building Services

Manufacturing


Revenue

Gross Profit

EBIT

Capital Employed

million184

million(144)

million(231)

million197

Randenigala Dam


240Number of Employees

2015/16

2292015/16

2,326Training Hours

2015/16


2015/16


OPERATIONAL REVIEW

During the financial year the sector recorded a revenue of LKR 184 million and a gross loss of LKR (144) million. The revenue of the sector fell 57.7 percent Year on Year. This was mainly as a result of the slowdown witnessed in the overall construction industry spilling over to the diverse engineering service industries the sector operates in.

During the year under review, the Group reorganised its operating structure which resulted in the sector expanding its capabilities to include building services.

The sector continued to maintain multiple EM1 Gradings for various service areas it operates in.

The Heavy Engineering sector derived its material sustainability aspects based on the Global Reporting Initiative G4 Guidelines to form its sustainability strategy, through an internal materiality assessment followed by an external stakeholder engagement, commissioned by the Group.

The material aspects of this sector: Economic Performance, Procurement Practices, Materials, Energy and

Emissions, Effluents and Waste, Environmental Compliance, Employment, Occupational Health and Safety, Training, Child Labour, Forced Labour, Supplier Assessment – Environmental Impacts, Supplier Assessment – Labour Impacts, Anti-Corruption and Regulatory Compliance, were identified as material aspects for the Heavy Engineering sector, which were then used to establish Key Performance Indicators for tracking and monitoring performance of the sector against the same.

PROJECTS

HEAVY ENGINEERING

REMEDIAL WORK OF MADURU OYA DAM

Client Mahaweli Authority of Sri Lanka

Main Contractor Walker Sons & Company Engineers (Private) Limited

Location Polonnaruwa District

Status Completed

Project Description Preparation of upstream and downstream slopes, installation of levelling monuments and corrosion protection of guard gate and control gates.

REMEDIAL WORK OF RANDENIGALA DAM



Location Kandy District

Status Completed

Project Description Stop log repairs up to 50 meters below the water level, the rehabilitation of the automation system for effective water management of dams and stabilising the embankment.

PAINTING OF ROOF EXTERIOR OF THE TANK NO. 23 AT KOLONNAWA INSTALLATION

Client Ceylon Petroleum Storage Terminals Limited, Kolonnawa



Status Completed

Project Description Painting of roof exterior of the Tank No. 34 at Kolonnawa

PAINTING OF SPILLWAY GATES AT RANDENIGALA AND RANTEMBE DAMS



Location Kandy District

Status Completed

Project Description Painting of seven spillway gates at Randenigala and Rantembe Dams which included corrosion protection of 14,000 square meters of steel structures and 100 percent water tightness using rubber seals.

BUILDINGS

URBAN REGENERATION PROJECT - CITY OF COLOMBO, INSTALLATION OF ELECTRICAL DISTRIBUTION SYSTEM IN LOW INCOME HOUSES - BLOCK A1, C1 AND C2




Status Completed

Project Description Supply and installation of distribution board, sub/main cable, cable ladders, cable trunking, switches, socket outlets, ceiling roses, fan hooks, bell and conduit laying, wiring of light fittings and fans including all necessary fittings and fixtures and installation of lightning protection system.

MTD WALKERS PLC112


URBAN REGENERATION PROJECT - CITY OF COLOMBO, INSTALLATION OF FIRE FIGHTING SYSTEM FOR APARTMENT COMPLEX A1, A2, C1 AND C2




Status Completed

Project Description Supply and fixing of fire protection and fire detection system.

CONSTRUCTION OF 28 ROOMED LUXURY HOTEL - KOSGODA

Client Beach Resort Kosgoda (Private) Limited



Status Ongoing

Project Description Installing water supply and drainage systems, electrical system and fire detection and protection for 28 rooms.

SUPPLYING AND FIXING CENTRAL AIR CONDITION SYSTEM AT PUTTLAM BASE HOSPITAL

Client N.W.P. Engineering Department, Kurunegala


Location Puttalam District

Status Completed

Project Description Installation of air conditioning and ducting system.

FABRICATING AND CONSTRUCTION OF COMPOUNDING BUILDING EXTENSION

Client Ansell Lanka (Private) Limited



Status Completed

Project Description Fabricating and Construction of a steel building extension.

WATERFRONT INTEGRATED RESORT (KEELLS CITY)

Client Hyundai Engineering Construction Company Limited



Status Ongoing

Project Description Installation of air conditioning and ducting system including HVAC, fresh air, smoke exhaust, kitchen exhaust ducting, grills and diffusers and dampers installation for all 34 stories.

MIXED DEVELOPMENT PROJECT - BANDARAWELA

Client ICONIC Land Mark (Private) Limited


Location Bandarawela District

Status Ongoing

Project Description Supply and installation of mechanical, electrical and plumbing work for a 12-storied building which included a shopping complex and residential apartments.

URBAN REGENERATION PROJECT - HENAMULLA




Status Ongoing

Project Description Mechanical work including cable management system, power cabling system, earthling system, and lightning protection system.

INSTALLATION OF ELECTRICAL SYSTEM FOR RICHMOND HILL RESIDENCIES - WAKUNEGODA

Client Walkers CML Properties (Private) Limited



Status Completed

Project Description Installation, commissioning and testing of electrical system for Richmond Hill Residencies.

PROJECTS

BUILDINGS


INDUSTRIAL INSTALLATIONS

KOLONNA - BALANGODA WATER SUPPLY PROJECT

Client CFE S.A.


Location Ratnapura District

Status Completed

Project Description Electro mechanical works of a new water supply scheme.

MONARAGALA - BUTTALA INTEGRATED WATER SUPPLY PROJECT

Client NV BESIX SA


Location Monaragala District

Status Ongoing

Project Description: Construction of two river water intakes, a surface water treatment plant with pumping stations, four ground reservoirs, access roads including bridges, several quarters, buildings and offices and a transmission and distribution network of a total length of 140 kilometers.

FINANCIAL CAPITAL

The Heavy Engineering sector experienced a drop in their performance and revenue in comparison to the most recent financial years. The revenue of the sector fell 57.7 percent Year on Year to LKR 184 million [FY 2014/15: LKR 435 million]. The mentioned drop in revenue was primarily due to the slowdown in construction and related industries.

The gross profit margin of the sector fell from 0.4 percent to (78.5) percent during the financial year. Rising labour costs and increased competition in the sector due to a lack of projects resulted in the contraction of the sector’s gross profit margin. 30.6 percent of the sector’s total gross revenue reflects work carried out for other Group entities, which adversely effects the sector’s financial results once the Group’s performance is consolidated.

The sector made a loss of LKR (261) million during the financial year under review down 174.9 percent Year on Year [FY 2014/15: LKR (95) million]. The loss was primarily due to the sector retaining staff and machinery in anticipation of the revival of the industry.

During the year the Group reorganised its Procurement Division to streamline its process and reduce costs. The Group is

certain that these measures will positively affect its bottom line during the coming financial year.

Revenue

184

2013/14 2014/15 2015/16

435

335

0

100

200

300

400

500

LKR Mn

Operating Profit

(231)

2013/14 2014/15 2015/16

(72)

33

-250

-200

-150

-100

-50

0

50

LKR Mn

Capital Employed

197

2013/14 2014/15 2015/16

450

223

0

100

200

300

400

500

LKR Mn


The Heavy Engineering sector of the Group maintains a construction related resource base which includes a fleet of heavy machinery, equipment and workshops.

The workshop of the sector is equipped with state-of-the-art metal working machinery and possesses the largest lathe in the country.

The sector further has a factory capable of manufacturing aluminium ducting, which is the only local supplier for ducting with a diameter greater than 315 millimeters.

MTD WALKERS PLC114



The Heavy Engineering sector of the Group understands the importance the Intellectual Capital plays in enhancing its Financial Capital.

The Intellectual Capital for the sector includes its brand equity, people, expertise and its accreditations.

Playing an important role in the brand equity of this sector is the brand name carried by Walker Sons and Company Engineers as one of the leading heavy engineering companies in Sri Lanka.

The sector also benefits from the expertise available to it having completed some of the largest and most iconic projects in Sri Lanka. The partnerships the sector has with world renowned companies further enhances its Intellectual Capital.

Playing a key role in the Intellectual Capital of the sector are its accreditations which includes EM1 Grading received by the Construction Industry Development Authority.

NATURAL CAPITAL

The Heavy Engineering sector’s operations which include heavy engineering, industrial installations and building services, is natural resource-intensive, and considers it essential to ensure environmental efficiency. The sector complies with all applicable local laws and regulations and is also in the process of establishing an environmental management system – ISO 14001, to minimise risks related to operational environmental impacts. The sector has also adopted the Group Environmental Policy and Sustainability Policies, available on the Group website (www.mtdwalkers.com/sustainability) to govern its Natural Capital.

The sector ascertained Materials, Energy and Emissions, Water, Effluents and Waste and Environmental Compliance as material sustainability aspects for the sector, and initiated monitoring of indicators related to these aspects during the year under review. During the forthcoming years, the sector will utilise Year on Year data to generate internal reduction targets and strive towards global best practices.

Processes and data related to the sector ascertained as material were audited by the Group Sustainability and Risk Management Division in addition to the independent external sustainability assurance carried out by DNV GL represented in Sri Lanka by DNV Business Assurance Lanka (Private) Limited.


The sector adopted the Group Procurement and Sourcing Policy to enable efficient sourcing of raw materials from local suppliers and ensure a continuous source of raw material supply. The policy which selects suppliers based on technical, commercial and sustainability evaluation ensures reduced risk, enhanced brand reputation to the Group, while benefiting local suppliers.

During the year under review the sector assessed its seven suppliers for Tor Steel and Cement for sustainability qualities. All materials are purchased locally or through an authorised local agent. The total percentage of spending on local purchases made in LKR were approximately 93 percent of total purchases during the year under review.

Major Materials Procured by the Sector

Raw Material Volume

Timber and Plywood (sq. ft) 153

Paint (l) 4,678

Tor Steel (MT) 2.57

Lubricant (l) 210

Cement (MT) 23.0


The sector’s energy use and emission generation is governed by the Group’s Environmental and Energy Management Policies. The policies focus on conserving energy and minimising the Group’s carbon footprint by adopting lean energy practices. The sector monitors its electricity and fossil fuel consumption by meaningful segmentation.

Energy UsagePetrol

Electricity

Diesel

LP Gas

45%

44%

10%1%

125103

(MT)

229Total Carbon Footprint

Scope 1(MT)

Scope 2(MT)


Waste and Effluents

The sector has adopted the Group’s Waste Management Policy and the Hazardous Waste Management Policy, which encourages minimising of waste generation and disposal of waste through licensed third party contractors. The sector is currently in the process of implementing a system to monitor waste data during the first reporting cycle. Waste data for the sector will be available from the next financial year, while waste inventory management processes will be further streamlined in the forthcoming years.


The sector tracked and monitored all fines paid, spillages and all other compliance related requirements as per Sri Lankan

legislation. No significant spills or fines worth over LKR 1 million were reported during the year under review.

HUMAN CAPITAL

The sector endeavoured to embed the Group’s Human Resources policies and other policies related to Forced Labour, Child Labour and Anti-Corruption, into its daily operations. To ensure entrenchment of the same, the sector tracked indicators including attrition, diversity, training hours, and incidents related to child labour and forced labour through its sustainability Performance Management System.

Employment

The Group’s Recruitment Policy, complemented by policies on Equal Opportunity, Performance and Talent Management, govern all recruitment activities of the sector. The sector also adheres to Group employee benefits at a minimum which is detailed in the Group Performance Review section. The sector also utilised the Sustainability Performance Management System to monitor the diversity of its workforce.

The sector hired 97 new employees of which three employees left the sector

during the year under review, resulting in a new hire attrition rate of 3.1 percent, while a total of 65 left the sector, resulting in a total attrition rate of 27 percent in the sector.

.


146,787Total Electricity Consumption(kWh)

Employees240The Workforce

Permanent

Contract

12

228

Contract TypeEmployment


216

24Male

Female

Employee Age Diversity

Above 50 years

Under 30 years

Between 30 – 50 years

37%17%

46%

MTD WALKERS PLC116


Training

The sector follows the Group policy of placing emphasis on capacity and skill development, and are governed by the Group’s Training and Development, Talent Management and Career Development policies.

The sector had a total of 2,326 training hours reported during the year under review. Training was provided to managers, executives and non-executives, resulting in 10 hours of training per managerial level employee, 21 hours of training per executive level employee, and seven hours of training per non-executive level employee. An average of 10 hours of training per employee, and an average of 10 hours per male employee and 11 hours per female employee was reported during the year under review.


The Heavy Engineering sector has adopted the Group’s Health and Safety Policy, and places emphasis on taking a proactive approach to the management of health and safety practices, while ensuring adherence to all relevant health and safety regulations.

The sector is also in the process of obtaining OHSAS 18001 certification for its operations to minimise risks related to occupational health and safety related incidents.

The workshop and other relevant sites recorded and reported rates of injury, occupational diseases, lost days, absenteeism and a total of work-related casualties of its workforce. During the year under review, no significant incidents were recorded. The Sustainability Management Framework does not capture incidents of minor occupational injuries or diseases that result in less than one lost day.

Child Labour

The sector adopted the Group Policy on Child Labour which is in line with local laws and regulations and ILO conventions, and took necessary steps to minimise risk of child labour, and thus had no reports of child labour during the year under review.

Forced Labour

The Group’s Policy on Forced Labour has been adopted by the sector, and it further complies with all legal requirements and industry standards with respect to labour practices. During the year under review, the sector had no reports of forced labour.

Anti-Corruption

The Group’s Policy on Anti-Corruption is adopted by the sector which requires all employees adhere to anti-corruption guidelines and the Code of Conduct provided by the Group. In line with the policy, the sector is continuously assessed on risk related to corruption to develop

mitigation plans to reduce such risks. The Group Internal Audit Division carries out periodical audits on the sector to ensure compliance with Standard Operating Procedures and best practices.

As part of the Group’s recently introduced Enterprise Risk Management process, disaster preparedness, fire safety and business continuity plans are being prepared.


The Heavy Engineering sector places great importance on enhancing its interactions with all its stakeholders and developing long lasting relationships. The sector carries out its operations in an open and ethical manner, engaging with stakeholders at various stages to ensure the alignment of mutual interests.

During the year the Group carried out a third party stakeholder engagement which included the sectoral stakeholders, to better understand its relationships with stakeholders and to formulate strategies to engage with stakeholders in a meaningful manner.

Significant stakeholders for the sector: Supply Chain, Regulators and Customers

2,326 10

Total Training Hours Average Training Hours per Employee

10

11Male

Female

Average Training Hours by Gender



The sector values its relationship with regulators and Government bodies that play a dual role as customers of the sector.

The sector’s relationship with regulators and Government bodies, plays a strategic importance in the sectors operations, as it engages predominately in infrastructure development. The Group conducted an external stakeholder engagement which also included the sector’s stakeholder groups, and no concerns were highlighted from regulatory bodies. The sector also monitored significant fines related to non-compliance and no significant fines over a value of LKR 1 million were reported this year.

Supply Chain

The sector seeks to maintain strong relationships with its suppliers as it heavily relies on its suppliers for timely project completion. The sector’s suppliers are selected on a Group level based on compliance with sustainable practices, in addition to commercial terms.

Although the sector imports its capital equipment through local agents, it obtains all other materials locally wherever possible. The sector also utilises outsourced labour contractors and subcontracts certain aspects of the project subsequent to a formal contract.

Sustainability of the sector’s key suppliers contributes to the sector’s ability to continue operations. As a part of the

Group Sustainability Drive, the Group introduced minimum pre-requisites for its suppliers to encourage them to adopt sustainable business practices. As this is the first reporting cycle, assessments of supply chain partners have not yet been initiated. However, the sector plans to carry out such assessments as a part of the Group’s Sustainability Drive to ensure its value chain is compliant at a minimum with local laws and regulations, and to create awareness on sustainable supply chain management in order to mitigate potential risks.

OUTLOOK

During the upcoming financial year, as the construction industry gains momentum the sector will continue to focus on its core competencies which includes, rehabilitation of dams, construction of oil tanks and pipelines, and water supply projects.

The sector’s strategic plans include a regional expansion to capitalise on clear growth opportunities, and enhancing its manufacturing capabilities to support other sectors of the Group.

The sector values its relationship with regulators and Government bodies that play a dual role as customers of the sector.

Capital Equipment



Material Suppliers


MTD WALKERS PLC118

Management Discussion and Analysis Integrated Performance ReviewMarine Engineering Sector

Walkers Colombo Shipyard (Private) Limited

Colombo Engineering Services (Private) Limited



Revenue

Gross Profit

EBIT

Capital Employed

million86

million56

million(12)

million127

Please refer Group Directory section of this Annual Report for details on exclusion of sustainability information.

External work being done on M P Shermac

Ship Building Services

Afloat Ship Repairs Services

Dry Dock Ship Repair Services


OPERATIONAL REVIEW

As Sri Lanka’s economy grows and the port of Colombo expands, the country is progressing on its way to becoming a key maritime hub in Asia. As a result, during the year under review demand for quality ship repair services continued to increase at a healthy pace.

During the financial year, the sector recorded a revenue of LKR 86 million and a gross profit of LKR 56 million. The revenue of the sector grew 71.5 percent Year on Year while the gross profit increased by 26.4 percent. The sector continued to enjoy its status as the leading afloat ship repair service provider in Sri Lanka, contributing to the growth in revenue and successfully completed a record number of repairs.

During the year under review, the Group issued debentures to the value of LKR 3.0 billion of which LKR 1.3 billion was allocated for the expansion of the Group’s Marine Engineering sector.

In line with the Group’s diversification strategy, the sector commenced the construction of its first shipyard. Located in the former Mutwal Fisheries Harbour, in close proximity to the Port of Colombo, the new shipyard will be a state-of-the-art vessel repair and building facility. The shipyard is expected to commence commercial operations in early 2017 and will be equipped with a Shiplift and Transfer System.

During the year under review, the sector also identified material sustainability aspects subsequent to a Group-wide internal materiality assessment and external stakeholder engagement commissioned by the Group. These material aspects will be utilised by the sector in the forthcoming years, to establish sustainability Key Performance Indicators for tracking and monitoring performance against each identified material aspect.

The material aspects identified for the Marine Engineering sector were: Economic Performance, Procurement Practices and Materials, Energy and Emissions, Water, Effluents and Waste,

Environmental Compliance, Employment, Occupational Health and Safety, Training, Labour Grievance Mechanisms, Forced or Compulsory Labour, Supplier Assessment – Environmental Impacts, Supplier Assessment – Labour Impacts, Local Communities, Anti-Corruption, and Regulatory Compliance

As disclosed in the Group Directory segment of this report, the entities within the sector have been excluded for sustainability performance measurements for the reporting period and data gathering will only commence in the forthcoming year.

The Marine Engineering sector witnessed strong growth in revenue due to a strong order book for afloat ship repairs.

Inspecting a newly fabricated and welded anchor frame

MTD WALKERS PLC120

FINANCIAL CAPITAL

The Marine Engineering sector of the Group reported revenue of LKR 86 million [FY 2014/15: LKR 50 million] and gross profit of 56 million [FY 2014/15: LKR 44 million] for the year under review. Revenue grew 71.5 percent Year on Year while gross profit grew 26.4 percent Year on Year.

Revenue

86

2013/14 2014/15 2015/16

5054

0

20

40

60

80

100

LKR Mn

Operating Profit

(12)

2013/14 2014/15 2015/16

2021

-15

-10

-5

0

5

10

15

20

25

LKR Mn

Capital Employed

2013/14 2014/15 2015/16

137130

0

30

60

90

120

150

LKR Mn

127

The Marine Engineering sector witnessed strong growth in revenue due to a strong order book for afloat ship repairs. The shipyard in Mutwal Harbour did not contribute to the revenue generated by the sector as operations have not commenced.


The sector which engages in providing ship repair services has an extensive range of marine engineering equipment and tools. The Manufactured Capital of the sector includes speed boats, underwater steel cutting and polishing equipment, and deep-sea diving gear.

The sector is currently constructing its first shipyard at Mutwal Harbour in Colombo. The total investment estimated to be LKR 1.3 billion, will include a Shiplift and Transfer System, a Boatlift System, three Tower Cranes and other advanced marine engineering equipment.

The sector will also build a barge and two tug boats to supplement its expertise and assist in the operational activities of the shipyard.


The Marine Engineering sector of the Group sought to build its Intellectual Capital by paying special attention to brand equity and creating awareness amongst its stakeholders. The sector carried out press and partner events, interviews, sponsorships and other communication activities to assists in reaching out to their stakeholders.

The sector further benefited from the knowledge sharing that was made possible through the Group restructure, allowing them to capitalise on the vast experience that was available.

NATURAL CAPITAL

The Marine Engineering sector is involved in the maintenance of ships, and as such interacts extensively with marine

environments and ecosystems. The sector endeavours to minimise its operational environmental impacts through the establishment of an Environmental Management System, and by complying with all applicable local laws and regulations. While Colombo Engineering Services’ operations comply with the Marine Environmental Protection License issued by the Marine Environmental Protection Authority of Sri Lanka, Walkers Colombo Shipyard is currently in the process of obtaining the same prior to commencing operations.

The sector’s Natural Capital is also governed by the overall Group Environmental and Sustainability Policies which are available on the Group website (www.mtdwalkers.com/sustainability).

The sector ascertains materials, energy and emissions, water, effluents and waste, as well as compliance as material aspects and hopes to initiate the monitoring of related data to generate reduction targets and strive towards global best practices in the forthcoming years.

HUMAN CAPITAL

The sector is also governed by the Group Human Resources Policy as well as policies on areas such as Child Labour, Forced Labour, Freedom of Association and Anti-Corruption, which are currently being embedded into the daily operations to ensure that operations are carried out in an ethical manner.

The sector hopes to initiate tracking of indicators including attrition, diversity, training hours, health and safety incidents, incidents related to child labour and forced labour through its Sustainability Performance Management System, and also hopes to establish a management system to minimise operational impacts on its employees in the forthcoming years.

Management Discussion and Analysis Integrated Performance ReviewMarine Engineering Sector



The Marine Engineering sector recognises that the Group’s brand reputation is a significant component of its Social and Relationship Capital and hence places great importance on carrying out its operations openly and ethically, while engaging with stakeholder groups to ensure alignment of mutual interests.

The sector obtains a significant amount of materials locally, with certain grades of material imported due to the unavailability of such items in Sri Lanka. The sector also utilises outsourced labour contractors and subcontracts certain aspects of the project, subsequent to a formal contract.

The sector hopes to adopt the Group policies on social responsibility, anti-corruption and compliance to incorporate principles of good corporate citizenship once operations commence.

With the commencement of operations at the shipyard in early 2017, the sector will have a direct positive impact on the fishing communities of Sri Lanka, Maldives and South India. The shipyard which will cater to small and medium scale vessels will offer servicing capability at a more accessible location.

The sector further hopes to align its social responsibility initiatives with the Group and support the United Nations Sustainability Development Goals.

OUTLOOK

The sector will complete construction activities and commence operations at its first shipyard in Mutwal Harbour during the coming financial year. This increase in capability of the sector will allow the Group to consolidate its presence in the Marine Engineering sector.

As part of the sector’s capability enhancement, ship building services will be introduced, and the sector hopes to complete building its first vessel during the upcoming year.

The sector is further studying the feasibility of constructing its second shipyard in the Galle Harbour, allowing the sector to supplement its competencies in marine engineering and benefit from increased market presence.

The shipyard is expected to commence commercial operations in early 2017 and will be equipped with a Shiplift and Transfer System.

Capital Equipment



Material Suppliers


MTD WALKERS PLC122

Management Discussion and Analysis Integrated Performance ReviewPower Generation Sector

Northern Power Company (Private) Limited


30 MW HFO Power Plant


Revenue

Gross Profit

EBIT

Capital Employed

million512

million283

million324

billion2.7

Operational check at the Northern Power Plant



2015/16

1552015/16

6Training Hours

2015/16


2015/16


OPERATIONAL REVIEW

As Sri Lanka transitions to a lower middle income country, the demand for power and energy is expected to increase. The current electricity generation capacity of 3,900 megawatts is expected to increase up to 4,800 megawatts by year 2030 to meet the anticipated demand, with Sri Lanka achieving 100.0 percent electrification in the coming years.

During the financial year 2015/16 the sector recorded a revenue of LKR 512 million and a gross profit of LKR 283 million. The revenue of the sector fell 59.3 percent Year on Year. The operation of the sector’s power plant located in Jaffna remained curtailed and was restricted to a Fixed Charge during the year, as a result of legal proceedings that are underway.

Studies conducted at site and on ground water sources in the area by leading independent industry experts such as Industrial Technology Institute (ITI), National Building Research Organisation (NBRO) and University of Jaffna have shown that the Northern Power Plant strictly adhered to all environmental guidelines when conducting its operations. During its operations the Power Plant maintained all mandated licenses and approvals and continues to renew them annually. The sector continues to work closely with the Central Environmental Authority and the Ceylon Electricity Board to ensure that operations commence shortly.

The Northern Power Plant has currently been granted complete access and undisturbed possession of the site and is progressing with routine maintenance activities to ensure it is ready for operation.

During the year under review, the sector identified relevant material issues through the internal materiality assessment and the independent stakeholder engagement exercise commissioned by the Group. Based on the above highlighted issues, the corresponding material aspects based on the GRI G4 Guidelines were identified and used to monitor performance against the aspects. These aspects also formed the base for the sector sustainability strategy. These material aspects included Economic Performance; Materials, Energy and Emissions, Water Effluents and Waste, Environmental Compliance, Employment, Training, Child Labour, Forced or Compulsory Labour, Supplier Assessment – Environmental Impacts, Supplier Assessment – Labour Impacts, Local Communities, Anti-Corruption, and Regulatory Compliance.

FINANCIAL CAPITAL

The Power Generation sector of the Group reported revenue of LKR 512 million down by 59.3 percent Year on Year for the year under review [FY 2014/15: LKR 1,257 million] and reported a profit of LKR 239 million [FY 2014/15: loss of LKR (229) million].

The curtailed operations of the Northern Power Plant resulted in the generated revenue being limited to only the Fixed Charge component of revenue. The Variable Charge component of revenue, which is paid on the total amount of power produced, was not applicable during the year.

The Northern Power Plant has currently been granted complete access and undisturbed possession of the site and is progressing with routine maintenance activities to ensure it is ready for operation.

Operational Check at the Northern Power Plant

MTD WALKERS PLC124

Revenue

512

2013/14 2014/15 2015/16

1,257

1,588

0

500

1,000

1,500

2,000

LKR Mn

Operating Profit

324

2013/14 2014/15 2015/16

(114)

234

-150

-100

-50

0

50

100

150

200

250

300

350

LKR Mn

Capital Employed

2,680

2013/14 2014/15 2015/16

3,4283,715

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

LKR Mn


The sector’s Manufactured Capital primarily consists of its Northern Power Plant located in Chunnakkam, Jaffna. The Power Plant, which generates electricity utilising Heavy Fuel Oil (HFO) has a commissioned capacity of 30 megawatts and a total installed capacity of 36 megawatts.


The Power Generation sector of the Group pays continuous attention to its Intellectual Capital as it understands the role it plays in enhancing the Financial Capital of the sector.

The Intellectual Capital for the sector includes its power purchase agreement, brand equity, people and expertise.

Contributing heavily to the sector’s Intellectual Capital is its Power Purchase Agreement valid till the end of year 2023, to supply 30 megawatts of electricity to the National Grid.

The brand equity of the sector’s Northern Power Company greatly benefits from the goodwill created amongst the local communities and regulators. The sector’s ability to supply power to the Northern Province in the absence of National Grid connectivity during the civil war prevailing at the time, played a key role in enhancing the Intellectual Capital of the sector.

NATURAL CAPITAL

The Power Generation sector operates a 30 megawatt Heavy Fuel Oil (HFO) Power Plant in Jaffna. The Power Plant generates power through the combustion of heavy fuel, requiring a large quantity of natural resources for operation. As such, the material aspects of its Natural Capital monitored by the sector are materials, energy consumption, emissions, water use, effluents and waste discharge.

The sector complies with all applicable local laws and regulations and is also governed by the overall Group Environmental and Sustainability Policies which are available on the Group website (www.mtdwalkers.com/sustainability).

As part of the Group strategy, the Power Generation sector also initiated data tracking related to the above mentioned material aspects during the year under

review. Due to the Power Plant currently not being in operation, no significant concerns were reported during the period under review.


The sector’s procurement and sourcing processes are governed by the Group Procurement and Sourcing Policy which encourages the efficient sourcing of raw materials from local suppliers, to ensure a continuous source of raw materials and to reduce the risk related to the supply chain. Since the sectoral company was non-operational during the year under review, no significant quantity of materials were procured. The sector reported that no solid or liquid high/low level Polychlorinated Biphenyls (PCBs) were identified in any equipment utilised during maintenance.


The sector adopted the Group’s Environmental Policy and related Energy Management Policy, which encourages energy conservation and minimisation of the operation’s carbon footprint.

The sector consumed a total of 63,124 kilowatt hours of electricity from the National Grid during the first quarter of the financial year.

Once the plant reopened for maintenance work, it generated electricity through the plant’s generators, using a total of 33,117 litres of diesel and 14,654 litres of furnace oil.

The data for the financial year 2015/16 is shown in this section, and as data tracking was initiated during the year under review, Year on Year comparisons will be included from the next financial year, which will also provide a rationale for energy and emission reduction initiatives.



Water and Effluent Management

The sector adopted the Group Water Management Policy; which requires the constant optimisation of the use of water withdrawn from blue water sources. The policy further specifies discharge quality levels of discharged waste water in line with the relevant country laws, which is highly material to the sector.

The sector’s water use was tracked based on estimates during the year under review as water meters were unavailable at the Power Plant for water consumed from ground water sources. The water use of the sector is currently limited to maintenance purposes such as cooling, employee sanitation, employee consumption and gardening.

Consumption of water in the sector during the year 2015/16 was reported as 10,800 cubic meters, and 100.0 percent of the consumed water, which was compliant with stipulated discharge quality levels, was discharged through soakage pits.

The sector hopes to install calibrated water meters at the Power Plant to improve the accuracy of data gathered, and to aid in establishing internal reduction targets and potential water reduction initiatives.

Waste Management

The sector has adopted the Group’s Waste Management Policy and

child labour, forced/compulsory labour and anti-corruption as material aspects. In order to manage these aspects, the Power Generation sector adopted the Group Human Resource Policy as well as policies governing areas of Child Labour, Forced Labour and Anti-Corruption, which are aligned to core labour principles and universal human rights.

The sector tracked all material indicators including attrition, diversity, training hours, health and safety incidents, incidents related to child labour and forced labour

through its Sustainability Performance Management System during the year under review.

Employment

Recruitment at the Power Generation sector is governed by the Group Recruitment Policy. The sector also adopted the Group’s Equal Opportunity and Performance/Talent Management policies and adhered to the Group’s employee benefit scheme which are aligned to country laws.

Hazardous Waste Management Policy which mandates disposal of waste through licensed third party contractors and encourages the minimisation of waste generation.

As the Power Plant was not in operation during the year under review, majority of waste generated by the sector was by employees and this waste was segregated in an appropriate manner.

As operations in the Northern Power Plant recommence, the sector hopes to adopt the Group’s waste management

templates and Standard Operating Procedures with respect to waste management to improve data accuracy and strive toward industry standard best practices in the forthcoming years.


The Power Generation sector monitored fines paid, spillages and all other compliance related requirements as per Sri Lankan legislation. No significant fines worth over LKR 1 million were reported in the year under review while all operations were conducted in compliance with the stipulated local laws and regulations.

HUMAN CAPITAL

Employment, Occupational Health and Safety and freedom of association and collective bargaining are of high relevance to the sector. The sector further ascertained training, labour grievance,



11144

Scope 1(MT)

Scope 2(MT)

(MT)

155Total Carbon Footprint Source of Carbon Footprint

Furnace Oil usage

Electricity usage

Diesel usage

28%

23%

49%

MTD WALKERS PLC126


The sustainability management system that was established during the financial year was utilised by the sector to monitor material aspects related to employment such as diversity of the workforce according to age and gender, new hires and attrition rates.

Training

The sector adopted the Group policies on Training and Development, Talent Management as well as the Performance Appraisal Process.

The sector provided a total of six training hours for the year.

As the operations of the sector resumes, the training hours will grow to reflect the Group average, while the training will have a specific focus on technical training for plant staff to ensure that the generation efficiency is maintained to meet electricity demand

The sector’s workforce consisted of 82 employees and no third party contractor personnel, of which two were employed on a permanent basis, while the remaining 80 were on contract.


The sector has adopted the Group’s stance on Freedom of Association and Collective Bargaining which is in line with the Trade Union Ordinance of Sri Lanka.

All employees have the right to freedom of association and collective bargaining, with no restrictions placed by the Group or any other Regulatory Regime. As an Independent power producer providing an essential service to the nation, the sector is required to produce an uninterrupted service, and as such continuously engages with its employees to ensure that all their grievances and concerns are addressed. As a result, during the year under review the sector had no Union activity taking place.

Labour Grievance Mechanisms

The labour grievance mechanisms of the Group are also adopted by the sector, and during the year under review the sector had no reports of any significant labour grievances.

One employee was hired while no new hires left the sector during the year under review. A total of three employees left the sector resulting in an attrition rate of 3.6 percent.


The Power Generation sector has adopted the Group’s Health and Safety Policy, and places emphasis on taking a proactive approach to the management of health and safety practices, while ensuring adherence to all relevant health and safety regulations. It also hopes to obtain the OHSAS 18001 certification once operations resume. During the year under review, no significant health and safety incidents were reported.

Child Labour

The Group’s policy on child labour which mandates zero tolerance of child labour and prohibits any company from employing any persons below the age of 18 years, is also adopted by the sector

As majority of the roles are technical, there is low risk of child labour at the power plant and during the year under review, the sector had no reports of child labour. 6

Total Training Hours

Employees82The WorkforceEmployment


75

7Male

Female


Above 50 Years

Under 30 Years

Between 30 – 50 Years

17%18%

65%


Forced Labour

The Group’s policy on forced labour has been adopted by the sector. The sector further complies with all legal requirements and industry standards with respect to labour practices. During the year under review, the sector had no reports of forced labour.

Anti-Corruption

With the adoption of Group Human Resource policies and procedures, all employees are required to comply with the related Anti-Corruption Policy and Code of Conduct. The Group’s Internal Audit Division audits all business units annually, to ensure compliance with Standard Operating Procedures. The Group also introduced an Enterprise Risk Management process, which assessed the sector for risk of corruption and established preventative and mitigation plans for the same.

Disaster Preparedness

As part of the Group’s recently introduced Enterprise Risk Management process, disaster preparedness, fire safety and business continuity plans are being prepared to be implemented in the forthcoming years, by the sector once operation resumes.


The Power Generation sector places great importance on enhancing its interactions with all its stakeholders and developing long lasting relationships. The sector carries out its operations in an open and ethical manner, engaging with stakeholders at various stages to ensure the alignment of mutual interests.

The Group policies of social responsibility, and compliance are adopted by the sector to incorporate principles of good corporate citizenship.

Significant stakeholders for the sector: Public Sector Customers, Local Communities and Regulators.

Local Communities

The sector employs over 65 percent of its employees from the local communities in Jaffna, where the Power Plant is based; providing livelihood development opportunities to communities in the area. During the year under review, as the sector was focused on its legal proceedings, no social responsibility initiatives were carried out. Once operations of Northern Power commence, the sector will align its social responsibility initiative to that of the Group.


The sector’s relationship with regulators and Government bodies plays a strategic importance in the sector’s operations as it engages in power generation.

The sector proactively engages with the Central Environmental Authority and Northern Provincial Council to ensure that its operations are compliant with local environmental laws, regulations, and conditions stipulated in its Environmental Protection License.

During the year, the Central Environmental Authority with the assistance of the Industrial Technology Institute of Sri Lanka, organised a scientific analysis of the water bodies in proximity to the sector’s Power Plant to help determine whether the operations of the Power Plant had caused any water contamination. The study revealed that the operations of the Power Plant were not responsible for any contamination.

The sector regularly communicates with the Ceylon Electricity Board, its primary customer, to ensure that strong links established during times of operation, are sustained. As electricity is an essential service for socio-economic stability and daily lives are affected by the non-availability of the same, the sector strives to ensure that the planned capacity against the projected demand is met, and that the generation efficiency is high. The sector conducted regular scheduled maintenance, and retained critical spares on site during the period where the Power Plant was not in operations.

Supply Chain

The sector obtains materials locally while its capital equipment are mainly imported through local agents. The sector also utilises outsourced labour contractors and subcontracts certain aspects of the project, subsequent to a formal contract.

OUTLOOK

The sector will continue to fulfill the conditions of its Power Purchase Agreement and provide uninterrupted power to the Northern Province. During the upcoming year the sector will also focus on improving the efficiency of its Northern Power Plant to cut costs and increase profitability.

In line with the Government’s goal of producing 20.0 percent of the country’s energy requirement using renewable source by 2020, the sector intends to enter the renewable energy market and is currently in the advanced stages of a feasibility study to evaluate options in wind and solar power.

Outsourced Labour

Capital Equipment and Spare Parts

Maintenance and Support Services/Bodies

Suppliers of Other Consumables

Fuel and Lubricant Suppliers


MTD WALKERS PLC128

Management Discussion and Analysis Integrated Performance ReviewReal Estate Sector

Walkers CML Properties (Private) Limited

Richmond Hill Residencies


Property Development


Revenue

Gross Profit

EBIT

Capital Employed

million357

million101

million36

billion2.2



2015/16

372015/16

24Training Hours

2015/16


2015/16


OPERATIONAL REVIEW

The sector reported a revenue of LKR 357 million and a gross profit of LKR 101 million, for the nine months from July 2015. Sales of sector’s pilot project, Richmond Hill Residencies in Galle has commenced successfully with 60.0 percent units already sold for the period of nine months.

The property market in Sri Lanka showed strong growth during the year as a result of increased purchasing power and strong economic growth. The sector continued to focus on the middle income housing market, where it foresees the strongest growth in the upcoming years.

The sector benefits from the Group’s core competencies in construction and engineering, allowing the sector to remain competitive as construction costs continued to rise.

The Nila Sevana mandate held by the sector to build 25,000 homes for the public sector employees remains the sector’s core advantage in a competitive housing market. The mandate also provides public sector employees with preferential pricing for the apartments, allowing the sector to strategically access to the public sector buyers.

The sector has completed and launched the first phase of its project comprising of 512 apartments while the second phase of 576 apartments is progressing steadily.


The sector’s pilot project, Richmond Hill Residencies, consists of 512 apartments in two sizes; 695 square feet and 776 square feet. Built under the Nila Sevana Mandate, the project offers preferential pricing for public sector buyers. The sale of apartments commenced in July 2015, followed by a series of promotional activities. The pricing of the apartments

together with the project’s focus on providing affordable housing for the public sector played a key role in the positive response received.

The Group, with a focus on contributing to the local community constructed a playground for children at the Wakunugoda Day Care Centre, situated in close proximity to the project site.

The sector identified relevant material issues through the internal materiality assessment and the independent stakeholder engagement exercise commissioned by the Group during the year under review. Subsequent to this, corresponding material aspects based on the GRI G4 Guidelines were identified to form the Group’s sustainability strategy as well as the sector strategy. These material aspects were then utilised to establish sustainability Key Performance indicators which were used to monitor performance against identified material aspects.

The material aspects identified for the Real Estate sector are: Economic Performance, Energy and Emissions, Effluents and Waste, Environmental Compliance, Employment, Training, Forced Labour, Supplier Assessment – Environmental Impacts, Supplier Assessment – Labour Impacts, Local Communities, Anti-Corruption, and Regulatory Compliance.

FINANCIAL CAPITAL

The Group’s Real Estate sector posted a revenue of LKR 357 million for the nine months since July 2015. In the same period the sector posted a gross profit of LKR 101 million and a net profit of LKR 31 million. A

The sector has completed and launched the first phase of its project comprising of 512 apartments.


MTD WALKERS PLC130

delay in the approval of the condominium plan for Richmond Hill Residencies resulted in the sector not being able to recognise the total forecasted sales. As the sector matures and completes its first year of operations, the streamlining of processes will enable the sector to reduce operating costs and improve margins.

Revenue

2015/16

357

0

50

100

150

200

250

300

350

400

LKR Mn

Operating Profit

2015/16

36

0

5

10

15

20

25

30

35

40

LKR Mn

Capital Employed

2015/16

2,176

0

500

1,000

1,500

2,000

2,500

LKR Mn


The Real Estate sector relies heavily on customer sentiment and customer satisfaction to generate sales. As a result Intellectual Capital plays an important role in this sector and special attention is paid to create brand awareness. The sector largely benefits from its association to the Group brand and its reputation of being a reliable partner capable of successfully completing large scale projects. This was further enhanced through strategic interviews, press communications, and media and partner events carried out throughout the year that aligned the sector with the Group brand, Walkers CML.

NATURAL CAPITAL

The sector engages in property development and as such has a low direct impact on the environment and use of natural resources. Operations of the sector primarily include project management, and marketing and sales activities. The material aspects of its Natural Capital monitored by the sector are energy and emissions, waste and environmental compliance


As part of the Group strategy, the Real Estate sector also initiated tracking of data related to the above mentioned material aspects, during the year under review.


The sector’s energy usage is governed by the Group’s Environmental and Energy Management policies which focus on conserving energy and minimising the sector’s carbon footprint.

The sector monitors its electricity and fossil fuel consumption to enable the overall monitoring of the carbon footprint within the sector and the Group.

The data for the financial year 2015/16 is shown in this section and comparative data will be included from the next financial year report.


(MT)


1621

Source of Carbon FootprintPetrol use

Electricity usage

Diesel usage

57%11%

32%

Scope 1(MT)

Scope 2(MT)

322Total Energy Consumption(GJ)



Waste Management

Operations of the sector are also governed by the Group’s Waste Management Policy and the Hazardous Waste Management Policy, which encourages the efficient use of material through reusing and recycling, and disposal of waste through licensed third party contractors.

As the sectoral company only generates waste related to office and admin-related procedures, it participated in a Group- wide waste management initiative aimed at recycling all paper and e-waste generated at office locations, through authorised third party contractors. Data on this initiative will be available from the upcoming reporting cycle.

The sector hopes to streamline and improve on its waste management processes to keep in line with overall Group’s policy and international best practices.


The Group tracked and monitored all fines paid by the sector and all other compliance related requirements as per Sri Lankan legislation. No significant fines worth over LKR 1 million were reported during the year under review.

HUMAN CAPITAL

The sector adopted the Group Human Resource Policies in addition to the policies governing the area of Anti-corruption to ensure that its operations are conducted in an ethical manner.

The sector tracked indicators including attrition, diversity, and training hours, through its Sustainability Performance Management System and will initiate monitoring its value chain for occupational health and safety incidents in the forthcoming years.

Employment

All recruitment carried out in the sector is based on the Group’s Recruitment Policy which is complemented by policies on Equal Opportunity, Performance and Talent Management. The sector also adheres to Group employee benefits, at a minimum, which are in line with the country’s regulations as mentioned in the Group performance review.

The diversity of the workforce based on age and gender as well as new hires and attrition, are continuously monitored through the Sustainability Performance Management System.

The sector’s workforce consisted of 13 employees, all on contract.

Seven new employees were hired, while no new hires left the sector. A total of one employee left the sector.

Training

The sector follows the Group’s policy of placing emphasis on capacity and skill development, and are governed by the Group’s Training and Development, Talent Management and Career Development policies.

As the sector is comprised of a recently acquired company, the number of hours of training provided are lower than the Group average. Over the coming years, as the operations of the sector picks up, the training hours will grow to reflect the Group average.

Employment


Above 50 years

Under 30 years


38%23%

38%

13The Workforce:

11 2Male Female

Average Number of Hours of Training per Employee

24 2

Total Hours of Training Provided

Employees


MTD WALKERS PLC132

Anti-Corruption

The sector adopted the Group’s policy on anti-corruption, which requires all employees adhere to anti-corruption guidelines and the Code of Conduct provided by the Group. In line with the policy, the sector is continuously assessed on risk related to corruption to develop mitigation plans to reduce such risks. The Group Internal Audit Division carries out periodical audits on the sector to ensure compliance with standard operating procedures and best practices.

As a part of the Group’s recently introduced Enterprise Risk Management process, disaster preparedness, fire safety and business continuity plans are being prepared.


The Real Estate sector places great importance on enhancing its interactions with all its stakeholders and developing long lasting relationships. The sector carries out its operations in an open and ethical manner, engaging with stakeholders at various stages to ensure the alignment of mutual interests.

The brand of the Group is the first interaction stakeholders have with the sector, and as such brand reputation is a significant component of the Group’s stakeholder engagement strategy. The Group policies of social responsibility, anti-corruption, and compliance are adopted by the sector to incorporate principles of good corporate citizenship.

Significant stakeholders for the sector: Customers, Local Communities, Supply Chain and Regulators.

Local Communities

The Real Estate sector of the Group carries out operations in dynamic environments amongst various community groups. The sector strives to establish strong relationships with local communities, to obtain its social license to operate.

During the year under review, the sector constructed a children’s park in close proximity to the Richmond Hill Residencies site at a total cost of LKR 100,000 to enhance the Social and Relationship Capital of the sector.

As a participant in the Government’s Nila Sevana Housing Development, the sector assists in bridging the housing gap in the middle income housing market. As the sector progresses with this mandate, the number of people benefiting will increase exponentially.

Regulators

The sector’s relationship with regulators play a strategic importance in its operations, as it engages predominately property development. During the Group’s external stakeholder

engagement, no concerns were highlighted from regulators. Further, no significant fines over a value of LKR 1 million were reported for the year under review for the sector.

Customers

The sector’s customers are predominantly the Government and public sector employees and the sector’s utmost priority is customer health and safety in real estate and infrastructure assets which it markets. The sector is currently in the process of developing a comprehensive internal checklist to assess quality and health and safety aspects of apartments prior to handing over the apartments to its customers.

The sector ensures that risk related to customer health and safety is minimised through the use of best practices at design stage such as a fully-fledged fire plan including a fire certificate for the building, fire escapes with fire proof door, fire proof cabling, accessibility for a fire truck in the apartment premises, fire rated elevated for emergency and generators for continued firefighting, for both main and backup pumps; safety checks such


The Real Estate sector places great importance on enhancing its interactions with all its stakeholders and developing long lasting relationships.


as the use of auto shutdown valves for the gas lines, electricity continuity checks and megger’s checks, earth fault checks, elevator testing, as well as guidelines, inclusive of drawings of electrical wiring and pipelines for customers to prevent unauthorised changes to the building.

As the sector matures and completes projects, customer satisfaction surveys will be conducted to evaluate the end users’ satisfaction trends over time.

Supply Chain

Significant materials and support services are obtained locally and certain aspects of the project is subcontracted subsequent to formal contracts. The sector also utilises outsourced labour contractors for its projects.

The sector identified potential risks related to its supply chain in terms of occupational health and safety, child labour, forced/compulsory labour as well as environmental impacts, and thus recognised the requirement to engrain sustainability in its supply chain. The sector therefore hopes to initiate a supplier engagement and assessment process to assist in reducing operational and reputational risks deriving from the supply chain to the business.

OUTLOOK

During the upcoming financial year the Real Estate sector will continue to fulfil its mandate to construct 25,000 affordable housing units under the Government initiated Nila Sevana mandate. The sector has received the necessary approvals for the next phase of this project, and is set to commence construction in the coming months.

The Group’s partnership with the National Housing Development Authority for their Accelerated Middle Income Housing Programme, will enable the sector to launch three affordable housing schemes in Ragama, Yakkala and Wadduwa totaling over 600 housing units in the coming year.

The sector’s confidence in this market segment together with the expected increase in demand for middle income housing, will see the sector continue to pursue emerging opportunities within the middle income housing market.

Support Services such as Architects, Consultants and Licensed Surveyors


Material Suppliers


MTD WALKERS PLC134

Management Discussion and Analysis Integrated Performance ReviewTrading and Other Sector


Revenue

Gross Profit

EBIT

Capital Employed

million260

million40

million(293)

billion9.8

Walkers Equipment Limited


MTD Walkers PLC


Supply of Construction Equipment

Repair Service for Infrastructure Related Equipment

Maintenance Services for Infrastructure Related Equipment

Sany Crane



2015/16

1572015/16

192Training Hours

2015/16


2015/16


OPERATIONAL REVIEW

The Trading sector reported a revenue of LKR 260 million and gross loss of LKR 40 million, for the year under review. The Trading sector primarily focuses on supporting the infrastructure development industry by supplying and providing maintenance services for machinery, equipment and products.

The contraction experienced in the overall construction industry during the year under review resulted in a slowdown in the overall infrastructure development market. However, in preparation of the revival in infrastructure development, many operators chose to focus on the maintenance of their existing machinery and equipment, contributing to growth in the maintenance services sector.

The sector’s entry in to the supply and maintenance of heavy machinery during the year under review resulted in the sectors overwhelming performance as compared to the previous financial year.

The sector acquired key agencies including Bobcat, SANY, Hyundai and Wacker Nueson during the year under review, increasing its product portfolio and market reach. In December 2015, the sector set up an after-market support centre to complement its services.

In line with the expansion of Group’s vision to venture into international markets, the sector was able to secure its first cross-border sale to the Republic of Maldives in January 2016.

An internal materiality assessment followed by an external stakeholder engagement, commissioned by the Group, was carried out to identify material issues relevant to each sector. Subsequently, relevant material aspects based on the GRI G4 Guidelines were identified to form the sustainability strategy for each sector, including Trading. These aspects were then used to establish Key Performance Indicators for tracking and monitoring performance against such identified material aspects. Economic Performance,

Energy and Emissions, Effluents and Waste, Environmental Compliance, Employment, Occupational Health and Safety, Training, Forced Labour, Supplier Assessment – Environmental Impacts, Supplier Assessment – Labour Impacts, Anti-Corruption and Regulatory Compliance, were identified as material aspects for the Trading sector.

The sector’s entry in to the supply and maintenance of heavy machinery during the year under review resulted in the sector’s overwhelming performance

Agency Operating Territories

Case New Holland Construction Equipment India (Private) Limited Sri Lanka

Doosan Infracore Bobcat Korea Co. Ltd. Sri Lanka and Maldives

Dragflow S.R.L Sri Lanka

ELGI Equipments Limited Sri Lanka

Hyundai Heavy Industries Co. Ltd. Sri Lanka

Sany International Development Limited Sri Lanka and Maldives

Top Global Parts Company Limited Sri Lanka

Wacker Neuson Singapore Pte Ltd. Sri Lanka and Maldives

Product Category Agency

Generators Fuji Yanan Power Co. Ltd.

Power Link Machine (UK) Co. Ltd.

Lifts and Escalators Hengda Fuji Elevator Co. Ltd.

Air Conditioners Teco Electric and Machinery Pte Ltd.

Airdale International Air Cooling Ltd.

Bearings Mina Far East

ZKL India (Private) Limited

HDPE Pipes Zhejiang Weixing New Building Materials Co. Ltd.

Switchgear Novateur Electrical and Digital Systems (Private) Limited

Valves Tecofi S.A

Railway Track Material Shanghai Suyu Railway Material Co. Ltd.

Safety Equipment Shandong Haolin Labor Safety Product Co. Ltd.

Anbu Safety Industrial Co. Ltd.

Power Cables Zhengzhou ZMS

Pumps Zhejiang Yonjou Technology Co. Ltd.

MTD WALKERS PLC136

FINANCIAL CAPITAL

The Trading sector of the Group reported revenue of LKR 260 million [FY 2014/15: LKR 89 million] and gross profit of 40 million [FY 2014/15: LKR 9 million] for the year under review. Revenue grew by 193.6 percent Year on Year.

Revenue

260

2013/14 2014/15 2015/16

89

120

0

50

100

150

200

250

300

LKR Mn

Operating Profit

(293)

2013/14 2014/15

(126)(112)

-350

-300

-250

-200

-150

-100

-50

0

LKR Mn

2015/16

Capital Employed

9,778

7,580

4,814

0

2,000

4,000

6,000

8,000

10,000

LKR Mn

2013/14 2014/15 2015/16

The key contribution towards revenue stemmed from the sale of construction machinery and equipment, enabling the sector to report a gross profit margin of 15.4 percent for the year under review.

The sector closely monitored its costs during the period under review, while proactive measures were taken to enable the sector to operate with minimum inventory.


The Intellectual Capital of the sector include its brand, people and expertise. As a new player in the market, Walkers Equipment plays a special importance on creating awareness amongst its stakeholders. This is achieved through regular press releases, strategic interviews, title sponsorships events that promotes its agencies and other similar activities.

The sector also benefits from the world renowned agencies they have partnered with and validates the sector amongst its stakeholders.

NATURAL CAPITAL

As a sector engaged in infrastructure development support services, the Trading sector has a lower direct impact on the environment and the use of natural resources. As such, energy and emissions, effluents and waste, and environmental compliance were ascertained as material for the sector.


During the year under review, the sector initiated the monitoring of material aspects to generate reduction targets and strive towards global best practices.

A group-wide sustainability awareness campaign specifically focusing on energy and water conservation was carried out by the Group Sustainability and Risk Management Division which included office locations of the sector.


The sector’s energy use and emission generation is governed by the Group’s Environmental and Energy Management policies which focus on conserving energy and minimising the sector’s carbon footprint.

The sector monitors its electricity and fossil fuel consumption to enable the overall monitoring of the carbon footprint within the sector and the Group.

The data for the financial year 2015/16 is shown below, while comparative data will be included from the next financial year.

The total electricity consumption in the sector was 181,796 kilowatt hours which was obtained from the National Grid.


29128

(MT)


Scope 1(MT)

Scope 2(MT)



Waste Management

Sector operations are governed by the Group’s Waste Management Policy and Hazardous Waste Management Policy, which encourages the efficient use of material through reusing and recycling, and disposal of waste through licensed third party contractors.

The sector did not have any significant waste to be reported in the year under review. Any hazardous waste generated in the after-sales care centre was amalgamated with the Civil Engineering sector workshop data in Sapugaskanda, as it shares operational space.

The sector participated in the Group wide waste management initiative aimed at recycling all paper and e-waste through third party contractors. Data on this initiative will be available from the upcoming reporting cycle.

Waste management processes of the sector will be further streamlined to ensure alignment to the overall Group policy as well as international best practices.


The Group tracked and monitored all fines paid by the sector and all other compliance related requirements as per Sri Lankan legislation. No significant fines worth over LKR 1.0 million were reported during the year under review.

HUMAN CAPITAL

The sector has adopted the Group Human Resources Policy as well as policies governing areas such as forced labour and anti-corruption, which are embedded into the daily operations of the sector.

The sector tracks indicators including attrition, diversity, training hours, incidents related to child labour and forced labour through its Sustainability Performance Management System

Employment

The Group’s Recruitment Policy, complemented by policies on Equal Opportunity, Performance and Talent Management, governs all recruitment activities of the sector. The sector also adheres to Group employee benefits at a minimum which is detailed in the integrated Group Performance Review section.

The diversity of the workforce based on age and gender as well as new hires and attrition, are continuously monitored through the Sustainability Performance Management System.

Moreover, 23 new employees were hired while two employees left the sector during the year under review, resulting in a new hire attrition rate of 8.7 percent, while a total of eight left the sector, resulting in a total attrition rate of 14.5 percent in the sector.

Employment


Above 50 years

Under 30 years


53%

38%

9%55The Workforce:

37 18Male

Employees

Female


Diesel

Electricity

LPG

Petrol

81%

12%

6% 1%

The sector participated in the Group-wide waste management initiative aimed at recycling all paper and e-waste through third party contractors.



MTD WALKERS PLC138

Training

The sector follows the Group policy of placing emphasis on capacity and skill development, and are governed by the Group’s Training and Development, Talent Management and Career Development policies.

The number of training hours illustrated above are slightly below the Group average as the sector is largely comprised of a company that commenced operations during the year under review. Over the coming years, as the operations progress, the training hours will grow to reflect the Group average.

Forced Labour

The sector strives to ensure that no incidents of forced labour takes place in its operations by complying with all legal requirements and industry standards regarding labour, and by adopting the Group’s policy on prevention of forced labour. As such, the sector had no reports of forced labour during the year under review.

Anti-Corruption

The Group’s policy on anti-corruption is adopted by the sector which requires all employees adhere to anti-corruption guidelines and the Code of Conduct

provided by the Group. In line with the policy, the sector is continuously assessed on risk related to corruption to develop mitigation plans to reduce such risks. The Group Internal Audit Division carries out periodical audits on the sector to ensure compliance with Standard Operating Procedures and best practices.


The Trading sector places great importance on enhancing its interactions with all its stakeholders such as customers, regulators and the supply chain, and developing long lasting relationships. The sector carries out its operations in an open and ethical manner, engaging with stakeholders at various stages to ensure the alignment of mutual interests.

During the year the Group carried out a third party stakeholder engagement to better understand its relationships with its stakeholders and to formulate strategies to engage with them in a meaningful manner.

Regulators

The sector’s relationship with regulators play a strategic importance in its operations. During the Group’s external stakeholder engagement, no concerns were highlighted from regulators. No significant fines were reported for the year under review for the sector.


3

4Male

Female

Average Training Hours by Gender

192

3

Total Training Hours

Average Training Hours per Employee

Bobcat - Track Loader


Supply Chain

The sector deals primarily in trading operations of heavy construction equipment and acts in the capacity of the local agents of principals of such equipment. The sector also utilises maintenance and support services externally where required, in servicing its client base subsequent to sale.

The sustainability of the sector’s key suppliers contributes to the sector’s ability to continue operations and as a result the sector seeks to maintain strong relationships with existing and potential suppliers. The Group plans to carry out assessments of supply chain partners, to ensure conformity to industry best practices, and conduct awareness programmes to mitigate any potential risks.

Customers

The sector proactively engages with its customers to provide after-sales service and any other maintenance requirements. As the sector matures and completes projects, customer satisfaction surveys will be conducted to evaluate the end users’ satisfaction trends over time.

OUTLOOK

In the upcoming year, the sector will continue to focus on strengthening its existing product lines, while acquiring strategic agencies to further enhance its service offering. The sector is also evaluating options to set up a dedicated workshop to provide after-sales services to its customers, and equipment rental to broaden its customer base.

As the sector matures and completes projects, customer satisfaction surveys will be conducted to evaluate the end users’ satisfaction trends over time.

Support Services

Principals of Equipment


FinancialReport

Annual Report of the Board of Directors 142-144Chief Financial Officer’s Responsibility Statement 145Statement of Director’s Responsibility 146Independent Auditor’s Report 147Statement of Financial Position 148Statement of Profit or Loss 149Statement of Comprehensive Income 150Statement of Changes in Equity 151Cash Flow Statement 152Notes to the Financial Statements 153-201

We have already achieved a lot. Yet, we want to do more

MTD WALKERS PLC142

Annual Report of the Board of Directors

The Board of Directors of MTD Walkers PLC take great pleasure in presenting their Annual Report, together with the Audited Consolidated Financial Statements of the Company and its subsidiaries for the financial year ended 31st March 2016.

Principal Activities

MTD Walkers PLC manages a portfolio of business operations covering a range of sectors including Civil Engineering, Heavy Engineering, Power Generation and Real Estate. Refer Note 1.3 to the Financial Statements on page 153 for a brief description of the principal activities of the Company and its subsidiaries.

There was no significant change in the nature of the business during the year that may have an impact on the state of the affairs of the Company and its subsidiaries (“the Group”).

Review of Performance

The review of the overall performance of the Group during the year is given in the Chairman’s Message of this Annual Report on pages 14 to 17. Further reviews of subsidiary operations are given in the Management Discussion and Analysis section of this Annual Report on pages 72 to 139.

Future Developments

MTD Walkers PLC is focussing on consolidating its presence in its core areas of operation and expanding its presence regionally.

Turnover

The consolidated Group turnover generated by the six sectors of the Group amounted to LKR 12.0 billion. Further details of the sectors of the Group are given in the Management Discussion and Analysis section of this Annual Report on pages 72 to 139.

In LKR Mn Civil Engineering

Heavy Engineering

Marine Engineering

Power Generation

Real Estate Trading and Other

Revenue 10,566 184 86 512 357 260

Operating profit 1,015 (231) (12) 324 36 (293)

Asset allocation 19,281 839 493 4,023 2,369 1,459

For the year ended 31 MarchIn LKR Mn

2016 2015

Results from operating activities 838 1,968

Finance cost (1,099) (665)

Finance income 199 118

Profit before tax (62) 1,421

Provision for taxation including deferred tax (59) (314)

Profit after tax (121) 1,107

Profit attributable to minority shareholders 206 342

Amount available to the Group’s shareholders (327) 766

Financial Results and Appropriations

The loss after tax of the Group was LKR 121 million, whilst the Group loss attributable to equity holders of the parent for the year was LKR 327 million.

Results of the Company and of the Group are given in the Statement of Profit or Loss on page 149. Detailed description of the result and appropriation are given below.

Financial Statements

The Financial Statements, which include the Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows and Notes to the Financial Statements of the Company for the year ended 31st March 2016 are given on pages 148 to 201 of this Annual Report.

Donations

The Company did not make any donations during the year other than the amount disclosed on Note 30 to the Financial Statements on page 188.

Accounting Policies

The Accounting Policies adopted in the preparation of the Financial Statements are given on Note 3 to the Financial Statements on page 154.

Property, Plant and Equipment

Extents, locations, valuations of land and buildings of the Group’s holdings, are

discussed in detail under Note 5 to the Financial Statements on page 168.

The book value of property, plant and equipment for the Group amounted to LKR 4.7 billion, as per the Statement of Financial Position dated 31st March 2016. Majority of property, plant and equipment comprised of plant and machinery which accounted for approximately 55.2 percent of total property, plant and equipment.

Capital expenditure for the reporting period amounted to LKR 1.7 billion of which the majority of the additions were attributable to plant and machinery.

Non-Current Assets

The value of non-current assets as at 31st March 2016 amounted to LKR 8.9 billion for the Group. Details of the non-current assets are provided on pages 168 to 175 on this Annual Report.


Board Audit Committee

Remuneration Committee

Mr. Albert Rasakantha Rasiah - Chairman X X

Mr. Keith George Cowling X

Mr. Leong Yow Lee X

Mr. Niranjan Joseph de Silva Deva - Aditya X X

Mr. Hewawasamge Ravindranath Srilal Wijeratne X X

Investments

Details of investments held by the Group are disclosed in Note 08 to the Financial Statements on page 173.

Stated Capital

The stated capital of MTD Walkers PLC as at 31st March 2016 was LKR 6.1 billion which comprised of 167,647,568 ordinary shares.

Revenue Reserves

Revenue reserves of the Group as at 31st March 2016 amounted to LKR 1.3 billion. The movement and composition of the reserves are disclosed in the Statement of Changes in Equity on page 151.

Share Information

Information pertaining to split of individual and institutional shareholding, split of residential and non-residential shareholding as well as the distribution schedule of the number of shareholders and their percentage holding as per the number of shares are given in the Share Information section of this Annual Report on page 204 to 206.

Information relating to net assets per share and market value per share are also presented under Share Information section of this Annual Report.

Further, the top twenty shareholders names, number of shares held and the percentage held by them are also presented under the Share Information Section of this Annual Report.

Ratios and Market Price Information

Details on ratios and market price information are presented under the sections Financial Highlights on page 12 to 13 and Share Information on page 204 to 206 of this Annual Report.

Interest Register

An interest register is maintained by the Company in terms of the Companies Act No. 07 of 2007 and is kept in the custody of the Group Head of Human Resources and Admin.

Directors

The Board of Directors of the Company as at 31st March 2016 and their brief profiles are given in the Board of Directors section of the Annual Report on page 24 to 29. The Directors of MTD Walkers PLC are as follows:

y Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid

y Jehan Prasanna Amaratunga

y Keith George Cowling

y Leong Yow Lee

y Albert Rasakantha Rasiah

y Niranjan Joseph de Silva Deva-Aditya

y Hewawasamge Ravindranath Srilal Wijeratne

In terms of Article 84 of the Articles of Association of the Company Messrs. Albert Rasakantha Rasiah, Niranjan Joseph de Silva Deva-Aditya, Hewawasamge Ravindranath Srilal Wijeratne are to retire by rotation and are eligible for re-election.

Directors’ Shareholding and their Interest

None of the Directors of the Company, their spouses, or dependent held any

shares in the Company during the year ended 31st March 2016 except those presented under Share Information section of this Annual Report.

Board Committees

The following members serve on the Board Audit and Remuneration Committees;

Directors’ Remuneration and other Benefits

The Directors’ remunerations and / or other benefits during the accounting period under review are given under Note 30 to the Financial Statements on page 188.

Employee Share Option Plans and Profit Sharing Plans

The Company announced plans to issue shares to employees of MTD Walkers PLC under its first Employee Share Option Plan in March 2015, which was later approved by the shareholders by way of a special resolution at the Extraordinary General Meeting held on the 12th June 2015. Under this Employee Share Option Plan the maximum number of options offered will not exceed 3.0 percent of the total issued shares of the Company, and a maximum of 0.9 percent of the total issued shares may be offered every year, over four years commencing in July 2015.

Details of the options granted, options exercised, the grant price and the options cancelled or lapsed, and outstanding as at the date of the Director’s report as required by the Listing Rules of the

Colombo Stock Exchange are given under the Share Information section of this Annual Report on pages 204 to 206.

The Directors confirm that the Company has not granted any funding to employees to exercise options. The employees are not presented with any profit sharing schemes.

MTD WALKERS PLC144

Environmental Protection

The Company has not been engaged in any activities which has caused detriment to the environment. A summary of activities in the aforementioned area are disclosed under the Integrated Group Performance Review section of this Annual Report on pages 87 to 88.

Statutory Payments

Directors have declared that to the best of their knowledge all statutory payments payable by the Group to the Government and to its employees were paid as at the reporting date of 31st March 2016.

Risk Factors

Details of the foreseeable exposure to risk factors are given under the Enterprise Risk Management section of this Annual Report on pages 59 to 61.

Events Occurring after the Reporting Period

There have been no subsequent events after the reporting period, which require adjustments or disclosures to the Financial Statements; other than those with their details disclosed in Note 35 to the Financial Statements on page 196.

Going Concern

Given the fact that the Directors are satisfied that the Company and its subsidiaries have the resources to continue its business for the foreseeable future, the Financial Statements continue to be prepared on a Going Concern basis.

Auditors

The accounts of the year under review have been audited by Messrs Ernst & Young, Chartered Accountants, who offer themselves for reappointment. Fees paid to the Auditors are disclosed in Note 30 to the Financial Statements on page 188. As far as the Directors are aware, the Auditors do not have any relationship (other than as external auditors) with the Group other than those disclosed above.

Auditors Report

The Report of the Independent Auditors on the Financial Statements of the Company and its subsidiaries is included under the Independent Auditor’s Report section of this Annual Report on page 147.

Annual Report

The Board of Directors approved the Consolidated Financial Statements on 20th July 2016. The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board on 05th August 2016.

Annual General Meeting

The Annual General Meeting will be held, on Thursday, 01st September 2016 at 10.00 a.m. The notice of meeting appears in the Supplementary Information section of this Annual Report on Page 219.


Chairman


Prashanie Saroja AttygalleCompany Secretary

29th July 2016Colombo

Annual Report of the Board of Directors

Issue of Shares and Debentures

MTD Walkers PLC issued 30,000,000 Debentures at a price of LKR 100 per Debenture during the year to raise LKR 3.0 billion to fund the Group’s expansion into the Marine Engineering and Real Estate Sectors. Full details of the Debenture Issue are given under Note 18.2 to the Financial Statements on page 179. No shares were issued for the 12 month period ending 31st March 2016.

Directors’ Interest in Contracts with the Company

The Directors have no direct or indirect interest in any contract or proposed contract of the Company, other than what is disclosed in Note 37.2 to the Financial Statements on page 199.

Corporate Governance

The Corporate Governance practices adopted by the Company and its subsidiaries are disclosed in the Corporate Governance section of this Annual Report on pages 24 to 58.

Directors’ Declaration on Corporate Governance

The Directors of MTD Walkers PLC

declare that;

1. The Group has complied with all applicable laws and regulations in relation to conducting the business operations in Sri Lanka

2. The business is operating on a Going Concern basis with supporting reasonable assumptions

3. A review of internal controls covering financial and operational aspects of the business together with a review of risk management has been conducted and reasonable assurance of their effectiveness and adherence has been obtained.

The Report on Corporate Governance is given under the Corporate Governance section of the Annual Report on pages 24 to 58.


Chief Financial Officer’s Responsibility Statement

The Financial Statements of MTD Walkers PLC (the “Company”) and the Consolidated Financial Statement of the Company and its subsidiaries (the “Group”) as at 31st March 2016 are prepared to comply with the requirements below;

y Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka,

y Companies Act No. 07 of 2007

y Sri Lanka Accounting and Auditing Standards Act No 15 of 1995

y Listing Rules of the Colombo Stock Exchange

y Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

The formats used in the preparation of the Financial Statements and disclosures comply with all relevant guidelines. In Compliance with the Listing Rules of the Colombo Stock Exchange, the Company on a quarterly basis presents financial results to its shareholders. The Financial

Statements conform to the appropriate Accounting Policies and are applied consistently without any deviation across the Company and its subsidiaries.

The Board Audit Committee together with

the External Auditors took all decisions regarding significant accounting policies and estimates that involved a high degree of judgment and complexity.

We confirm that to the best of our knowledge, the Financial Statements, significant accounting policies and other financial information included in this Annual Report fairly present in all material respects the financial condition, results of the operations and the cash flows of the Company and is subsidiaries during the period under review. We also confirm that the Company and its subsidiaries have adequate resources to continue in

operation and have therefore prepared these Financial Statements on a Going Concern basis.

The Board of Directors and the Management of the Company accept responsibility for the integrity and objectivity of these Financial Statements. All judgements and estimates that relate to the Financial Statements have been made in a fair and transparent manner, and the form and substance of transactions and the Group’s state of affairs is reasonably presented in order to confirm that the Financial Statements are presented in a true and fair manner. This is further ensured by a system of internal controls already in place, to safeguard assets and to detect and prevent serious fraud. The Internal Audit Department has conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Group were consistently followed.

The Board Audit Committee examined all of the internal and external audit and inspection programmes and the efficiency of the internal control systems and procedures. The committee also reviewed and confirmed the adherence

to statutory and regulatory requirements and quality of accounting policies, the details of which are given in the Board Audit Committee Report on pages 39 to 40 of this Annual Report. The Board Audit Committee followed up on any issues raised during the statutory audit after reviewing the external audit plan and the management letters. To review the effectiveness of the audit, the Board Audit Committee met with the external and internal auditors.

The Financial Statements of the Company and the Group were audited by Messrs Ernst & Young Chartered Accountants and their report is given under the Independent Auditor’s Report section on page 147 of this Annual Report.

The Board Audit Committee pre-approves the audit services provided by Messrs

Ernst & Young in order to ensure that the provision of such services does not contravene with any guidelines and requirements that impair Ernst & Young’s impartiality. The External Auditors and the Internal Auditors have full and free access to the members of the Audit Committee to discuss any matter of substance, in order to ensure complete independence of the two parties.

We confirm that;

y The Group has complied with all applicable laws, regulations and prudential requirements, there is no

material non-compliance.

y There are no material litigations that are pending against the Group other than those disclosed in Note 34.2 on page 195 of the Financial Statements of this Annual Report.

y All taxes, duties, levies and all statutory payments by the Group and all contributions, levies and taxes payable on behalf of and in respect of the employees of the Group as at 31st March 2016 have been paid, or where relevant provided for.

Viraj De SilvaChief Financial Officer


MTD WALKERS PLC146

Statement of Directors’ Responsibility

Directors’ Responsibilities

In line with the terms of the Companies Act No. 07 of 2007, the Directors have prepared the Financial Statements for the financial year ended 31st March 2016, giving a true and fair view of the state of affairs of the Company and its subsidiaries, and the profit or loss for the financial year. In preparing the consolidated financial statements, appropriate accounting policies have been selected and applied consistently, reasonable and prudent judgment and estimates have been made, and applicable accounting standards have been followed.

The financial statements comprise of:

y The statement of comprehensive income of the Company and its subsidiaries, which present a true and fair view of the profit and loss of the Company and its subsidiaries for the financial year

y The statement of financial position, which presents a true and fair view of the state of affairs of the Company and its subsidiaries as at end of the financial year

Since the Directors are satisfied that the Company and its subsidiaries have the resources to continue its business for the foreseeable future, the Financial Statements continue to be prepared on a going concern basis. Directors have maintained sufficient accounting records that they are able to disclose with reasonable accuracy the financial position of the Company and its subsidiaries; these also empower them to ensure that the financial statements comply with the Companies Act No. 07 of 2007.

Directors have also taken responsibility for safeguarding the assets of the Company and its subsidiaries, and for that purpose have put in place internal controls, with a view to detect and prevent fraud, amongst other irregularities.

The Directors are of the view that they have carried out their responsibilities as set out in this statement.

Compliance Report

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company, and all other known statutory dues as were due and payable by the Company as at 31st March 2016 have been paid, and where relevant provided for, except as disclosed in Note 34.2 to the Financial Statements covering contingent liabilities.

BY ORDER OF THE BOARD,

MTD WALKERS PLC




Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF MTD WALKERS PLC

Report on the Financial Statements

We have audited the accompanying financial statements of The MTD Walkers PLC, (“the Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of financial position as at 31st March, 2016, and the statement of profit or loss and statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Board’s Responsibility for the Financial Statements

The Board of Directors (“Board”) is responsible for the preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards and for such internal control as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31st March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements

As required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion, scope and limitations of the audit are as stated above.

b) In our opinion:

- we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company,

- the financial statements of the Company give a true and fair view of its financial position as at 31st March 2016, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards and

- the financial statements of the Company and the Group comply with the requirements of sections 151 and 153 of the Companies Act No 07 of 2007.


MTD WALKERS PLC148

Statement of Financial Position

Group Company

As at 31st March 2016 2015 2016 2015

Note LKR LKR LKR LKR

ASSETSNon-Current AssetsProperty, plant and equipment 5 4,685,889,071 4,232,778,002 58,222,093 32,377,956 Leasehold property 5.11 84,908,562 87,610,317 - - Intangible assets 6 622,368,077 511,858,012 82,964,557 - Finance lease receivables 7 2,586,404,142 2,665,593,734 - - Investment in subsidiaries 8 - - 5,782,585,878 5,754,044,288 Other non current financial assets 9 928,303,861 531,157,564 17,640 14,380 Amounts due from related parties 13 - - 1,120,685,083 1,127,185,083

8,907,873,713 8,028,997,629 7,044,475,251 6,913,621,707 Current Assets Inventories 10 3,374,645,166 2,950,300,086 - - Finance lease receivables 7 299,818,118 230,078,940 - - Trade and other receivables 11 13,344,127,567 8,866,594,610 128,091,186 114,842,078 Other current assets 12 744,157,795 567,293,853 2,426,318 792,919 Amounts due from related parties 13 - - 2,049,676,167 774,953,515 Income Tax Receivables 10,355,123 - - - Other current financial assets 9 1,946,804,214 1,440,301,487 703,370,405 74,915,325 Cash and cash equivalents 14 375,265,714 172,003,610 167,854,469 69,671,927

20,095,173,697 14,226,572,586 3,051,418,545 1,035,175,764 Total assets 29,003,047,410 22,255,570,215 10,095,893,796 7,948,797,471

EQUITY AND LIABILITIESCapital and ReservesStated capital 15 6,057,497,739 6,057,497,739 6,057,497,739 6,057,497,739 Capital reserves 16 378,561,807 379,458,964 - - Retained earnings 1,285,207,392 1,609,715,853 (175,690,186) 50,109,171 Equity attributable to equity holders of the parent 7,721,266,938 8,046,672,556 5,881,807,553 6,107,606,910 Non-controlling interest 17 919,916,244 723,611,372 - - Total shareholders' funds and non controlling interest 8,641,183,182 8,770,283,928 5,881,807,553 6,107,606,910

Non-Current Liabilities Interest bearing loans & borrowings 18 6,496,922,598 2,851,226,018 3,576,033,014 1,256,484,110 Other non current liabilities 19 2,300,000 2,300,000 - - Deferred tax liabilities 20 105,445,573 113,414,687 - - Retirement benefit obligations 21 96,716,520 84,193,016 6,870,949 8,132,257

6,701,384,691 3,051,133,721 3,582,903,963 1,264,616,367 Current Liabilities Trade and other payables 22 5,013,719,757 3,541,679,046 91,722,315 13,976,620 Other current liabilities 23 207,281,510 155,647,930 522,000 522,000 Amounts due to related parties 24 532,353,650 498,724,143 281,042,271 265,500,051 Interest bearing loans & borrowings 18 7,779,655,242 5,990,064,119 219,215,647 220,986,392 Income tax liabilities 127,469,378 248,037,328 38,680,047 75,589,131

13,660,479,537 10,434,152,566 631,182,280 576,574,194 Total equity and liabilities 29,003,047,410 22,255,570,215 10,095,893,796 7,948,797,471

It is certified that the financial statements have been prepared in compliance with the requirements of the Companies Act No. 7 of 2007.

Viraj de SilvaChief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these financial statements. Signed for and on behalf of the board by,

Jehan Prasanna Amaratunga Keith Jeorge CowlingDirector Director

The accounting policies and notes on page 153 to 201 form an integral part of these Financial Statements.



Statement of Profit or Loss

Group Company

Year ended 31st March 2016 2015 2016 2015


Revenue 26 11,964,382,521 14,025,193,011 148,300,827 409,774,165

Cost of sales (9,871,040,510) (10,902,278,493) - -

Gross profit 2,093,342,011 3,122,914,518 148,300,827 409,774,165

Other operating income 27 277,354,366 228,226,819 43,529,283 192,869,547

Administrative expenses (1,462,191,839) (1,274,816,501) (282,243,660) (214,627,915)

Selling & distribution cost (70,784,912) (108,034,895) (13,918,635) (10,093,332)

Results from operating activities 837,719,627 1,968,289,941 (104,332,185) 377,922,465

Finance cost 28 (1,099,498,389) (665,272,008) (223,112,989) (63,701,243)

Finance income 29 199,827,727 118,017,335 111,952,866 61,737,226

Profit/(loss) before tax 30 (61,951,036) 1,421,035,268 (215,492,308) 375,958,448

Income tax expense 31 (59,422,643) (313,766,599) (13,765,776) (62,515,628)

Profit/(loss) for the year (121,373,678) 1,107,268,669 (229,258,084) 313,442,820

Attributable to

Equity holders of the parent (327,261,883) 765,750,374 - -

Non-controlling interest 205,888,205 341,518,295 - -

(121,373,678) 1,107,268,669 - -

Basic earning/(loss) per share 32 (1.95) 5.97 (1.37) 2.44

The accounting policies and notes on page 153 to 201 form an integral part of these Financial Statements.

Figures in brackets indicate deductions.

MTD WALKERS PLC150

Statement of Comprehensive Income

Group Company


LKR LKR LKR LKR

Profit/(loss) for the year (121,373,678) 1,107,268,669 (229,258,084) 313,442,820

Other comprehensive income/(loss)

Other comprehensive income not to be reclassified to profit or loss in subsequent periods:

Revaluation of land and buildings - 295,675,006 - -

Actuarial gains/(losses) on retirement benefit obligation 2,958,653 (7,852,553) 3,458,727 (2,786,572)

Income tax effect (351,143) (13,244,813) - -

Net other comprehensive income/(loss) not to be reclassified to profit or loss in subsequent periods (net of tax): 2,607,510 274,577,640 3,458,727 (2,786,572)

Other comprehensive income/(loss) for the year (net of tax) 2,607,510 274,577,640 3,458,727 (2,786,572)

Total comprehensive income/(loss) for the year, net of tax (118,766,169) 1,381,846,309 (225,799,357) 310,656,248

Attributable to:

Equity holders of the parent (325,405,617) 1,040,328,014 - -

Non-controlling Interest 206,639,449 341,518,295 - -

(118,766,169) 1,381,846,309 - -

The accounting policies and notes on page 153 to 201 form an integral part of these Financial Statements..Figures in brackets indicate deductions.


Statement of Changes in Equity

Year ended 31st March 2016 Attributable to equity holders of the company

Non Controlling

Interest Total Equity

Group

Stated Revaluation Capital Other Retained Total

Capital Reserve Reserves Reserves Earnings

LKR LKR LKR LKR LKR LKR LKR LKR

Balance as at 01st April 2014 3,659,428,479 118,100,129 897,157 4,648,661 936,224,983 4,719,299,409 382,649,657 5,101,949,066 Issues of shares 2,398,069,260 - - - - 2,398,069,260 - 2,398,069,260 Net profit for the year - - - - 765,750,374 765,750,374 341,518,296 1,107,268,670 Revaluation of land and buildings - 272,971,928 - - - 272,971,928 22,703,078 295,675,006 Actuarial losses on retirement benefit obligation - - - - (7,194,416) (7,194,416) (658,136) (7,852,553)Income tax on other comprehensive income - (12,510,250) - - 384,665 (12,125,585) (1,119,228) (13,244,813)Effect on common control business combinations - - - - (32,919,844) (32,919,844) - (32,919,844)Dividends paid to equity holders - - - - (57,178,570) (57,178,570) (21,482,294) (78,660,864)Transfers - - - (4,648,661) 4,648,661 - - - Balance as at 31st March 2015 6,057,497,739 378,561,807 897,157 - 1,609,715,853 8,046,672,556 723,611,373 8,770,283,929Transfers - - (897,157) - 897,157 - - -Acquisition of a subsidiary - - - - - - (515,508) (515,508)Net profit/(loss) for the year - - - - (327,261,883) (327,261,883) 205,888,205 (121,373,678)Actuarial gains on retirement benefit obligation - - - - 1,856,266 1,856,266 751,244 2,607,510Subsidiary Dividends - - - - - - (13,152,403) (13,152,403)Share issue in subsidiary - - - - - - 3,333,333 3,333,333Balance as at 31st March 2016 6,057,497,739 378,561,807 - - 1,285,207,392 7,721,266,938 919,916,244 8,641,183,182

Company Stated Capital

Other Reserves

Retained Total

Earnings /(Loss)

LKR LKR LKR LKR

Balance as at 01st April 2014 3,659,428,479 1,804,100 (205,172,608) 3,456,059,971 Issues of shares 2,398,069,260 - - 2,398,069,260 Net Profit for the year - - 313,442,821 313,442,821 Other comprehensive income/(loss) - - (2,786,572) (2,786,572)Dividends - - (57,178,570) (57,178,570)Transfers - (1,804,100) 1,804,100 - Balance as at 31st March 2015 6,057,497,739 - 50,109,171 6,107,606,910 Net Loss for the year - - (229,258,084) (229,258,084)Other comprehensive income/(loss) - - 3,458,727 3,458,727 Balance as at 31st March 2016 6,057,497,739 - (175,690,186) 5,881,807,553

The accounting policies and notes on page 153 to 201 form an integral part of these Financial Statements.Figures in brackets indicate deductions.

MTD WALKERS PLC152

Cash Flow Statement

Group Company



Cash Flows From/(Used in) Operating ActivitiesProfit/(loss) from operating activities before tax (61,951,036) 1,421,035,268 (215,492,308) 375,958,448Adjustments for :Depreciation of property, plant & equipment 897,997,180 651,606,581 17,541,081 9,282,105Interest income 29 (155,983,296) (117,009,833) (111,952,866) (61,616,048)Dividend income 27 (485,897) (1,252,157) (43,450,847) (89,655,514)Net unrealized(gain)/loss on financial assets at fair value through profit or loss 572,947 (1,007,502) (3,260) (121,178)Profit on sale of property, plant & equipment 27 (20,066,717) (2,366,005) - -Finance costs 28 1,099,498,389 665,272,008 223,112,989 63,701,242Provision for retirement benefit plans - gratuity 21.1 20,137,972 16,704,452 2,197,420 2,237,316Impairment/(reversal) for bad and doubtful debts 331,401,555 167,446,670 - (8,806,896)Net unrealized foreign exchange (gain)/loss (338,755,003) (204,253,124) 55,785,408 (103,083,437)Amortisation of leasehold property 5.11 2,701,755 1,484,717 - -

Operating profit/(loss) before working capital changes 1,775,067,848 2,597,661,075 (72,262,383) 187,896,038(Increase)/decrease in inventories (424,345,080) (147,498,891) - -(Increase)/decrease in trade and other receivables and other Current assets (4,741,645,411) (1,713,902,821) (14,882,506) (85,030,786)(Increase)/decrease in amounts due from related companies - 90,615,434 (1,168,594,127) (524,963,257)Increase/(decrease) in trade and other payables and other current liabilities 1,523,674,290 (928,984,749) 77,745,696 16,961,160Increase/(decrease) in amounts due to related companies 24,474,430 7,295,646 15,542,220 36,605,546Cash generated from/(used in) operations (1,842,773,923) (94,814,306) (1,162,451,100) (368,531,298)Finance cost paid (1,099,498,389) (665,272,008) (223,112,989) (63,701,242)Income tax paid (198,665,974) (163,384,069) (50,674,861) (601,903)Employee benefit paid (4,655,814) (2,191,599) - -Net cash flows from/(used in) operating activities (3,145,594,100) (925,661,982) (1,436,238,950) (432,834,443)

Cash flows from/(used in) investing activitiesAcquisition of subsidiary (21,874,923) - (21,874,923) -Acquisition of property, plant & equipment (1,313,224,233) (1,810,004,537) (43,385,219) (8,759,744)Acquisition of Intangible assets (82,964,557) - (82,964,557)Proceeds from sale of property, plant & equipment 56,133,154 12,761,869 - -Purchase of the finance lease receivables 7 - (75,285,877) - -Net receipts on the finance lease receivables 7 - 184,890,656 - -Acquisition of leasehold property 5.11 - (89,095,034) - -(Investments)/Withdrawal of bank deposits and investments (904,221,973) (998,716,707) (628,455,080) (13,767,813)Dividend received 485,897 1,252,157 - 89,655,514Interest received 155,983,296 117,009,833 55,775,188 61,144,773Net cash and cash equivalents acquired on business combinations - (2,056,556) - -Net cash flows from/(used in) investing activities (2,109,683.338) (2,659,244,197) (720,904,591) 128,272,730

Cash flows from/(used in) financing activitiesRepayment of interest bearing borrowings 18 (9,301,284,847) (4,635,800,880) (2,952,242,040) -Long term loan obtained during the year 18 11,506,638,689 6,656,716,422 2,268,799,643 150,000,000Principle payment under finance lease liabilities (276,333,050) (283,225,158) (5,265,993) (2,330,736)Proceeds from issue of debentures 2,970,716,236 - 2,981,736,236 -Proceeds from right issue - 223,798,860 - 223,798,860Share issue in Subsidiary 3,333,333 - (6,666,667) -Dividends paid (13,152,406) (78,660,864) - (56,897,342)Net cash flows from/(used in) financing activities (4,889,917,957) 1,882,828,380 2,286,361,180 314,570,782

Net (decrease)/increase in cash and cash equivalents (365,359,481) (1,702,077,799) 129,217,638 10,009,069Cash and cash equivalents at the beginning of the year 14 (3,509,360,700) (1,807,282,901) 3,951,528 (6,057,541)Cash and cash equivalents at the end of the year 14 (3,874,720,181) (3,509,360,700) 133,169,165 3,951,528

The accounting policies and notes on page 153 to 201 form an integral part of these Financial Statements.Figures in brackets indicate deductions.


Notes to the Financial Statements

1 CORPORATE INFORMATION

1.1 Reporting entity

MTD Walkers PLC (“the Company”) is a public limited liability Company, listed on the Colombo Stock Exchange, incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No. 18, St. Michael’s Road, Colombo 03, Sri Lanka.

1.2 Consolidated financial statements

The Consolidated Financial Statements of the Company for the year ended 31st March 2016 comprise the Company and its subsidiaries (together referred to as “the Group”).

1.3 Principal activities and nature of operations

During the year, the principal activities of the company and group were as follows:

MTD Walkers PLC

MTD Walkers PLC, the Group’s holding company, manages a portfolio of investments in the civil and mechanical engineering, marine engineering, heavy and light machinery trading, real estate and power generation industries.

Walker Sons & Company Ltd

The Board of Directors of the company decided to temporarily cease all activities, and transferred operations to its subsidiary company Walker Sons & Company Engineers (Pvt) Ltd.

Walker Sons & Company Engineers (Pvt) Ltd

Mechanical & Electrical Engineering, and Building Services Engineering.

MTD Walkers Infracon Ltd

Importer and distributor of power tools and light machinery.

MTD Walkers Projects Ltd

Facilitates projects which focuses on infrastructure development and construction projects.

Walkers Piling (Pvt) Ltd

Piling of foundations and other related earthwork.

CML-MTD Construction Ltd

Construction of roads and highways and providing other engineering services.

Special Projects Company (Pvt) Ltd

Selling of metal items, drilling quarry and metal crushing.

Northern Power Company (Pvt) Ltd

Owner and operator of a 30 MW HFO power plant in Jaffna Peninsula supplying power to the Ceylon Electricity Board.

However, on 15th January 2015, operations were suspended due to an interim court order issued by the Mallakam Megistrate due to an alleged contamination of the wells in the Chunnakam area. Test reports carried out by independent sources have found that there is no contamination of any petroleum based products. An appeal has been made to the Court of Appeal and the Board of Directors are optimistic of a judgment in favour of the Company.

Colombo Engineering Services (Pvt) Ltd

Provide ship repairing & marine engineering services.

Western Airducts Lanka (Pvt) Ltd

Manufacturing of spiral wound duct work and associated fittings for exports.

CML-MTD Joint Venture Ltd

Carrying on project designing, building and constructing of Housing Complex for the Urban Development Regional Project for relocation of underserved settlements for the city of Colombo.

Walkers CML Properties (Pvt) Ltd [Formerly known as Wincon Development Ceylon (Pvt) Ltd]

Construction of houses for sale or lease and the acquisition of land /lands for the purposes aforesaid by purchase or lease or grant or license from the state (Sri Lanka).

Walkers Equipment Ltd

Infrastructure development support business.

Walkers Colombo Shipyard (Pvt) Ltd

To establish ships, boats building, repair facility and provides services to general engineering projects in Sri Lanka and other countries.

1.4 Parent enterprise and ultimate parent enterprise

In the opinion of the Directors, the Company’s parent and ultimate parent undertaking and controlling party is also MTD Capital Bhd, which is incorporated in Malaysia.

1.5 Date of authorization for issue

The Consolidated Financial Statements of the Group for the year ended 31st March 2016 were authorized for issue in accordance with a resolution of the Board of Directors on 20th July 2016.

1.6 Responsibility for financial statements

The responsibility of the Directors in relation to the Financial Statements is set out in the Statement of Directors’ Responsibility Report in the Annual Report.

2. BASIS OF PREPARATION

2.1 Statement of compliance

The Consolidated Financial Statements which of comprises the Statement of Financial Position, Statement of Profit or Loss, Statement of Comprehensive Income, Statement of Changes in Equity, Cash Flow Statement together with accounting policies and notes have been prepared in accordance with the Sri Lanka Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No. 7 of 2007.

2.2 Basis of measurement

The Consolidated Financial Statements have been prepared on the historical cost basis, except for the following material items in the Statement of Financial Position.

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y Land and buildings are recognised at cost at the time of the acquisition and subsequently measured at fair value.

y Financial instruments fair value through profit or loss is measured at fair value.

Where appropriate, the specific policies are explained in the succeeding Notes.

No adjustments have been made for inflationary factors in the Consolidated Financial Statements.

2.3 Going concern

The Directors have made an assessment of the Group’s ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on the going concern basis.


The Company incurred an accumulated losses of LKR 550,049,007/- as at 31st March 2016, and its total liabilities exceeded its total assets by LKR 325,471,396/-. In these circumstances the continuity of the Walker Sons & Company Engineers (Pvt) Ltd as going concern is dependent on the financial assistance from the parent Company MTD Walkers PLC.

Walker Sons & Company Ltd

Walker Sons & Company Ltd booked an impairment provision amounting to LKR 209,467,736/- in respect of the investments in subsidiaries Walker Sons& Company Engineers (Pvt) Ltd and MTD Walkers Infracon Ltd.

However, this provision did not have any impact on the Consolidated Financial Statements of the Group as the losses

were consolidated to the Group in the respective financial periods or accounted at the point of acquisition of the company as applicable.

The directors are of the opinion that the continuous financial support received from the parent company MTD Walkers PLC that will mitigate this position and these subsidiaries will be able to continue as a going concern, in the future, on which assumption these financial statements have been prepared.

Walkers CML Properties (Pvt) Ltd

The Company incurred an accumulated

loss of LKR 3,251,105,343/- (2015 - loss of LKR 3,281,034,944/-) as at 31st March 2016. In these circumstances the continuity of the Company as a going concern is dependent on the financial assistance from the shareholders of the Company.

Current financial position has been leading the company to having a serious loss of capital as defined by the Companies Act No: 7 of 2007. This factor raise doubts that the Company will be able to continue as a going concern. Further, Board of Directors of the Company will have to take necessary steps in order to prevent further losses or to recoup losses as required by the Section 220 of the Companies Act No.7 of 2007.

The Directors have made an assessment of the Company’s ability to continue as a going concern and they do not intend either to liquidate or to cease trading.


The Company incurred an accumulated losses of LKR 91,609,492/- as at 31st March 2016, and its total liabilities exceeded its total assets by LKR 41,609,492/-. In these circumstances the continuity of the Western Airducts Lanka (Pvt) Ltd as a going concern is dependent on the financial assistance from the parent Company MTD Walkers PLC.


The Company incurred an accumulated losses of LKR 78,243,121/- as at 31st March 2016, and its total liabilities exceeded its total assets by LKR 10,023,051/-. In these circumstances the continuity of the MTD Walkers Infracon Limited as a going concern is dependent on the financial assistance from the parent Company MTD Walkers PLC.

2.4 Comparative information

The accounting policies have been consistently applied by the Group and, are consistent with those used in the previous year unless otherwise stated.

2.5 Materiality and aggregation

Each material class of similar items presented separately in the Consolidated Financial Statements. Items of a dissimilar nature or function are presented separately unless they are immaterial.

2.6 Functional and presentation currency

The Financial Statements are presented in Sri Lankan Rupee, which is the Group’s functional currency.

3. SIGNIFICANT ACCOUNTING POLICES

3.1 Basis of consolidation

The Consolidated Financial Statements (referred to as the “Group”) comprise the Financial Statements of the Company and its subsidiaries.

Subsidiaries are those entities controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

y Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)


y Exposure, or rights, to variable returns from its involvement with the investee

y The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

y The contractual arrangement with the other vote holders of the investee

y Rights arising from other contractual arrangements

y The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interest, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in income statement. Any investment retained is recognised at fair value.

3.1.1 Business combination and Goodwill

Business Combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group measures the non-controlling interest in the acquire either at fair value or at the proportionate share of the acquirer’s identifiable net assets.

Transaction costs, other than those associated with the issue of debt or equity securities that the Group incurs in connection with a business combinations are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss recognised in income Statement.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with LKAS 39 either in Income Statement or

as a change to Other Comprehensive Income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of LKAS 39, it is measured in accordance with the appropriate LKAS.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in Income Statement.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion the cash-generating unit retained.

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3.2 Foreign currency translations

The Group’s Consolidated Financial Statements are presented in Sri Lanka Rupees (LKR), which is the functional and presentation currency of the Group.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group at the

functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

All differences are taken to the income statement.

3.3 Current versus non-current classification

The Group presents assets and liabilities in Statement of Financial Position based on current/non-current classification. An asset is current when it is:

y Expected to be realised or intended to sold or consumed in normal operating cycle

y Held primarily for the purpose of trading

y Expected to be realised within twelve months after the reporting period

Or

y Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when it is;

y Expected to be settled in normal operating cycle

y Held primarily for the purpose of trading

y Due to be settled within twelve months after the reporting period

Or

y No unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities

3.4 Fair value measurement

The Group measures investments in quoted equity securities and lands at fair value. Fair value related disclosures for financial and non-financial assets that are measured at fair value are summarised in the following notes:

y Quantitative disclosures of fair value measurement (Note 25)

y Land and Building under revaluation model (Note 5.7)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

y In the principal market for the asset or liability

Or

y In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

3.1.2 Subsidiaries

The subsidiaries and their controlling percentages of the Group, which have been consolidated, are as follows:

Company Name 2016 2015

Walker Sons & Company Ltd 99.80% 99.80%

Walker Sons & Company Engineers (Pvt) Ltd 99.67% 99.67%

MTD Walkers Infracon Ltd 92.55% 92.55%

MTD Walkers Projects Ltd 86.39% 86.39%

Walkers Piling (Pvt) Ltd 99.99% 99.99%

CML-MTD Construction Ltd 78.59% 78.59%

Northern Power Company (Pvt) Ltd 100.00% 100.00%

Special Projects Company (Pvt) Ltd 78.59% 78.59%

Colombo Engineering Services (Pvt) Ltd 100.00% 100.00%

Western Airducts Lanka (Pvt) Ltd 79.74% 79.74%

CML-MTD Joint Venture Ltd 47.14% 47.14%

Walkers CML Properties (Pvt) Ltd 100.00% 100.00%

Walkers Equipment Ltd 66.67% -

Walkers Colombo Shipyard (Pvt) Ltd 90.00% -


All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

y Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

y Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

y Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the Financial Statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group’s Management determines the policies and procedures for recurring fair value measurement, such as lands and buildings.

External valuers are involved for valuation of Land and Building. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Company’s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.

The Management decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case.

For the purpose of fair value disclosures, the Group has determined classes of

assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

3.5 Assets and bases of their valuation

3.5.1 Property, plant and equipment

The group applies the requirements of LKAS 16 on ‘Property, plant and equipment’ in accounting for its owned assets which are held for and use in the provision of the services and for administration purpose and are expected to be used for more than one year.

3.5.1.1 Basis of recognition

Property plant and equipment is recognised if it is probable that future economic benefit associated with the assets will flow to the Group and cost of the asset can be reliably measured.

3.5.1.2 Basis of measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any, whilst land is measured at fair value.

3.5.1.3 Owned assets

The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets. Purchased software that is integral to the functionality of the related equipment is capitalised as a part of that equipment.

When significant parts of plant and equipment are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives.

Revaluation of land and buildings are done with sufficient frequency to ensure that the fair value of the land and building does not differ materially from its carrying amount, and is undertaken by professionally qualified valuers.

Any revaluation surplus is recorded in Other Comprehensive Income and credited to the asset revaluation reserve in equity, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the statement of profit or loss, in which case, the increase is recognised in the statement of profit or loss. A revaluation deficit is recognised in the statement of profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

3.5.1.4 Subsequent costs

The cost of replacing a component of an item of Property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised in accordance with the derecognition policy given below.

The costs of the day-to-day servicing of Property, plant and equipment are recognised in profit or loss as incurred.

3.5.1.5 Derecognition

The carrying amount of an item of Property, plant and equipment is derecognised on disposal; or when no future economic benefits are expected from its use. Gains and losses on derecognition are recognised in statement of profit or loss and gains are not classified as revenue. When revalued assets are sold, any related amount included in the Revaluation reserve is transferred to retained earnings.

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3.5.1.6 Depreciation

Depreciation is recognised in the statement of profit or loss on a straight-line basis over the estimated useful lives of each part of an item of Property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

The estimated useful lives for the current and comparative periods are as follows:

Assets Years

Buildings 50

Plant and machinery 05-15

Furniture and fittings 08-10

Component assets 03

Office equipment 08-10

Motor vehicles 04 -05

Tools and equipment 10

Computer and accessories 04

Depreciation of an asset begins when it is available for use and ceases at the earlier of the dates on which the asset is classified as held for sale or is derecognised.

The asset’s residual values, useful lives are reviewed, and adjusted if appropriate, at each financial year end and adjusted prospectively, if appropriate.

3.5.2 Leases

3.5.2.1 Finance leases

Leases in terms of which the Group assumes substantially all the risks and benefits incidental to ownership of the leased item, are classified as finance leases. On initial recognition, the leased assets under property, plant and equipment, is measured at an amount equal to the lower of its fair value and the present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense

is allocated to each period during the lease term so as to produce a constant periodic rate interest on the remaining balance of the liability.

3.5.2.2 Operating leases

Leases where the lessor effectively retains substantially all the risks and rewards of ownership over the assets are classified as operating leases. Payments under operating leases are recognised as an expense in the statement of profit or loss on a straight-line basis over the term of the lease or any other basis more representative of the time pattern of the benefits derived from the lease. The initial costs incurred in negotiating an operating lease are added to the carrying amount of the lease asset and recognised as a non-current asset and is amortised over the period of the lease in accordance with the pattern of benefits expected to be derived from the lease. The carrying amount of leasehold property is tested for impairment annually.

Details of the Leasehold Property are given in Note 5.11 to the Financial Statements.

3.5.2.3 Group as a Lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit or loss.

3.5.2.4 Determining whether an arrangement contains a lease

At the inception of an arrangement, the Group determines whether such an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date. This will

be applied if the following two criteria are met:

y the fulfilment of the arrangement is dependent on the use of a specific asset or assets; and

y the arrangement contains a right to use the asset(s).

At the inception or on reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those in respect of the lease and those for other elements, on the basis of their

relative fair values. In respect of a finance lease, if the Group concludes that it is impractical to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently as payments are made the liability is reduced and imputed finance cost on the liability is recognised using the Group’s incremental borrowing rate.

3.5.3 Intangible assets

3.5.3.1 Basis of recognition

An Intangible asset is recognised if it is probable that future economic benefit associated with the assets will flow to the Group and cost of the asset can be reliably measured.

3.5.3.2 Basis of measurement

Intangible assets acquired separately are measured on initial recognition at cost. The costs of intangible assets acquired in a business combination are their fair value as at the date of acquisition.

Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

3.5.3.3 Intangible assets with finite lives and amortisation

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation


period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of profit or loss in the expense category consistent with the function of the intangible assets.

3.5.3.4 Derecognition of intangible assets

Intangible assets are derecognised on disposal or when no future economic benefits are expected from its use. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.

3.5.3.5 Amortisation

Amortisation is recognised in statement of profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date on which they are available for use. The estimated useful lives for the current and comparative periods are as follows:

ERP Systems Over 04 Years

3.5.4 Financial Instruments – Initial recognition and subsequent measurement

3.5.4.1 Initial recognition and measurement

Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines

the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

The Group’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments.

3.5.4.2 Subsequent measurement

The subsequent measurement of financial assets depends on their classification as described below:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined by LKAS 39.

The Group has investment in quoted equity securities which has classified as financial assets at fair value through profit and loss and that are carried in the statement of financial position at fair value with net changes in fair value recognised in finance income or finance costs in the statement of profit or loss.

Financial assets designated upon initial recognition at fair value through profit

and loss are designated at their initial recognition date and only if the criteria under LKAS 39 are satisfied.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss in finance costs for loans and in other operating expenses for receivables.


A financial asset is derecognised when:

y The rights to receive cash flows from the asset have expired

y The Group has transferred its rights to receive cash flows from the asset

or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In

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that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

3.5.4.4 Impairment of financial assets

The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not

included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the

current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the statement of profit or loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the statement of profit or loss.

3.5.5 Financial Liabilities

3.5.5.1 Initial recognition and measurement

Financial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging

instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings.

3.5.5.2 Subsequent measurement

The measurement of financial liabilities

depends on their classification as described below:

Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement of profit or loss.


A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.


3.5.6 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if:

y There is a currently enforceable legal right to offset the recognised amounts

and

y There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously

3.5.7 Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:

y Using recent arm’s length market transactions

y Reference to the current fair value of another instrument that is substantially the same

y A discounted cash flow analysis or other valuation models.

3.5.8 Current assets

Assets classified as current assets on the statement of financial position are cash and bank balances and those which are expected to be realised in cash during the normal operating cycle or within one year from the reporting date, whichever is shorter.

3.5.8.1 Inventories

Inventories are valued at the lower of cost and net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which inventories can be sold in

the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

The cost incurred in bringing inventories to its present location and condition, are accounted using the following cost formula;

a) Raw material – Weighted average cost

b) Finished goods & work in progress – at the cost of direct material, direct labour and appropriated proportion of fixed production overheads.

3.5.8.2 Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flow.

3.5.9 Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date or more frequently, if events or changes in circumstances indicate that they might be impaired.

3.5.9.1 Calculation of recoverable amount

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. A cash-generating unit is the smallest identifiable asset group that generates cash flows

that largely are independent from other assets and groups.

3.5.9.2 Impairment/ reversal of impairment

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in statement of profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.6 Liabilities and provisions

3.6.1 Employee benefits

3.6.1.1 Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to Provident and Trust Funds covering all employees are recognised as an employee benefit expense in statement of profit or loss in the periods during which services are rendered by employees.

The Group contributes 12% and 3% of gross emoluments to employees as Provident Fund and Trust Fund contribution respectively.

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3.6.1.2 Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The defined benefit is calculated by independent actuaries using Projected Unit Credit (PUC) method as recommended by LKAS 19 – “Employee benefits”. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability.

Current service cost and interest cost are recognised in the statement of profit or loss while any actuarial gains or losses arising are recognised in other comprehensive income.

The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the defined retirement benefit obligations are given in Note 21. Any changes in these assumptions will impact the carrying amount of defined benefit obligations.

Provision has been made for retirement gratuities from the beginning of service for all employees, in conformity with LKAS 19 on employee benefit. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.

The gratuity liability is not funded.

The Group carried out an actuarial valuation of its retirement benefit obligations for the following subsidiaries as required by LKAS 19 -“Employee Benefits”.

I. MTD Walkers PLCII. Walkers Piling (Pvt) LtdIII. Walker Sons & Company Engineers

(Pvt) LtdIV. CML-MTD Construction Ltd

V. Northern Power Company (Pvt) LtdVI. Western Airducts Lanka (Pvt) LtdVII. Special Projects Company (Pvt) LtdVIII. Walkers CML Properties (Pvt) Ltd

Other entities in the group do not have significant retirement benefit liability as at reporting date.

3.6.1.3 Short term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

3.6.2 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit or loss net of any reimbursement.

3.6.3 Capital commitments and contingencies

Capital commitments and contingent liabilities of the Group are disclosed in the respective Note 34 to the Financial Statements.

3.6.4 Stated capital

3.6.4.1 Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

3.7 Statement of profit or loss and other comprehensive income

For the purpose of presentation of the statement of profit or loss, the function of expenses method is adopted.

3.7.1 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The following specific recognition criteria must also be met before revenue is recognised:

Construction revenue

Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognised in the statement of profit or loss in proportion to the stage of completion of the contract activity at the reporting date. Any expected losses on specific contract are recognized immediately by a corresponding reduction in their revenue. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.

Sale of goods

Revenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to buyer with the Group retaining neither continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold.

Rendering of services

Revenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.


Interest income

For all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the Effective Interest Rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.

Interest income is included in finance income in the statement of profit or loss.

Dividend income

Dividend income is recognised in the statement of profit or loss on the date the entity’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Rental income

Rental income is recognized on an accrual basis.

Gains and losses on disposal of assets

Gains and losses on disposal of assets are determined by comparing the net sales proceeds with the carrying amounts of the assets and are recognised net within “other operating income” in the statement of profit or loss. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

Other income

Other income is recognized on an accrual basis.

3.7.2 Expenditure recognition Construction contract

Contract expenses are recognised as

incurred unless they create an asset to future contract activity. An expected loss on contract is recognized immediately in statement of profit or loss.

Other expenses

All expenditure incurred in the running of the business and in maintaining property, plant and equipment in a state of efficiency has been charged to revenue in arriving at the profit or loss for the year.

For the purpose of presentation of statement of profit or loss, the Directors are of the opinion that function of expenses methods present fairly the elements of the enterprises performance hence such presentation method is adopted.

Recognition of expected losses

Expected losses are recognised as an expense when it is probable that the total cost pertaining to construction contracts will exceed its revenue.

3.7.3 Operating leases

Payments made under operating leases are recognised in the statement of profit or loss on a straight-line basis over the term of the lease.

3.7.4 Borrowing costs

Borrowing costs are recognized as an expense in the period in which they are incurred, except to the extent that they

are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalized as part of the cost of that asset.

3.7.5 Finance income and finance costs

Finance income comprises interest income on funds invested, dividend income, and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in statement of profit or loss.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and changes in the fair value of financial assets at fair value through profit or loss.

The interest expense component of finance lease payments is allocated to each period during the lease term so as

to produce a constant periodic rate of interest on the remaining balance of the liability.

Foreign currency gains and losses are reported on a net basis.

3.7.6 Tax expense

Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in statement of income except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date and any adjustments to tax payable in respect of previous years.

Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Northern Power Company (Pvt) Ltd

Pursuant to agreement dated 31st August 2007, entered into with Board of Investments of Sri Lanka under section 17 of the Board of Investment Law No. 04 of 1978, the provision of the Inland Revenue Act No. 10 of 2006 relating to the imposition, payment and recovery of income tax in respect of the profit and income of the Company shall not apply for a period of eight (8) years reckoned from the year of assessment as may be determined by the Board (“the tax exemption period”).

For the above purpose the year of assessment shall be reckoned from the year in which the Company commences to make profits or any year of assessment not later than two (02) years reckoned from the date of commencement of commercial operations whichever comes

MTD WALKERS PLC164


first, as may be specified in a certificate issued by the Board. This exemption period commence from 01st April 2011 and expires on 31st March 2019.

CML-MTD Joint Venture Ltd

As per the agreement entered into with the Board of Investments of Sri Lanka on 12 August 2014, under section 17 of the Board of Investment Law No. 4 of 1978 and as per section 17(A) of the Inland Revenue Act No. 10 of 2006 as amended by the Inland Revenue (Amendment) Act No. 8 of 2014, the Company is exempted from income tax for a period of 09 years, subject to the condition that a minimum investment made by the Company to the project shall be more than LKR 1,500 Million on or before 31st March 2015 from the date of agreement. The above investment shall be made in fixed assets.

For the above purpose, the year of assessment shall be reckoned from the year in which the company commences to make profits or any year of assessment not later than two (02) years reckoned from the date of commencement of commercial operations, whichever year is earlier as determined by the Commissioner General of Inland Revenue.

However, the company is liable for income tax on other income.

Walkers CML Properties (Pvt) Ltd

Pursuant to agreement dated 03 April 2003, entered into with Board of Investments of Sri Lanka under section 17 of the Board of Investment Law No. 04 of 1978, the provision of the Inland Revenue Act No. 10 of 2006 relating to the imposition, payment and recovery of income tax in respect of the profit and income of the company shall not apply for a period of ten (10) years reckoned from the year of assessment as may be determined by the Board (“the tax exemption period”).

For the above purpose the year of assessment shall be reckoned from the year in which the Company commences

to make profits or any year of assessment not later than two (02) years reckoned from the date of commencement of commercial operations whichever comes first, as may be specified in a certificate issued by the Board. This exemption period commence from 02nd July 2015 and expired on 01st July 2025.

After the expiration of the aforesaid tax exemption period, the profit and income of the Company shall be charge at the rate of fifteen per centum (15%).

Deferred tax

Deferred tax is provided using the liability

method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

y When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

y In respect of taxable temporary differences associated with investments in subsidiaries when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

y When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

y In respect of deductible temporary differences associated with investments in subsidiaries deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed.


Tax withheld on dividend income from subsidiaries is recognised as an expense in the Consolidated Income Statement at the same time as the liability to pay the related dividend is recognised.

3.8 General

3.8.1 Events occurring after the reporting date

All material post Balance Sheet events have been considered and where appropriate adjustments or disclosures have been made in the respective notes to the Financial Statements.

3.8.2 Earnings per share

The Group presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period.

3.8.3 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the board of directors to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the senior management and board of directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment.

3.9 Use of estimates and judgements

The preparation of Financial Statements in conformity with LKAS’s requires

management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Judgements and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. Hence actual experience and results may differ from these judgements and estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimates are revised if the revision affects only that period and any future periods.

Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes.

Going concern

The Directors have made an assessment of the Group’s ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on the going concern basis.

Measurement of the recoverable amount of cash-generating units containing goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 3.5.9.2 the basis of determining the recoverable amounts of cash generating units and key assumptions used are given in note 6.2.

Income taxes

The group recognises liabilities for anticipated tax based on estimates of taxable income. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on upon the likely timing and the level of future taxable profits together as with future tax planning strategies.

Measurement of the defined benefit obligations

The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the defined retirement benefit obligations are given in Note 21. Any changes in these assumptions will impact the carrying amount of defined benefit obligations.

Impairment of property, plant and equipment

The impairment analysis is principally based upon discounted estimated cash flows from the use and eventual disposal of the assets. Factors like lower than anticipated sales and resulting decreases of net cash flows and changes in the discount rates could lead to impairment.

Revaluation of land and buildings

The Group measures lands which are recognised as property, plant & equipment at revalued amount with change in value being recognised in the statement of other comprehensive

MTD WALKERS PLC166


income. The valuer has used valuation techniques such as open market value. Further details on revaluation of land and buildings are disclosed in Note 5.7 to the Financial Statements.

3.9.4 Standards Issued But Not Yet Effective

Standards issued but not yet effective up to the date of issuance of the group’s financial statements are listed below. This listing of standards and interpretations issued are those that the group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when they become effective.

Pending the completion of detailed review, the financial impact is reasonably estimatable at the date of the publication of these Financial Statements.

SLFRS 9 -Financial instruments: classification and measurement

SLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39.

SLFRS 9 is effective for annual reporting periods beginning on or after 01st January 2018.

SLFRS 14 Regulatory Deferral Accounts

SLFRS 14 is an interim standard which provides relief for first time -adopters of SLFRS in relation to the accounting for certain balances that arise from rate-regulated activities (‘regulatory deferral accounts’). The standard permits these entities to continue to apply their

previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts.

SLFRS 14 is effective for annual periods beginning on or after 1 January 2016.

SLFRS 15 Revenue from Contracts with Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including LKAS 18 Revenue, LKAS 11 Construction Contracts and IFRIC

13 Customer Loyalty Programmes.

SLFRS 15 is effective for annual reporting periods beginning on or after 01st January 2018.

The following amendments and improvements are not expected to have a significant impact on the Group’s consolidated financial statements.

y Accounting for Acquisitions of Interests in Joint Operations (Amendments to SLFRS 11).

y Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to LKAS 16 and LKAS 38).

y Equity Method in Separate Financial Statements (Amendments to LKAS 27).

y Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to SLFRS 10 and LKAS 28).

y Annual Improvements to SLFRSs 2012–2014 Cycle – various standards.

y Investment Entities: Applying the Consolidation Exception (Amendments to SLFRS 10, SLFRS 12 and LKAS 28).

y Disclosure Initiative (Amendments to LKAS 1).


Year ended 31st March 2016

4 BUSINESS COMBINATIONS AND GOODWILL4.1 Acquisition of Walkers Colombo Shipyard (Pvt) Ltd [Formerly known as Seagulf UK (Pvt) Ltd] On 21st May 2015, the Company acquired 90% of the voting shares of Walkers Colombo Shipyard (Pvt) Ltd , a non-listed

company incorporated in Sri Lanka and engages in establishing ships, boats building, repair facility and provides services to general engineering projects in Sri Lanka and other countries.

Assets acquired and liabilities assumed The fair values of the identifiable assets and liabilities of Walkers Colombo Shipyard (Pvt) Ltd as at the date of acquisition were:

Net Book Value - Group Fair values recognised on

acquisition

LKR

Assets Refundable Deposits 4,000,000

4,000,000 LiabilitiesAmounts due to Related Parties 9,155,077

9,155,077

Total identifiable net liabilities at fair value (5,155,077)

Non-controlling interest measured at fair value (515,508)Goodwill arising on acquisition 27,545,508 Purchase consideration transferred 21,874,923

4.1.2 Purchase consideration The Company has settled the entire purchase consideration by cash on the date of acquisition.

4.1.3 Cash Flow on Acquisition

LKR

Net cash acquired with the subsidiary - Cash paid (21,874,923)Net cash flow on acquisition (21,874,923)

4.1.4 The Group has elected to measure the non-controlling interests at fair value.

MTD WALKERS PLC168

As at 31st March

5 PROPERTY, PLANT AND EQUIPMENT

5.1 Group Balance as at Additions/ Disposal/ Balance as at

01.04.2015 Transfers Transfers 31.03.2016

Gross Carrying Amounts LKR LKR LKR LKR

At Cost or ValuationFreehold land 639,681,484 124,799,000 - 764,480,484Buildings 196,398,568 828,500 197,227,068Plant & machinery 4,085,266,583 866,556,398 (32,369,372) 4,919,453,609Furniture & fittings 76,887,243 5,792,346 (193,117) 82,486,472Office equipment 110,008,214 26,237,790 (4,315,800) 131,930,204Other equipment 384,383,220 517,042,906 (5,141,628) 896,284,498Motor vehicles 360,180,936 68,205,700 (45,006,250) 383,380,386

5,852,806,248 1,609,462,640 (87,026,167) 7,375,242,721Assets on Finance LeasesMotor vehicles 280,967,638 59,060,000 (56,597,501) 283,430,137Plant & machinery 791,726,075 - (327,852,302) 463,873,773

1,072,693,713 59,060,000 (384,449,803) 747,303,910Total value of depreciable assets 6,925,499,961 1,668,522,640 (471,475,970) 8,122,546,631

Incurred during the year

Balance as at 31.03.2016

In the course of construction LKR LKR

Capital work in progress 103,101,847 103,101,847 103,101,847 103,101,847

5.2 Company Balance as at Additions Disposal/ Balance as at

01.04.2015 Transfers 31.03.2016

Gross Carrying Amounts LKR LKR LKR LKR

At cost or valuationOffice equipment 10,654,817 27,814,979 - 38,469,796 Furniture & fittings 17,098,136 9,356,609 - 26,454,745 Motor vehicle - 538,270 - 538,270

27,752,953 37,709,858 - 65,462,811

Assets on finance leasesMotor vehicle 24,595,357 - - 24,595,357

24,595,357 - - 24,595,357 Total value of depreciable assets 52,348,310 37,709,858 - 90,058,168

Incurred during the year


In the course of construction LKR LKR

Capital work in progress 5,675,360 5,675,360



As at 31st March

5.3 Depreciation - Group Balance as at01.04.2015

Charge for the Year / Transfers

Disposal / Transfers


LKR LKR LKR LKR

At Cost or ValuationBuildings 15,488,795 4,395,995 - 19,884,790Plant & machinery 1,798,241,185 666,820,869 (18,565,172) 2,446,496,882Furniture & fittings 22,471,182 10,574,109 (5,794) 33,039,497Office equipment 39,786,456 15,009,061 (2,857,781) 51,937,736Other equipment 95,892,334 103,309,393 - 199,201,727Motor vehicles 242,362,871 61,791,186 (29,530,984) 274,623,073

2,214,242,823 861,900,613 (50,959,731) 3,025,183,705Assets on Finance LeasesMotor vehicles 128,564,534 55,569,089 (18,898,513) 165,235,110Plant & machinery 349,914,602 48,579,422 (49,153,431) 349,340,593

478,479,136 104,148,511 (68,051,944) 514,575,703Total depreciation 2,692,721,959 966,049,124 (119,011,675) 3,539,759,408

5.4 Depreciation - Company Balance as at 01.04.2015

Charge for the Year

Disposal / Transfers


LKR LKR LKR LKR

At Cost or ValuationOffice equipment 3,359,326 7,225,051 - 10,584,377 Furniture & fittings 8,299,479 5,340,889 - 13,640,368 Motor vehicle - 56,070 - 56,070

11,658,805 12,622,010 - 24,280,815 Assets on Finance LeasesMotor vehicles 8,311,549 4,919,071 - 13,230,620

8,311,549 4,919,071 - 13,230,620 Total depreciation 19,970,354 17,541,081 - 37,511,435

5.5 Net book value -Group 2016 2015

LKR LKR

At cost or valuationFreehold lands 764,480,484 639,681,484Buildings 177,342,278 180,909,773Plant & machinery 2,472,956,727 2,287,025,398Furniture & fittings 49,446,975 54,416,061Office equipment 79,992,468 70,221,758Other equipment 697,082,771 288,490,886Motor vehicles 108,757,313 117,818,065

4,350,059,016 3,638,563,424

Assets on finance leasesMotor vehicles 118,195,027 152,403,104Plant & machinery 114,533,180 441,811,473

232,728,207 594,214,577

In the course of constructionBuilding work in progress 103,101,847 -

103,101,847 -Total carrying amount of property, plant & equipment 4,685,889,071 4,232,778,002

MTD WALKERS PLC170

As at 31st March

5 PROPERTY, PLANT AND EQUIPMENT (CONTD.)

2016 2015

LKR LKR

5.6 Net Book Value - CompanyAt cost or valuationOffice equipment 27,885,419 7,295,491 Furniture & fittings 12,814,377 8,798,657 Motor vehicle 482,200 -

41,181,996 16,094,148 Assets on Finance LeasesMotor vehicles 11,364,737 16,283,808

11,364,737 16,283,808

In the course of construction Capital work in progress 5,675,360 - Total carrying amount of property, plant & equipment 58,222,093 32,377,956

5.7 Revaluation of Land and BuildingsFreehold land and Building of the Group were revalued by Messers. W.D.P Rupananda independent valuer and consultant report dated 31st March 2015, an accredited independent valuer to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence. Valuations are based on active market prices, adjusted for any difference in the nature, location or condition of the specific property.

Details of company’s land & building stated at valuation are indicated below;

Property Method of Valuation Property valuer

Lands Market comparable method W.D.P RupanandaChartered Valuation Surveyors

Buildings Depreciated replacement cost method

W.D.P RupanandaChartered Valuation Surveyors

Fair value measurement disclosures for revalued land and buildings are provided in Note 25.

5.8 During the financial year, the group acquired property, plant & equipment for cash to the aggregate value of LKR 1,313,224,233/- (2015 LKR 1,810,004,537/-)

5.9 The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows;

Group

As at 31st March Cost Cumulative 2016 2015

depreciation Net carrying Net carrying

if assets amount amount

are carried

at cost

LKR LKR LKR LKR

At Cost Freehold land 443,056,000 - 443,056,000 443,056,000 Buildings 41,182,658 (9,902,916) 31,279,742 32,103,395

484,238,658 (9,902,916) 474,335,742 475,159,395



As at 31st March

5.10 Value of Land and Ownership at the Year End - GroupInformation on the freehold lands of the group is as follows;

Company Property Method of valuation Location Extent 2016

Carrying value

LKR

Walkers Piling (Pvt) Ltd Lands Market comparable method

5/A, Thuduwa Road, Madapatha

101.51 Perches 22,800,000

CML-MTD Construction Limited Lands Market comparable method

No.428/1, Samurdhi Mawatha, Heyanthuduwa

388 Perches 126,000,000

Lands Market comparable method

Kirwanawatha, Hamanawatha, Giriulla

758.08 Perches 15,000,000


Nos 14 and 20, Mosque Lane, Kollupitiya

13.76 Perches 88,861,400


Nos 24, 28/1 and 28/2, Mosque Lane, Kollupitiya

9.31 Perches 56,273,000


Madatiyawala Mawatha, Pahala Madatiyawala, Kaluwagala, Divulapitiya

6,240 Perches 124,799,000



Mahena Road, Siyambalape South, Siyambalape

260.10 Perches 35,000,000


Akuressa Road, Wanchawala, Galle

112.3 Perches 6,000,000

Walker Sons & Company Limited


No. 18, St. Michael’s Rd, Colombo 03

40 Perches 240,000,000


Walden Place, Welimada Road, Bandarawela

445 Perches 44,400,000



Mahena Road, Siyambalape South, Siyambalape

445.3 Perches 2,200,000

5.11 Leasehold Property - Group

2016 2015

LKR LKR

As at 01st April 87,610,317 - Acquired during the year - 89,095,034 Amortisation for the year (2,701,755) (1,484,717)At 31st March 84,908,562 87,610,317

5.11.1 Prepaid lease rentals to acquire land use rights have been classified as leasehold property are amortized over the lease term in accordance with the pattern of benefits provided.

5.11.2 The remaining period of lease for the leasehold property is 31 years.

MTD WALKERS PLC172


As at 31st March

Goodwill ERP system 2016 2015

LKR LKR LKR LKR

6 INTANGIBLE ASSETS-GROUPCostAt the beginning of the year 511,858,012 - 511,858,012 511,858,012 Acquisitions during the year (Note 04) 27,545,508 - 27,545,508 - At the end of the year 539,403,520 - 539,403,520 511,858,012 Capital work in progress - 82,964,557 82,964,557 - Carrying amount 539,403,520 82,964,557 622,368,077 511,858,012

6.1 GoodwillGoodwill acquired through business combinations have been allocated to cash generating units (CGUs) for impairment testing as follows;

Group

2016 2015

LKR LKR

Northern Power Company (Pvt) Ltd 289,069,326 289,069,326 Colombo Engineering Services (Pvt) Ltd 160,060,258 160,060,258 Western Airducts Lanka (Pvt) Ltd 62,728,428 62,728,428 Walkers Colombo Shipyard (Pvt) Ltd 27,545,508 -

539,403,520 511,858,012

The recoverable amount of all CGUs have been determined based on the fair value less cost to sell or the value in use (VIU) calculation.

6.2 Key assumptions used in the VIU calculationsGross MarginThe basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceding the budgeted year adjusted for projected market conditions.

Discount RateThe discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium.

InflationThe basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected economic condition.

Volume GrowthVolume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to five years immediately subsequent to the budgeted year based on industry growth rates. Cash flows beyond the five year period are extrapolated using 5% growth rate.

6.3 Intangible Assets - Company

2016

LKR

ERP System 82,964,557

Amount paid to acquisition and implementation of SAP-ERP system is classified as Intangible assets and amortized over 4 years. ERP system is being implemented as at the reporting date and no amortization was charged for the current year.


As at 31st March

7 FINANCE LEASE RECEIVABLESUpon recognition of the power plant owned by Northern Power Company (Pvt) Ltd, under IFRIC 4 the arrangement was accounted as a finance lease where Northern Power Company (Pvt) Ltd is treated as the lessor.

Group

2016 2015

LKR LKR

Balance at the beginning of the year 2,895,672,674 2,956,185,192 Addition during the year - 75,285,877 Settlements during the period (241,184,055) (184,890,656)Adjustments for exchange difference 231,733,641 49,092,261 Balance at the end of the year 2,886,222,260 2,895,672,674

Current portion of finance lease receivables 299,818,118 230,078,940 Non current portion of finance lease receivables 2,586,404,142 2,665,593,734

7.1 Ageing of gross finance lease receivables and present value of lease receivables

Gross Investment

Unearned Income Present Value

LKR LKR LKR

Not later than one year 815,427,338 (515,609,219) 299,818,119 One to five years 3,964,394,995 (1,638,686,553) 2,325,708,442 Over five years 275,118,093 (14,422,394) 260,695,699

5,054,940,426 (2,168,718,166) 2,886,222,260

8 INVESTMENTS IN SUBSIDIARY - COMPANY

Non - Quoted 2016 2015

Holding % LKR Holding % LKR

Walker Sons & Company Ltd 99.80 76,999,860 99.80 76,999,860 Walker Sons & Company Engineers (Pvt) Ltd 99.60 26,132 99.60 26,132 MTD Walkers Projects Ltd 86.38 399,940 86.38 399,940 MTD Walkers Infracon Ltd 92.55 34,650 92.55 34,650 Walkers Piling (Pvt) Ltd 99.99 224,999,000 99.99 224,999,000 CML- MTD Construction Ltd 78.59 466,748,959 78.59 466,748,959 Northern Power Company (Pvt) Ltd 100 2,535,565,347 100 2,535,565,347 Colombo Engineering Services (Pvt) Ltd 100 275,000,000 100 275,000,000 Walkers CML Properties (Pvt) Ltd 100 2,174,270,400 100 2,174,270,400 Walkers Equipment Ltd 66.67 6,666,667 - - Walkers Colombo Shipyard (Pvt) Ltd 90 21,874,923 - -

5,782,585,878 5,754,044,288

MTD WALKERS PLC174


As at 31st March

Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

9 OTHER FINANCIAL ASSETSNon CurrentQuoted equity securities & debt securities (Note 9.1) 3,946,289 4,519,237 17,640 14,380 Unquoted equity securities (Note 9.2) 260,370 260,370 - - Fixed Deposits 924,097,203 526,377,957 - -

928,303,861 531,157,564 17,640 14,380 CurrentInvestment in Short Term Deposits 1,313,020,187 1,431,177,049 69,586,378 65,790,887 Investment in Unit Trusts 633,784,027 9,124,438 633,784,027 9,124,438

1,946,804,214 1,440,301,487 703,370,405 74,915,325

9.1 Quoted equity securities & debt securities - Group 2016 2015 2016 2015

No. of No. of Fair Value Fair Value

Shares Shares LKR LKR

Seylan Merchant Bank 1,100 1,100 7,000 7,340 Kelani Tyre PLC 600 600 38,400 46,800 Royal Ceramic Lanka PLC 100 100 10,010 11,100 Coco Lanka PLC 100 100 2,080 2,690 First Capital PLC 100 100 1,910 2,700 Asian Hotel & Properties PLC 1,586 1,586 75,811 99,918 Ferm Tea PLC 100 100 350 350 The Finance Company PLC 100 100 800 1,490 Asia Capital PLC 100 100 580 870 CW Mackie PLC 100 100 5,460 6,090 Udupussallawa Plantation PLC 200 200 4,000 6,940 Balangoda Plantation PLC 300 300 5,660 6,120 Namunukula Plantation PLC 200 200 11,900 14,180 Kahawathtte Plantation PLC 200 200 7,540 6,360 Lanka Walltile PLC 100 100 9,880 9,580 Ceylinco Finance PLC 300 300 2,670 2,670

Thalawakelle Plantation PLC 200 200 6,500 7,020 DFCC Bank 344 344 47,128 69,763 National Development Bank PLC 210 210 49,704 52,080 Peoples Leasing PLC 81,700 81,700 1,307,200 1,805,570 Seylan Bank PLC 7,600 7,600 478,800 281,200 Nation Lanka Finance PLC 300 300 300 1,320 Malwatta Welly Plantation PLC 5,000 5,000 12,500 18,500 Hapugastenna Plantation PLC 100 100 6,360 3,100 Royal Palms Beach Hotels PLC 400 400 13,300 14,400 Seylan Bank PLC 12,500 12,500 1,250,000 1,250,000 Hatton National Bank PLC 787 787 174,803 174,803 Commercial Bank PLC 2,513 2,513 415,643 415,643

3,946,289 4,519,237


As at 31st March

9.1 Quoted equity securities & debt securities - Company 2016 2015 2016 2015



Hapugastenna Plantation PLC 100 100 6,360 3,100 Balangoda Plantation PLC 200 200 4,080 4,080 Royal Palms Beach Hotel PLC 200 200 7,200 7,200

17,640 14,380

The Group uses Level 1 : Quoted (unadjusted) prices in active markets for identical assets and liabilities, in determining and disclosing the fair value of the financial instruments by valuation techniques.

9.2 Unquoted equity securities - Group 2016 2015 2016 2015



MBSL Savings Bank 10,000 10,000 100,000 100,000 Asbestos Cement Industries 24,055 24,055 160,370 160,370

260,370 260,370

Group

2016 2015

LKR LKR

10 INVENTORIES Materials 555,685,395 648,590,985 Work-in-progress 1,324,440,915 2,195,208,517 Spare parts & consumables 249,888,057 138,363,267 Goods in transit 6,054,149 622,637 Completed Apartments and Finished goods 1,177,343,077 5,629,964 Other inventories 61,233,572 56,924,188

3,374,645,166 3,045,339,558 Less : Provision for write-down of inventories - (95,039,472)

3,374,645,166 2,950,300,086

MTD WALKERS PLC176


As at 31st March

Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

11 TRADE AND OTHER RECEIVABLESTrade debtors (Note 11.1) 10,136,560,353 6,138,086,186 - - Less: Impairment for trade debtors (Note 11.2) (256,805,355) (83,206,416) - -

9,879,754,998 6,054,879,770 - -

Other receivables 3,557,555,485 2,747,095,141 128,091,186 114,842,078 Less: Impairment for other receivables (93,182,916) (93,182,915) - -

3,464,372,569 2,653,912,226 128,091,186 114,842,078

Extra fuel chargers receivable 368,172,483 368,172,483 - - Less: Impairment for fuel chargers receivables (368,172,483) (210,369,868) - -

- 157,802,615 - - 13,344,127,567 8,866,594,610 128,091,186 114,842,078

11.1 The aging analysis of trade debtors is as follows:

Group

Total Neither Past Due nor Impaired

Past Due but Not Impaired

01 - 02 Year < 02 Year

LKR LKR LKR LKR

31 March 2016 9,879,754,998 8,850,654,540 949,271,645 79,823,813 31 March 2015 6,054,879,770 5,478,914,627 430,917,315 145,047,828

The Group carries out a significant portion of its businesses with the Road Development Authority (RDA) and to the Ceylon Electricity Board (CEB) both entities which are owned and administered by the Government of Sri Lanka (GOSL). It is an inherent factor that invoices relating to work carried out by the Group to these entities affiliated to the GOSL have long settlement cycles which is, consistent with the current practice in the industry.

The Board of directors of the group is of the view, that this phenomenon is an inherent factor in the construction industry and further provisioning is not required for bad and doubtful debts on receivables, as they are deemed to be recoverable. Further, the directors of the group is of the view that the current provisioning for bad and doubtful debts is adequate to meet any potential bad debts that could crystallize in the future.

11.2 Movement in the provision for Impairment

Group

2016 2015

LKR LKR

Balance at the beginning of the year 83,206,415 42,129,758 Charge/(reversal) for the year 173,598,940 41,076,657 Balance as at end of the year 256,805,355 83,206,415

Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

12 OTHER CURRENT ASSETS WHT receivable 11,010,982 9,492,694 - 601,469 ESC receivable - 3,739,954 - - VAT receivable 254,984,412 211,580,584 - - Deposits and advances 435,973,494 301,494,388 - - Other receivables 42,188,907 40,986,234 2,426,318 191,450

744,157,795 567,293,853 2,426,318 792,919


As at 31st March

13 AMOUNTS DUE FROM RELATED PARTIES - COMPANY

2016 2015

Relationship LKR LKR

Non-CurrentLoans ReceivableNorthern Power Company (Pvt) Ltd Subsidiary 374,212,928 374,212,928

CML-MTD Construction Ltd Subsidiary 408,814,120 408,814,120 Walker Sons & Company Engineers (Pvt) Ltd Subsidiary 141,916,136 141,916,136 Walkers Piling (Pvt) Ltd Subsidiary 186,045,241 192,545,241 MTD Walkers Projects Ltd Subsidiary 9,696,658 9,696,658

1,120,685,083 1,127,185,083 CurrentWalker Sons & Company Limited Subsidiary 58,634,656 58,433,750 Walkers Piling (Pvt) Ltd Subsidiary 108,602,201 93,206,024 Northern Power Company (Pvt) Ltd Subsidiary 223,816,284 63,252,200 CML-MTD Construction Ltd Subsidiary 621,024,842 395,663,912 MTD Walkers Projects Limited Subsidiary 34,727,442 33,589,833 Walkers CML Properties (Pvt) Ltd Subsidiary 201,417,573 18,009,482 MTD Walkers Infracon Limited Subsidiary 1,405,677 888,878 Walker Sons & Company Engineers (Pvt) Ltd Subsidiary 121,305,772 83,156,648 Western Airducts Lanka (Pvt) Ltd Subsidiary 6,751,657 370,880 Walkers Equipment Limited Subsidiary 4,126,868 4,410,668 Special Projects Company (Pvt) Ltd Subsidiary 28,790 7,840 CML-MTD Joint Venture Limited Subsidiary 25,619,538 23,963,400 Walkers Colombo shipyard (Pvt) Ltd Subsidiary 642,214,867 -

2,049,676,167 774,953,515

14 CASH AND CASH EQUIVALENTS IN CASH FLOW STATEMENT

Components of cash and cash equivalents Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

14.1 Favourable cash & cash equivalent balancesCash & bank balances 340,910,019 143,053,580 167,854,469 69,671,927 Call deposits 34,355,695 28,950,030 - -

375,265,714 172,003,610 167,854,469 69,671,927

14.2 Unfavourable cash & cash equivalent balancesBank overdrafts (4,249,985,895) (3,681,364,310) (34,685,304) (65,720,399)Total cash and cash equivalent for the purpose of the Cash flow statements (3,874,720,181) (3,509,360,700) 133,169,165 3,951,528

MTD WALKERS PLC178


As at 31st March

15 STATED CAPITAL - GROUP/COMPANY

2016 2015

Number of Value of Number of Value of

Shares Shares Shares Shares

LKR LKR

Opening Balance 167,647,568 6,057,497,739 114,357,140 3,659,428,479 Issue of shares for cash - - 53,290,428 2,398,069,260 Closing Balance 167,647,568 6,057,497,739 167,647,568 6,057,497,739

16 CAPITAL RESERVES

Group

2016 2015

LKR LKR

Revaluation reserve (Note 16.1) 378,561,807 378,561,807 Other capital reserves - 897,157

378,561,807 379,458,964

16.1 Revaluation reserveAs at 01st April 378,561,807 118,100,129 Revaluation during the year, net of tax - 283,164,756 Revaluation reserve attributable to non-controlling interest - (22,703,078)As at 31st March 378,561,807 378,561,807

The above revaluation surplus consist of net surplus resulting from the revaluation of land and buildings of the Group. The unrealised amounts cannot be distributed to shareholders.

17 NON CONTROLLING INTEREST

Group

2016 2015

LKR LKR

As at the beginning of the year 723,611,373 382,649,657 Total Comprehensive Income 206,639,449 340,949,916 Effect of acquisition of subsidiaries (515,508) - Revaluation of land and buildings, net of tax - 21,494,093 Dividend paid (13,152,403) (21,482,294)Share issue in subsidiary 3,333,333As at the end of the year 919,916,244 723,611,372


As at 31st March

18 INTEREST BEARING LOANS AND BORROWINGS - GROUP

2016 2016 Total 2015 2015 Total

Amounts Amounts 2016 Amounts Amounts 2015

Repayable Repayable Repayable Repayable

within 1 Year after 1 Year within 1 Year after 1 Year

LKR LKR LKR LKR LKR LKR

Bank loans 3,379,732,167 2,830,555,098 6,210,287,265 2,044,988,799 2,074,751,395 4,119,740,194 Finance leases 149,937,180 108,771,978 258,709,158 263,711,011 197,380,745 461,091,756 Related party loans - 586,879,286 586,879,286 - 579,093,878 579,093,878 Unsecured debenture (Note 18.2) - 2,970,716,236 2,970,716,236 - - - Bank overdrafts 4,249,985,895 - 4,249,985,895 3,681,364,310 - 3,681,364,310

7,779,655,242 6,496,922,598 14,276,577,840 5,990,064,119 2,851,226,018 8,841,290,137

18.1 Interest Bearing Loans & Borrowings - Company

2016 2016 Total 2015 2015 Total

Amounts Amounts 2016 Amounts Amounts 2015

Repayable Repayable Repayable Repayable

within 1 Year after 1 Year within 1 Year after 1 Year


Bank loans 179,057,603 - 179,057,603 150,000,000 664,500,000 814,500,000 Finance leases 5,472,740 7,417,492 12,890,232 5,265,993 12,890,232 18,156,225 Related party loans - 586,879,286 586,879,286 - 579,093,878 579,093,878 Unsecured debenture (Note 18.2) - 2,981,736,236 2,981,736,236 - - - Bank overdrafts 34,685,304 - 34,685,304 65,720,399 - 65,720,399

219,215,647 3,576,033,014 3,795,248,661 220,986,392 1,256,484,110 1,477,470,502

18.2 Unsecured Debentures

On 30th September 2015, MTD Walkers PLC has issued 30,000,000 of unsecured redeemable debentures at LKR 100/- each. Details of the debentures are as follows;

Type ofdebentures

Interest Payable

Face valueLKR

Amortized cost LKR

Interest rate(per annum)

AER (per annum)

Period RedemptionDate

Type A Semi annual 2,113,280,000 2,100,323,191 9.75% 10.03% 3 Years 30-sep-18Type B Semi annual 886,720,000 881,413,045 10.25% 10.44% 5 Years 30-sep-20

3,000,000,000 2,981,736,236

MTD WALKERS PLC180

As at 31st March

18 INTEREST BEARING LOANS AND BORROWINGS - GROUP (CONTD.)

18.3 Bank loans - Group Balance as at New Loans Repayment Impact of Balance as at

01.04.2015 Obtained Exchange Rate 31.03.2016

on Conversion

LKR LKR LKR LKR LKR

Hatton National Bank PLC 424,063,511 1,562,993,555 (195,652,398) (191,458,456) 1,599,946,212 Development Finance Corporation Ceylon PLC 177,140,416 1,518,347,307 (1,591,415,856) - 104,071,867 Merchant Credit Bank of Sri Lanka Limited 100,000,000 - - - 100,000,000 People's Bank 1,605,976,410 5,370,628,750 (5,065,052,792) 17,671,492 1,929,223,859 People's Leasing & Finance PLC 3,371,266 - (3,371,266) - - Bank of Ceylon 54,367,399 - (54,367,399) - - National Development Bank PLC 559,834,953 265,235,634 (280,065,237) 10,980,194 555,985,543 LB Finance PLC 50,179,570 98,826,226 (107,757,167) - 41,248,629 Nations Trust Bank PLC 7,877,945 - (2,241,404) - 5,636,541 Sampath Bank PLC 463,946,863 164,371,000 (95,228,369) - 533,089,494 Amana Bank 8,481,862 - (1,550,919) - 6,930,943 CIMB Bank Malaysia 664,500,000 - (712,500,000) 48,000,000 - National Asset Management Limited - 1,068,799,646 (889,742,040) - 179,057,606 EXIM Bank Loan - 1,118,206,571 - - 1,118,206,571 Seylan Bank PLC - 39,230,000 (2,340,000) - 36,890,000 First Capital Holdings PLC - 100,000,000 (100,000,000) - - Assetline Holdings PLC - 200,000,000 (200,000,000) - -

4,119,740,195 11,506,638,689 (9,301,284,847) (114,806,770) 6,210,287,265

2016 2015

LKR LKR

Current 3,379,732,167 2,044,988,799 Non Current 2,830,555,098 2,074,751,395

6,210,287,265 4,119,740,194

18.3.1 Bank Loans - Company Balance as at New Loans Repayment Impact of Balance as at

01.04.2015 Obtained Exchange Rate 31.03.2016

on Conversion

Current LKR LKR LKR LKR LKR

CIMB Bank - Malaysia 664,500,000 - (712,500,000) 48,000,000 - Development Finance Corporation Ceylon PLC 150,000,000 900,000,000 (1,050,000,000) - - First Capital Holdings PLC - 100,000,000 (100,000,000) - - Assetline Holdings PLC - 200,000,000 (200,000,000) - - National Asset Management Limited - 1,068,799,643 (889,742,040) - 179,057,603

814,500,000 2,268,799,643 (2,952,242,040) 48,000,000 179,057,603



As at 31st March

18.4 Finance leases - Group Balance as at New Loans Repayment Balance as at

01.04.2015 Obtained 31.03.2016

LKR LKR LKR LKR

People's Leasing & Finance PLC 40,035,037 - (28,398,420) 11,636,616 Hatton National Bank PLC 151,820,035 12,928,064 (84,937,218) 79,810,881 Sampath Leasing & Factoring Limited 8,886,819 - (8,886,819) - Bank Of Ceylon 18,074,550 7,009,140 (9,018,194) 16,065,496 Seylan Bank PLC 82,359,787 - (48,370,276) 33,989,511 Development Finance Corporation Ceylon PLC 53,312,719 - (44,225,816) 9,086,903 Central Finance Company PLC 13,891,579 - (11,737,843) 2,153,736 Pan Asia Bank PLC 36,636,735 - (18,312,461) 18,324,274 Merchant Bank of Sri Lanka PLC 6,447,072 - (2,998,638) 3,448,434 Mercantile Investment & Finance PLC 72,462,132 6,896,568 (30,472,819) 48,885,881 LB Finance PLC 28,651,932 - (19,063,180) 9,588,752 People's Merchant Finance PLC 18,623,151 - (11,474,328) 7,148,823 Nations Trust Bank PLC - 8,694,629 (905,690) 7,788,939 Sampath Bank PLC - 50,766,694 (8,884,172) 41,882,522 Gross liability 531,201,548 86,295,095 (327,685,874) 289,810,769 Finance charges allocated to future period (70,109,780) (12,344,644) 51,352,824 (31,101,612)

Net liability 461,091,756 73,950,451 (276,333,050) 258,709,158

2016 2015

LKR LKR

Current 149,937,180 263,711,011 Non Current 108,771,978 197,380,745

258,709,158 461,091,756

18.4.1 Finance leases - Company Balance as at New Loans Repayment Balance as at

01.04.2015 Obtained 31.03.2016

Current LKR LKR LKR LKR

People's leasing & Finance PLC 3,135,841 - (1,839,420) 1,296,421 Mercantile Investment & Finance PLC 4,084,372 - (1,581,048) 2,503,324 Hatton National Bank PLC 14,643,976 - (3,738,888) 10,905,088 Gross liability 21,864,189 - (7,159,356) 14,704,833 Finance charges allocated to future period (3,707,964) - 1,893,363 (1,814,601)

Net liability 18,156,225 - (5,265,993) 12,890,232

2016 2015

LKR LKR

Current 5,472,740 5,265,993 Non Current 7,417,492 12,890,232

12,890,232 18,156,225

MTD WALKERS PLC182


As at 31st March

18 INTEREST BEARING LOANS AND BORROWINGS - GROUP (CONTD.)

18.5 Related Party Loans - Group /Company

Relationship


Impact of exchange rate on conversion


LKR LKR LKR

MTD Capital Bhd Ultimate Parent 579,093,878 7,785,408 586,879,286 579,093,878 7,785,408 586,879,286

18.6 Details of assets which were pledged against above bank facilities are disclosed in Note 33.

2016 2015

LKR LKR

19 OTHER NON CURRENT LIABILITIES Long Term loansLoan from Mr. V.R.J.Edirisinghe 2,300,000 2,300,000

2,300,000 2,300,000

* This loan is not secured and terms of repayments are not agreed as at the reporting date. Further interest has been paid on market rate.

20 DEFERRED TAX LIABILITIES

Group

2016 2015

LKR LKR

Balance at the beginning of the year 113,414,687 96,481,130 Amount origination/ (reversal) of temporary differences - Recognised in profit or loss (8,320,258) 3,688,744 - Recognised in other comprehensive income 351,143 13,244,813 Balance at the end of the year 105,445,572 113,414,687

20.1 Deferred tax assets and liabilities are attributable to the following:

2016 2015

Temporary Difference

Deferred Tax Temporary Difference

Deferred Tax

LKR LKR LKR LKR

Deferred tax liabilityProperty, plant and equipment 1,546,723,879 193,466,533 1,278,154,282 167,586,138 Deferred tax assetRetirement benefit obligation (76,700,756) (8,787,367) (37,358,899) (7,900,411)Tax losses (615,335,992) (79,233,593) (336,702,767) (46,271,039)

854,687,131 105,445,572 904,092,616 113,414,688

20.2 Movement in temporary differences during the year

Balance Recognised Balance Recognised Balance as at in Total as at in Total as at

01st April Comprehensive 31st March Comprehensive 31st March 2014 Income 2015 Income 2016LKR LKR LKR LKR LKR

Property, plant and equipment 122,747,943 44,838,195 167,586,138 25,880,395 193,466,533 Retirement benefit obligation (3,959,783) (3,940,628) (7,900,411) (886,956) (8,787,367)Tax losses (22,307,030) (23,964,009) (46,271,039) (32,962,554) (79,233,593)

96,481,130 16,933,558 113,414,688 (7,969,115) 105,445,572


As at 31st March

Group Company2016 2015 2016 2015LKR LKR LKR LKR

21 RETIREMENT BENEFIT OBLIGATIONRetirement Benefits Obligation-Gratuity At the beginning of the year 84,193,016 60,924,729 8,132,257 3,436,564 Current service cost 11,384,447 9,526,125 1,343,533 1,859,294 Interest cost 8,753,525 7,178,327 853,887 378,022 Benefits paid/Payable (4,655,814) (2,191,599) - (328,195)Actuarial (gains)/losses (2,958,653) 7,852,553 (3,458,727) 2,786,572 Retirement benefit obligations of companies acquired during the year - 902,881 - - At the end of the year 96,716,520 84,193,016 6,870,950 8,132,254

21.1 Expense recognised in profit or lossCurrent service cost 11,384,447 9,526,125 1,343,533 1,859,294 Interest cost 8,753,525 7,178,327 853,887 378,022

20,137,972 16,704,452 2,197,420 2,237,316

21.2 Actuarial gains and losses recognised directly in OCIRecognized during the period (2,958,653) 7,852,553 (3,458,727) 2,786,572

(2,958,653) 7,852,553 (3,458,727) 2,786,572

LKAS 19 (Revised) - ‘Employee Benefits’ - requires the use of actuarial techniques to make a reliable estimate of the amount of employee benefit that employees have earned in return for their service in the current and prior periods and discount that benefit using the Projected Unit Credit Method in order to determine the present value of the employee benefit obligation and the current service cost. This requires an entity to determine how much benefit is attributable to the current and prior periods and to make estimates about demographic variables and financial variables that will influence the cost of the benefit.

Group/Company

2016 2015

The principal assumptions used are as follows :Discount rate 10.5% 10.5%Future salary increases 5% 5%Retirement age 55 Years 55 Years

21.3 Sensitivity of Assumptions Used

Values appearing in the financial statements are very sensitive to the financial and non-financial assumptions used.A sensitivity analysis was carried out as follows:

Expected Future Salaries Discount Rate 1% increase 1% decrease 1% increase 1% decrease

LKR LKR LKR LKR

GroupChange in present value of defined benefit obligation 2,321,029 (4,922,400) (4,670,241) 2,084,526

CompanyChange in present value of defined benefit obligation 382,627 (342,869) (322,979) 363,605

21.4 Maturity Analysis of the Payments Group Company 2016 2015 2016 2015

LKR LKR LKR LKR

The following payments are expected on employee benefit liabilities in future years.Less than or equal 1 year 50,991,818 42,593,918 2,172,862 2,276,997 Over 1 year and less than or equal 2 years 3,026,158 2,574,886 - - Over 2 years and less than or equal 5 years 4,310,274 4,251,680 1,035,645 49,749 Over 5 years and less than or equal 10 years 19,100,134 16,823,809 1,306,213 2,174,080 Over 10 years 19,288,136 17,948,722 2,356,229 3,631,430 Total expected payments 96,716,520 84,193,016 6,870,949 8,132,256

MTD WALKERS PLC184


As at 31st March

Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

22 TRADE AND OTHER PAYABLESTrade Creditors 2,522,544,484 1,961,724,754 - - Mobilization Advance 1,787,702,044 1,026,749,913 - - Retention Payable 118,642,922 142,772,171 - - Sundry Creditors Including Accrued Expenses 582,023,677 340,067,656 91,722,315 13,976,620 Deposits and Advance 2,806,630 70,364,552 - -

5,013,719,757 3,541,679,046 91,722,315 13,976,620

23 OTHER CURRENT LIABILITIES Other Taxes Payable 11,652,728 29,592,278 522,000 522,000 VAT Payable 186,475,042 126,055,652 - - EPF Payable 9,153,740 - - -

207,281,510 155,647,930 522,000 522,000

Group Company

Relationship 2016 2015 2016 2015

LKR LKR LKR LKR

24 AMOUNTS DUE TO RELATED PARTIESCurrent account balancesMTD Capital Bhd Ultimate parent 517,927,166 495,876,022 280,720,786 261,951,930 Key Management Personnel Director 14,426,484 2,848,121 321,485 3,548,121

532,353,650 498,724,143 281,042,271 265,500,051

25 FAIR VALUE MEASUREMENT25.1 The Group uses the following hierarchy for determining and disclosing the fair value of assets and liabilities by valuation

techniques:

Level 1 : Quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2 : Inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectlyLevel 3 : Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

As at 31st March 2016 Date of Valuation

Level 1 Level 2 Level 3 Total

LKR LKR LKR LKR

Assets Measured at Fair Value :Non Financial Assets Property, plant and equipment- Freehold land and building 31st March 2015 - - 961,707,552 961,707,552

Total non financial assets - - 961,707,552 961,707,552

Financial AssetsOther current financial assets- Quoted equity securities 31st March 2016 3,946,289 - - 3,946,289

Total Financial Assets 3,946,289 - - 3,946,289


As at 31st March

As at 31st March 2015 Date of Valuation

Level 1 Level 2 Level 3 Total

LKR LKR LKR LKR

Assets Measured at Fair Value :Non Financial Assets Property, plant and equipment- Freehold land and building 31st March 2015 - - 836,080,052 836,080,052

Total non financial assets - - 836,080,052 836,080,052

Financial AssetsOther current financial assets- Quoted equity securities 31st March 2015 4,519,237 - - 4,519,237

Total Financial Assets 4,519,237 - - 4,519,237

25.2 Valuation techniques and significant unobservable inputsThe following table shows the valuation techniques used for the Group in measuring Level 3 fair values, and the significant unobservable inputs used.

Significant Sensitivity of the Input to

Non Financial Assets Valuation Technique Unobservable Inputs the Fair Value

Property, plant and equipment

- Freehold land Market comparable method Price per perch of land

Estimated fair value would increase/ (decrease) if ;- Price per perch increases/(decreases)

This method considers the selling price of a similar property within a reasonably recent period of time in determining the fair value of property being revalued. This involves evaluation of recent active market prices of similar assets, making appropriate adjustments for difference in size, nature and location of the property.

- Freehold building Depreciated replacement cost method Rate per square feet of building

Estimated fair value would increase/ (decrease) if ;- Rate per square feet increases/(decreases)

Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

26 REVENUE26.1 Summary

Gross revenue 12,486,060,143 14,930,720,018 148,300,827 409,774,165 Less:- Sales taxes - Value Added Tax (521,677,622) (905,527,007) - - Net revenue 11,964,382,521 14,025,193,011 148,300,827 409,774,165

26.2 Goods and Services AnalysisSales of goods 327,393,583 390,124,066 - - Rendering of services/contract revenue 10,727,135,610 12,377,809,539 - - Investment income - - 148,300,827 409,774,165 Revenue from power generation 511,733,893 1,072,368,750 - - Lease interest income - 184,890,656 - - Sale of apartments 398,119,435 - - -

11,964,382,521 14,025,193,011 148,300,827 409,774,165

MTD WALKERS PLC186


Year ended 31st March

26 REVENUE (CONTD.)

26.3 Segment Information

Civil Engineering services Heavy engineering Marine engineering services

Trading Power generation Real estate Others Total

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Segment Revenue LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Revenue 10,878,957,162 13,358,609,966 264,950,843 571,207,532 86,009,630 50,160,580 347,354,390 3,559,684 511,733,893 1,257,259,406 356,557,117 - 148,300,827 494,735,764 12,593,863,861 15,735,532,931

Inter segmental revenue (312,792,075) (1,164,468,374) (80,946,737) (136,097,381) - (87,441,700) - - - - - (148,300,827) (409,774,165) (629,481,339) (1,710,339,920)

Total revenue to external customers 10,566,165,087 12,194,141,592 184,004,105 435,110,151 86,009,630 50,160,580 259,912,690 3,559,684 511,733,893 1,257,259,406 356,557,117 - - 84,961,599 11,964,382,521 14,025,193,011

Cost of sale (8,807,256,644) (9,154,625,968) (328,386,328) (433,494,841) (30,311,340) (6,088,579) (220,389,347) (2,271,454) (228,700,281) (1,228,638,344) (255,996,571) - - (77,159,307) (9,871,040,510) (10,902,278,493)

Other operating income 33,760,744 62,633,201 6,337,363 6,876,456 32,924 59,603 - 9,818 236,639,900 55,225,585 505,000 - 78,436 103,422,156 277,354,367 228,226,819

Administrative expenses (752,107,532) (755,352,144) (86,387,433) (74,911,411) (62,797,355) (21,240,275) (36,477,494) (5,610,917) (194,334,634) (195,754,201) (48,806,077) - (281,281,315) (221,947,554) (1,462,191,839) (1,274,816,501)

Selling & distribution cost (25,774,651) (87,845,796) (7,026,238) (5,178,809) (5,094,616) (2,708,577) (1,284,700) (414,326) (1,472,060) (1,794,054) (16,214,012) - (13,918,635) (10,093,332) (70,784,912) (108,034,895)

Segment results 1,014,787,005 2,258,950,885 (231,458,531) (71,598,455) (12,160,757) 20,182,752 1,761,149 (4,727,194) 323,866,818 (113,701,609) 36,045,457 - (295,121,513) (120,816,438) 837,719,626 1,968,289,941

Finance cost (740,649,235) (445,999,623) (34,602,377) (28,158,275) (279,641) (39,370) (6,526,087) - (87,780,259) (126,562,470) (5,107,660) - (224,553,130) (64,512,269) (1,099,498,389) (665,272,008)

Finance income 127,161,521 83,546,772 6,500,870 8,543,805 1,463,519 353,394 356,597 95,340 8,103,907 20,033,753 257,162 - 55,984,150 5,444,270 199,827,727 118,017,335

Net Financing (cost)/income (613,487,713) (362,452,851) (28,101,507) (19,614,470) 1,183,878 314,023 (6,169,489) 95,340 (79,676,352) (106,528,717) (4,850,498) - (168,568,980) (59,067,999) (899,670,663) (547,254,673)

Profit/(loss) before tax 401,299,291 1,896,498,034 (259,560,038) (91,212,925) (10,976,879) 20,496,776 (4,408,341) (4,631,854) 244,190,465 (220,230,325) 31,194,959 - (463,690,493) (179,884,436) (61,951,035) 1,421,035,269

Tax expense (38,784,911) (243,202,288) (1,396,324) (3,709,815) (703,014) (1,336,534) - 820,093 (4,772,616) (8,465,918) - - (13,765,776) (57,872,137) (59,422,642) (313,766,598)

Profit/(loss) for the year 362,514,380 1,653,295,746 (260,956,362) (94,922,740) (11,679,894) 19,160,242 (4,408,341) (3,811,761) 239,417,849 (228,696,243) 31,194,959 - (477,456,270) (237,756,573) (121,373,678) 1,107,268,669

Segment assets 19,281,068,899 14,122,665,455 838,887,016 745,654,412 492,827,099 150,121,222 328,596,238 12,081,602 4,023,405,669 3,812,262,535 2,368,931,191 2,198,235,776 1,129,927,778 702,691,202 28,463,643,890 21,743,712,204

Goodwill on consolidation - - - - - - - - - - - - - - 539,403,520 511,858,012

Total assets 19,281,068,899 14,122,665,455 838,887,016 745,654,412 492,827,099 150,121,222 328,596,238 12,081,602 4,023,405,669 3,812,262,535 2,368,931,191 2,198,235,776 1,129,927,778 702,691,202 29,003,047,410 22,255,570,215

Segment liabilities 14,366,655,775 9,882,550,257 541,833,617 505,780,915 12,999,731 2,521,247 327,396,873 816,929 659,503,452 1,129,003,460 229,928,675 109,317,364 4,223,546,104 1,855,296,114 20,361,864,228 13,485,286,286

Total liabilities 14,366,655,775 9,882,550,257 541,833,617 505,780,915 12,999,731 2,521,247 327,396,873 816,929 659,503,452 1,129,003,460 229,928,675 109,317,364 4,223,546,104 1,855,296,114 20,361,864,228 13,485,286,286



26 REVENUE (CONTD.)

26.3 Segment Information

Civil Engineering services Heavy engineering Marine engineering services

Trading Power generation Real estate Others Total

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Segment Revenue LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Revenue 10,878,957,162 13,358,609,966 264,950,843 571,207,532 86,009,630 50,160,580 347,354,390 3,559,684 511,733,893 1,257,259,406 356,557,117 - 148,300,827 494,735,764 12,593,863,861 15,735,532,931

Inter segmental revenue (312,792,075) (1,164,468,374) (80,946,737) (136,097,381) - (87,441,700) - - - - - (148,300,827) (409,774,165) (629,481,339) (1,710,339,920)

Total revenue to external customers 10,566,165,087 12,194,141,592 184,004,105 435,110,151 86,009,630 50,160,580 259,912,690 3,559,684 511,733,893 1,257,259,406 356,557,117 - - 84,961,599 11,964,382,521 14,025,193,011

Cost of sale (8,807,256,644) (9,154,625,968) (328,386,328) (433,494,841) (30,311,340) (6,088,579) (220,389,347) (2,271,454) (228,700,281) (1,228,638,344) (255,996,571) - - (77,159,307) (9,871,040,510) (10,902,278,493)

Other operating income 33,760,744 62,633,201 6,337,363 6,876,456 32,924 59,603 - 9,818 236,639,900 55,225,585 505,000 - 78,436 103,422,156 277,354,367 228,226,819

Administrative expenses (752,107,532) (755,352,144) (86,387,433) (74,911,411) (62,797,355) (21,240,275) (36,477,494) (5,610,917) (194,334,634) (195,754,201) (48,806,077) - (281,281,315) (221,947,554) (1,462,191,839) (1,274,816,501)

Selling & distribution cost (25,774,651) (87,845,796) (7,026,238) (5,178,809) (5,094,616) (2,708,577) (1,284,700) (414,326) (1,472,060) (1,794,054) (16,214,012) - (13,918,635) (10,093,332) (70,784,912) (108,034,895)

Segment results 1,014,787,005 2,258,950,885 (231,458,531) (71,598,455) (12,160,757) 20,182,752 1,761,149 (4,727,194) 323,866,818 (113,701,609) 36,045,457 - (295,121,513) (120,816,438) 837,719,626 1,968,289,941

Finance cost (740,649,235) (445,999,623) (34,602,377) (28,158,275) (279,641) (39,370) (6,526,087) - (87,780,259) (126,562,470) (5,107,660) - (224,553,130) (64,512,269) (1,099,498,389) (665,272,008)

Finance income 127,161,521 83,546,772 6,500,870 8,543,805 1,463,519 353,394 356,597 95,340 8,103,907 20,033,753 257,162 - 55,984,150 5,444,270 199,827,727 118,017,335

Net Financing (cost)/income (613,487,713) (362,452,851) (28,101,507) (19,614,470) 1,183,878 314,023 (6,169,489) 95,340 (79,676,352) (106,528,717) (4,850,498) - (168,568,980) (59,067,999) (899,670,663) (547,254,673)

Profit/(loss) before tax 401,299,291 1,896,498,034 (259,560,038) (91,212,925) (10,976,879) 20,496,776 (4,408,341) (4,631,854) 244,190,465 (220,230,325) 31,194,959 - (463,690,493) (179,884,436) (61,951,035) 1,421,035,269

Tax expense (38,784,911) (243,202,288) (1,396,324) (3,709,815) (703,014) (1,336,534) - 820,093 (4,772,616) (8,465,918) - - (13,765,776) (57,872,137) (59,422,642) (313,766,598)

Profit/(loss) for the year 362,514,380 1,653,295,746 (260,956,362) (94,922,740) (11,679,894) 19,160,242 (4,408,341) (3,811,761) 239,417,849 (228,696,243) 31,194,959 - (477,456,270) (237,756,573) (121,373,678) 1,107,268,669

Segment assets 19,281,068,899 14,122,665,455 838,887,016 745,654,412 492,827,099 150,121,222 328,596,238 12,081,602 4,023,405,669 3,812,262,535 2,368,931,191 2,198,235,776 1,129,927,778 702,691,202 28,463,643,890 21,743,712,204

Goodwill on consolidation - - - - - - - - - - - - - - 539,403,520 511,858,012

Total assets 19,281,068,899 14,122,665,455 838,887,016 745,654,412 492,827,099 150,121,222 328,596,238 12,081,602 4,023,405,669 3,812,262,535 2,368,931,191 2,198,235,776 1,129,927,778 702,691,202 29,003,047,410 22,255,570,215

Segment liabilities 14,366,655,775 9,882,550,257 541,833,617 505,780,915 12,999,731 2,521,247 327,396,873 816,929 659,503,452 1,129,003,460 229,928,675 109,317,364 4,223,546,104 1,855,296,114 20,361,864,228 13,485,286,286

Total liabilities 14,366,655,775 9,882,550,257 541,833,617 505,780,915 12,999,731 2,521,247 327,396,873 816,929 659,503,452 1,129,003,460 229,928,675 109,317,364 4,223,546,104 1,855,296,114 20,361,864,228 13,485,286,286

MTD WALKERS PLC188



Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

27 OTHER OPERATING INCOMEInsurance claim - 9,603 - - Profit on sale of property, plant & equipment 20,066,717 2,366,005 - - Creditors & customers advances written back - 9,818 - - Sundry income 19,031,608 10,014,491 78,436 500 Sludge income 485,780 8,643,649 - - Dividend income 485,897 1,252,157 43,450,847 89,785,610 Exchange gain 237,284,364 205,931,096 - 103,083,437

277,354,366 228,226,819 43,529,283 192,869,547

28 FINANCE COSTInterest expense on loans & borrowings 408,602,607 288,070,946 33,025,560 31,044,389 Interest expense on overdrafts 418,582,668 262,110,941 8,754,021 789,483 Finance charges on lease liabilities 53,334,459 77,700,510 1,893,363 1,401,309 Default interest on leases & loans 33,742,258 2,772,163 129,386 502,997 Interest on MTD Capital Bhd loans 33,469,912 34,617,448 27,544,174 29,963,065 Interest on debentures 151,766,485 - 151,766,485 -

1,099,498,389 665,272,008 223,112,989 63,701,243

29 FINANCE INCOMEInterest income on fixed deposits and Savings Deposits 155,983,296 117,009,833 19,458,455 5,256,795 Net gain on financial assets at fair value through profit or loss 43,844,431 1,007,502 36,316,732 121,178 Interest income on related parties loan - - 56,177,679 56,359,253

199,827,727 118,017,335 111,952,866 61,737,226

30 PROFIT/(LOSS) FROM OPERATING ACTIVITIES Stated after charging /( crediting)Included in administration expensesAuditors' remuneration - Statutory audit fees 4,235,000 4,768,744 316,250 750,000 - Audit related fees 1,055,632 2,029,524 592,285 690,856 Directors fees 31,939,981 45,701,199 5,900,000 25,077,303 Depreciation 897,997,180 651,606,581 17,541,081 9,282,105 Employee benefits including the following - Defined contribution plan costs - EPF & ETF 113,064,679 77,547,398 9,967,241 7,185,748 - Defined benefit plan costs - Gratuity 20,556,204 16,318,054 2,197,420 2,237,316 - Other staff costs 1,327,328,522 1,086,986,284 70,478,165 50,024,688 Bonus 21,500,531 23,490,749 5,448,898 7,636,887 Donation 3,975,715 4,399,547 576,724 206,000 EPF/ETF surcharge 219,651 856,764 - - Penalty & surcharge 561,782 2,819,647 - - Legal fee 17,838,709 5,985,893 2,923,201 1,658,452 Professional fees 10,752,743 1,438,840 - - Advertising 10,713,107 4,043,133 1,594,052 3,899,281 Business promotion 30,841,322 15,547,709 - - Impairment for debtors 331,401,555 167,446,670 - - Bad debt written off 677,855 57,402,497 - -



Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

31 TAX EXPENSEThe major components of income tax expense for the year ended 31st March are as follows :Income statementCurrent income taxCurrent income tax expense on ordinary activities for the year (Note 31.1) 62,647,723 276,917,521 13,765,776 62,515,628

Under/(over) provision of current taxes in respect of prior years 267,306 31,960,334 - - Tax on intercompany dividend income 4,827,872 1,200,000 - -

67,742,901 310,077,855 13,765,776 62,515,628 Deferred income tax Deferred taxation charge/(reversal) ( Note 20) (8,320,258) 3,688,744 - - Income tax expense reported in the income statement 59,422,643 313,766,599 13,765,776 62,515,628

31.1 A reconciliation between tax expenses and the product of accounting profit multiplied by the applicable tax rates is as follows:

Group Company

2016 2015 2016 2015

LKR LKR LKR LKR

Accounting profit/(loss) before income tax (61,951,036) 1,421,035,268 (215,492,308) 375,958,448 Income not form a part of trade or business (455,511,770) (378,905,142) (75,636,134) (164,699,485)Add: Aggregate disallowable items 1,722,230,484 1,440,710,028 42,972,931 79,099,625 Less: Aggregate allowable items (1,627,506,313) (1,461,585,876) (17,619,810) (8,482,175)Less: Tax exempt profit (409,582,284) (192,820,987) - - Total tax loss of subsidiaries 851,059,013 839,009,264 - - Taxable profit/(loss) from business 18,738,094 1,667,442,555 (265,775,321) 281,876,413

Taxable other income 237,167,829 193,621,350 75,636,134 61,616,048

Total Statutory Income 255,905,923 1,861,063,905 75,636,134 343,492,461 Tax losses (limited to 35 % of the statutory income) (30,568,689) (129,922,523) (26,472,647) (120,222,362)Taxable Income 225,337,234 1,731,141,383 49,163,487 223,270,100

Taxable Income

of which, - Taxable income at 10% - 13,365,337 - - - Taxable income from construction at 12% 2,791,893 1,283,726,909 - - - Taxable income other than construction at 28% 222,545,341 434,049,137 49,163,487 223,270,100

225,337,234 1,731,141,383 49,163,487 223,270,100 Income tax provision for the year is made up of the following: - Income tax at 10% - 1,336,534 - - - Income tax at 12% 335,027 154,047,229 - - - Income tax at 28% 62,312,696 121,533,758 13,765,776 62,515,628 Current income tax expense 62,647,723 276,917,521 13,765,776 62,515,628

31.2 Tax Losses

Tax losses brought forward 2,769,519,775 2,060,433,034 20,460,552 140,682,914 Tax losses for the year 851,059,013 839,009,264 265,775,321 - Tax losses set off against taxable profit (30,568,689) (129,922,523) (26,472,647) (120,222,362)Carried forward tax losses 3,590,010,099 2,769,519,775 259,763,226 20,460,552

MTD WALKERS PLC190



32 EARNINGS/(LOSS) PER SHARE

32.1 Basic earnings/(loss) per share is calculated by dividing the net profit/(loss) for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

32.2 The following reflects the income and share data used in the basic earnings/(loss) per share computation.

Group Company

2016 2015 2016 2015

Amounts Used as Numerator: LKR LKR LKR LKR

Net profit/(loss) for the year attributable to the owners of the parent (327,261,883) 765,750,374 (229,258,084) 313,442,820

Group Company 2016 2015 2016 2015

Numbers of ordinary shares used as denominator: Number Number Number Number

Weighted average number of ordinary shares in issue applicable to basic earnings per share 167,647,568 128,245,450 167,647,568 128,245,450

Basic earning/(loss) per share (LKR) (1.95) 5.97 (1.37) 2.44

32.3 There were no potentially dilutive ordinary shares outstanding at any time during the year.



33 ASSETS PLEDGED

Lender Approved Facility Repayment Terms Security Included under

2016 2015

LKR LKR

CML-MTD CONSTRUCTION LIMITED

People's Bank 4.4 Bn 4.28 Bn Revolving Facilities Mortgage over Machinery and Vehicle amounting to LKR 600 Mn


Fixed Deposits amounting to LKR 535.5 Mn

Other current financial assets

National Development Bank PLC

3.05 Bn 2.99 Bn Revolving Facilities Fixed Deposits amounting to LKR 114.20 Mn


Mortgage over Machinery and Vehicle amounting to LKR 95.0 Mn and Corporate Guarantee from MTD Walkers PLC


Hatton National Bank PLC

2.5 Bn 2.50 Bn One off Facilities Fixed Deposits amounting to LKR 224.16 Mn


Mortgage over Machinery and Vehicle amounting to LKR 155.81 Mn


Seylan Bank PLC 1442 Mn 788.38 Mn

Revolving Facilities Fixed Deposits amounting to LKR 72.4 Mn


Primary mortgage for LKR 20 Mn and secondary mortgage for 60 Mn over property at Dambugahawatte, Heiyantuduwa


Sampath Bank PLC 1.27 Bn 1.27 Bn Revolving Facilities Fixed Deposits amounting to LKR 107.3 Mn


Corporate Guarantee from MTD Walkers PLC

Amana Bank PLC 9.2 Mn 8.48 Mn 36 equal monthly instalments commencing from October 2014

Mortgage over machinery Property, plant and equipment

Nations Trust Bank PLC 9.8 Mn 9.8 Mn 36 equal monthly instalments commencing from March 2014

Mortgage over machinery Property, plant and equipment

DFCC Vardhana Bank PLC

560 Mn 560 Mn Revolving Facilities Fixed Deposits amounting to LKR 10.5 Mn


MTD WALKERS PLC

Peoples's Bank 4.5 Mn 4.5 Mn Revolving and renewed annually

Fixed Deposits amounting to LKR 6 Mn


NORTHERN POWER COMPANY (PVT) LTD

Union Bank of Colombo PLC

25 Mn 25 Mn On demand Primary floating mortgage over leasehold land and building

Financial lease receivable

MTD WALKERS PLC192


33 ASSETS PLEDGED (CONTD.)


2016 2015

LKR LKR

WALKER SONS & COMPANY ENGINEERS (PVT) LTD

People's Bank 5 Mn 5 Mn Revolving and renewed annually

Primary mortgage over property at Siyambalape, Sapugaskanda

Property, plant & equipment

People's Bank 25 Mn 25 Mn 90 days Fixed Deposits of LKR 40 Mn of MTD Walkers PLC

Other current financial assets included under MTD Walkers PLC

People's Bank 100 Mn 100 Mn Revolving and renewed annually

Secondary mortgage over land at 18, St. Michael's Road, Colombo 3

Property, plant & equipments included under Walker Sons & Company Limited

People's Bank 10 Mn 10 Mn 120 days Primary mortgage over property at Siyambalape, Sapugaskanda


People's Bank 32.4 Mn 32.4 Mn On demand Fixed Deposits amounting to LKR 20.9 Mn


Commercial Bank PLC

0.4 Mn 0.4 Mn Revolving and renewed annually

Fixed Deposits amounting to LKR 471,947


Bank of Ceylon 50 Mn 50 Mn Revolving and renewed annually

Fixed Deposits amounting to LKR 50 Mn


Bank of Ceylon 10.9 Mn 10.9 Mn One off facility Cash Margin amounting to LKR 2.8 Mn Other current financial assets

MBSL 100 Mn 100 Mn One off Facility Mortgage over Piling Machine amounting to LKR 55 Mn

Property, plant & equipment included under Walkers Piling (Pvt) Ltd

WALKERS PILING (PVT) LTD

People's Bank 80 Mn 80 Mn 48 Monthly Instalment Primary mortgage over Piling Machine

and Corporate Guarantee of MTD Walkers PLC


People's Bank 13.7 Mn 13.7 Mn 120 days - 360 days Mortgage over land at 18A, St. Michael's Road, Colombo 03 and Corporate Guarantee of MTD Walkers PLC

Property, plant & equipment included under Walker Sons & Company Limited

People's Bank 250 Mn Nil 48 Monthly Instalment Primary mortgage over Piling Machine

and Corporate Guarantee of MTD Walkers PLC


People's Bank 75 Mn Nil 36 Monthly Instalment Mortgage over land at 18A, St. Michael's Road, Colombo 03 and Corporate Guarantee of MTD Walkers PLC


People's Bank 25 Mn 10 Mn On Demand Mortgage over land at 18A, St. Michael's Road, Colombo 03 and Corporate Guarantee of MTD Walkers PLC


Cargills Bank 50 Mn 50 Mn On Demand Corporate Guarantee of MTD Walkers PLC

-

Hatton National

Bank PLC

50 Mn 50 Mn On Demand Corporate Guarantee of MTD Walkers PLC

-

National

Development Bank PLC

115 Mn 115 Mn On Demand Corporate Guarantee of MTD Walkers PLC

-





2016 2015

LKR LKR


82.5 Mn 82.5 Mn 60 Monthly Instalment Primary mortgage over Casagrande Machine and a Corporate Guarantee of MTD Walkers PLC



67.5 Mn 67.5 Mn 60 Monthly Instalment Primary Mortgage over Sany 280 RD Machine and a Corporate Guarantee of MTD Walkers PLC


National Development

Bank PLC

160 Mn 160 Mn 48 Monthly Instalment Primary mortgage over BG 25 Machine and Corporate Guarantee of MTD Walkers PLC



90 Mn 90 Mn 48 Monthly Instalment Primary mortgage over Sany 280 R II Machine and Corporate Guarantee of MTD Walkers PLC



190 Mn 190 Mn 48 Monthly Instalment Primary mortgage over Ancillary Equipment and Corporate Guarantee of MTD Walkers PLC


National

Development Bank PLC

70 Mn 70 Mn 60 Monthly Instalment Primary Mortgage over Crane & Pile Breaking Machine and Corporate Guarantee of MTD Walkers PLC


WESTERN AIRDUCTS LANKA (PVT) LTD


10 Mn 10 Mn Revolving and renewed annually

Primary mortgage over inventory Inventory


32.5 Mn 32.5 Mn Revolving and renewed annually

Primary mortgage over Plant & Machinery held within the factory

premises at Mahena Road, Siyambalape, Sapugaskanda



24 Mn 24 Mn Revolving and renewed annually

Primary mortgage over Property at Mahena Road, Siyabalape, Sapugaskanda



2.65 Mn 2.65 Mn On demand Fixed Deposits amounting to LKR 2.65 Mn


MTD WALKERS PLC194



33 ASSETS PLEDGED (CONTD.)


2016 2015

LKR LKR

CML-MTD JOINT VENTURE LIMITEDHatton National Bank PLC

4.4 Mn 4.4 Mn 30 equal monthly instalments commencing from January 2015

Mortgage over Machinery Property, plant and equipment


43.3 Mn 43.3 Mn 30 equal monthly instalments commencing from January 2015



20.25 Mn 20.25 Mn 30 equal monthly instalments commencing from June 2015



16.2 Mn 16.2 Mn 30 equal monthly instalments commencing from October 2014



29.7 Mn 29.7 Mn 120 day equal monthly instalments commencing from February 2015



117 Mn 117 Mn 30 equal monthly instalments commencing from January 2015



9.3 Mn - 60 equal monthly instalments commencing from January 2015



55 Mn - 60 equal monthly instalments commencing from May 2015



60.16 Mn - 60 equal monthly instalments commencing from June 2015



35.51 Mn - 30 equal monthly instalments commencing from August 2015






8 Mn - 60 equal monthly instalments commencing from August 2015



30 Mn - 60 equal monthly instalments commencing from August 2015






10.2 Mn - 60 equal monthly instalments commencing from October 2015



39.43 Mn - 60 equal monthly instalments commencing from November 2015



14.24 Mn - 60 equal monthly instalments commencing from December 2015



35 Mn - 60 equal monthly instalments commencing from December 2015









32.85 Mn - 60 equal monthly instalments commencing from April 2016



50.24 Mn

- 60 equal monthly instalments commencing from April 2016



528 Mn 450 Mn Revolving facilities Fixed Deposits against OD amounting to LKR 529.25 Mn


EXIM Bank 1,118.2 Mn

- Loan facility Corporate Guarantee given by CML-MTD Construction Ltd & MTD Capital Bhd - Promissory Note (65% from the contract proceed LKR 3,693,397,500)

N/A



34 COMMITMENTS & CONTINGENCIES

34.1 Capital Expenditure Commitments The Company and Group do not have significant capital commitments as at the reporting date.

34.2 Contingenciesa) Lawsuits

The Group is the plaintiff/defendant in lawsuits filed in respect of the followings:

Company Type of Cases Name / Institution Case No.

Northern Power Company (Pvt) Ltd Revision for Mallakam MC Order 11 Individuals in Chunakam East (Jaffna)

Court of Appeal Case CA/PHC/APN/29/2015

Northern Power Company (Pvt) Ltd Revision for Mallakam MC Order Supreme Court CaseSCFR/141/2015

Walker Sons & Company Ltd Ownership of Land MMA Izadeen 60/2014/HC/Badulla

Walker Sons & Company Ltd Non payment of gratuity and EPF Mr. L.J.K Hettiarachchi and H.G Fonseka

CA/WAIT/280/2012

Western Airducts Lanka (Pvt) Ltd Ownership of Land - Cemetery Mr. Hettiarrchchige Don Amaradasa

592/L (Gampaha)

CML-MTD Constructions Ltd Breach of contract Mr. Upul Premajayantha 13596/M (Kurunagala)

Although, there can be no assurance, the directors believe, based on the information currently available, that the ultimate resolution of such legal procedures would not likely have a material adverse affect on the results of operations, financial position or liquidity of the company. Accordingly no provision for any liability has been made in the financial statements, nor has any liability been determined by the ongoing legal cases, as at 31st March 2016.

MTD WALKERS PLC196



34 COMMITMENTS & CONTINGENCIES (CONTD.)

34.2 Contingencies

b) Bank and Corporate Guarantees

The Group had given bank & corporate guarantees to its client where contracts are in progress. Based on the information currently available, The directors do not expect a liability to arise from these Guarantees.

2016 2015

LKR LKR

Bank GuaranteesPeople's Bank 2,200,086,788 1,086,832,005 Seylan Bank PLC 537,629,176 403,777,957 Nations Trust Bank PLC - 69,650,000 DFCC Vardhana Bank PLC - 5,350,000 Hatton National Bank PLC 1,046,174,210 1,508,511,125 National Development Bank PLC 521,682,490 1,547,929,051 Bank of Ceylon 424,415,045 57,640,231 Sampath Bank PLC 178,586,401 426,651,674

4,908,574,110 5,106,342,043

Corporate GuaranteesWalkers Piling (Pvt) Ltd 2,886,000,000 1,708,000,000 Walkers Sons and Company Engineers (Pvt) Ltd 300,000,000 300,000,000 CML-MTD Construction Ltd 4,437,200,000 3,505,000,000 Northern Power Company (Pvt) Ltd 739,645,000 839,645,000 Western Airducts Lanka (Pvt) Ltd 27,500,000 27,500,000 Walkers Equipment Limited 480,000,000 -Walkers Colombo Ship Yard (Pvt) Ltd 340,000,000 -

9,210,345,000 6,380,145,000

c) Employees’ Provident Fund & Employees’ Trust FundWhere ever foreseeable the company has made adequate provision for unpaid EPF & ETF liabilities as at the financial year end on all group companies. As per the information currently available with the company, no evidence has emerged for us to believe that further provisions are necessary for additional surcharge/levies for the non-payment of such dues as the management is of the view that provisioning has been made for any future liability that may crystallize on the same.

35 EVENTS AFTER THE REPORTING PERIODThere have been no material events occurred after the reporting date that require adjustments to or disclosure.



36 MATERIAL PARTLY-OWNED SUBSIDIARIES

Summarised Statement of Income

2016 2015

CML- MTD CML- MTD Walkers CML- MTD CML- MTD Walkers

ConstructionLimited

Joint VentureLimited

Equipment Limited

Construction Limited

Joint Venture Limited

Equipment Limited


Revenue 7,415,003,023 1,969,611,174 338,896,514 10,637,535,796 1,071,344,586 1,870,697 Cost of sales (6,324,795,885) (1,446,292,513) (298,399,837) (8,287,554,928) (861,095,988) (871,072)Administrative expenses (623,860,816) (46,452,676) (32,449,550) (722,667,284) (15,376,292) (3,983,802)Finance costs (533,111,711) (111,224,212) (6,526,087) (375,594,442) (26,085,564) - Profit/(loss) before tax 46,978,996 406,038,096 730,683 1,314,886,994 192,820,987 (3,039,482)Income tax (36,922,016) (11,666,034) - (205,689,878) (6,729,589) 837,445 Profit/(loss) for the year 10,056,981 394,283,451 730,683 1,109,197,116 186,091,398 (2,202,037)Total comprehensive income 13,464,079 394,372,062 730,683 1,210,699,902 186,091,398 (2,202,037)Dividends paid to non-controlling interests (13,152,403) - - (21,482,294) - -

Summarised Statement of Financial Position

2016 2015


ConstructionLimited


Equipment Limited



Equipment Limited


Current Assets 11,982,243,833 1,718,171,884 359,934,547 8,961,327,449 679,120,445 8,666,023 Non-Current Assets 2,386,698,605 1,482,864,608 1,478,048 2,218,742,780 817,425,202 1,235,813 Current Liabilities (10,192,674,752) (1,105,088,094) (353,028,561) (7,000,166,261) (1,191,931,614) (12,103,723)Non-Current Liabilities (1,321,812,509) (1,515,484,437) - (1,277,481,751) (118,522,134) - Total Equity 2,854,455,177 580,463,960 8,384,034 2,902,422,217 186,091,899 (2,201,887)

Summarised Cash Flow Information

2016 2015


ConstructionLimited


Equipment Limited



Equipment Limited


Operating (1,270,669,310) (679,053,207) (76,024,462) (156,028,758) (131,778,853) 4,583,917Investing (640,025,129) (712,360,281) (45,368,440) (887,297,139) (805,867,228) (407,936)Financing (5,897,361,788) 1,500,778,115 70,417,777 476,447,055 211,237,377 -Net increase / (decrease) in cash and cash equivalents (7,808,056,227) 109,364,627 (50,975,125) (566,878,843) (726,408,704) 4,175,981

MTD WALKERS PLC198


37 RELATED PARTY DISCLOSURES

Details of significant related party disclosures are as follows:

37.1 Transaction with the Related Entities

Parent Company Subsidiary Companies Other Companies Total

2016 2015 2016 2015 2016 2015 2016 2015

Nature of Transaction LKR LKR LKR LKR LKR LKR LKR LKR

As at 01st April (1,074,969,900) (1,143,656,472) 1,902,138,598 1,367,455,366 - 2,649,484 827,168,698 226,448,377

Reimbursement of expenses (11,473,895) (10,804,901) 31,235,128 9,265,483 - - 19,761,233 (1,539,418)

Interest paid (31,202,951) (34,617,418) - - - - (31,202,951) (34,617,418)

Interest received - - 56,177,679 - - - 56,177,679 -

Loan received - - - 56,359,254 - - - 56,359,254

Temporary advance given - - 1,217,225,000 - - - 1,217,225,000 -

Temporary advance settled - - (69,315,000) 597,500,000 - - (69,315,000) 597,500,000

Settlement of liabilities 38,602,909 - - (393,005,000) - - 38,602,909 (393,005,000)

Acquisition of Subsidiaries - - - - - - - -

Amounts receivable from the Rights Issue - 2,174,270,400 - - - - - 2,174,270,400

Amounts received for the Rights Issue - (2,174,270,445) - - - - - (2,174,270,445)

Transferred to subsidiaries - - - 2,649,484 - (2,649,484) - -

Lease rental paid - - (473,410) (171,679) - - (473,410) (171,679)

Settlement of directors current account - 8,125,077 - - - 8,125,077 -

Temporary advance received - - - 264,982,143 - - - 264,982,143

Projects Commission charged - - 20,921,618 - - - 20,921,618

Management fees receivable - 148,300,826 - - - 148,300,826 -

Gratuity paid - - - (4,818,072) - - - (4,818,072)

PLC Expenses reimbursed by subsidiaries - - (17,606,311) - - - (17,606,311) -

Funds received for Management fees & interest - - (105,446,336) (19,000,000) - - (105,446,336) (19,000,000)

Exchange loss (25,762,615) 114,108,936 - - - - (25,762,615) 114,108,936

As at 31st March (1,104,806,452) (1,074,969,900) 3,170,361,250 1,902,138,598 - - 2,065,554,798 827,168,698

Included in

Related party - Loans payable (586,879,286) (579,093,878) - - - - (586,879,286) (579,093,878)

Related party - Loans receivables - - 1,120,685,083 1,127,185,083 - - 1,120,685,083 1,127,185,083

Amount due to related Party (517,927,166) (495,876,022) - - - - (517,927,166) (495,876,022)

Amount due from Related Party - - 2,049,676,167 774,953,515 - - 2,049,676,167 774,953,515

(1,104,806,452) (1,074,969,900) 3,170,361,250 1,902,138,598 - - 2,065,554,798 827,168,698

Parent: MTD Capital BhdSubsidiaries: Walker Sons & Company Ltd, Walker Sons & Company Engineers (Pvt) Ltd, MTD Walkers Infracon Ltd, Walkers Piling (Pvt) Ltd, MTD Walkers Projects Ltd, CML-MTD Construction Ltd, CML-MTD Joint Venture Limited, Special Projects Company (Pvt) Ltd, Colombo Engineering Services (Pvt) Ltd, Northern Power Company (Pvt) Ltd, Western Airducts Lanka (Pvt) Ltd, Walkers Equipment Limited, Walkers CML Properties (Pvt) Ltd [Formerly known as Wincon Development Ceylon (Pvt) Ltd] and Walkers Colombo Shipyard (Pvt) Ltd.




37.2 Transactions with Key Management Personnel of the Company

Key management personnel include members of the Board of Directors of MTD Walkers PLC and its subsidiary companies.

Group Company

2016 2015 2016 2015

a) Key Management Personnel Compensation LKR LKR LKR LKR

Short-term employee benefits 31,939,981 45,701,199 5,900,000 25,077,303 31,939,981 45,701,199 5,900,000 25,077,303

Capital Interest

2016 2015 2016 2015

) Other Transactions with Key Management Personnel LKR LKR LKR LKR

Mr. J P Amaratunga (11,578,363) (8,010,884) - - (11,578,363) (8,010,884) - -

37.3 There are no related party transactions other than those disclosed in Notes 13,18,24 & 37 to the financial statements.

MTD WALKERS PLC200



38 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Financial risk management objectives and policiesThe Group’s principal financial liabilities comprise short and long term borrowings, trade and other payables, and trade and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds fair value through profit or loss investments.

The Group is exposed to market risk, credit risk and liquidity risk.

The Board of Directors and Group’s senior management oversees the management of these risks, reviews and agrees policies for managing each of these risks, which are summarized below.

Market RiskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: finance rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include: loans and borrowings, deposits and fair value through profit or loss investments.

Finance Rate RiskFinance rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating rates. The rates applied to Groups short term borrowings are fixed periodically. The Group manages its finance rate risk by aggressively negotiating rates for short and long term borrowings and having a portfolio of facilities from various financial institutions which gives avenues use the facility based on competitive rates.

Foreign Currency RiskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.

The Group manages its foreign currency risk by having a balance of receivables and payables which enables a natural hedging & through leading and lagging of transactions.

Equity Price RiskThe Group’s listed and non listed equity securities are susceptible to market-price risk arising from uncertainties about future values of the investment securities.

At the reporting date, the Group exposure to quoted equity securities at market value was LKR 3,946,289/-. A decrease in comparison to the previous financial year where the market value stood at LKR 4,519,237/-.

At the reporting date, the Group exposure to non-quoted equity securities at carrying value was LKR 260,370/-. This is the exact carrying value which was held in 2015 for LKR 260,370/-.

Credit RiskCredit risk is the risk that counter-party will not meet its obligations under a financial instrument or customer contract leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.



Trade and Other ReceivableCustomer credit risk is managed by each business unit subject to the Group’s established policies, procedures and controls relating to customer credit risk management.

Liquidity riskThe Group manages liquidity risk exposure through effective working capital management. The Group also has planning guidelines in place to ensure that the short term and medium term liquidity is managed at acceptable levels.

The table below summarises the maturity profile of Group’s financial liabilities based on contractual payments.

Year ended 31st March 2016 Less than 1 year Above 1 year Total

LKR LKR LKR

Bank financing 7,629,718,062 2,830,555,098 10,460,273,161 Finance leases 263,711,011 197,380,745 461,091,756 Trade and other payables 5,013,719,757 - 5,013,719,757

MTD WALKERS PLC202

Supplementary Information

Share Information 204-206Quarterly Analysis 207-208Decade at a Glance 209Assurance Statement on Non-Financial Information 210-212GRI G4 Content Index 213-215Group Directory 216-217Circular to Shareholders 218Notice of Meeting 219Form of Proxy 221-222Corporate Information IBC


We’re pursuing our vision of continuous improvement into the years ahead

MTD WALKERS PLC204

Share Information

Share Information at a Glance

Total Shares Issued as at

31st March 2016 167,647,568

Public Shareholding as at

31st March 2016 9.2 percent

Stock Ticker KAPI.N0000

The following information is a summary of the market conditions during the year under review. The section will include a discussion based on MTD Walkers PLC’s (MTDW) share related information.

Market review for Financial Year 2015/16

The All Share Price Index (ASPI) of the Colombo Stock Exchange (CSE) closed at 6,071.8 points, decreasing by 11.0 percent in comparison to 31st March 2015. The Standard & Poor SL20 Index (S&P SL20), which represents the 20 largest companies by market capitalisation and liquidity, dropped by 16.8 percent over the financial year closing at 3,204.4 points.

The CSE lost LKR 305.0 billion in capitalisation during the year as investor

confidence continued to remain low as a result of a lack of policy clarity on key economic topics by the Government. The macroeconomic indicators of Sri Lanka were further affected as the country’s sovereign credit rating was downgraded to B+ with a negative outlook by Fitch Ratings in February 2016. The downgrade in credit rating coupled with a hike in interest rates and rising inflation saw both foreign and local investors opting to stay out of the market amid heavy selling pressure.

Foreign participation in the equity market dropped during the year, as the CSE recorded a foreign outflow of LKR 6.41 billion during the year (2014/15 : LKR 31.2 billion inflow). Market activity also saw a sharp decrease as the average daily market turnover dropped by 35.5 percent to LKR 954 million.

MTD Walkers PLC Share

The share price of MTD Walkers PLC dropped by 28.2 percent during the year under review as investor sentiment in the construction sector eroded due to the sustained delay in commencing large scale infrastructure projects, and the overall adverse market conditions which further resulted in a drop in the Group’s performance. The share price ranged from LKR 25.0 to LKR 64.8 during the year, before closing at LKR 33.3 as at 31st March 2016.

Employee Share Option Plan

The Group announced an Employee Share Option Plan (ESOP) during the year under review amounting to 3.0 percent of the issued shares of MTD Walkers PLC. No ESOPs were exercised during the year, while, out of the 5,029,427 unexercised ESOPs, 1,508,828 are eligible for immediate exercise.

Year of Vesting

Category of Employee Total Options Exercised

Price Expiry

Senior Management

Middle Management Executives

2015/16 540,160 492,180 476,488 1,508,828 0 53.7 Jul-20

2016/17 540,160 492,180 476,488 1,508,828 N/A 53.7 Jul-20

2017/18 360,107 328,120 317,659 1,005,886 N/A 53.7 Jul-20

2018/19 360,107 328,120 317,658 1,005,885 N/A 53.7 Jul-20

Total 1,800,534 1,640,600 1,588,293 5,029,427

Earnings per Share

The Earnings per Share (EPS) for the period under review reduced by 133.0 percent to LKR (2.0) (FY2014/15 : LKR 6.0). This drop is attributable due to above mentioned reasons and the reduction in the Group’s growth in revenue and overall profitability.

Price to Book Value and Net Asset Value per Share

The Price to Book Value (PBV) of the Group stood at 0.7x as at 31st March 2016 decreasing from 1.0x last year due to the contraction in the Group’s performance and adverse market conditions that prevailed during the year.

Further, Net Asset Value per Share attributable to equity holders of the Group dropped by 1.0 percent Year on Year to LKR 46.1 in comparison to LKR 48.0 last year.


20 MAJOR SHAREHOLDERS

Name of Shareholder 31st March 2016 31st March 2015

No. of shares % No. of shares %

1 MTD Capital Bhd 152,183,583 90.8 152,183,583 90.8

2 Elgin Investments Limited 644,777 0.4 - -

3 Standard Chartered Bank Singapore S/A HL Bank Singapore Branch 591,091 0.4 591,091 0.4

4 Rubber Investment Trust Limited A/C No. 01 428,242 0.3 - -

5 Sandwave Limited 344,335 0.2 504,860 0.3

6 Ceylon Investment PLC A/C No.01 320,104 0.2 - -

7 Mr Hamish Winston Mcdonald Woodward 314,000 0.2 314,000 0.2

8 Mr Hans Anton Van Starrex 274,366 0.2 756,488 0.5

9 Deutsche Bank AG As Trustee to Capital Alliance Quantitative Equity Fund 239,300 0.1 - -

10 Dr Sena Yaddehige 237,480 0.1 - -

11 Waldock Mackenzie Limited / HI-Line Trading (Private) Limited 231,177 0.1 - -

12 First Capital Limited 226,242 0.1 - -

13 Mrs Palamandadige Anoma Sandhayani Amaratunga 214,153 0.1 214,153 0.1

14 Mr Abbasally Nuruddin Esufally 203,000 0.1 - -

15 National Development Bank of Sri Lanka Limited A/C No. 2 200,494 0.1 - -

16 Guardian Fund Management Limited / The Aitken Spence and Associated Companies Executive Staff Provident Fund 184,000 0.1 - -

17 Sezeka Limited 181,928 0.1 - -

18 Deutsche Bank AG As Trustee for Guardian Acuity Equity Fund 174,074 0.1 - -

19 Guarian Holdings Limited 150,000 0.1 - -

20 Seylan Bank Limited / Govindasamy Ramanan 150,000 0.1 - -

TOTAL 157,492,346 93.9 154,564,175 92.2

Others 10,155,222 6.0 13,083,393 7.8

Total No. of shares in issue 167,647,568 100.0 167,647,568 100.0

ANALYSIS REPORT OF SHAREHOLDERS

31st March 2016 31st March 2015

No. of Shareholders %

TotalShareholding %


TotalShareholding %

Individual 2,171 92.0 8,182,120 4.9 2,063 93.0 9,777,036 5.8

Institutional 187 8.0 159,465,448 95.1 156 7.0 157,870,532 94.2

TOTAL 2,358 100.0 167,647,568 100.0 2,219 100.0 167,647,568 100.0

Resident 2,327 98.7 12,679,837 8.0 2,191 98.7 13,773,047 8.2

Non-Resident 31 1.3 154,967,731 92.0 28 1.3 153,874,521 91.8

TOTAL 2,358 100.0 167,647,568 100.0 2,219 100.0 167,647,568 100.0

SHAREHOLDERS’ CATEGORISED SUMMARY REPORT

No. of Shares Held 31st March 2016 31st March 2015


TotalShareholding %


TotalShareholding %

1 - 1,000 1,402 59.5 432,610 0.3 1,300 58.6 398,269 0.2

1,001 - 10,000 729 31.0 2,604,190 1.6 689 31.1 2,432,043 1.5

10,001 - 100,000 196 8.3 5,713,890 3.4 205 9.2 5,675,732 3.4

100,001 - 1,000,000 30 1.3 6,713,295 4.0 23 1.0 5,928,217 3.5

1,000,00 1 & Over 1 0.0 152,183,583 90.8 2 0.0 153,213,307 91.4

TOTAL 2,358 100.0 167,647,568 100.0 2,219 100.0 167,647,568 100.0

MTD WALKERS PLC206

ShareInformation

PUBLIC HOLDING

As at 31st March Number of Shares Percent

Public Holding 15,249,832 9.2

MARKET VALUE OF A SHARE FOR THE 12 MONTHS

Ended 31st March 2016 (LKR) 2015 (LKR)

Market Price per Share - Highest 64.8 80.8

Market Price per Share - Lowest 25.0 30.0

Market Price per Share - Closing 33.3 46.4

SHARE TRADING FOR THE 12 MONTHS ENDED

Year Ended 31st March 2016 2015

Number of Transactions 9,974 19,165

Number of Shares Traded 19,960,950 31,419,072

Values of Shares Traded (LKR) 1,092,284,132 1,687,036,940

MTD Walkers PLC's (KAPI) Monthly Movement of Share Price

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Market Movement against MTD Walkers PLC's (KAPI) Shares

LKRIndex

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ASPI KAPI.N0000 S&P SL20


QuarterlyAnalysisBalance Sheet

Quarter 1 Quarter 2 Quarter 3 Quarter 4

As at 30.06.2015

As at 30.09.2015 As at 31.12.2015 As at 31.03.2016

ASSETSNon-current assets

Property, plant & equipment 4,416,406,113 4,574,290,482 4,670,196,090 4,685,889,071

Leasehold property 87,547,955 87,485,589 87,423,222 84,908,562

Intangible asset 533,632,935 533,632,935 533,632,935 622,368,077

Finance lease receivables 2,618,479,483 2,554,115,336 2,455,735,065 2,586,404,142

Other non-current financial assets 523,476,322 529,302,142 552,287,611 928,303,861

8,179,542,808 8,278,826,483 8,299,274,925 8,907,873,713

Current assetsInventories 3,101,078,806 3,128,806,459 3,028,141,665 3,374,645,166

Finance lease receivables 230,868,911 245,925,959 282,129,074 299,818,118

Trade and other receivables 8,326,407,005 10,450,612,151 10,519,725,599 13,344,127,567

Other current assets 501,727,852 551,804,295 730,995,824 744,157,795

Amount due from related parties 2,978,685 - - -

Income tax receivables 10,355,123

Other current financial assets 1,454,068,803 1,483,966,026 3,058,586,539 1,946,804,214

Cash and cash equivalents 211,996,000 3,222,020,464 261,003,919 375,265,714

Total assets 13,829,126,063 19,083,135,353 17,880,582,620 20,095,173,697

22,008,668,871 27,361,961,836 26,179,857,544 29,003,047,410

EQUITY AND LIABILITIESCapital and reserves

Stated capital 6,057,497,739 6,057,497,739 6,057,497,739 6,057,497,739

Capital reserves 379,458,964 379,458,964 379,458,964 378,561,807

Retained earnings 1,469,321,309 1,399,757,852 1,344,210,423 1,285,207,392

Equity attributable to equity holders of parent 7,906,278,012 7,836,714,555 7,781,167,126 7,721,266,938

Minority interest 705,592,803 752,163,450 864,115,289 919,916,244

Total Shareholders' Funds and Minority Interest 8,611,870,816 8,588,878,005 8,645,282,414 8,641,183,182

Non-current liabilities Interest bearing loans & borrowings 2,860,853,023 5,866,399,636 5,832,524,668 6,496,922,598

Other noncurrent Liability 2,300,000 2,300,000 2,300,000 2,300,000

Deferred tax liabilities 114,278,168 114,193,558 114,193,558 105,445,573

Retirement benefit obligations 89,368,780 92,367,704 96,805,779 96,716,520

3,066,799,971 6,075,260,898 6,045,824,005 6,701,384,691

Current liabilities Trade and other payables 3,135,508,883 3,809,427,350 3,546,274,954 5,013,719,757

Other current liabilities 152,119,933 57,651,413 63,237,600 207,281,510

Amounts due to related parties 473,628,792 496,421,483 496,104,661 532,353,650

Interest bearing loans & borrowings 6,281,578,614 8,194,062,182 7,276,544,751 7,779,655,242

Income tax liabilities 287,161,862 140,260,505 106,589,160 127,469,378

10,329,998,084 12,697,822,933 11,488,751,125 13,660,479,537

Total equity and liabilities 22,008,668,871 27,361,961,836 26,179,857,544 29,003,047,410

MTD WALKERS PLC208

QuarterlyAnalysis

Income Statement Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Apr -June 15 July- Sep 15 Oct-Dec 15 Jan-Mar 16 Apr -Mar 16

Revenue 2,220,730,859 2,225,774,090 2,746,908,332 4,770,969,241 11,964,382,521

Cost of Sales (1,975,505,874) (1,784,539,716) (2,070,923,460) (4,040,071,460) (9,871,040,510)

Gross Profit 245,224,984 441,234,374 675,984,872 730,897,782 2,093,342,012

Other Income 9,063,278 5,036,914 18,182,658 245,071,517 277,354,366

Administrative Expenses (197,432,084) (230,633,193) (334,651,859) (699,474,702) (1,462,191,839)

Sales Expenses (10,754,905) (38,752,126) (28,494,006) 7,216,125 (70,784,912)

Profit/(Loss) from Operating Activities 46,101,273 176,885,968 331,021,666 283,710,721 837,719,628

Finance Cost (217,993,592) (227,823,408) (304,216,521) (349,464,867) (1,099,498,389)

Finance Income 21,216,677 39,155,605 39,828,340 99,627,105 199,827,727

Net Finance Income (196,776,915) (188,667,803) (264,388,181) (249,837,762) (899,670,663)

Profit/(Loss) Before Tax (150,675,642) (11,781,835) 66,633,484 33,872,959 (61,951,035)

Less: Income Tax Expenses 7,737,471 11,210,975 10,229,075 (88,600,163) (59,422,643)

Profit/(Loss) for the period (158,413,113) (22,992,810) 56,404,409 3,627,836 (121,373,678)


Decadeat a GlanceLKR in 000s 31 March

200731 March

200831 March

200931 March

201031 March

201131 March

201231 March

201331 March

201431 March

201531 March

2016

Operating results

Group revenue 162,519 154,475 1,476,056 1,933,584 2,769,685 5,853,313 7,389,640 10,092,371 14,025,193 11,964,383

EBIT (27,891) 9,022 93,923 119,197 (23,796) 675,214 1,072,714 1,335,777 1,968,290 837,720

Net finance cost (8,781) (11,872) (97,421) (164,814) (173,989) (253,840) (455,981) (605,358) (547,255) (899,671)

Profit before tax (36,673) 43,916 109,552 (20,672) (197,785) 421,375 616,734 730,419 1,421,035 (61,951)

Tax expenses (168) (4,488) (27,315) (43,835) (39,595) (22,638) (62,516) (129,623) (313,767) (59,423)

Profit for the year (36,840) 39,428 82,237 (64,507) (237,380) 398,737 554,218 600,796 1,107,269 (121,374)

Capital employed

Stated capital 74,332 74,332 74,332 74,332 3,659,428 3,659,428 3,659,428 3,659,428 6,057,498 6,057,498

Other reserves 73,650 193,650 164,174 123,646 123,646 123,646 123,646 123,646 379,459 378,562

Retained earnings (86,388) (48,645) 35,014 (60,319) (266,448) 66,099 500,678 936,225 1,609,716 1,285,207

61,594 219,337 273,520 137,659 3,516,627 3,849,173 4,283,753 4,719,299 8,046,673 7,721,267

Non-controlling interest 322 594 327,188 188,864 179,309 242,013 297,079 382,650 723,611 919,916

Total equity 61,916 219,931 600,708 326,523 3,695,936 4,091,186 4,580,832 5,101,949 8,770,284 8,641,183

Total debt 37,616 96,654 690,960 788,469 1,224,132 2,853,145 3,178,019 5,296,447 8,841,290 14,276,578

99,532 316,585 1,291,667 1,114,992 4,920,068 6,944,331 7,758,851 10,398,396 17,611,574 22,917,761

Assets employed

Property, plant and equipment (PP&E) 184,746 549,341 1,152,759 1,047,952 1,610,488 2,305,894 2,450,630 2,604,047 4,232,778 4,685,889

Non-current assets other than PP&E 205 378 292 378 2,499,826 2,608,787 2,774,552 3,294,274 3,708,609 4,137,076

Current assets 110,812 278,153 1,443,584 1,654,064 2,686,608 4,423,141 6,536,583 9,752,516 14,226,573 20,095,174

Liabilities net of debt 196,231 511,288 1,304,968 2,375,083 3,099,762 5,243,783 7,177,754 10,543,592 13,476,445 20,347,588

99,532 316,585 1,291,667 327,311 3,697,160 4,094,040 4,584,010 5,107,246 8,691,515 8,570,551

Cashflow

Net cash flow from operating activities (35,749) (94,425) (117,698) (104,363) 185,190 (433,584) 859,861 (52,396) (925,662) (3,145,594)

Net cash flow from investing activities 8,007 (195,349) (120,332) (321,822) (759,564) (513,289) (999,327) (1,129,662) (2,659,244) (2,109,683)

Net cash flow from financing activities 29,600 335,946 456,778 400,201 555,662 592,482 (242,526) 228,179 1,882,828 4,889,918

Net increase/(decrease) in cash and cash equivalents 1,859 46,173 218,748 (25,984) (18,712) (354,391) (381,993) (953,879) (1,702,078) (365,359)

At a glanceEPS (LKR) (6.4) 6.9 14.7 (16.2) 0.1 2.9 3.9 4.2 4.6 (2.0)

Interest cover (no. of times) (3.2) 0.8 1.0 0.7 (0.1) 2.7 2.4 2.2 3.6 0.9

Net assets per share 10.8 38.4 47.8 24.1 30.8 33.7 37.5 41.3 48.0 46.1

ROE (59.5)% 17.9% 13.7% (19.8)% (6.4)% 9.7% 12.1% 11.8% 12.6% (1.4)%

Debt / debt +equity ratio 37.8% 30.5% 62.0% 70.7% 24.9% 41.1% 41.0% 50.9% 50.2% 62.3%

Current ratio 0.6 1.2 1.2 1.2 1.0 1.0 1.0 1.2 1.4 1.5

Market price per share 8.0 79.5 75.0 386.8 65.0 23.0 24.5 30.1 46.4 33.3

MTD WALKERS PLC210

Assurance Statement onNon-Financial Information

Introduction

DNV GL represented by DNV GL Business Assurance Lanka (Private) Limited has been commissioned by the management of MTD Walkers PLC (‘MTD Walkers’ or ‘the Group) to carry out an independent assurance engagement (Type 2, Moderate level) for the non-financial - qualitative and quantitative information (sustainability performance) reported in MTD Walkers PLC Annual Report 2015/16 (‘the Report’) in its printed and online formats. The sustainability disclosures in the Report are prepared based on the ‘in accordance’ – Core reporting option of the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines Version 4 (GRI G4). This engagement focused on verification of sustainability performance disclosed in the Report, and underlying management system and reporting processes. The assurance engagement was carried out against AccoutAbility’s AA1000 Assurance Standard 2008 (AA1000AS) the DNV GL Verification Protocol for Sustainability Reporting (‘VeriSustain’ - available on request from www.dnvgl.com).

The intended user of this assurance statement is the management of MTD Walkers PLC (‘the Management’). The Management is responsible for all information provided in the Report as well as the processes for collecting, analysing and reporting the information presented in the printed and web based Report, including the maintenance and integrity of the website. Our responsibility in performing this work is regarding the verification of the sustainability performance reported in the Annual Report 2015/16 only, in accordance with the scope of work agreed with the management of the Group. The assurance engagement is based on the assumption that the data and information provided to us is complete, sufficient and true. We disclaim any liability or responsibility to a third party for decisions, whether investment or otherwise, based on this assurance statement. Our assurance engagement was planned and carried out in May – June 2016.

Scope, Aspect Boundary and Limitations of Assurance

The scope of assurance included the review of sustainability performance covering the economic, environment and social performance reported in the Annual Report 2015/16. In particular the assurance engagement included:

The verification of the qualitative and quantitative sustainability performance reported in the Annual Report prepared by the Group and based on the GRI G4 guidelines, covering economic, environmental and social performance for the activities undertaken by the Group over the reporting period 1st April 2015 to 31st March 2016 and reported in this Report;

Review of the policies, initiatives, practices and performance related to the Group’s sustainability disclosures, and reported in MTD Walkers PLC Annual Report 2015/16 as well as references made in the Report;

Evaluation of the systems and processes the Group has in place for adherence to reporting principles set out in GRI G4;

Evaluation of the disclosed information in the Report - both General and Specific Standard Disclosures – for ‘in accordance’ – Core reporting requirements of GRI G4;

Evaluation with respect to the AccountAbility principles and specified performance information, for a Type 2, moderate level of assurance, in accordance with the requirements of AA1000AS (2008):

information relating to the issues, responses, performance data, case studies and underlying systems for the management of such information and data;

information relating to materiality assessment and stakeholder engagement processes;

Confirmation of the fulfillment of GRI G4’s ‘in accordance’ – Core option, as declared by MTD Walkers PLC, including adherence to Principles for defining reporting content as per the GRI G4 Reporting Principles and Standard Disclosures.

During the assurance process, we did not come across limitations to the scope of the agreed assurance engagement. The reporting boundary of sustainability performance covers operations of the Group in Sri Lanka as set out in the Reporting Period and Boundary segment of the Sustainability Integration section. The Report does not include sustainability performance related to the activities of three subsidiaries of the Group – Walkers Colombo Shipyard (Pvt) Ltd (WCSL), Colombo Engineering Services (Pvt) Ltd (CESL) and Walkers Sons & Company Ltd (WSCL) Ltd due to the nature of their operations within the reporting period.

The Aspect Boundary has been brought out covering significant internal and external stakeholders in Sri Lanka (refer the section ‘Significant Stakeholders and Aspect Boundary’). The reported data on economic performance and other financial data are based on audited financial statements issued by the Group’s statutory auditors. No external stakeholders were interviewed as part of this assurance engagement.

Verification Methodology

This assurance engagement was planned and carried out in accordance with the AA1000AS (2008) i.e. Type 2, Moderate and VeriSustain. The report has been evaluated against the following criteria:

Adherence to the principles of Inclusivity, Materiality and Responsiveness, as well as Reliability of specified sustainability performance information, as set out in the AA1000AS (2008);

Adherence to additional principles of Completeness and Neutrality, as set out in DNV GL’s Protocol;


The GRI G4 Reporting Principles and Standard Disclosures’ requirements – ‘in accordance’ - Core.

During the assurance engagement, we have taken a risk-based approach, meaning we concentrated our verification efforts on the issues of high material relevance to the Group’s business and its stakeholders. We have verified the statements and claims related to GRI G4 disclosures and made in the Report and assessed the robustness of the underlying data management system, information flow and controls. In doing so, we have:

Reviewed the approach to stakeholder engagement and its materiality determination process;

Examined and reviewed documents, data and other information made available by MTD Walkers and visited the Head Office at Colombo, workshop at Sapugaskanda, quarry location at Dodangoda, piling operation at Matara and a construction site at Salamulla;

Conducted interviews with key representatives including data owners and decision-makers from different functions and companies of the Group;

Performed sample-based reviews of the mechanisms for implementing the sustainability related policies, as described in the Report;

Performed sample-based checks of the processes for generating, gathering and managing the quantitative data and qualitative information included in the Report

Conclusions

MTD Walkers PLC has put in place management systems with sustainability as the focus, to manage its key sustainability parameters. Sustainability performance reported in this Report is prepared considering the GRI G4 Reporting Principles and Standard Disclosures for its ‘in accordance’ – Core option.

In our opinion, based on the scope of this assurance engagement, the sustainability performance including the referenced information presented in the Group’s Annual Report 2015/16 a fair representation of the sustainability related strategies, management system and performance indicators and meets the general content requirements of the GRI G4 i.e.,

General Standard Disclosures: We are of the opinion that the reported disclosures generally meet the GRI G4 reporting requirements for ‘in accordance’ – Core based on GRI G4.

Specific Standard Disclosures: We are of the opinion that the reported disclosures generally meet the GRI G4 reporting requirements for ‘in accordance’ – Core based on GRI G4 covering generic ‘Disclosures on Management Approach’ (DMA) and ‘Performance Indicators’ for identified material Aspects as below:

Economic

• Economic Performance - G4-EC1, G4-EC3;

• Market Presence – G4-EC6;• Procurement Practices – G4-EC9.

Environmental

• Materials – G4-EN;• Energy - G4-EN3;• Water – G4-EN8;• Emissions – G4-EN15, G4-EN16;• Effluents and Waste - G4- EN22, G4-

EN23, G4-EN24;• Compliance – G4-EN29;

Social

Labour Practices and Decent Work

• Employment - G4-LA1;• Occupational Health and Safety – G4-

LA6;• Training and Education - G4-LA9;

Human Rights

• Child Labour - G4-HR5;• Forced or Compulsory Labour - G4-

HR6;

Society

• Local Communities - G4-SO1;• Anti-Corruption - G4-SO3;• Compliance - G4-SO8;


• Customer Health and Safety – G4-PR1;

• Product and Service Labelling - G4-PR5;

• Compliance – G4-PR9.

We have evaluated the Report’s adherence to the following principles on a scale of ‘Good’, ‘Acceptable’ and ‘Needs Improvement’:

AA1000AS (2008) Principles

Inclusivity: MTD Walkers has commissioned an independent stakeholder engagement exercise during the reporting period, to formulate its stakeholder engagement strategies. The Group has formal and informal engagement mechanisms in place for identifying and engaging with key stakeholders, and identifying and responding to key sustainability challenges. In our opinion, the level at which the Report adheres to this principle is ‘Good’.

Materiality: The Group has carried out a materiality assessment exercise to identify significant material issues which have impacts internal and external to the Group and its sectors, through an independent stakeholder engagement process. The process of materiality assessment has considered inputs from diverse sources such as needs and concerns of external and internal stakeholders, media reports and impacts of material issues. In our opinion, the level at which the Report adheres to this principles is ‘Good’.

Responsiveness: We consider that the response to key stakeholder concerns, through the Group’s policies and management systems including governance are fairly reflected in the Report. The Group has committed to carrying out assessments of supply

MTD WALKERS PLC212

Assurance Statement onNon-Financial Information

chain partners to identify and respond to potential challenges and risks, which will help in bringing out responses to key challenges and risks in the supply chain in future reporting periods. In our opinion, the level at which the Report adheres to this principle is ‘Acceptable’.

Reliability: The majority of data and information verified at the Head Office at Colombo, and at four operational sites were found to be fairly accurate. Some of the data inaccuracies identified during the verification process were found to be attributable to transcription, interpretation and aggregation errors and the errors have been corrected. Hence in accordance with the AA1000AS (2008) requirements for a Type 2, moderate level assurance engagement, we conclude that the specified sustainability data and information presented in the Report is reliable and acceptable. In our opinion, the level at which the Report adheres to this principle is ‘Good’.

Specific Evaluation of the Information on Sustainability Performances

We consider the methodology and process for gathering information developed by MTD Walkers PLC, for its sustainability performance reporting is appropriate and the qualitative and quantitative data included in the Report, was found to be identifiable and traceable; the personnel responsible was able to demonstrate the origin and interpretation of the data and its reliability. We observed that the Report presents a faithful description of the reported sustainability activities for the reporting period.

Additional principles as per DNV GL’s VeriSustain

Completeness: The Report has fairly attempted to disclose General and Specific Standard Disclosures including the disclosure on management approach covering the sustainability strategy, management approach, monitoring systems and sustainability performances

indicators against the GRI G4 – ‘in accordance’ – Core. The Group has brought out its commitment to carry out assessments of supply chain partners, to identify and report on responses to potential risks in future reporting periods. In our opinion, the level at which the Report adheres to this principle is ‘Acceptable’.

Neutrality: The disclosures related to sustainability issues and performances are fairly reported in a neutral tone, in terms of content and presentation, however Report could further bring out responses related to the challenges faced during the reporting period for the businesses of MTD in terms of disclosure of identified material aspects, sustainability goals and targets etc. In our opinion, the level at which the Report adheres to the principle of Neutrality is ‘Good’.

Opportunities for Improvement

The following is an excerpt from the observations and further opportunities for improvement reported to the Management of MTD Walkers and are not considered for drawing our conclusion on the Report; however, they are generally consistent with the Management’s objectives:

The Group has committed to setting Key Performance Indicators relevant to sector-specific material issues in future reporting periods. MTD Walkers may disclose key goals and short, medium and long-term targets with respect to identified material Aspects and topics within future reports.

Standard operating procedures may be established across sites for consistency in monitoring and recording sustainability performance indicators; this will help in further strengthening the reliability of sustainability parameters.

Our Competence and Independence

We are a global provider of sustainability services, with qualified environmental and social assurance specialists working in

over 100 countries. We were not involved in the preparation of any statements or data included in the Report except for this Assurance Statement. DNV GL maintains complete impartiality toward any people interviewed.

Rathika de SilvaCountry HeadDNV GL Business Assurance Lanka (Private) Limited, Colombo, Sri Lanka

Kiran RadhakrishnanLead VerifierAssociate Assessor – Sustainability Assurance servicesDNV GL Business Assurance India Private Limited, India.

Nandkumar VadakepatthAssurance Reviewer Regional Sustainability Manager – Region India and Middle EastDNV GL Business Assurance India Private Limited, India.

25th July 2016, Colombo, Sri Lanka.


GRI G4 ContentIndexGENERAL STANDARD DISCLOSURES

General Standard Disclosures

Page Number (or Link) External Assurance Reporting Alignment to UNGC 10 Principles

Reporting Alignment to Sustainable Development Goals

Reporting Alignment to Code of Best Practice on Corporate Governance 2013 - SECSL & CA Sri Lanka

STRATEGY AND ANALYSISG4-1 Page 14-17, 18-21 Page 210-212 7

ORGANISATIONAL PROFILEG4-3 Page 1 Page 210-212

G4-4 Page 1 Page 210-212

G4-5 Page 1 Page 210-212

G4-6 Page 1 Page 210-212

G4-7 Page 1 Page 210-212

G4-8 Page 1, 216 Page 210-212

G4-9 Page 12-13 Page 210-212

G4-10 Page 88 Page 210-212 Goal 1, Goal 5,

Goal 8, Goal 10

3

G4-11 Page 90 Page 210-212 Goal 16 3

G4-12 Page 91 Page 210-212

G4-13 Page 6-7 Page 210-212

G4-14 Page 63 Page 210-212 Principle 7 Goal 13 2

G4-15 Page 63, 213-215 Page 210-212 7

G4-16 Page 8 Page 210-212

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIESG4-17 Page 3, 216-217 Page 210-212

G4-18 Page 64 Page 210-212 6,7

G4-19 Page 67-68 Page 210-212 6

G4-20 Page 64 Page 210-212 6

G4-21 Page 64 Page 210-212 6

G4-22 Page 3 Page 210-212

G4-23 Page 3 Page 210-212

STAKEHOLDER ENGAGEMENTG4-24 Page 65-66 Page 210-212 Goal 16 6

G4-25 Page 64 Page 210-212 Goal 16 6

G4-26 Page 65-66 Page 210-212 Goal 16 6

G4-27 Page 67 Page 210-212 Goal 16 6

REPORT PROFILE

G4-28 Page 3 Page 210-212

G4-29 Page 3 Page 210-212

G4-30 Page 3 Page 210-212 7

G4-31 Page 3 Page 210-212

G4-32 Page 3, 213-215, 210-212 Page 210-212 Goal 12 7

G4-33 Page 3, 36, 21 Page 210-212 Goal 12 7

GOVERNANCEG4-34 Page 36 Page 210-212 Goal 16 7

ETHICS AND INTEGRITYG4-56 Front Inner Cover Page Page 210-212 Goal 8, Goal 16

MTD WALKERS PLC214

GRI G4 ContentIndex

SPECIFIC STANDARD DISCLOSURES

DMA and Indicators

Page Number (or Link) Identified Omission(s)

Reason(s) for Omission(s)

Explanation for

Omission(s)

External Assurance

Reporting Alignment to UNGC 10 Principles



CATEGORY: ECONOMIC

MATERIAL ASPECT: ECONOMIC PERFORMANCE

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Goal 1, Goal 8,

Goal 10

1

G4-EC1 Page 80 Page 210-212 Goal 1, Goal 8 1

G4-EC3 Page 88-89 Page 210-212 Goal 1, Goal 8,

Goal 10

1

MATERIAL ASPECT: MARKET PRESENCE

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Goal 8 1,3

G4-EC6 Page 88 Page 210-212 Goal 8 1,3

MATERIAL ASPECT: PROCUREMENT PRACTICES

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Goal 12 1

G4-EC9 Page 85 Page 210-212 Goal 12 1

CATEGORY: ENVIRONMENTAL

MATERIAL ASPECT: MATERIALS

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 8 Goal 12 2

G4-EN1 Page 84-85 Page 210-212 Principle 8 Goal 12 2

MATERIAL ASPECT: ENERGY

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 8 Goal 7, Goal 12,

Goal 13

2

G4-EN3 Page 85-86 Page 210-212 Principle 8 Goal 7, Goal 12,

Goal 13

2

MATERIAL ASPECT: WATER

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 8 Goal 6, Goal 12 2

G4-EN8 Page 86 Page 210-212 Principle 8 Goal 6, Goal 12 2

MATERIAL ASPECT: EMISSIONS

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 8 Goal 3, Goal 12,

Goal 13

2


Goal 13

2


Goal 13

2

MATERIAL ASPECT: EFFLUENTS AND WASTE

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 8 Goal 3, Goal

6, Goal 12,

Goal 14

2

G4-EN22 Page 86-87 Page 210-212 Principle 8 Goal 3, Goal

6, Goal 12,

Goal 14

2

G4-EN23 Page 87 Page 210-212 Principle 8 Goal 3, Goal

6, Goal 12,

Goal 14

2

G4-EN24 Page 87 Page 210-212 Principle 8 Goal 3, Goal

6, Goal 12,

Goal 14

2


DMA and Indicators

Page Number (or Link) Identified Omission(s)

Reason(s) for Omission(s)

Explanation for

Omission(s)

External Assurance

Reporting Alignment to UNGC 10 Principles



MATERIAL ASPECT: COMPLIANCE

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 8 Goal 16 2

G4-EN29 Page 87 Page 210-212 Principle 8 Goal 16 2

CATEGORY: SOCIAL

SUB-CATEGORY: LABOUR PRACTICES AND DECENT WORK

MATERIAL ASPECT: EMPLOYMENT

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 3,

Principle 6

Goal 5, Goal 8 3

G4-LA1 Page 89 Page 210-212 Principle 3,

Principle 6

Goal 5, Goal 8 3

MATERIAL ASPECT: OCCUPATIONAL HEALTH AND SAFETY

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Goal 3, Goal 8 3,7

G4-LA6 Page 90 Page 210-212 Goal 3, Goal 8 3,7

MATERIAL ASPECT: TRAINING AND EDUCATION

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Goal 4, Goal 5,

Goal 8

3

G4-LA9 Page 89 Page 210-212 Goal 4, Goal 5,

Goal 8

3

SUB-CATEGORY: HUMAN RIGHTS

MATERIAL ASPECT: CHILD LABOUR


Principle 1

Goal 8, Goal 16 3

G4-HR5 Page 90 Page 210-212 Principle 5 Goal 8, Goal 16 3

MATERIAL ASPECT: FORCED OR COMPULSORY LABOUR


Principle 1

Goal 8, Goal 16 3

G4-HR6 Page 90 Page 210-212 Principle 4 Goal 8, Goal 16 3

SUB-CATEGORY: SOCIETY

MATERIAL ASPECT: LOCAL COMMUNITIES


G4-SO1 Page 90 Page 210-212 Goal 16 4

MATERIAL ASPECT: ANTI-CORRUPTION

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Principle 10 Goal 16

G4-SO3 Page 91 Page 210-212 Principle 10 Goal 16

MATERIAL ASPECT: COMPLIANCE


G4-SO8 Page 91 Page 210-212 Goal 16 4

SUB-CATEGORY: PRODUCT RESPONSIBILITY

MATERIAL ASPECT: CUSTOMER HEALTH AND SAFETY

G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Goal 3, Goal 11 5

G4-PR1 Page 91, 132-133 Page 210-212 Goal 3, Goal 11 5

MATERIAL ASPECT: PRODUCT AND SERVICE LABELLING


G4-PR5 Page 91, 133 Page 210-212 Goal 11 5

MATERIAL ASPECT: COMPLIANCE G4-DMA Page 69-71, www.mtdwalkers.com/sustainability Page 210-212 Goal 16 5

G4-PR9 Page 91 Page 210-212 Goal 16 5

MTD WALKERS PLC216

GroupDirectory 2015/16

Business interests of MTD Walkers PLC span across six sectors which include, Civil Engineering, Heavy Engineering, Marine Engineering, Power, Real Estate and Trading. The Group consists of subsidiaries, associates and joint venture companies with operations solely in Sri Lanka. The holding company is located at 18, St. Michael’s Road, Colombo 03.

Fifteen legal entities of the Group (MTD Walkers PLC and its 14 subsidiaries), create the financial reporting boundary of this report. All legal entities barring Walkers Colombo Shipyard (Private) Limited and Colombo Engineering Services (Private) Limited and Walkers

The customer base serviced by the Walkers CML Group of companies can be classified primarily into three sections as illustrated below:

Sons & Company Limited have been included as part of the sustainability reporting boundary of this report. Walkers Colombo Shipyard has been excluded this year for sustainability reporting due to the company only being incorporated during the year, and being yet in the setting up phase of operations. Colombo Engineering Services has been excluded due to the nature of the company operations which are highly project/success based, resulting in processes and procedures relating to sustainability performance assessment not yet being fully established in the company. It is expected that both these companies will be included in the sustainability reporting

boundary from the next reporting cycle. Walkers Sons & Company Limited is an investment holding company and does not carry out any operations, and as such, this entity too has been excluded from the sustainability reporting boundary. Any further exclusions relating to the 12 legal entities coming under the reporting scope, is clearly mentioned under the corresponding sustainability aspects.

While core business activities are carried out in-house, the Group utilises outsourced labour services in activities where it is industry practice to do so, and where it has been proven to be an efficient and effective business model.

Individuals

Real Estate, Marine Engineering

Businesses/Corporates

Civil Engineering, Heavy Engineering, Marine Engineering, Trading

Government

Civil Engineering, Heavy Engineering, Marine Engineering, Trading, Real Estate, Power

MTD Walkers PLC

Civil Engineering Sector

Company Name CML-MTD Construction Limited

Effective Share Holding 78.59 percent

Registered Address No. 155, Dharmapala Mw, Colombo 07

Company Name Special Projects Company (Private) Limited



Company Name CML-MTD Joint Venture Limited



Company Name Walkers Piling (Private) Limited


Registered Address No. 18, St. Michael’s Road, Colombo 03

Company Name MTD Walkers Projects Limited



G4 - 17


Heavy Engineering Sector

Company Name Walker Sons & Company Limited



Company Name Walker Sons & Company Engineers (Private) Limited



Company Name Western Airducts Lanka (Private) Limited


Registered Address Mahahena Rd, Siyabalape

Marine Engineering Sector

Company Name Colombo Engineering Services (Private) Limited


Registered Address No. 172, St. Andrew’s Road, Colombo 15

Company Name Walkers Colombo Shipyard (Private) Limited



Power Generation Sector

Company Name Northern Power Company (Private) Limited



Real Estate Sector

Company Name Walkers CML Properties (Private) Limited



Training Sector

Company Name Walkers Equipment Limited



Company Name MTD Walkers Infracon Limited



G4 - 17

MTD WALKERS PLC218

Circular to Shareholders

Notice of the Meeting, Chairman’s Review, the Annual Report of the Board of Directors, the Statement of Accounts for the year ended 31st March 2016 and the Report of the Auditors are attached.

A shareholder appointing a proxy (other than Directors of the Company) to attend the meeting should indicate the proxy holder’s National Identity Card number on the form of proxy and request the proxy holder to bring his/her National Identity Card with him/her.

Please note that only registered shareholders and/or their proxy holders will be permitted to attend the meeting.

BY ORDER OF THE BOARDMTD WALKERS PLC




Noticeof Meeting

NOTICE IS HEREBY GIVEN that the Thirtieth Annual General Meeting of MTD Walkers PLC will be held at the Liberty Ballroom, Ramada Hotel Colombo at No.30 Sir Mohamed Macan Markar Mawatha Colombo 03 at 3.00 p.m. on Thursday 01st of September 2016 for the following purposes:

1) To receive and consider the Report of the Directors and Statement of Accounts for the year ended 31st March 2016 with the Report of the Auditors thereon.

2) To re-elect Mr Albert Rasakantha Rasiah who retires by rotation at the Annual General Meeting in terms of Article 84 of the Articles of Association, as a Director of the Company.

3) To re-elect Mr Niranjan Joseph de Silva Deva-Aditya who retires by rotation at the Annual General Meeting in terms of Article 84 of the Articles of Association, as a Director of the Company.

4) To re-elect Mr Hewawasamge Ravindranath Srilal Wijeratne who retires by rotation at the Annual General Meeting in terms of Article 84 of the Articles of Association, as a Director of the Company.

5) To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year and to authorise the Directors to determine their remuneration.

BY ORDER OF THE BOARDMTD WALKERS PLC



Note:

A member entitled to attend and vote is entitled to appoint a proxy to attend and vote and speak on his/her behalf and such proxy need not be a member of the Company. The instrument appointing a proxy is attached and must be deposited at the Registered Office of the Company at No. 18, St. Michael’s Road, Colombo 3, not less than 48 (forty eight) hours before the time fixed for holding of the meeting.

MTD WALKERS PLC220

Notes


Formof Proxy

The Board of DirectorsMTD Walkers PLCNo.18, St. Michael’s RoadColombo 3

I/We*………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… of

………………………………………………………………………………………………………..………………………………………………………………………………………………………………………………… being a

Member/Members * of MTD Walkers PLC hereby appoint-

Tan Sri Dr. Azmil Khalili Bin Dato’ Khalid or failing himMr Jehan Prasanna Amaratunga or failing himMr Leong Yow Lee or failing himMr Keith George Cowling or failing himMr Albert Rasakantha Rasiah or failing himMr Niranjan Joseph de Silva Deva-Aditya or failing himMr Hewawasamge Ravindranath Srilal Wijeratne or failing him

Mr/Mrs/Miss …………………………………………………..………………………………………………………….......……………... (NIC No …………………………………..…………………………………..)

of …………………………………………………………………….........……………………………………………………………………............………………………………..... as my/our*Proxy to vote

as indicated hereunder for me/us* and on my behalf at the Thirtieth Annual General Meeting of the Company to be held on 1st of September 2016 and at any adjournment thereof and at every poll which may be taken in consequence thereon: FOR AGAINST

1. To receive the Audited Financial Statement and the Directors Report for the year ended 31st March 2016

2. To re-elect Mr Albert Rasakantha Rasiah who retires by rotation in terms of Article 84 of the Articles of Association as a Director of the Company

3. To re-elect Mr Niranjan Joseph de Silva Deva-Aditya who retires by rotation in terms of Article 84 of the Articles of Association as a Director of the Company

4. To re-elect Mr Hewawasamge Ravindranath Srilal Wijeratne who retires by rotation in terms of Article 84 of the Articles of Association as a Director of the Company

5. To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors of the Company and to authorise the Directors to determine their remuneration

Signed this …………………………………………………..……… day of …………………………………………………..……… Two Thousand and Sixteen.

Signature …………………………………………………..……… National Identity Card No …………………………………………………..………

Share Folio No …………………………………………………..………......................

NoteIf the Form of Proxy is signed by an Attorney, the relevant Power-of-Attorney should accompany the completed Form of Proxy for registration, if such document has not already been registered with the Company.

MTD WALKERS PLC222

Formof Proxy

Instructions as to Completion of Form of Proxy

1. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a Proxy to attend and vote on his/her behalf.

2. A Proxy need not be a member of the Company.

3. Kindly complete the Form of Proxy by filling legibly the full name, NIC number and address of the Proxy Holder and also of the Shareholder appointing the Proxy Holder. Please sign in the space provided and fill in the date and NIC number.

4. Please indicate preference of your vote on each resolution in the space provided therefore. If in the view of the Proxy Holder there is doubt by reason of the way in which instructions in the Proxy have been completed, the Proxy Holder will vote as he/she think fit.

5. In terms of Article 66 of the Articles of Association of the Company it is provided that;

The instruction appointing a Proxy shall be in writing and

(a) In the case of an individual shall be signed by him/her or his/her Attorney; and

(b) In the case of a corporation shall be signed either under its common seal or shall be signed by its Attorney or by an Officer on behalf of the corporation.

6. To be valid, the completed Form of Proxy should be deposited at the Registered Office of the Company, No. 18, St. Michael’s Road, Colombo 3, not less than 48 hours before the time fixed for the holding of the meeting.

7. The shareholders and the proxy holders are kindly requested to bring this Annual Report, together with an acceptable form of identity.

CorporateInformation

Company

MTD Walkers PLC

Legal Form

Public Quoted Company

Date of Incorporation

8th October 1981

Company Registration No.

PQ 80

Registered Office

No. 18, St. Michael’s Road,Colombo 03Telephone : 94-1-2473677, 94-1-2423954Fax : 94-1-2478597E-mail : [email protected] : www.mtdwalkers.com

Board of Directors

Tan Sri Dr. Azmil Khalili Bin Dato’ KhalidMr. Jehan Prasanna AmaratungaMr. Leong Yow LeeMr. Keith George CowlingMr. Albert Rasakantha RasiahMr. Niranjan Joseph de Silva Deva-AdityaMr. Hewawasamge Ravindranath Srilal Wijeratne

Company Secretary

Ms. P S Attygalle; ACIS (UK); ACCSNo. 18, St. Michael’s Road,Colombo 03

Auditors

Messrs. Ernst & YoungChartered Accountants,201, De Saram Place,Colombo 10

Legal Advisors

Messrs. D L & F de Saram,Attorneys-at-Law & Notaries PublicNo. 47, Alexandra Place,Colombo 07

Nithya PartnersAttorneys-at-LawNo. 97 A, Galle Road,Colombo 03

Triple Oath Law ChambersNo. 4/145 - 1/1,Thalakotuwa Gardens,Polhengoda,Colombo 05

Bankers

People’s BankBank of CeylonHatton National Bank PLCNational Development BankCommercial Bank of Ceylon PLCSampath Bank PLC

MTD Walkers PLC

P.O. Box 166No. 18, St Michael’s RoadColombo 03. Sri Lanka.

Tel : +94 11 2473677 / 2423954 Fax: +94 11 2478597

E-mail : [email protected]

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