Millennium Housing Developers PLC Annual Report 2016/17 3
Reaching New Heights, Transforming Lives
Millennium Housing Developers is the concept leader when it comes to providing housing solutions for all. Great accommodation transforms lives. Over the years we have taken concrete steps to transform the lives of our customers, who are at the heart of everything we do, by creating unique abodes and luxurious urban living spaces. We possess one of the most diversified product portfolios in the business yet our gaze goes far beyond. Shaped by burgeoning customer demand, we are prepared to redefine urban living and reach new heights. Millennium Housing Developers PLC 2 Annual Report 2016/17
Contents 10 03 Chairman’s Letter About Us 08 Highlights 14 Chief Executive 06 Officer’s Review Key Milestone 35 Risk Management
20 Management Discussion 38 Governance and Analysis 38 Board of Directors 42 Senior Management 43 Managers 46 Corporate Governance 53 Annual Report of the Directors’ on 27 the affairs of the of the Company Sustainability Report 57 Statement on Internal Controls 58 Statement on Director’s Responsibility 59 Audit Committee Report 61 Remuneration Committee Report 62 Related Party Transaction Review Committee Report Millennium Housing Developers PLC Annual Report 2016/17 3
About Us
Millennium Housing Developers PLC has taken urban and schemes that are secure, eco-friendly and modern. They township development to unprecedented heights. Since are strategically positioned and intelligently planned to cater 1999, the Company has been revolutionising mega township to target markets. The latest addition to the portfolio is the projects by identifying and catering to the progressive Heights Apartments in Edmonton. Among other forthcoming lifestyles of prospective clients around the island. The tenacity projects are the apartment complexes which are to be located of the Company has been rightly acknowledged as it is the in Colombo 5, Nawala, Rajagiriya and Battaramulla. only private property developing company that is listed in the Colombo Stock Exchange. The Company which is a member of the prestigious Nawaloka Holdings meets impeccable standards in the use of raw The Company has a diverse portfolio which includes homes, material, construction and execution. By also maintaining apartments and villas in diverse settings. Heartland, Olympus, relationships with its clients long after the completion of a Paradis, Orchid and Tulip are a few of the branded housing project, the Company continues to transform lifestyles and cityscapes around Sri Lanka.
63 Financial Reports 65 Independent Auditors’ Report 66 Statement of Profit or Loss and Other Comprehensive Income 67 Statement of Financial Position 68 Statement of Changes of Equity 69 Statement of Cash Flows 70 Notes to the Financial Statements
105 Annexes 106 Ten Year Summary 108 Shareholder and Investor Information 110 Notice of Meeting Form of Proxy – Enclosed Corporate Information – Back Inner Cover Millennium Housing Developers PLC 4 Annual Report 2016/17
VISION “We have created a landmark in the industry by crafting innovative, unique, eco-friendly and residential neighbourhood solutions in vertical and horizontal living”
CORPORATE OBJECTIVES
Provide Quality Maximise Enhance Maintain Satisfy our Contribute Houses to our customer shareholder dynamic satisfied obligation to the customers satisfaction value and motivated towards society development staffs, who are at large of the country directed towards our mission Millennium Housing Developers PLC Annual Report 2016/17 5
MISSION “To provide housing solutions to middle, upper middle and elite class customer segments while preserving individuality and presenting a wider choice of standard housing to luxury apartments together with all facilities in flexible terms by the leader in mega township developments” Millennium Housing Developers PLC 6 Annual Report 2016/17
Key Milestones
1998 1999 2003
Incorporated as Ceylinco • Launched Island’s first Incorporated three Developers Ltd. Mega Township subsidiaries Project – Athurugiriya • Millennium Housing (1,600 Units) Ltd. (418 Units) • Commenced second • Ceylinco Housing phase of Athurugiriya Corporation Ltd. project (270 more • Ceylinco Construction Units) Company Ltd.
2016 2015 2014
• Commenced • Launched Homagama • Listed in CSE Dirisavi operations of MC Urban Range Board Urban Developers Ltd. • Started First Apartment • Launched Millennium and MC Universal Ltd. Project in Kirulapone Urban Range in • Started construction • Change in ownership Maharagama/Piliyandala of apartment project – of the Company • Launched a project in Kirulapone Seeduwa • Purchased land in • Purchased land Piliyandala • Launched project for Rajagiriya ‘Millennium Terrace’s, apartment project which includes land sales • Purchased land for Nawala apartment project
2017
• Launched the Second • Land was purchased apartment project for the housing in Nawala scheme in Pelanwatta • Purchased plots of land • Successfully for the construction of completed the housing apartment complexes schemes in Seeduwa, in Battaramulla and Piliyandala and Koswatta Athurugiriya Millennium Housing Developers PLC Annual Report 2016/17 7
2004 2008 2010
Incorporation of Exposure to Ceylinco Change in parent’s Millennium Villa Group crisis. MHDL’s ownership (Nation Lanka Housing Development margins were affected Finance PLC) Ltd. (MVHDL) • Launched Millennium Villa Housing range (192 Units)
2013 2012 2011 Activated the construction Entry into urban Turnaround of MHDL under the name of and semi-urban with new Directorship, Millennium Housing development projects followed by the Construction Ltd. restructuring Millennium Housing Developers PLC 8 Annual Report 2016/17
Highlights
Change 2016/17 2015/16 %
Earning highlights and ratios Revenue (Rs. ’000) 1,305,738 820,265 59.18 Gross profit (Rs. ’000) 405,122 276,706 46.41 Results from operating activities (Rs. ’000) 197,766 107,815 83.43 Profit before tax (Rs. ’000) 198,606 117,329 69.27 Profit after tax (Rs. ’000) 148,368 88,460 67.72 Dividends (Rs. ’000) 37,037 37,037 – Gross profit margin (%) 31.03 33.73 (8.03) Operating profit margin (%) 15.15 13.14 15.23 Net profit margin (%) 11.36 10.78 5.36 Earnings per share (Rs.) 1.10 0.66 67.72 Interest cover (No. of Times) 42.89 107.44 (60.08)
Financial position highlights and ratios Equity attributable to owners (Rs. ’000) 904,921 787,346 14.93 Total assets (Rs. ’000) 2,628,445 1,671,502 57.25 Total borrowings (Rs. ’000) 809,176 350,350 130.96 Debt to equity (%) 89.42 44.50 100.95 Gearing (%) 47.21 30.79 53.30 Current asset ratio (No. of Times) 1.84 2.49 6.44 Quick asset ratio (No. of Times) 0.61 0.79 11.20 Net asset per share (Rs.) 6.72 5.85 14.93 Share in issue (No. Mn) 134.68 134.68 –
Market/Shareholders information Market value per share as at 31st March (Rs.) 7.40 7.20 2.78 Market capitalisation as at 31st March (Rs. ’000) 996,942 969,706 2.78 Price earnings ratio (No. of Times) 6.72 10.96 (38.72) Dividend per share (Rs.) 0.275 0.275 – Dividend yield ratio (%) 3.72 3.82 (2.70) Dividend paid out (%) 24.96 41.87 (40.38) Dividend cover (No. of Times) 4.01 2.39 67.72 Millennium Housing Developers PLC Annual Report 2016/17 9
Highlights 68%Profit AfterTax (Rs. Mn) Net15Asset Per Shar%e (Rs.)
148 6.7 127 5.8 5.5 114 5.2 98 88 3.8
2012/13 2013/14 2014/15 2015/16 2016/17 2012/13 2013/14 2014/15 2015/16 2016/17
The remarkable revenue gained Total Assets by the Group and noteworthy 2,628 Mn net profit after tax are indicative Total Revenue of the unprecedented growth 1,305 Mn of the Group. Profit After Tax 148 Mn 68%Earning Per Share (Rs.) Shar15eholders Fund%(Rs. Mn)
905 1.06 787 1.1 736 0.82 0.85 624 0.66 446
2012/13 2013/14 2014/15 2015/16 2016/17 2012/13 2013/14 2014/15 2015/16 2016/17 Millennium Housing Developers PLC 10 Annual Report 2016/17
Chairman’s Letter
During the course of the year, we made many strategic decisions to diversify our ever-expanding portfolio. Having already established our presence as the market leader in the housing sector, we also bravely ventured into the apartment sector under the brand name ‘Heights’.
73.5% of the Group’s revenue was contributed by the subsidiaries, Millennium Villa Housing Development Ltd. and Millennium Housing Ltd. Millennium Housing Developers PLC Annual Report 2016/17 11
Chairman’s Letter Millennium Housing Developers PLC 12 Annual Report 2016/17
Chairman’s Letter
Dear Shareholders, Affordable, middle income and luxury are the three categories It is with a sense of immense joy and gratitude that I of apartments that are currently required. Accordingly, the present to you the Annual Report of Millennium Housing prices, floor spaces and luxuries afforded by each apartment Developers PLC. I also take great pride in reporting our differ. Market analysis further reveals that there is also an performance for the financial year that ended increased demand for small apartments which have a smaller on 31st March 2017. number of apartment units and allows more privacy. Luxury apartment complexes in and around Colombo are also We have already established our presence as the market attracting the attention of international investors and visitors. leader in the housing sector. However, as a strategy of The housing market is also experiencing a boom as citizens in diversification, we also bravely ventured into the High-rise semi-urban areas choose to purchase houses in the Greater property development sector under the brand name ‘Heights’. Colombo area. While it appears that the sector is sustained by Our focus, strategy and customer centricity further cemented the increasing demand for living spaces, continuous attention our unwavering position in the industry. must be paid to modes of conveyance, drainage systems and the long-term impacts urbanisation has on the environment.
Operating Under Volatile Conditions Sites of Focus Global economic growth stood at 3.1% in 2016 and despite predictions of a declining growth rate among developed During the course of the year, we made many strategic economies, they performed satisfactorily while developing decisions to diversify our ever-expanding portfolio. Lands and emerging economies weakened. This resulted in tighter were purchased in and around Colombo to carry out the external financial conditions, currency depreciations and new projects undertaken by the Company. However, we capital flows. Towards the fourth quarter of the year, the also focused on further enhancing the quality of already world economy gained pace while the World Bank predicted established constructions. a growth of 3.5% in 2017 and 3.6% in 2018. Despite the fluctuations in the economy, there was an increased demand Our entrance into the apartment sector proved to be very for housing in both developed and emerging economies. fruitful. In 2016, many apartment projects were launched following the success of the Heights Edmonton Project. Within The growth of the Sri Lankan economy also reported a the year, lands were purchased and designs finalised for the downward trend as it plunged to 4.4% in 2016 as opposed construction of five other apartment projects in the Greater to 4.8% in 2015. However, important sectors such as the Colombo area. Our present target markets are the affordable, industry and services sector reported significant growths. middle and upper middle income categories and we design Industry activities reported a notable growth of 6.7% in apartment complexes that meet their unique needs. Under 2016 in comparison to 2.1% in the previous year. Despite the green concept, all apartments are constructed in an the soaring prices of material such as sand and timber, environmentally-friendly manner. Furthermore, we are proud to construction contributed towards the growth of the sector. say that we are a M1 contractor. Although, the growth of the services sector decelerated slightly throughout the year, it also contributed vastly to the We also had to face a few challenges as a result of the growth of the economy. competition in the apartment sector. Yet we took a heads on approach when tackling the competition in the market as we established a target market, set goals and delivered Developments in the Housing Market impeccably with the use of quality materials. We hope to be identified as a market leader in the apartment sector in the Sector of Sri Lanka years to come. Independent surveyors have also revealed that out of the two Mn houses that are required in the country, 400,000 We also focused on enhancing the quality of our to 500,000 affordable housing is needed for middle constructions. Even our oldest projects are given a modern income earners in the Greater Colombo area. The need for touch as we believe in updating our knowledge and in turning accommodation arises primarily because of migration from out products to the satisfaction of our clients. rural to urban areas and the need to invest. This is evidently changing the urban landscape of Sri Lanka. Apartment As climate change continues to take a turn for the worst, complexes that cater to diverse segments of the population we also contemplate the repercussions of our actions. We are being established in urbanised areas particularly in survey the lands that are chosen for our projects and make Greater Colombo. sure constructions would not impede the natural flow of nature in any way. Thus, our housing schemes have withstood many natural disasters as we constantly focus on managing oncoming risks. Millennium Housing Developers PLC Annual Report 2016/17 13
Chairman’s Letter
Built for the Future Our persistence in the sector has ensured continuous successes. As we journey towards a promising future, we will embed sustainable solutions to the overall operations of our business. In the future we would be primarily focusing on apartments followed by housing and land sales. At present we will also be constructing in the Greater Colombo area but have hopes to venture into different areas in the island.
Acknowledgments I am truly grateful to the competent staff at Millennium Housing Developers PLC and the Board of Directors for the support they extended throughout the year. It is their commitment to the Company that has helped us reach this level of success. I am grateful to all our Shareholders for their support and confidence paced in the Company through the years. The Company operates under a strict governance structure and disclosures given in the page 46 to 52. A big thank you to the subsidiaries, project heads and the numerous teams that helped us in every step of the way. I hope we will continue to inspire each other and in turn enhance the quality of our products and services. Most importantly, I am forever grateful to our customers who have faith in our delivery.
U Harshith Dharmadasa Chairman
22nd May 2017 Millennium Housing Developers PLC 14 Annual Report 2016/17
Chief Executive Officer’s Review
The Company made stupendous financial growths during the year. For the first time in the history of the Company, the revenue surpassed Rs. 1 Bn to reach Rs. 1.305 Bn.
68%growth of the gross profit and the Rs. 148 Mn profit after tax is indicative of the sound financial status of the Company. Millennium Housing Developers PLC Annual Report 2016/17 15
Chief Executive Officer’s Review Millennium Housing Developers PLC 16 Annual Report 2016/17
Chief Executive Officer’s Review
An unparalleled growth marked the financial performance Solid Constructions of Millennium Housing Developers PLC throughout the year. While profits were made from housing and land sales, the From its inception, the Company continuously focused on using new subsidiaries in the Group further bolstered the Group’s quality materials to build constructions that can be passed financial performance as it facilitated the Company’s entrance down to subsequent generations. In the construction process, into the apartment sector. Today, Millennium Housing we ensure that supervisors and technical officers guide the Developers PLC is the market leader in the housing sector process. We also seek the assistance of professional engineers but it soon will have an unwavering position in the apartment and architects while giving top most priority to the feedback sector as well. and insights we receive from our customers.
Reaching Unprecedented Heights Customer Feedback – The Company’s For the first time in the history of the Company, the revenue Founding Stone surpassed Rs. 1.1 Bn to reach Rs. 1.305 Bn in comparison In the past, the Company showcased pre-constructed houses to Rs. 820.26 Mn in 2015/16. Remarkably, the Group’s to its customers. Today, while a certain degree of uniformity subsidiaries, Millennium Villa Housing Development Ltd., is maintained in the construction of houses, customer input is (MVHDL) and Millennium Housing Ltd., (MHL) contributed considered invaluable. From the moment the foundation stone 73.5% towards the revenue. Moreover, the Group’s gross is laid customers are given the opportunity to provide their profit also increased to Rs. 405 Mn as opposed to Rs. 276 feedback. Hence, the end product is not the production of the Mn in 2015/16. Along with these successes the Company’s Company but that of its customers. Moreover, the Company profit before tax and profit after tax also increased. The profit also gathers primary data in order to re-evaluate its mission after tax grew to Rs. 148 Mn, a noteworthy increase when and change its focuses in order to meet the needs of the juxtaposed against Rs. 88 Mn in 2015/16. The Company’s target market. profit before tax also climbed to Rs. 199 Mn during the financial year. Security Ensured Prioritising Apartment Sales Risk management is an important component in the sector and one that has received the attention of the Company So far, the Company has enjoyed the successes of the from its inception. The Company seeks expert advice Heights Edmonton Project which is an apartment complex when designing homes while the construction process is that comprises 30 apartment units which were sold within managed by chartered engineers. Geological surveys are two months. In June 2016, the Company launched its also conducted before lands are chosen for projects as the second apartment project, Heights Colombo 5 which has Company checks the structural components of the selected 64 apartments and is located in Narahenpita, Nawala Road. land to avoid possibilities of landslides. The Company also The third project commenced in 2016/17 in a scenic location checks the pressure bubble of the house and ensures that in Rajagiriya which is also thought to be one of the highest water can flow under the chosen land. As the Company takes points in Colombo. The apartment complex will be aptly every necessary precaution to avoid the flow of nature, its called ‘Green Heights’. Three other apartment complexes will constructions have withstood adverse weather conditions. be constructed in Koswatta, Battaramulla and Athurugiriya. Moreover, we maintain the stipulated distance between These projects will generate sizeable revenues for the houses to avoid the ravages of fire. Appointed security Company while providing comfortable and convenient persons are also well-equipped with fire hydrants in the case accommodation for those who require affordable yet luxurious of an emergency within gated communities. We also choose apartment spaces. SLS approved electrical items and brands to ensure the protection of occupants at all times. Millennium Housing Developers PLC Annual Report 2016/17 17
Chief Executive Officer’s Review
Fortifying the Future of Employees Our employees have also been our driving force throughout the years and their future has been of great importance to the Company. In order to ensure that they keep pace with the ever-expanding sector, industry and other technological advancements, the Company provides training programmes that help enhance their knowledge and skills.
Vision for the Future As we embark on a journey of continuous expansion, we hope to give priority to our foray into the apartment sector while also driving sales of land and housing projects.
Thank you I would like to extend my appreciation to the Chairman and Board of Directors who have contributed their experience and wisdom to achieving future goals. A special thank you to our Management and staff for their continuous support and corporation. Last but not least I would like to thank our customers, financiers, investors, shareholders, suppliers, contractors, respective Government bodies and most importantly the team of Millennium Housing Developers, for their continuous support and dedication to MHD PLC. Their unwavering support has encouraged the Company to reach great heights.
Sisira Weerabhahu Chief Executive Officer
22nd May 2017 Millennium Housing Developers PLC 18 Annual Report 2016/17
Set amidst calming surroundings, Green Heights combines luxury living and eco-friendly solutions. The pool that overlooks the city and the spacious living areas are impeccably designed. Millennium Housing Developers PLC Annual Report 2016/17 19 GREATER HEIGHTS AND GREENER LIVING SOLUTIONS AMIDST A TRANQUIL URBAN SETTING Millennium Housing Developers PLC 20 Annual Report 2016/17
Management Discussion and Analysis
The Company has revolutionised the cityscape of greater Colombo by catering to the ever-evolving housing needs of the nation. The Company will soon contribute high-rises and mid-rises to the urban landscape. Millennium Housing Developers PLC Annual Report 2016/17 21
Management Discussion and Analysis
Group Structure
Nawaloka Holdings Companies
50.1%
Millennium Housing Developers PLC
Millennium Millennium Villa Housing Millennium Housing MC Urban Developers MC Universal Housing Limited Development Limited Construction Limited Limited Limited 100% 100% 100% 100% 100%
Millennium Housing Developers PLC formally known as subsidiary focuses on the housing requirements of the Ceylinco Developers Ltd. has experienced tremendous upper income segment, it has constructed branded villa growth since the commencement of business in 1999. The houses that are a part of the Ja-ela project. So far, eight first project undertaken by the Company was Millennium exclusive villa designs have been introduced. 192 villas City in Athurugiriya, a trailblazing initiative that introduced will be built on an expansive land of 31 acres. As has been mega township projects to Sri Lanka. The success of the allocated in other projects, a substantial amount of land project motivated the Company to launch its second township is set aside for parks and greenery. The Directors of the project in Ja-Ela. These projects revolutionised the concept Company are Mr. S S Weerabahu, Mr. M K W J Seresinhe, of suburban neighbourhoods around Colombo and further Mr. Gihan De Zoysa, Mr. K C Chandana Perera and encouraged the Company to commence projects that catered Mr. H Jayantha C Perera. to the housing requirements of those in the upper-middle income group in Colombo and its suburbs. Millennium Housing Construction Ltd. (MHCL) Millennium Housing Ltd. (MHL) At the time of its inception, Millennium Housing Construction The Millennium Housing Ltd. (MHL) is a fully-owned Ltd. (MHCL) was a fully-owned subsidiary of Nation subsidiary of Millennium Housing Developers PLC. Since Lanka Finance PLC. However, in 2007 the ownership 2003, housing schemes have been built in Ja-Ela, Piliyandala of the Company was transferred to Millennium Housing and Seeduwa under the direction of this subsidiary. The Developers PLC. The Company primarily co-ordinates total land area used for the construction of the Heartland construction-related work for the Ceylinco Group of category of houses in Ja-Ela is approximately 29 acres Companies and Millennium Housing Developers and its on which 418 houses have been constructed. Eight acres subsidiaries. Mr. S S Weerabahu and Mr. Gihan De Zoysa are are reserved for pockets of greenery and parks, a plan the Directors of the Company. that is in keeping with the Company’s commitment to the environment. The site in Piliyandala and Seeduwa have 38 units and 40 units respectively. The Directors of the MC Urban Developers Ltd. (MCUDL) Company are Mr. S S Weerabahu, Mr. M K W J Seresinhe, Mr. Gihan De Zoysa, Mr. K C Chandana Perera and One of the Company’s more recent subsidiaries, MC Urban Mr. H Jayantha C Perera Developers Ltd. (MCUDL) was established in 2013 and registered with the BOI in 2015. The subsidiary handles the construction of apartments and individual housing Millennium Villa Housing Development units. The first project undertaken by the Company was Ltd. (MVHDL) ‘Heights’, an apartment complex located in Narahenpita. The Directors of the Company are Mr. U Harshith Dharmadasa, Established in February 2004, the Millennium Villa Housing Mr. S S Weerabahu, Mr. M K W J Seresinhe, Mr. Gihan De Development Ltd. (MVHDL) operates as a fully-owned Zoysa and Mr. Rajiv Perera, Mr. K C Chandana Perera, subsidiary of Millennium Housing Developers PLC. As this Mr. H Jayantha C Perera. Millennium Housing Developers PLC 22 Annual Report 2016/17
Management Discussion and Analysis
MC Universal Ltd. (MCUL) Contributions by the Subsidiaries Much like MCUDL, MC Universal Ltd. handles the The performance of the subsidiaries of the Company played construction of apartment complexes and individual a crucial role in the Group’s noteworthy performance. housing units. The subsidiary was established in 2015 Millennium Villa Housing Development Ltd. (MVHDL) and and subsequently registered with the BOI in 2015. Millennium Housing Ltd. (MHL) contributed 73.5% towards The subsidiary will launch its first apartment project in the revenue achieved by the Group. The revenue acquired Rajagiriya under the brand name ‘Heights’. Mr. U Harshith by MVHDL was Rs. 707.98 Mn, a stupendous growth from Dharmadasa, Mr. S S Weerabahu, Mr. M K W J Seresinhe, Rs. 257.45 Mn as of 2015/16. The revenue of Millennium Mr. K C Chandana Perera and Mr. H Jayantha C Perera are Housing Ltd. (MHL) further contributed towards the financial the Directors of the subsidiary. performance of the Group. The subsidiary’s revenue was Rs. 252.04 Mn, a growth of Rs. 32 Mn from the growth of 2015/16. In the case of MHL the growth was driven by the Financial Review projects commenced in Homagama and Piliyandala. Millennium Housing Developers PLC is proud to report an exceptional financial performance throughout the financial Revenue–Group year 2016/17. The remarkable revenue gained by the Group and noteworthy net profit after tax are indicative of the L K A B unprecedented growth of the Group. The stability gained C J 2% 4% 5% 1% throughout the year, will strengthen the performance of the I 4% 1% D 3% 5% Group in the years to come. H 1%
G Group Performance 12% For the first time in the history of the Company, Millennium Housing Developers PLC crossed the Rs. 1 Bn mark in revenue. The goal which drove the operations of the Company throughout the years reached Rs. 1.305 Bn within the year F as opposed to Rs. 820.26 Mn in 2015/16. The Group also 9% maintained the net profit after tax at 10%, which is well above the allocated percentage for the industry.
E 53%
A–Olympus G–Amber B–Paradis H–Topaz C–Lotus/Sakura/Carnation I–Garnet D–Sapphire J–Land E–Villas K–Ruby F–Clove L–Opal
Profitability The Group’s gross profit and net profit after tax increased significantly within the year. The gross profit rose to Rs. 405 Mn as opposed to Rs. 276 Mn in 2015/16. Moreover, as mentioned before the net profit after tax increased to Rs.148 Mn in comparison to Rs. 88 Mn as of 2015/16. These are developments that the Group is proud to report. However, within the year, the Group also noted a drop of the gross profit margin from 33.73% of 2015/16 to 31% in 2016/17 largely due to the increase in VAT. Millennium Housing Developers PLC Annual Report 2016/17 23
Management Discussion and Analysis
Operations Review Urbanisation and Development The rate of urbanisation is not merely measured by infrastructural developments but is also dependent on the rate of migration from rural to urban areas and the rate of healthy births in an urbanised area. Moreover, the relationship between urbanisation and income (GDP per capita) has been long established particularly in developing countries and high growth Asian countries such as China, Malaysia, Vietnam, Indonesia and Thailand. Undoubtedly the link between urbanisation and industrialisation is also very strong.
The Sri Lankan Government has continued to display interest in urbanisation despite receiving mixed reactions from the public. The Government of the country has been committed to social welfare programmes and achieved significant gains in social development indicators. The country is on par with developed countries in certain areas of development as it continues to report a high literacy rate and low infant mortality rate. In terms of infrastructural development, certain segments of the society were relocated in the recent past to facilitate construction processes. The Government is also willing to upgrade the living conditions of those living in lands that have not been altered so far. The lands will be reclaimed for future development projects and the well-being of all.
A Lucrative Future Demand for Apartments and Sustainable During the past one and a half decades, Millennium Housing Solutions Developers PLC has delivered more than 3,000 housing The demand for apartments and the need to live in high rise units to the Nation. In order to also contribute towards the buildings are growing exponentially. Expatriates who live growth of the apartment sector, the Group established two in the country for prolonged periods and many Sri Lankan other subsidiaries namely, MC Urban Developers Ltd. and families choose to live in apartments. Hence the government MC Universal Ltd. The first project undertaken by MC Urban is pressurised to accommodate a growing number of people Developers Ltd., an apartment project on Edmonton Road is in in urban areas. The situation is addressed through the its final stages of construction and will be ready for occupation densification of existing areas, the expansion of existing towns in the first quarter of the 2017/18 financial year. The Group and the focus on developing the suburbs of Colombo. will soon be able to report on its performance. Moreover, the second project undertaken by the subsidiary, the apartment However, the Government has to address the needs of project in Nawala will manage to secure 50% of the apartment the public and its urge to promote development by also sales by the end of 2017. The 14-storey apartment complex adopting sustainable solutions. An issue now popularly is not the only acquisition of the Company as it recently also known as ‘remaking sustainable cities in the vertical purchased land in a prime location opposite Waters Edge age’ brings some crucial areas into focus. While making Hotel. Given that Colombo is undergoing unparalleled growth, infrastructural developments, the Government has to also the future construction on this land would prove to be an focus on transportation systems, the intelligent use of natural invaluable acquisition for the Group. On the other hand, MC resources such as water, the disposal of waste and thoughtful Universal Ltd. will launch its first apartment project in Rajagiriya planning of sewerage systems. Hence, the Government and during the financial year 2017/18 while planning another private property developers must be sensitive to the needs apartment project in Nawala, Koswatte and individual housing of the environment and society at large and understand the units in Palanwatte. Evidently, the Group’s most recently repercussions of dismissing sustainable solutions on the road established subsidiaries will continue to contribute towards the to development. growth of the Company as it did this year. Millennium Housing Developers PLC 24 Annual Report 2016/17
Management Discussion and Analysis
Condominium Property Management The management and maintenance of high rise buildings is also of great importance in this regard. It has been observed that ill-maintained apartments could turn into ‘vertical slums’. The Government is aware of the long-term impacts of relocation and has put into place a condominium and property law that ensures standards are maintained in the management of condominiums.
Analysis of Apartments in and Around Colombo According to the information received from the condominium authority, currently approximately 5,600 apartment projects have received approval while some of these projects are already under way, 10%-20% of the projects are yet to commence. The apartments within greater Colombo can be categorised into super luxury tall apartments, luxury apartments in prominent locations, luxury apartments and affordable apartments.
An astounding amount of super luxury apartments are being constructed in the heart of Colombo. These projects amount to 60%-70% of the apartment projects that have been commenced in the recent past. A single unit of an apartment that belongs to this category uses a floor area of around 1,250 sq. ft. 2,800 sq. ft. and is priced between Rs. 60 Mn to Rs. 240 Mn. Altrair, Achilleion and Astoria are a few of those that fall under this category.
There are also a significant number of apartments that cater to the middle income segment. These apartments which are within the Colombo city limits are in high demand as they are conveniently located and could be purchased for a minimum of Rs. 35 Mn or a maximum of Rs. 45 Mn. These apartments which consist of around two to three rooms are moving rapidly and are constructed within a relatively short period.
MHDL’s Strategy for the Future Subsequent to assessing the market and making note of the growth trends in the apartment sector, MHDL too has made strategic decisions in expanding its scope. MC Urban Developers Ltd. and MC Universal Ltd. are subsidiaries that have taken on apartment projects that cater to the needs of the middle income segment. The projects are expected to generate impressive profits for the Group. Millennium Housing Developers PLC Annual Report 2016/17 25
Management Discussion and Analysis
Performance of Our Brands House Branding
The Heartland range provides value The Olympus range consists of ‘Paradis’ is Sri Lanka’s largest selling for money and is an affordable option exclusively designed luxury two luxury home brand. The houses in for couples both young and old who storied houses with three bedrooms. this range are spacious and luxurious prefer to live in spaces that are small The houses are set in eco friendly havens. These living spaces consist and easy to maintain. Amber, Topaz, environments with private lakes and of four bedrooms. Moreover Paradis Garnet and Opal are the brands parks. Occupants also get membership home-owners are entitled to a available within this range. 35 houses to the Millennium City recreational concessionary membership to the in this range were sold during the facilities at a concessionary rate. While Millennium City recreational centre financial year and contributed 20.69% the environment is relaxing, the and can gain access to private lakes to the total revenue. premises also provide security at all and landscaped parks within the times of the day. The sale of houses compound. During the financial in this range contributed 4.68% to the year contributed 0.94% to the total revenue. total revenue.
Ruby Lily, Carnation, Sakura and Lotus
This range showcases a unique The Ruby range is structurally similar Within this range, Lily, Carnation, design that is in keeping with the to Olympus. Yet houses in this range Sakura and Lotus provide living future needs of customers. The feature a fully covered front wall that spaces for those with small budgets. houses have rooftops and well- has a wire cut brick effect. Two houses This new brand also provides all designed staircases while the were sold during the financial year necessary living comforts in secure spaciousness contributes towards a with a 1.6% contribution to the total and tranquil environments. The brands cosy atmosphere. 15 houses from this revenue. have been very successful in the range were sold during the financial previous years and contributed 0.65% year contributing 8.85% to the total to the total revenue this year. revenue. Millennium Housing Developers PLC 26 Annual Report 2016/17
Management Discussion and Analysis
Township Branding
Millennium City Millennium Villas The Heights
Mega projects such as Millennium Millennium Villas consist of a limited Apartments are the latest addition to city offer all the conveniences of number of villas that have been MHD PLC ‘s portfolio. The apartments living in a mini city. Shops, medical exclusively designed and constructed offer semi luxury apartment complexes and commuter facilities are all within to meet European specifications. with modern facilities, well designed walking distance for occupants. Occupants of the villas have access bathrooms and fitted kitchens to suit 24 hour security is also provided in to private lakes, landscaped parks, sophisticated lifestyles. An apartment these schemes. club houses, swimming pools and is ideal as a second home, a long other luxury facilities. 48 villas term investment or a centrally located were sold during the financial year housing solution to workplaces, and contributed 54.22% to the hospitals and schools. Apartments will total revenue. drive the growth of the Company in the years to come.
Urban Range
The demand for projects of moderate proportions resulted in the development of this project. Millennium Housing Developers PLC Annual Report 2016/17 27
Sustainability Report
The tradition of reporting on a company’s performance has Economic Sustainability shifted from the mere concentration on financial performance to encapsulate the economic, environmental and social The financial sustainability of a company cannot be solely aspects of business operations. Today, in addition to the basic based on a traditional accounting definition of profit. financials, most companies report on the impact business Currently, the economic value created by a company is operations have on the economy, environment and society calculated after the cost of all inputs is deducted, this at large. The Global Reporting Initiative (GRI) through the includes the cost of all capitals. standardisation of the process, helps companies meet these criteria when reporting on their annual performance with The main investors of Millennium Housing Developers regard to sustainability. PLC are the equity investors and loan providers. If the financial sustenance of the Company is to be considered in isolation, within the year, the investment in equity amounted to Rs. 293.8 Mn while debenture holders have invested Rs. 3.2 Mn. Moreover, since 2014 when the Company was listed in the Colombo Stock Exchange, the Company has been maintaining satisfying relationships with shareholders by ensuring that a regular dividend is paid. Group Value Addition and Distribution
For the Year Ended 31st March 2016/17 2015/16 2014/15
Rs. 000 Rs. 000 Rs. 000
Income from operation 1,305,738 820,265 688,964 Income from investments and others 18,346 30,673 6,507 Cost of external suppliers and services (1,024,673) (643,968) (469,407) 299,411 206,970 226,064 Value distributed To employees 79,741 82,658 65,768 To lenders as interest and charges 4,741 1,102 4,425 To Government as taxes 50,238 28,869 39,460 To shareholders as dividend 37,037 37,037 33,671 Value retained for expansion and growth As depreciation set 10,078 6,230 2,484 As reserves 117,576 51,075 80,257 299,411 206,970 226,063
Group Value Distribution
2016/17 2015/16 2014/15
A A F F 29.1% 39.2% 26.6% 24.8% A 39.9%
F 35.5% E B 3.0% 1.6% B 2.0% E C D 1.1% E 16.8% 17.9% B C 3.4% D 17.5% D C 0.5% 12.4% 13.9% 14.9%
A–To employees as remuniration C–To Government as Taxes E–To Depreciation B–To Lenders as interest & charges D–To shareholders as dividend F–To Reserves Millennium Housing Developers PLC 28 Annual Report 2016/17
Sustainability Report
Environmental Sustainability other new housing projects also adopt these strategies. Many pockets of greenery are visible at the housing schemes In a corporate setting, environmental sustainability refers located in Homagama, Piliyandala and Seeduwa. to the adoption of sustainable environmental practices in the overall operations of a company. By managing the consumption of energy, reducing wastage and adopting Conserving Water eco-friendly strategies throughout a product’s lifecycle, companies ensure that the flow of the environment is MHD PLC has also had the fore-sight to develop and minimally disrupted. maintain three lakes. Two lakes are located in Athurugiriya while another has been developed in Ja-Ela. The system As construction is an integral part of MHD PLC’s operations, has been designed to direct rainwater to the lakes by way of the Company remains sensitive to the needs of the the drainage system. When the lakes over flow the water is environment. By paying attention to the lands chosen for directed to the paddy fields in the surrounding areas, thereby construction and maintaining standards in the construction easing the tasks of the farmers. process, the Company ensures that minimal damage is caused to the environment. Eco-friendly strategies are not Moreover, the Company has constructed a water treatment only adopted within the peripheries of Millennium City but also plant that provides water to 900 units in the Ja-Ela scheme. in the individual housing units constructed by the Company. The water treatment plant is regularly checked by quality Solar electricity has been introduced to the housing units and assurance officers and is in line with the normal water system. apartments in common areas while all customers are also informed of the benefits of making use of solar energy.
WATER
T N E
M
E E
G
N
A E
N
R
A
G
M Y
Water treatment Plant at the Ja-Ela Scheme
E
T
S A
W Other Waste disposal has become another area of concern following the tragedy that struck Meethotamulla in April 2017. However, MHL PLC has systematised its waste disposal B system by recycling its waste through external agencies. As IO DIVERSITY a result many inconveniences are avoided in terms of waste disposal while the betterment of the environment is ensured. Cultivating Greenery The Company combats global warming by cultivating Social Sustainability pockets of greenery in all Millennium City projects. To this A company is considered socially sustainable when it day the Company has developed ten parks and areas combines the interests of all stakeholders giving special dedicated to cultivation. The Company has also hired nursery attention to all who sustain its operations. This component managers and horticulturists to ensure the cleanliness of of sustainability focuses on the payment of fair salaries, the environment. Most nurseries are maintained within the maintenance of a healthy work environment and tolerable premises while occupants are encouraged to purchase the work hours. Moreover, it is crucial that companies pay plants for their own homes. attention to the ramifications of their actions on society at large. The Company cultivates bamboo plants at the Kaluela reservation area which is part of the Ja-Ela project. These plants grow fast and also protect against soil erosion. All Millennium Housing Developers PLC Annual Report 2016/17 29
Sustainability Report
SUPPLIERS
CUSTOMERS
CATERING TO THE STAKEHOLDERS CONRTACTORS
REGULATORS EMPLOYEES
COMMUNITY
Our Customers MHD PLC has established itself in a sector that is increasingly comparison to the previous financial year. However, statistics competitive. Given that the Company caters to the needs of show that the affluent class contributed towards the growth of customers from diverse segments of the market, it ensures the revenue. Nevertheless the Company continued to cater to that their unique needs are met. Moreover, as the sector the diverse needs of various segments of the market. necessitates the creation and maintenance of long-term relationships, it is essential that the Company pays attention Housing Scheme to the changing needs of its customers. Millennium City – Athurugiriya 1,700 Millennium City – Ja-Ela 900 Millennium Housing Development PLC created its first Urban Range 210 township project in 1998. At its inception, Sri Lankans were 2,810 astounded by the concept of a gated community created in calm and relaxing surroundings. The housing schemes popularly called ‘Millennium City’ were constructed in the Apartments suburbs of Athurugiriya, Ja-Ela, Seeduwa, Piliyandala and Apartments – Edmonton 30 Homagama. Today they are home to many, some who have Colombo 05 40 migrated to Colombo from rural areas in Sri Lanka. ‘Millennium 70 City’ has evidently revolutionised the lifestyles of many. Through the construction of wide access roads, garbage 2016/17 2015/16 disposal systems and recreational facilities the Company has % % been able to widen its target market, but most importantly satisfy the needs of its existing customers. Middle income category – Rs. 5.0 Mn and less 24 64 Due to a range of issues ranging from increasing lending rates Upper income category – to the increasing cost of construction, the purchasing power Rs. 5.0 Mn – 12.0 Mn 32 26 of the middle income category made a downward trend in Affluent Class – Rs. 12.0 plus 54 10 Millennium Housing Developers PLC 30 Annual Report 2016/17
Sustainability Report
Our Employees Millennium Housing Developers PLC has always considered its employees an invaluable asset. The Company currently has a staff strength of 146 employees out of which 72 are permanent employees. The Company ensures the sustained growth of all its employees.
MHD PLC has also arrived at the understanding that employees come from significantly different backgrounds and possess diverse talents. The Company ensures that employees are socialised subsequent to the recruitment process. ‘Organisation socialisation’ helps greatly in nurturing the strengths of employees and helping them direct their talents towards the growth of the Company.
Employees by Gender
B 11%
Employees by Location
G F 3% A 7% 13%
B E 1% 11% A 89%
A–Male D 6% B–Female
C 59%
A–Head Office D–Piliyandala F–Kirulapone B–Athurugiriya E–Homagama G–Seeduwa C–Ja-Ela Millennium Housing Developers PLC Annual Report 2016/17 31
Sustainability Report Millennium Housing Developers PLC 32 Annual Report 2016/17
Sustainability Report
The Company is also sensitive to the overall well-being of its Division wise Employees employees and maintains an open door policy. Employees are now able to voice their concerns to the Management. In turn the Company evolves and changes its policies to ensure K the comfort and security of its employees. The remuneration A 14% 20% corresponds to the qualifications and experience of the employees while salary revisions are carried out on a regular basis. In addition, the Company maintains a minimum wage for all employees, which is revised along with changes in J cost of living. Moreover, under the ‘Suwasampatha’ insurance 10% B policy of the Ceylinco Insurance Company a health insurance 5% cover is provided for employees and their family members at a nominal cost.
Millennium Housing Developers PLC also recognises the I C 13% 11% efforts made by its employees. Subsequent to evaluating various aspects such as the achievement of KPIs, the Company accorded Mr. Anuradha Dias the award for the best
H D employee of the year. Mr. Dias has put in a great deal of effort 2% G 8% to achieve the goals of the Company but has been adequately 5% F E supported by others in his team. 4% 8%
A–Engineering G–Administration B–Project Coordination & Recovery H–Purchasing C–Plant Nursery Division I–Maintenance Division D–Marketing J–Direct Construction E–Finance K–Security F–Stores
Training programmes are conducted at different stages of an employees’ development. Training focuses on areas such as condominium property development while some employees also receive training under seniors. University students and students of professional bodies are given training in quantity Best Employee of the Year – Mr. Anuradha Dias surveying, engineering and accounting under the supervision of qualified and experienced quantity surveyors, engineers and accountants. Moreover, job rotation and setting short term Our Suppliers targets also helps to keep employees goal-oriented. The relationship the Company has built with its chain of suppliers is of great importance to the construction process. Quality supplies ensure the construction of solid buildings and this in turn creates value for customers. The Company’s purchasing division is allowed to make ad-hoc decisions when the need for supplies arises. The Company also conducts market surveys to be certain that they have the best products delivered swiftly to the relevant construction site.
Staff Training Activity Millennium Housing Developers PLC Annual Report 2016/17 33
Sustainability Report
Our Contractors The Company also held a Blood Donation Campaign in collaboration with their sister company Ceyoka (Pvt) Ltd. The When the Company’s first projects were under way they solely project was a success as 115 persons participated while 98 relied on the expertise of local and international contractors. made their donation to the National Blood Bank. Moreover the To this day, only the ICTAD (Institute of Construction Training Company distributed stationary items, constructed shrine rooms and Development) approved contractors are invited to and lavatories while planting trees in a number of schools and commence the construction process. This stringent process their surrounding areas in rural Sri Lanka. MHD PLC hopes ensures that quality and uniformity is maintained. to expand its efforts to improve the lives of those directly and indirectly impacted by the operations of the Company. Today in addition to external contractors, the Company also has five in-house construction teams including a maintenance team. The carpenters and masons recruited are given onsite training and also act as solid replacements when our contractors are unavailable. All contractors and in-house teams are supervised and are part of weekly meetings that are conducted by project managers and chief engineers. Many township and apartment projects are yet to be commenced and will require the continuous assistance of contractors and in-house teams
Our Regulators In selecting lands for construction purposes, the Company seeks the approval of many government agencies such Religious Programme at the Maharagama Cancer Hospital as the Central Environment Authority, Urban Development Authority and other local authorities in the respective area. In the Millennium City projects the Company ensures that rain water doesn’t accumulate in the premises. In order to maintain an effective drainage system and the clearance of water paths, the Company seeks the assistance and advise of local authorities and abide by the rules imposed by them. Moreover, each housing unit has an effective sewerage system with individual septic tanks. Depending on the condition of the soil and the number of houses the Company also designs Individual soakage pits, control soakage pits or sewerage treatment plants that ensures the Company will not pollute the ground water and the environment in general.
Tree Plantation Programme at Thambiyawa Dharmapala Our Community Vidyalaya, Thanthirimalaya Together with private and public partners, the Company creates CSR projects that have penetrative effect on the society at large. The Company’s CSR efforts are integrated into the operations of the Company and have become a part of MHD PLC’s culture. We pay attention to experts in the field and also receive feedback from our stakeholders when designing these programmes.
During the year the MHD PLC also made a donation, conducted a religious service and provided lunch to the patients of ward 11 of the Cancer Hospital in Maharagama.
Construction of Lavatories at Kimbulwewa Ananda Viduhala, Thanthirimalaya Millennium Housing Developers PLC 34 Annual Report 2016/17
Awards
We ensure compliance for regulations and guidelines in our operation. Millennium Housing Developers PLC Annual Report 2016/17 35
Risk Management
In business, risk can be defined as any event or incident that Operational Risk if occurs will adversely affect the achievement of expected goals and objectives including missed opportunities. It is a Operational Risk is an inherent risk of day-to-day business must for any company to analyse risk factors while developing activities due to human errors, frauds, and failures in systems strategies to accomplish their objectives. A poor analysis and procedures and deviations from designed procedures; of risk factors may lead to natural and/or man-made crises. any of which could result in financial and non-financial loss. Therefore risk analysis and management is an integral part of any organisation. Operational Risk Mitigation Strategies: Risk management is the selection of those risks a business •• The Company has designed and implemented a should take, and those, which should be avoided or mitigated, comprehensive and sound system of internal controls followed by actions to avoid or reduce risk. MHDL PLC’s has to minimise operational risk. Regular reviews of systems designed strategies after analysing all internal and external and controls by the Management ensures the quality, risk factors in detail to achieve company short-term and effectiveness and efficiency of the system of controls. long-term goals and objectives. Finally the updating of all information ensures that the appropriate changes are in line with the changing business environment. The continuous internal audits Managing Risk at MHDL PLC carried out by the internal audit team to ensure the Risk management is an integral part of decisions and adequacy and strength of the designed system. business processes in the Company. All the planning, •• The construction and development activities of the site reporting, information systems, and audit reviews provide the are directly supervised by qualified and well-experienced basis for integrating risk management into the management team of Consultants/Engineers/Architects who see to it of the business. Millennium Housing Developers PLC that the quality standards of the construction activities are approaches risk management in a proactive manner and has strictly enforced. implemented systems where possible to avoid or mitigate risk. •• Specific and general provisions have been made to Control mechanisms are in place to track the exposure to risk meet any unexpected price increases without disturbing as well, giving the management signals as to when and where the ongoing operations of the Company. Finally, all the control is needed. pre-emptive steps such as adequate insurance cover, collection of performance bonds and guarantees from contractors, safekeeping of important documents and Analyse risk Assess risk backup of important files have been implemented to face any unforeseen disaster.
Report Risk Control Risk Credit Risk Credit risk is connected with the potential losses arising from the failure of customers to perform contractual agreements Manage Risk with the Company by way of default.
Risk management MHDL PLC involves a four-step process: Credit Risk Mitigation Strategies:
1. Taking steps to eliminate the risk •• Cash customers – Execution of the transfer deed and handing over of the house for occupation is done only 2. Reducing the probability of its occurrence upon receipt of the entire sales consideration. 3. Taking steps to reduce the severity if it occurs •• Credit customers – The lending institutions disburse the 4. Transfer the risk or its consequences to another party loan directly to MHDL PLC after signing the mortgage bond in the case of credit customers who may opt to use bridge financing. The handing over of the house also is done after receiving the full consideration. •• Overall, the Company carefully designs the payment structure from customers to ensure a well-balanced cash flow over time, and also monitors the collection of dues through the recoveries division. Millennium Housing Developers PLC 36 Annual Report 2016/17
Risk Management
Interest Rate Risk Reputation Risk Interest rate risk specific to MHD PLC is connected with its Goodwill is one of the most important intangible assets of borrowing cost (interest rate) being higher than the prevailing the Company, and Millennium Housing Developers PLC has rate in the market and interest income is lower than the market realised the importance of maintaining a sound reputation due to the fluctuation of interest. to retain and improve its customer base, and also to have a better public image in the eyes of all stakeholders. Interest Rate Mitigating Strategies: Reputation Risk Mitigation Strategies: •• During the year the MHD PLC Group was able to negotiate better rates than previous occasions with the support of •• MHD PLC has employed team of qualified and Nawaloka Holdings to reduce interest rate risk. well-experienced professionals of the industry to ensure •• Entered to the loan agreement with cap and floor. the utilisation of standardised raw material and adherence to the standards of the construction industry so as to deliver quality houses to the customer in a timely manner. Legal Risk •• Special care is taken to safeguard the reputation of the Company in the eyes of the customer. A separate Legal risk is the risk resulting from the legal or regulatory customer care unit is in place to under the supervision of framework that governs the Company and its transactions a Project Coordination Manager to coordinate customer with third parties. complaints in a very positive manner. •• Regular newsletters and meetings with customers’ welfare Legal Risk Mitigation Strategies: societies also strengthen the customer relationship. Special emphasis has also been given to the constructive •• Millennium Housing Developers PLC takes all necessary suggestions made by the customers, contractors and staff steps to ensure compliance with all legal, statutory members. requirements and special attention has been given to •• The firm commitment of MHD PLC to serve the community maintain ethics, standards and transparency. while liaising with various individuals and organisations •• MHD PLC uses a three-pronged approach to mitigate over the years has helped MHD PLC to build its reputation legal risk; i.e., in-house, parent company and external third as a corporate entity that takes social responsibility party counsel. The while we have access to expert legal seriously. advice through an experienced in-house legal officer and the highly capable officers of the legal division of parent company, we can also seek expert opinions from external Competition Risk senior legal counselors in special circumstances to ensure the legal safety of the Company. The competitive advantage we have enjoyed during past being the pioneer township developer in the country has reduced within the last two years due to growing competition Liquidity Risk from new smaller scale house constructors in the market. This situation has eroded our overall market share. Competition Liquidity risk is connected with the inability or difficulties the comes not only for a share in the housing market, but also Company may face to meet its financial obligations as they for the increasingly scarce supply of land. The source of this become due without affecting normal operations. competition is real estate companies who purchase, develop and sell bareland in addition to other house constructors. Liquidity Risk Mitigation Strategies: Competition Risk Mitigation Strategies: •• The regular preparation of cash flows and close monitoring of deviations will ensure the smooth matching of collection •• Entry into to apartment sector due to scares of land for and borrowings against the expenses of the Company. township development. •• The strategy of pre-selling has also reduced the potential •• Incorporated two new fully-owned Companies with BOI for liquidity problems in the Company. facilities, MHD PLC benefited from a five-year tax holiday •• Timely preparation of MIS reports also minimises the not available to its Non-BOI competitors. liquidity risk by identifying the strengths and weaknesses •• Large-scale development has its own inherent advantages in relation to cash flows and financing. like economies of scale, which are enjoyed by MHD PLC. Millennium Housing Developers PLC Annual Report 2016/17 37
Risk Management
•• Expertise gained over the years has strengthened Procurement Risk Mitigation Strategy: our capabilities, enabling us to deliver more value to our customers. Construction that meets customer •• A separate supply division has been established at Head requirements, focused marketing strategies, and a wide of and at site level to coordinate with suppliers to procure range of products with unique branding has enabled us to material on time to minimise idle time of the construction. achieve the desired position in the minds of customers. •• Long-term relationships with suppliers has developed •• As a result of price increases in the housing market due through contractual agreements. to increase in raw material prices aggravated by heated •• Supplier’s base has increased to reduced dependency on demand leading to additional increase in the prices individual suppliers. completed finished houses, a segment in the market has •• Timely settlement of suppliers’ bills and advance payments lost their purchasing power. Having identifying this gap, prior to supply has ensured timely delivery of quality raw MHD PLC is now planning to introduce a house at a lower material at the right quantity. price to exploit the existing market opportunity, which definitely enhances the competitiveness of the Company among its rivals. Dependence on Contractors In the past MHD PLC dealt with many contractors. However, Environmental Risk a few contractors handled the bulk of the construction. This reliance will negatively affect the profits, Company reputation There is a risk faced by any construction firm that its activities and customer expectations should a contractor become non- could cause permanent damage to the environment. Once performing. a site has been selected for development, the trees are removed, exposing the earth directly to the rays of the sun. The result of this is environmental pollution as well as drying Dependence on Contractors up of the surface water in that area. Mitigation Strategies: •• Contracts awarded to series of contractors with proven Environmental Risk Mitigating Strategies: track records. •• Each project is planned with specifications as to the •• Contractors has sub-divided and award based on reservations for the drainage system, percentage of open specialty Eg: Masonry work, Carpentry work, Finishing Etc: spaces, reservation for green pockets etc. MHD PLC has established a separate construction team with qualified and experienced people to handle any type •• Makes it a point to minimise the removal of trees as much of crisis due to a discontinuation of a contractor. as possible. •• Minimises the disturbance to the existing/natural Being a subsidiary of Nawaloka Hodings which is a one of drain paths. the fast-growing conglomerate in the country, MHD PLC has •• Has designed a garbage collection system and a solid established system and procedures to identify risk which are waste disposal system. inevitable to any business and develop strategies to accept •• Complies with legal requirements such as obtaining and mitigate those risk to maximise shareholder values while approval from the Central Environmental Authority for the satisfying all our stakeholders. construction of buildings, developing the project according to UDA (Urban Development Authority) regulations.
Procurement Risk The construction of houses and other infrastructure facilities in the townships are carried out subject to the risk that raw materials and other applicable inputs may be unavailable or the desired quality or volumes may be insufficient. All the construction activities are dependent upon on the availability of raw material such as cement, bricks, sand, timber, steel, rubble, roofing sheets etc. Any shortage in the supply may lead to a crisis by badly affecting the bottom-line. This may be a result of purchasing supplies at excessively high prices and loss of customer goodwill. Millennium Housing Developers PLC 38 Annual Report 2016/17
Governance Board of Directors
5
3 1 4 Millennium Housing Developers PLC Annual Report 2016/17 39
Board of Directors
2
7 6 8 Millennium Housing Developers PLC 40 Annual Report 2016/17
Board of Directors
1. Harshith Dharmadasa 4. M K W J Seresinhe Chairman/Non-Executive Director Executive Director
Mr. Dharmadasa was appointed to the Board on Mr. Seresinhe joined Millennium Housing Developers PLC 11th March 2011. He is an Associate Member of the Institute in 1999 and was appointed to the board in 2003 as the of Certified Professional Managers and a young business Director Marketing. He holds a Masters Degree in Business professional with over 21 years experience in executive Management from Australian Institute Of Business. He is a management. He has acquired extensive experience in the fellow member of Chartered Management Institute of UK fields of trading, manufacturing and construction sector. He and a fellow member of Association of Business Executives also served as a Director at the Export Development Board UK. Mr. Seresinhe possesses 30 years of experience in of Sri Lanka and Sathosa Retail Ltd, during 2003/04 period. disciplines of advertising, sales management, marketing and Currently, Mr. Dharmadasa serves as a Director of Nawaloka strategic management in the fields of media advertising, BTL, Holdings Company and all other ventures under its umbrella, real-estate and housing sectors. Currently he serves as a including Nawaloka Hospitals PLC. Director of boards of Millennium Housing Limited, Millennium Villa Housing Development Limited, MC Urban Developers 2. Victor R Ramanan Ltd. and MC Universal Limited. Deputy Chairman – Non-Executive Director 5. Chandana Perera Victor Ramanan is a Sri Lankan born British National residing Non-Executive Director in London. Being educated in Sri Lanka and the UK, Victor is a B.Sc. Graduate and holds a Diploma in Software Chandana Perera accounts for more than 31 years of Senior Engineering, Business Admin & Sales Techniques (UK). Management experience in Sri Lanka, Vietnam and India.
He is a versatile marketer and administrator with more than Mr. Perera started his career at John Keells Holdings in 29 years of hands on experience working in many countries 1985. During his tenure at John Keells Holdings, he held including United Kingdom, Kuwait, Dubai, Baharain, the positions of Manager Walkers Tours, Director, Mack Germany, France, USA and Sri Lanka. He has worked in International Freight, and Country Manager of DHL Worldwide areas such as IT, HR, Marketing and Business Development Express. Mr. Perera also held the positions of Country of which more than 17 years has been in the fields of Oil, Gas Manager for Aramex International in Vietnam and as the and Logistics sectors. Regional General Manager for Aramex overlooking North Indian region covering over nine states. Mr. Perera also, held Presently holds positions as a Director & Chairman in the the position of Country Manager – Hayleys Advantis, Freight under mentioned companies. operations in India from 2008/11.
•• Adventus Education (Pvt) Ltd. – Chairman Mr. Chandana Perera holds a MBA from the University of •• Nawaloka College of Higher Studies (NCHS) – Deputy Western Sydney and currently serves as the Director General Chairman Manager for Ceyoka (Pvt) Ltd., Nawaloka Trading (Pvt) Ltd., •• Millennium Housing Developers PLC – Deputy Chairman Ceyoka Health (Pvt) Ltd., Ceyoka Engineering (Pvt) Ltd., •• Nawaloka Hospitals PLC – Director Nawaloka Agri (Pvt) Ltd., Nawaloka MEP Concepts (Pvt) Ltd., Ceyoka Exports (Pvt) Ltd., Koala (Pvt) Ltd. Mr. Perera is also a •• Nation Lanka Finance PLC – Director Director of Millennium Housing Developers PLC, Tea & Herb •• Ideal Getaways (Pvt) Ltd. – Director Co. (Pvt) Ltd., MC Urban Developers Ltd. and MC Universal Ltd. 3. Sisira S Weerabahu Chief Executive Officer/Executive Director 6. Gihan De Zoysa
Mr. Weerabahu joined our company at its inception as the Non-Executive Director General Manager and was appointed to the Board in 2002. Mr. De Zoysa was appointed to the Board in March 2011. He holds a Bachelors Degree in Engineering from University He was an Associate Director and Consultant for Taru of Moratuwa. He is a member of Institute of Engineers of Villas (Pvt.) Ltd., during 2007/10. He is in charge of Special Sri Lanka and a Fellow Member of the Chartered Institute Projects and Technical Services. He has more than 26 years’ of Management Accountants (FCMA). Mr. Weerabahu experience in building construction, hotel construction and possesses 36 years experience in the capacity of a senior hotel maintenance management. He has worked overseas executives in both private and public sectors. Currently, he in the Seychelles, United Kingdom and Sri Lanka. He has serves as a Director of Millennium Housing Ltd., Millennium work experience with International Non-Governmental Villa Housing Development Ltd., MC Urban Developers Ltd Organizations (INGOs’) in rebuilding houses, medical and MC Universal Ltd. centers and hospitals. He excelled as a leading sportsman his schooling days. Currently, Mr. De Zoyza serves as a Director for Millennium Housing Ltd., Millennium Villa Housing Development Ltd., MC Urban Developers Ltd. and MC Universal Ltd. Millennium Housing Developers PLC Annual Report 2016/17 41
Board of Directors
7. H Jayantha C Perera 9. Rajiv Perera Executive Director Non-Executive Independent Director (Not in Picture) Mr. H Jayantha C Perera is a CFA Charter holder from the CFA Institute, Charlottesville, USA. He is also a Diploma Holder from Mr. Perera was appointed to the Board of MHD PLC in 2011. the National Computing Centre, UK. Mr. Perera is licensed by He counts over 23 years of experience in marketing, property the Securities and Exchange Commission of Sri Lanka to Trade and real estate business, both in the United Kingdom and and provide Investment Advise on Securities. Sri Lanka. Mr. Rajiv is currently a Director of Nation Lanka Equities, Nation Lanka Promotions and Nation Lanka Mr. Perera has well over two decades of work experience in Capital. He worked as the Head of Marketing of Primer the corporate sector having worked in many divisions and in Communication International London and Directors of Capital many capacities in many business establishments. He brings CLS, Air Line Suppliers in UK. Currently, Mr. Perera serves as with him experiences in Management, Strategy, Treasury, a Director for MC Urban Developers Ltd. Finance, Corporate Finance and Sales. 10. Jayaprakash Rudra He is the Executive Director cum Chief Executive Officer Non-Executive Independent Director at Nation Lanka Finance PLC and has previously worked (Not in Picture) in the Finance/Financial Services areas in the capacities of Managing Director, Director/CEO at Richard Pieris Securities Appointed to the Board on 06th May 2015. He is a Private Ltd., as the CEO of Richard Pieris Arpico Finance well-established businessman, Served as a Director in Ltd., As the CFO of Nawaloka Hospitals PLC, as the Senior many Companies. He has wide experience especially in Manager heading capital markets at the Merchant Bank of the property development sector. Sri Lanka, and also as the VP Head of Research at DFCC Stock Brokers (Pvt) Ltd. Prior to these appointments, he worked at NDBs Stock Brokers as an Investment Advisor, Stock Broker and Floor Trader and later became the Research Manager at Lanka Securities (Pvt) Ltd.
8. U H Palihakkara Non-Executive Independent Director
Mr. Palihakkara was appointed to the Board in 2011. He holds nearly 43 years of post-qualifying experience in divers fields. He has worked in a number of private and public sector organisations in Sri Lanka and overseas, which includes; Chairman, Acland Insurance Services, Deputy Chairman, Ceylon Electricity Board, Director/General Manager People’s Merchant Bank, Deputy General Manager DFCC, Financial Specialist Commonwealth Secretariat (CFTC). He has also worked in a number of projects funded by the World Bank (WB), Asian Development Bank (ADB), African Development Bank (AFDB), International Fund for Agricultural Development (IFAD), and Commonwealth Secretariat and JIAC. He was the former president of The Institute of Chartered Accountants of Sri Lanka and the Sri Lanka branch of Chartered Institute of Management Accountants (CIMA) UK, and the Chartered Association of Certified Accountants (ACCA) UK. He was a Council member of the Securities Council of Sri Lanka for four years, Postgraduate Institute of Management, Open University of Sri Lanka and the Central Culture Fund National Institute of Business Management, CINTEC. He was the President of the Organization of the Professional Associations (OPA) in Sri Lanka (2010/11). Millennium Housing Developers PLC 42 Annual Report 2016/17
Senior Management
1 2 3 4
W A Indunil Rangana Perera K D S Fernando H R Wanniarachchi A C H J Thebuwana Financial Controller AGM Sales Deputy Financial Controller General Manager Engineering and Projects Millennium Housing Developers PLC Annual Report 2016/17 43
Managers
R M R Jayawardena H G Vipula M Sonnadara M A D S Fernando Manager – Projects Senior Manager – Material Manager – Purchasing Senior Manager Marketing – Control & Stores Communication & Sales
B N J Mendis W A L Ajith Kumara A M K Sepali Manager – Villa Construction Manager – Security & Head of Legal Project Administration
K Jagath N W P Dilruks P A J Anuradha Dias Chief QS Manager – Sales Accountant
A M Dharshana Bandara K A Chareeth Panduka N G S Weerakeerthi W Danuka Perera Senior Manager – Sales Accountant Manager – Personal and Project Officer Administration (Not in Picture) Millennium Housing Developers PLC 44 Annual Report 2016/17
The life of urbanites have transformed to accommodate comfortable living spaces and luxury conveniences in the heart of Colombo. Occupants can either relax in their spacious apartment or dive into the blue on the rooftop. Millennium Housing Developers PLC Annual Report 2016/17 45
ELEVATING THE LIFESTYLES OF MANY, THE HEIGHTS BECKONS TO ALL WHO DREAM OF LIVING IN THE CITY. Millennium Housing Developers PLC 46 Annual Report 2016/17
Corporate Governance
Statement of Corporate Governance within the applicable rules and regulations and delegate the necessary authority to fulfil their job responsibilities. The Millennium Housing Developers PLC is one of the leading Board of the Directors is responsible for the shareholders property development Companies in the country, registered for creating and delivering sustainable shareholder value under BOI, listed in the Colombo Stock Exchange in 2014 through management of business activities. Each Director and is a subsidiary of Nawaloka Group of Companies. has unrestricted access to information and services of Senior The Board of Directors has given the highest priority to Management and the Company Secretary. At least seven develop an effective Corporate Governance Framework days prior notices are given to the Directors regarding the to the Company. The Board is committed to improve the Board meetings and circulate all relevant Board minutes, internal control systems with a view to provide transparency Board papers well in advance so that all Directors could well and accountability to ensure best practices of corporate prepared and actively participate and contribute to the Board governance principles. Millennium Housing Developers PLC proceedings adopts Code of Best Practices in Corporate Governance issued jointly by the Securities and Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Composition of Board of Directors Sri Lanka. There were ten Directors represent the Board at the end of the financial year ended 31st March 2017. They were Role of Board of Directors highly-qualified professionals in the banking, accountancy, engineering, and Marketing fields. Out of ten Directors The Board of Directors is directly responsible for overall two Directors are Executive Directors, eight Directors are Company’s activities since they are the final decision-maker Non-Executive Directors and four of them are Independent who has the authority and directs the Management team Non-Executive Directors. At the beginning of the financial year to uphold highest level of integrity, function in compliance there were ten Directors and no appointments or resignation has taken place during the year.
Attendance of the Directors for the Board Meetings during the Year 2016/17
Name Executive/Non-Executive Independence/ Meetings attended/ Non-independence Meetings held
Mr. U H Dharmadasa (Chairman) Non-Executive Non-Independent 09/10 Mr. V R Ramanan (Deputy Chairman) Non-Executive Non-Independent 08/10 Mr. S S Weerabahu (Chief Executive Officer) Executive Non-Independent 10/10 Mr. M K W J Seresinhe Executive Non-Independent 10/10 Mr. G D Zoysa Non-Executive Non-Independent 09/10 Mr. U H Palihakkara Non-Executive Independent 07/10 Mr. Rajiv Perera Non-Executive Independent 03/10 Mr. Jayaprakash Rudra Non-Executive Independent 07/10 Mr. K C Chandana Perera Non-Executive Non-Independent 09/10 Mr. H Jayantha C Perera Non-Executive Independent 09/10 Millennium Housing Developers PLC Annual Report 2016/17 47
Corporate Governance
Board’s Skills/Expertise and Remuneration Committee Independent Advice The Remuneration Committee appointed by the The Board is balanced in its composition; it has qualified Board comprises three Non-Executive Directors as at Chartered Accountant, Chartered Engineer, Experienced 31st March 2017. The Chairman of the Committee is Banker and experienced property development consultants. Mr. U H Dharmadasa (Non-Executive) and the members Expertise possess by them enable to contribute effectively of the Committee were Mr. K C C Perera (Non-Executive) to the Board’s deliberations in respect of the affairs of the and Mr. Jayaprakash Rudra (Independent). Considering Company. The Board of Directors may seek independent responsibility of the Committee, formulation, establishment of professional advice when necessary to achieve the objectives remuneration policies including the reviewing, approving and of the organisation. The Board of Directors ensures complete recommending to the Board the remuneration of Directors disclosure of financial and Non-financial information, and including the key positions of the Company and work force of report financial information in accordance with Sri Lanka the Company. Financial Reporting Standards (SLFRSs) and Sri Lanka Accounting Standards (LKASs), Listing Rules of Colombo The Report of the Remuneration Committee is on Page 61. Stock Exchange and the Companies Act No. 07 of 2007.
The profiles of the Directors as set out on pages 40 & 41. Disclosure of Director’s Remuneration During the financial year under review, aggregate remuneration paid to Executive and Non-Executive Directors Board Subcommittees of the Company is disclosed in Note 7 to the Financial The Board has appointed the following Subcommittees and Statements. delegate responsibilities to ensure good governance. All Subcommittees are represented by the Board members of the Company. Related Party Transaction Review Committee The Subcommittees are: The Related Party Transaction Committee was formed 1. Audit Committee by the Board comprises three Non-Executive Directors 2. Remuneration Committee as at 31st March 2017. The Chairman of the Committee Mr. U H Palihakkara is Independent Non-Executive Director. 3. Related Party Transactions Review Committee The objective of Related Party Transaction Committee is to assist the Board in reviewing the all related party transaction Audit Committee carried out by the Company and its subsidiaries of the Group. The Audit Committee is appointed by the Board comprises The report on the Related Party Transaction Committee is on two Independent Directors and one Non-Executive Director as the page 62. at 31st March 2017. The Chairman of the Committee Mr. U H Palihakkara is a qualified Chartered Accountant having extensive experience in field of finance. The Audit Re-Election Committee met eight times for the year 2016/17 with the According to the Article Association of the Company, three presence the Auditors. The Report of the Audit Committee is Directors should retire from the office at each Annual General on page 59 & 60. Meeting (AGM) and offer themselves for re-election. Any Directors appointed during the year also seek re-election at the AGM. Millennium Housing Developers PLC 48 Annual Report 2016/17
Corporate Governance
Corporate Disclosure and Shareholder to carry out the internal audit function to ensure the control systems is in operation throughout the year and review their Relationship reports and implement their recommendations. The Company has complied with all requirements related to the Colombo Stock Exchange (CSE). Interim Financial The Board has delegated the process of reviewing the Statement has been uploaded on time and all vital information effectiveness of the internal controls to the Audit Committee. regarding the Company promptly communicated to CSE in order to be released to the shareholders. No penalties or strictures have been imposed on the Company by relevant The Whistle-Blower Policy authorities. The Board of Directors is very keen to have active Company committed to the highest standard of ethical, moral engagement with our shareholders through various means. and legal conduct in operating its business. In line with this The Annual General Meeting provides the good opportunity to commitment, the whistle-blower policy exists to provide communicate their opinions and clarify their concerns. mechanism to employees to raise their concerns where interests of the organisation are at risk and is expected to Our Company’s Annual General Meeting (AGM) is scheduled provide assurance the employees raising such concerns will to be held within three months from the end of financial year be protected from the reprisal and victimisation. This policy on 30th June 2017, after providing a copy of Annual Report in applies to the all individual working in all levels in the Company. CD form to all shareholders. Board of Directors are very warmly welcome active participation of shareholders to the AGM. Compliance with the Best Practices Internal Control and CSE Rules on Corporate The Board of Directors has established and maintains Governance comprehensive internal control system to safeguard Company The corporate governance practices adopted by the asset and to increase shareholders wealth. These internal Company, including the adoption of code of best practices control systems are regularly reviewed and updated and issued jointly The Institute of Chartered Accountants of designed with identification of significant risks faced by Sri Lanka (ICASL) and The Securities and Exchange the Company as a result of ongoing process to safeguard Commission of Sri Lanka and rules set out in Section 7.10 Company assets against unauthorised use. To support this the Colombo Stock Exchange Listing Rules on Corporate the Company has outsourced professional internal audit team Governance are given in the following table:
Rule No. Subject Applicable Requirement Compliance Status Company Extent of Adoption/Reference
7.10.1(a) Non-Executive Directors At least one-third of the total number Complied. Eight out of ten Directors of Directors should be Non-Executive are Non-Executive Directors Directors. 7.10.2(a) Independent Directors Two or one-third of Non-Executive Complied. Four out of eight Directors, whichever is higher should Non-Executive Directors be independent are independent. 7.10.2(b) Independent Directors Each Non-Executive Director Complied. Refer Annual Report of the should submit a declaration of Board on the state of affairs independence/Non-Independence of the Company on pages in the prescribed format 53 to 56. 7.10.3(a) Disclosure relating to The Board shall annually make a Complied. Refer on page 46. Directors determination as to the independence of the Non-Executive Directors and names of independent Directors should be disclosed in the Annual Report. 7.10.3(b) Disclosure relating to The basis for the Board to determine Not Applicable Directors a Director is Independent, if criteria specified for independence is not met Millennium Housing Developers PLC Annual Report 2016/17 49
Corporate Governance
Rule No. Subject Applicable Requirement Compliance Status Company Extent of Adoption/Reference
7.10.3(c) Disclosure relating to A brief résumé of each Director Complied. Refer Directors’ Profile on Directors pages 40 to 41. 7.10.3(d) Disclosure relating to Forthwith provide a brief résumé of Complied at A brief résumé of new Directors new Directors appointed to the Board the time of new Directors and The with details specified in 7.10.3(a), (b) appointment appointments were and (c) to the rules of the Colombo submitted to the Colombo Stock Exchange. Stock Exchange when such appointments were made. 7.10.5 Remuneration Committee A listed company shall have a Complied. Refer page 61. Remuneration Committee. 7.10.5(a) Composition of Shall comprise Non-Executive Complied. Two out of three Remuneration Committee Directors, at which a majority of Non-Executive Directors are whom shall be independent. independent 7.10.5(b) Function of Remuneration The Remuneration Committee Complied. Remuneration Committee. shall recommend the remuneration Committee report on of the Chief Executive Officer and page 61. of this Report Executive Directors. which set out the functions of the Committee. 7.10.5(c) Disclosure relating to a. Names of Directors of the Complied. Refer on page 61 Remuneration Committee. Committee and Statement emoluments on page 78. of Remuneration Policy. b. Aggregate remuneration paid to Executive and Non-Executive Directors. 7.10.6 Audit Committee. The Company shall have an Complied. Names of the members of Audit Committee. the Audit Committee are stated on page 59. 7.10.6(a) Composition of Audit Shall comprise Non-Executive Complied. Two of three Non-Executive Committee. Directors, a majority of who shall Directors are independent. be independent. A Non-Executive Director shall be Complied. Chairman of the Audit appointed as the Chairman of the Committee is an Committee meetings. Independent Non-Executive Chief Executive Officer and Chief Complied. Director, CEO and Financial Financial Officer should attend Controller participate for the Audit Committee meetings. meetings. The Chairman of the Audit Committee Complied. Chairman of the Audit or one member should be a member Committee is a qualified of a professional accounting body. Chartered Accountant. 7.10.6(b) Audit Committee Functions of the Audit Committee. Complied. Refer on pages 59 & 60 Functions for the functions of Audit Committee. 7.10.6(c) Disclosure in the Annual a. Names of Directors comprising Complied. Refer on page 59 for Report relating to Audit the Audit Committee. the functions of Audit Committee. Committee. b. The Audit Committee shall make a Complied. Refer on pages 59 & 60 determination of the independence for the functions of Audit of the Auditors and disclose the Committee. basis for such determinations. c. The Annual Report shall contain Complied. Refer on pages 59 & 60 a report of the Audit Committee for the functions of Audit setting out the manner of Committee. compliance with their functions. Millennium Housing Developers PLC 50 Annual Report 2016/17
Corporate Governance
Compliance with the Code of Best Practice on Corporate Governance Issued Jointly by the Securities & Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (ICASL)
Subject and Ref. Corporate Governance Principle Level of Compliance
A. Annual Report Chairman and CEO If Chairman and CEO is one and the same person, the name of the Chairman Mr. U H Dharmadasa A.2.1 & A.5.7 Chairman/CEO and Senior Independent Director appointed and Is Non-Executive Director and justification of the decision to combine the positions. the CEO is Mr. S S Weerabahu Executive Director. Board Balance A.5.5Should identify the independent Non-Executive Directors. Complied The Board consists eight Non-Executive Directors. Four Directors are independent. Appointment of New When new Directors are appointed, the following details should be Complied Directors A.7.3 disclosed: Disclosure of details as •• a brief résumé of each Director; required of new appointments to the Board was informed to •• the nature of his expertise in the relevant functional areas; the Colombo Stock Exchange •• the names of companies in which the Director holds directorships or and also in the Annual Report. memberships in Board Committees; and Profiles of Directors are given •• Whether such Director can be considered independent. on pages 40 & 41. Appraisal of Board Should disclose how performance evaluation have been conducted Complied Performance A.9.3. Performance evaluation of the Board and individual Directors takes place annually on a self- appraisal basis. Board-Related The following details pertaining to each Director should be disclosed: Complied Disclosures A.10.1 •• Name, qualification and brief profile, expertise possess; Directors’ profiles with their qualifications, expertise etc, •• Immediate family and/or material business relationship with other are given on pages 40 & 41. Directors of the Company; Details of directorships/other •• Whether executive, Non-Executive and/or independent Director; positions held, Directors’ •• Names of other listed Companies in Sri Lanka in which the Director interests in contracts and concerned serves as a Director; related party transactions are •• Names of Companies in which the Director concerned serves as a Director disclosed in Note 28 of the and/or the fact that he/she holds other directorships in Group companies; Financial Statements given on page 94 to 96. •• Number/percentage of Board meetings of the Company attended during the year; Details of Board meetings and •• The total number of Board seats held by each Director indicating listed Board Subcommittees, their and unlisted companies and whether in an executive or Non-Executive composition, attendance by capacity; Directors of meetings held during the year are given on •• Names of the Board Committees in which the Director serves as the pages 46, 59, 61 & 62. Chairman or a member; and •• Number/percentage of Committee meetings attended during the year. Disclosure of •• A Statement of Remuneration Policy and details of Remuneration of the Complied Remuneration B.3 Board as a whole. Refer Remuneration Committee and B.3.1 •• Names of Directors comprising the Remuneration Committee, contain Report on page 61 and also a Statement of Remuneration Policy and set out the aggregate Note 7 of the Audited Financial remuneration paid to Executive and Non-Executive Directors. Statements. Major transactions All major transactions entered into by the Company should be No such transactions during C.3 & C 3.1 disclosed. the financial year. Audit Committee Names of the members of the Audit Committee should be disclosed. Complied D.3.4 •• Basis for determining the independence of Auditors. Refer the Audit Committee Report on pages 59 & 60. Millennium Housing Developers PLC Annual Report 2016/17 51
Corporate Governance
Subject and Ref. Corporate Governance Principle Level of Compliance
Going Concern Should report that the Company is a going concern, with supporting Complied D.1.5 assumptions and qualifications as necessary. Refer Annual Report of the Board on the State of Affairs of the Company on page 56. Code of Business Should disclose whether the Company has a Code of Business Will be complied shortly Conduct and Ethics Conduct & Ethics for Directors and members of the Senior D.4.1 & D.4.2 Management team.
•• Should also disclose an affirmative declaration that they have abided by such Code. •• The Chairman must certify that he/she is not aware of any violation of any of the provisions of this Code
B. Remuneration Committee Report Members of The names of the members of Remuneration Committee should be Complied Remuneration disclosed in the Remuneration Committee report. Refer the Remuneration Committee B.1.3 Committee report on page 61.
C. Directors’ Report Directors’ Report Should contain the following declarations made by the Directors: Complied D.1.2 •• The Company has not engaged in any activities, which contravenes Refer Annual Report of laws and regulations; the Board on the State of •• The Directors have declared all material interests in contracts involving Affairs of the Company on the Company and refrained from voting on matters in which they were pages 53 to 56. materially interested; •• The Company has made all endeavours to ensure the equitable treatment of shareholders; •• The business is a going concern with supporting assumptions or qualifications as necessary; and •• They have conducted a review of internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of their effectiveness and successful adherence herewith.
D. Financial Statements Financial Statements •• The Board of Directors should include a Statement of Responsibility Complied D.1.3 for the preparation and presentation of Financial Statements. Refer on page 58. •• Auditors should also have a statement about their reporting Refer on page 65. responsibility Related Party •• Should disclose the related parties and related party transactions as Complied Transactions D. 1.7 specified by Sri Lanka Accounting Standards, SEC regulations and Refer Note 27 and 28 on other related regulations. pages 93 to 96.
E. Management Report Management Report Should include a Management Discussion and Analysis Report Complied. D.1.4 discussing at least the following issues: Refer Chairman’s Review on •• industry structure and developments; page 10 to 13. •• opportunities and threats; Refer Chief Executive Officer’s •• risks and concerns; Review on pages14 to 17. •• internal control systems and their adequacy; •• social and environmental protection activities carried out by the Refer Management Discussion Company; and Financial Review on pages 20 to 26. •• financial performance; •• material developments in human resources/industrial relations; and •• prospects for the future Millennium Housing Developers PLC 52 Annual Report 2016/17
Corporate Governance
Subject and Ref. Corporate Governance Principle Level of Compliance
F. Corporate Governance Report Corporate Should disclose the manner and extent to which the Company has Complied. Governance complied with the principles and provisions of the Code. Refer on pages 46 to 52. Report D 5.1
G. Audit Committee Report Audit Committee Should set out the work carried out by the Committee. Complied. Report D 3.3 Refer on pages 59 to 60.
H. Statement of Internal Control Statement of Should disclose the following as a minimum: Complied. Internal Control Refer Statement of Internal (a) The Board should summarise the process it has applied in reviewing D.1.3 & D.2.3 Control on page 57. the design and effectiveness of the system of internal control (b) Should disclose the process it has applied to deal with material internal control aspects of any significant problems disclosed in the Annual Report. (c) An acknowledgment by the Board it is responsible for the Company’s system of internal control and for reviewing its design and effectiveness. Should also explain that such a system is designed to management rather than eliminate the risk of failure to achieve objectives, and can only provide reasonable and not absolute assurance against material misstatements of loss. (d) Should disclose that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company, whether it has been in place for the year under review whether it is regularly reviewed by the Board. (e) The Board has to disclose if it has failed to conduct a review of design and effectiveness of the Company’s system of internal control (f) Should ensure that Its disclosures provide meaningful, high level information and do not give a misleading impression. (g) Where material subsidiaries, joint ventures and associates have not been dealt with in applying this guidance, as part of the Group, that fact should be disclosed. (h) The Confirmation by the Board;
The Board should confirm in its report that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of Financial Statements for external purposes has been done in accordance with applicable accounting standards and regulatory requirements. Should be signed by the Directors who signed the Financial Statements and the Chairman of the Audit Committee.
I. Sustainability Reporting Sustainability Disclose the policies and procedures adopted to develop a Complied. Reporting sustainable business in the context of: Refer Sustainability Report G.1 to G.1.7 on pages 27 to 33. •• Sustainable economic performance; •• The environment; •• Labour practices; •• Society; •• Product responsibility; •• Stakeholder identification, engagement and effective communication; Millennium Housing Developers PLC Annual Report 2016/17 53
Annual Report of the Directors’ on the Affairs of the Company The Directors of Millennium Housing Developers PLC have Review of the Year pleasure in presenting their Report, together with the Audited Financial Statements for the year ended 31st March 2017. The Chairman’s review and Chief Executive Officer’s review describe in detail the Company’s performance, affairs and important events of the year. Mission Statement and Corporate Goals Financial Statements of the Company The Mission Statement and Corporate goals are set out on and the Group pages 4 & 5 in this Report. Financial Statements of both Company and Group are given on pages 66 to 104 of this Annual Report. Principal Activity The principal activity of the Company is sales of houses/land Auditors’ Report and Construction of houses, apartments, flats, housing units and condominium units. Auditors’ report on the Financial Statements of the Company and the Group are given on page 65.
Review of the Operations Accounting Policies Millennium Housing Developers PLC, a BOI-approved Company, being the pioneer township developer in Sri Lanka, The Accounting Policies adopted in preparation of Financial has continued its stellar performance by achieving a Statements are given in Pages 70 to 77. These Accounting remarkable profit during the year under review. Policies have been applied consistently to all periods.
The “Millennium City” housing project at Athurugiriya was fully completed and Ja-Ela Millennium city also completed Entries in Interest Register around 95% which offers more than twenty unique residential The Company, in compliance with company Act No. 07 of house types that differ in size, type and price accordingly. 2007, maintains interest registry. All Directors of the Company “Villa” houses at Ja – Ela are exclusive supreme quality house and Subsidiaries, have made relevant disclosures under constructed with additional land area, allowing our customers Section 192 (2) of the Companies Act No. 07 of 2007. to have a wide range of houses to match their needs. During the year under review seven new Villa categories were introduced to the customers. Further Millennium Housing Dividends Limited Ja-Ela project which target lower middle income earners consists 424 housing units were fully completed. The Board of Directors has proposed first and final dividend Rs. 00.275 per share for the period ended 31st March 2016 There is a continuous demand for housing in and around (Rs. 00.275 in 2015) ensuring steady cash flow to it investors. Colombo and its suburbs. In addition to the two main projects Dividend payout ratio was 24.96 (41.87 in 2016) and dividend MHD Plc has embarked on new projects at Piliyandala, cover was 4.01 (2.39 in 2016) times for the year. The Directors Seeduwa and Homagama, Palenwatta in order to exploit this confirm that company satisfies the solvency test requirement potential market opportunity. During the year under review under section 56 of the companies Act. No 7 of 2007 for the Piliyandala Project 1and Seeduwa Urban range projects first and final dividend proposed. targeting lower /middle income earners were fully completed and 75% of the Piliyandala project -2 which consist 28 units were completed and Homagama project 79 units were Corporate Donations completed out of 80 units during the year under reviewd and Donations given are disclosed under the Sustainability Report. Palanwatte project to be started.
MHD PLC has incorporated BOI approved two new fully owned subsidiaries in 2015 MC Urban Developers Limited and MC Universal limited to undertake apartment and individual housing projects at Kirulapone, Nawala, Rajagiriya, Koswatta, Athurugiriya,Ja-Ela and Piliyandala. MC Urban 1st Apartment projects at Kirulapone which consists five floors and 30 units reached finishing level at year end and Nawala projects which consist 64 units filing also completed. Millennium Housing Developers PLC 54 Annual Report 2016/17
Annual Report of the Directors’ on the Affairs of the Company
Revenue Stated Capital and Reserves The total Revenue of the Group for the year under review The stated capital and reserves of the company as at was Rs. 1305.74 Mn (Rs.820.26 Mn in 2016) The Company’s 31st March 2017 is Rs. 544.51 Mn (Rs. 553.22 Mn in 2016) Revenue year under review was Rs. 478.71 Mn (Rs. 343.24 Mn The stated capital and reserves of the group as at in 2016) of which details are disclosed in note 5 to the Financial 31st March 2016 is Rs. 904.92 Mn (Rs. 787.34 Mn in 2016). Statements. Fully own subsidiaries Millennium Housing Limited The composition of the reserve is shown in the Statement of and Millennium Villa Hosing Development limited contributes Changes in Equity of the financial statement. to group revenue Rs. 252.04 Mn (Rs. 219.58 Mn in 2016) and Rs. 707.98 Mn ( Rs. 257.44 Mn 2016) respectively. Share Information Profitability Information relating to earnings, dividends, market value of shares, and distribution of shareholding is given on pages 8, The profit before tax of the group amounted to Rs. 198.60 Mn 108 and 109. in 2017 (Rs. 117.32 Mn in 2016) while the Company made a profit before tax of Rs.28.62 Mn in 2017 (Rs. 61.38 Mn in 2016) Overall group profit before tax has increased by 69.27% Shareholdings compared to previous year. There were 659 registered shareholders as at 31st March 2017 holding Ordinary voting shares (627 in 2016), the Provision for Taxation distribution of shareholding is given in page 109. The tax status of the Group and the Company has been explained in Note 9 to the Financial Statements. Substantial Shareholding The top twenty one shareholders list is given in page 108. Stated Capital The total stated Capital of the company as at 31st March 2017 Directorate is Rs. 293,802,200/- comprising of 134,681,320 ordinary There were ten board members at the beginning and end of shares. There were no changes in the stated capital during the financial year 2016/17. the year.
Name of the Director Executive/Non-Executive Independent Status
Mr. U Harshith Dharmadasa Chairman/Non-Executive Director Mr. V R Ramanan Deputy Chairman/Non Executive Director Mr. S S Weerabahu CEO/Executive Director Mr. M K W J Seresinhe Executive Director Mr. Gihan De Zoysa Non-Executive Director Mr. Rajiv Perera Non-Executive Independent Director Mr. U H Palihakkara Non-Executive Independent Director Mr. Jayaprakash Rudra Non-Executive Independent Director Mr. K C Chandana Perera Non-Executive Director Mr. H Jayantha C Perera Non-Executive Independent Director
The Profile of the Board of Directors of the Company are given in pages 40 to 41. Millennium Housing Developers PLC Annual Report 2016/17 55
Annual Report of the Directors’ on the Affairs of the Company
Directors Shareholdings Directors’ Responsibility and Individual Shareholding of the Directors were as follows: Financial Reporting
Director Ordinary shares The directors are responsible for the preparation of the Financial Statements to reflect a true and fair view of the 31.Mar.17 31.Mar.16 state of its affairs. The Directors are of the view that these financial statements have been prepared in conformity with Mr. U Harshith Dharmadasa 5,000,000 – the requirements of the Sri Lanka Accounting Standards, Mr. V R Ramanan 36,904,173 36,904,173 Companies Act No. 17 of 1982, Sri Lanka Accounting and Mr. S S Weerabahu 20,000 20,000 Auditing Standards Act No. 15 of 1995. Mr. M K W J Seresinhe 50,000 50,000 Mr. Gihan De Zoysa – – Mr. U H Palihakkara 130,000 100,000 Directors’ Meetings Mr. Rajiv Perera – – Details of Directors’ meetings, including Board meeting, Mr. Jayaprakash Rudra – – Audit Committee meetings and Remuneration Committee Mr. K C Chandana Perera 1,300,000 1,300,000 meetings and Related Party Transaction Review Committee Mr. H Jayantha C Perera 5,665,760 5,665,760 meeting and attendance for the meetings are disclosed in Corporate Governance report, Audit Committee report and Remuneration Committee report and Related Party Transaction Review Committee report. Directors’ Interest in Contracts with the Company The Directors have no direct or indirect interest in contracts Internal Control System with the Company, other than those disclosed in Note 28 to Directors acknowledge their responsibility of Group’s system the Financial Statements and the same have been declared at and internal controls. The Directors Statement of Internal the meetings of the Board. Controls on page 57 provides further details.
Directors’ Remuneration Property Plant & Equipment The remunerations paid to the Executive and Non-Executive Capital expenditure during the year on acquisition of Directors during the financial year under review is given in property, Plant and Equipment for Group and the Company Note 7 to the Financial Statements. Rs. 10.16 Mn ( Rs. 28.88 Mn 2016) and Rs. 4.43 Mn (Rs. 21.79 Mn 2016) Respectively. Retirement of Directors by Rotation or Otherwise and their Re-election Subsidiaries In accordance with Articles 95 of the Articles of Association The performance and information of the subsidiaries are of the Company Mr. V R Ramanan and Mr. K C C Perera and presented in pages 21, 22, 84 & 85 in the annual report. Mr. H Jayantha C Perera retired by rotation is eligible for re-election and Mr. U H Palihakkara who over seventy year eligible for re-election. Segmental Reporting There are no specific segments that can be identified in the group, although we operate in separate sites. The risk and returns from those sites cannot be differentiated. Therefore we have not presented segmental reports. Millennium Housing Developers PLC 56 Annual Report 2016/17
Annual Report of the Directors’ on the Affairs of the Company
Post-Balance Sheet Events Environment Protection There were no material Post-Balance Sheet events which Millennium Housing Developers PLC has obtained the require adjustment to or disclosure to the Financial Statements. approvals of the Environment Authority in doing their business and has not engaged in any activities, which have caused detriment to the environment. Further we have developed Litigations and Claims Lakes, Parks, and Green pockets to ensure the Eco-friendly environment of the projects. In the opinion of the Directors and the Company’s lawyers, pending litigation against the Company will not have a material impact on the reported financial results or future Notice of Meeting operations of the Company. The Annual General meeting will be held on BMICH on 30th June 2017 at 10.30 am. The notice of annual general Statutory Payments meeting is given on page 110. The statutory payments relating to employees and the Government have been made up to date or provided for By Order of the Board, the same.
Employment The employee’s details are described in Human Resource S S Weerabahu Management Report included in this Annual Report Chief Executive Officer Pages 30 to 32.
Auditors The Financial Statements for the year under review have M K W J Serersinhe been audited by M/s KPMG, Chartered Accountants. Audit Director Committee has recommended their re-appointment as Auditors in term of the Section 158 of Companies Act No. 07 of 2007. The Auditors M/S KPMG, Chartered Accountant audit fees for the company is Rs. 760,000/- (Rs. 650,000/- in 2016) and the subsidiaries Rs. 442,000/- (Rs. 392,000/- in 2016)
First Corporate Solution Ltd. Secretaries Going Concern 22nd May 2017 The Board of Directors of the Company is satisfied that the Company has adequate resources to continue its operation in the forceable future. Therefore the Company continues to adopt going concern concept in preparing the accounts of the Company. Millennium Housing Developers PLC Annual Report 2016/17 57
Statement on Internal Controls
Introduction •• The Comments made by the External Auditors regarding the internal control system of the Company are also Board of Directors is responsible for maintaining sound taken into consideration and appropriate actions taken system of internal controls to safeguard the shareholder’s where necessary. investment and Company’s assets. This responsibility has •• Established the processes that are required to adopt emphasised according to the Code of Best Practice on and comply with the latest development in Sri Lanka Corporate Governance jointly issued by the Securities and Accounting Standards and continuous monitoring is Exchange Commission of Sri Lanka and The Institute of in place to ensure effective implementation of the Chartered Accountants of Sri Lanka. The Board of Directors required process. of Millennium Housing Developers PLC acknowledges its responsibility and pleased to set out below the Company’s Statement on Internal Control for the financial year 2016/17. Conclusion The Board having implemented above strategies are aware Board Responsibility that systems are designed and implemented to manage the risk rather than elimination, and to provide reasonable and The Board has established ongoing process for identifying, not the absolute assurance against the occurrence of any evaluating and managing the significant risk faced by the material misstatement and loss. Company and the Group. These processes are regularly reviewed and updated by the Board to comply with business The Board of Millennium Housing Developer PLC is of the environment and the regulatory guidelines. view that the systems of internal control in place are sufficient to safeguard all stakeholders’ interest. The Board is in the view that systems of internal controls in place are sound and adequate to provide reasonable assurance regarding the reliability of financial reporting, and the preparation of financial reporting for the external purposes and is in accordance with the relevant accounting standards and regulatory requirements. U H Dharmadasa The Board has implemented the followings to obtain Chairman reasonable assurance that proper system of internal controls are in place:
•• Established clear organisational and reporting structures and instituted various committees to ensure effectiveness S S Weerabahu of the company operations and operations are in line with CEO/Executive Director corporate strategies. •• The Internal Audit Division to review and report internal control environment of the Company and the Group. Audits are carried out at all subsidiaries according to the audit plan approved by the Audit Committee. Finding of the U H Palihakkara audits are submitted to the Audit committee reviews. Chairman – Audit Committee •• The Audit Committee review internal control issues 22nd May 2017 identified by the Internal Auditors and the management, and evaluate adequacy and the effectiveness of risk management and internal control systems and procedures. Internal Auditors scope and quality of the internal audit also reviewed by the Audit committee. The minutes of the Audit Committee are tabled at the Board meeting of Millennium Housing Developers PLC. Millennium Housing Developers PLC 58 Annual Report 2016/17
Statement on Directors’ Responsibility
In terms of Section 150(1), 151, 152(1) & 153 of the Further, as required by section 56 (2) of the Companies Act Companies Act No.07 of 2007, the Directors are responsible No. 07 of 2007, the Board of Directors have confirmed that to ensure compliance with the requirement set out therein to the Company, based on the Information available, satisfied prepare Financial Statements for each financial year, giving the solvency test immediately after the distribution, in a true and fair view of the state of the affairs of the Company accordance with Section 57 of the Companies Act No. 07 of and the Group, as at the end of financial year and of the profit 2007 and has obtained a certificate from the Auditors, prior & Loss of the Company and the Group for the financial year. to recommending a final dividend of Rs. 0.00 per share for The Directors are also responsible, in terms of Section 148 for this year, which is to be approved by the shareholders at the ensuring that proper accounting records are maintained to Annual General Meeting to be held on 30th June 2016. disclose with reasonable accuracy, the financial position and to enable the preparation of Financial Statements. The Directors confirm that to the best of their knowledge, all statutory payments relating to employees and the The Board accepts responsibility for the integrity and Government that were due in respected of the Company and objectivity of the Financial Statements presented. The its Subsidiaries as at the reporting date have been paid or Directors confirm that in preparing the Financial Statements, provided for, in arriving at the financial results for the year appropriate accounting policies have been selected and under review. applied, so that the form and substance of transactions are properly reflected. The Financial Statements provide the By Order of the Board, information required by the Companies Act, Listing Rules of Colombo Stock Exchange and the Sri Lanka Accounting Standards. The Directors have taken reasonable measurers to safeguard the assets of the Group and in that concepts have instituted appropriate system of internal control, with a view to prevent and detect fraud and other Irregularities. Company Secretary The External Auditors, Messrs KPMG, were reappointed First Corporate Solution Ltd. in accordance with a resolution passed at the last Annual General Meeting and they were provided with every 22nd May 2017 opportunity to undertaken the inspection they considered appropriate to enable them to form their opinions on the Financial Statements. The Report of the Auditor, shown on page 57 sets out their responsibilities in relation to the Financial Statements. Millennium Housing Developers PLC Annual Report 2016/17 59
Audit Committee Report
THE MHDL Audit Committee is established as per the Objectives of the Audit Committee rules and regulations stipulated in the ‘Rules on Corporate Governance’ under listing rules of Colombo Stock Exchange Since MHDL is a Group of Companies the MHDL Audit and the ‘Code of Best Practice on Corporate Governance’ Committee spreads its scope not only to cover the functions issued jointly by The Institute of Chartered Accountants of parent company but also to cover the functions of other of Sri Lanka and Securities and Exchange Commission of subsidiaries within the Group. Sri Lanka. The Audit Committee assists the Board of Directors in THE Audit Committee is governed by the Charter approved performing effectively its responsibilities relating to the by the Board of Directors. Further the Terms of References financial and other related activities of the Company. (TOR) is also well defined in the Board-approved Charter. Accordingly followings are the main objectives of the Audit Board reviews the Charter in each year and adjusts for new Committee: development and concerns. a. Reviewing the External Audit Reports and The Audit Committee Charter was lastly reviewed in January recommendations stated in the Management letter to 2017 with the concurrence of the Board of Directors. improve the internal control. b. Reviewing the Internal Audit Reports in detail and follow-up on findings and recommendations. Members of The Audit Committee c. Keeping a track to ensure the compliances on financial and Committee Meetings held within reporting obligations under Colombo Stock Exchange the Year listing rules, Various Rules and Regulations of Securities and Exchange Commission (SEC), Companies Act The Audit Committee comprises three Non-Executive No. 07 of 2007 and other statutory requirements. Independent Directors. The credentials of the Chairman and d. Reviewing the quality and appropriateness of the the other two members of the Audit Committee are given Company Risk Management Policies and advice the in the page numbers from 40 to 41 in the Annual Report Board of Directors for further improvement. 2016/17. e. Reviewing the effectiveness and the appropriateness of the internal control procedures which are in operation Table below shows the list of members of the Board Audit at present. Committee during the year under review and their attendance at the Committee meetings held during the year. f. Reviewing the interim and annual Financial Statements prepared for the approval of the Board and submission Member Position Number of Meetings to the shareholders. Attended/Number of Meetings Eligible to g. Perusing the minutes of the other Board Subcommittees Participate such as Integrated Risk Management Committee (IRMC) and Related Party Transaction Review Committee Mr. Uditha Palihakkara Chairman 8/8 (RPTRC) to ensure the smooth functioning of the said Mr. Jayantha Perera Member 8/8 Committees and whether it helps to maintain the good Mr. Gihan De Zoysa Member 8/8 governance of the Company.
Sarukkali Associates (Chartered Accountants) being the Internal Auditors of the Company acts as the Secretaries to Internal Auditors the Audit Committee in 2016/17. The Audit Committee closely evaluates the independency of the Internal Auditors and whether the Internal Auditor The Executive Director/Chief Executive Officer Mr. Sisira performs its duties with impartiality, proficiency and due Weerabahu and the Financial Controller Mr. Indunil Rangana professional care. During the year, the Audit Committee Perera participated for all the Audit Committee meetings on reviewed the adequacy of the scope, functions and resources invitation. of the internal auditors, the results of the Internal Audit process and their evaluation of the Company’s internal control Furthermore the External Auditors participated for two Audit system. The Audit Committee also reviewed and approved the Committee meetings and explained their date plans for interim adequacy of coverage of the internal audit programme. audits and the final audit. Millennium Housing Developers PLC 60 Annual Report 2016/17
Audit Committee Report
Audit Committee discusses all the Internal Audit reports in detail and forwards a summary to the Board of Directors by explaining the key findings and the given recommendations.
External Auditors The Audit Committee recognises the importance of maintaining the independence of the External Auditors both in fact and appearance. Therefore the Audit Committee is highly concerned on offering non-audit assignments to the External Auditors to ensure that it does not hamper the independency status of the External Auditors.
Each year, the Audit Committee evaluates the qualifications, performance and independence of the External Auditor and determines whether to reappoint as the External Auditor. Based on this evaluation, the Audit Committee advises the Company to retain KPMG Ford Rhodes Thornton and Company as the Company’s External Auditor for 2017/18. KPMG Ford Rhodes Thornton and Company has been the External Auditor for the Company since 2009. However, the Audit Committee recommends getting the shareholder’s consent at the AGM, to ratify the appointment of the External Auditors.
Opinion of the Audit Committee The Audit Committee is of the opinion that the Company has managed its risks and complied with the rules and regulations applicable to the Company.
The Audit Committee is also of the view that the Company maintains good governance in all its activities
U H Palihakkara Chairman to the MHDL Audit Committee
22nd May 2017 Millennium Housing Developers PLC Annual Report 2016/17 61
Remuneration Committee Report
The Remuneration Committee was appointed by the Board Remuneration Policy consisting three Non-Executive Directors of which two Directors are independent. Chairman and the members of the The Company’s remuneration policy aims to attract and retain Committee are as follows: qualified and experienced team of high calibre managers and professionals and reward their performance. Mr. U H Dharmadasa – (NED) Mr. Rajiv Perera* – (IND/NED) Remuneration Committee has established systems, policies Mr. Jayaprakash Rudra – (IND/NED) (Chairman) and evaluation procedures to monitor the performance Mr. K C Chandana Perera – (NED) of Executive Directors and Chief Executive Officer and/ *Resigned from the Committee in May 2016. or equivalent positions of the Company. The main task of the Committee is to recommend remuneration payable Brief profile of each member has given on pages 40 to 41. to above positions and forward for Board approval. Final responsibility is with the Board to consider recommendation of the Committee and determine remuneration payable to Key Objective of the Committee Senior Positions of the Company. The main objective of the Remuneration Committee is to The Remuneration Committee considers Long-term attract, retain top talent needed to Company. Shareholders returns and performance in all their deliberations. Meeting Two Remuneration Committee meetings were held during the financial year under review.
Name of the Director Attendances Jayaprakash Rudra Mr. Jayaprakash Rudra – Chairman 2/2 Non-Executive Independent Director 2/2 Mr. U H Dharmadasa – Member 22nd May 2017 Mr. K C Chandana Perera* – Member 2/2
* Appointed to the Committee in May 2016.
Scope The Committee deliberates and recommends to the Board of Directors on remuneration packages, annual increments and bonuses paid to the Chief Executive Officer and other senior level staff. The Committee is also responsible for the determination of the compensation of the Executive Directors and fees paid to the Non-Executive Directors for participation at Board meetings. Millennium Housing Developers PLC 62 Annual Report 2016/17
Related Party Transaction Review Committee Report The Related Party Transaction Review Committee (RPTRC) Activities and Focus of the Committee was established by the Board in 2016 as per Code of Best Practice issued by the Securities and Exchange •• Develop Related Party Transaction Policy for the Company Commission of Sri Lanka (SEC). The RPTRC comprises and its subsidiaries recommend their adoption. three Non-Executive Directors of which two Directors are •• Update the Board of the Directors on the related Independent. Chairman and the members of the Committee party transaction carried out by the Company and its are as follows: subsidiaries on a quarterly basis.
Mr. U H Palihakkara – Chairman – (IND/NED) •• Making immediate market disclosures on applicable related Mr. Rajiv Perera – Member* – (IND/NED) party transactions as required by the Section 9 of the Mr. Gihan De Soyza – Member – (NED) continuing Listing Rules of the Colombo Stock Exchange. Mr. H Jayantha C Perera – (IND/NED) •• Making relevant disclosures in the Annual Report on related *Resigned from the Committee in May 2016. party transactions as required by the Section 9 of the continuing Listing Rules of the Colombo Stock Exchange Brief profile of the each member has given on the pages 40 to 41. The Committee endeavours to meet at least quarterly basis to review and report to the Board on related party transactions.
Objective of the Committee The objective of the Related Party Transaction Review Committee is to assist the Board in reviewing the all related party transactions carried out by the Company and its U H Palihakkara subsidiaries in the Group. Chairman – Related Party Transaction Review Committee
22nd May 2017 Meeting Four Related Party Transaction Review Committee meetings were held during the financial year under review:
Name of the Director Attendances
Mr. U H Palihakkara – Chairman 4/4 Mr. Gihan De Soyza – Member 4/4 Mr. H Jayantha C Perera – Member* 4/4
*Appointed to the Committee in May 2016. FINANCIAL REPORTS Independent Auditors’ Report 65 / Statement of Profit or Loss and Other Comprehensive Income 66 / Statement of Financial Position 67 / Statement of Changes of Equity 68 / Statement of Cash Flows 69 / Notes to the Financial Statements 70 Millennium Housing Developers PLC 64 Annual Report 2016/17
Financial Calender – 2016/17
17th Annual General Meeting held on 30th September 2016. First and Final Dividend payment to the shareholders on 11th October 2016. Unaudited Interim Financial Statements submitted to the Colombo Stock Exchange in terms of Rule 7.4.
First Quarter ended 30th June 2016 – 15th August 2016
Second Quarter ended 30th September 2016 – 15th November 2016
Third Quarter ended 31st December 2016 – 14th February 2017
Fourth Quarter ended 31st March 2017 – 31st May 2017
Proposed Financial Calender – 2017/18
18th Annual General Meeting to be held on 30th June 2017. Unaudited Interim Financial Statements submitted to the Colombo Stock Exchange in terms of Rule 7.4.
First Quarter ended 30th June 2017 – On or before 15th August 2017
Second Quarter ended 30th September 2017 – On or before 15th November 2017
Third Quarter ended 31st December 2017 – On or before 15th February 2018
Fourth Quarter ended 31st March 2018 – On or before 31st May 2018 Millennium Housing Developers PLC Annual Report 2016/17 65
Independent Auditors’ Report
TO THE SHAREHOLDERS OF accounting policies used and the reasonableness of accounting estimates made by Board, as well as evaluating the overall MILLENNIUM HOUSING presentation of the financial statements.
DEVELOPERS PLC We believe that the audit evidence we have obtained is sufficient Report on the Financial Statements and appropriate to provide a basis for our audit opinion. We have audited the accompanying financial statements of Millennium Housing Developers PLC (the ‘Company’) and the consolidated financial statements of the Company and its Opinion subsidiaries (the ‘Group’), which comprise the statement of In our opinion, the consolidated financial statements give financial position as at 31st March 2017, and the statement of a true and fair view of the financial position of the Group profit or loss and other comprehensive income, statement of as at 31st March 2017 and of its financial performance and changes in equity and cash flow statement for the year then cash flows for the year then ended in accordance with Sri Lanka ended, and a summary of significant accounting policies and Accounting Standards. other explanatory notes set out on pages 66 to 104.
Board’s Responsibility for the Financial Report on Other Legal and Regulatory Statements Requirements As required by Section 163 (2) of the Companies Act No. 07 of The Board of Directors (‘Board’) is responsible for the preparation 2007, we state the following: of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such a) The basis of opinion and scope and limitations of the audit internal control as Board determines is necessary to enable the are as stated above. preparation of financial statements that are free from material misstatement, whether due to fraud or error. 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 Auditors’ Responsibility examination, proper accounting records have been kept Our responsibility is to express an opinion on these financial by the Company. statements based on our audit. We conducted our audit in •• The financial statements of the Company give a true and accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and fair view of its financial position as at 31st March 2017, perform the audit to obtain reasonable assurance about whether and of its financial performance and cash flows for the the financial statements are free from material misstatement. year then ended in accordance with Sri Lanka Accounting Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. •• The financial statements of the Company and the Group The procedures selected depend on the auditor’s judgment, comply with the requirements of Sections 151 and 153 of including the assessment of the risks of material misstatement of the Companies Act No. 07 of 2007. 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 Chartered Accountants control. An audit also includes evaluating the appropriateness of 22nd May 2017 Colombo
M.R. Mihular FCA P.Y.S. Perera FCA C.P. Jayatilake FCA T.J.S. Rajakarier FCA W.W.J.C. Perera FCA Ms. S. Joseph FCA KPMG,aSri Lankan partnershipand a member firm Ms. S.M.B. Jayasekara ACA W.K.D.C. Abeyrathne FCA S.T.D.L. Perera FCA of theKPMGnetwork of independent member firms G.A.U. Karunaratne FFCA R.M.D.B. Rajapakse CA Ms. B.K.D.T.N. Rodrigo FCA affiliated with KPMG International Cooperative R.H. Rajan ACA (”KPMG International”), aSwissentity. Principals - S.R.I. Perera FCMA(UK), LLB, Attorney-at-Law, H.S. Goonewardene ACA Ms. C.T.K.N. Perera ACMA (UK) Millennium Housing Developers PLC 66 Annual Report 2016/17
Statement of Profit or Loss and Other Comprehensive Income
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Notes
Revenue 5 1,305,737,790 820,265,186 478,711,675 343,241,735 Cost of sales (900,615,429) (543,559,442) (391,481,692) (227,831,974) Gross profit 405,122,361 276,705,744 87,229,983 115,409,761 Other operating income 6 18,346,363 30,672,688 16,752,583 25,052,653 Administration expenses (174,728,853) (160,710,015) (68,560,846) (75,295,402) Selling and marketing expenses (50,973,580) (38,853,406) (4,825,929) (12,073,453) Results from operating activities 7 197,766,291 107,815,011 30,595,791 53,093,559 Finance income 5,580,631 10,616,431 2,411,890 8,562,438 Finance costs (4,740,979) (1,102,298) (4,385,269) (268,814) Net finance income/(cost) 8 839,652 9,514,133 (1,973,379) 8,293,624 Profit before income tax 198,605,943 117,329,144 28,622,412 61,387,183 Income tax expense 9 (50,237,812) (28,868,833) (5,439,919) (13,376,421) Profit for the year 148,368,131 88,460,311 23,182,493 48,010,762
Other comprehensive income Items that will not be re-classified to profit or loss Actuarial gain/(loss) on retirement benefit obligation 24 8,519,816 (482,676) 7,136,503 (472,389) Tax effect on actuarial gain/(loss) on retirement benefit obligation 9 (2,274,884) 134,327 (1,998,221) 132,269 Other comprehensive income (expenses) net of tax 6,244,932 (348,349) 5,138,282 (340,120) Total comprehensive income for the year 154,613,063 88,111,962 28,320,775 47,670,642
Profit attributable to: Owners of the company 148,368,131 88,460,311 23,182,493 48,010,762 Non-controlling interest – – – – Profit for the year 148,368,131 88,460,311 23,182,493 48,010,762
Total comprehensive income attributable to: Owners of the company 154,613,063 88,111,962 28,320,775 47,670,642 Non-controlling interest – – – – Total comprehensive income for the year 154,613,063 88,111,962 28,320,775 47,670,642
Earnings per share Basic earnings per share 10 1.10 0.66 0.17 0.36
The Notes to the Financial Statements set out on pages 70 to 104 form an integral part of these Financial Statements.
Figures in brackets indicate deductions. Millennium Housing Developers PLC Annual Report 2016/17 67
Statement of Financial Position
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Notes
ASSETS Non-current assets Property, plant & equipment 11 40,006,372 39,929,226 27,978,784 30,993,114 Investment property 12 47,500,000 45,000,000 – – Intangible assets 13 2,394,570 2,737,309 1,809,154 2,489,809 Investment in subsidiaries 14 – – 307,470,000 232,470,800 Available-for-sale investments 16 13,000,000 13,000,000 13,000,000 13,000,000 Deferred tax asset 23 6,294,353 7,808,296 6,016,859 7,029,632 109,195,295 108,474,831 356,274,797 285,983,355 Current assets Inventories 17 1,686,123,642 1,068,121,183 356,652,437 577,611,755 Trade and other receivables 18 784,827,996 450,284,087 197,038,825 167,778,035 Amounts due from related companies 19 – – 84,916,917 21,093,097 Cash and cash equivalents 20 48,298,019 44,621,769 16,050,212 21,975,328 2,519,249,657 1,563,027,039 654,658,391 788,458,215 Total assets 2,628,444,952 1,671,501,870 1,010,933,188 1,074,441,570 EQUITY AND LIABILITIES Equity Stated capital 21 293,802,200 293,802,200 293,802,200 293,802,200 Capital redemption reserve 25,000,000 25,000,000 25,000,000 25,000,000 Retained earnings 586,119,299 468,543,600 225,704,970 234,421,559 Equity attributable to owners of the Company 904,921,499 787,345,800 544,507,170 553,223,759 Non-controlling interests – – – – Total equity 904,921,498 787,345,800 544,507,170 553,223,758 Non-current liabilities Interest-bearing borrowings 22 319,448,024 221,326,656 53,421,024 130,726,656 Retirement benefit obligation 24 33,516,962 35,524,665 29,536,164 30,795,514 352,964,986 256,851,321 82,957,188 161,522,170 Current liabilities Trade and other payables 25 841,974,566 483,858,567 125,170,847 200,125,362 Interest-bearing borrowings 22 468,226,896 70,856,886 53,572,896 46,136,886 Debentures 26 3,250,000 3,250,000 3,250,000 3,250,000 Amounts due to related companies 27 1,079,055 1,409,951 192,283,314 60,449,161 Income tax payable 37,777,335 13,013,386 3,910,373 3,214,218 Bank overdraft 20 18,250,604 54,915,959 5,281,400 46,520,014 1,370,558,467 627,304,749 383,468,830 359,695,641 Total liabilities 1,723,523,453 884,156,070 466,426,018 521,217,811 Total equity and liabilities 2,628,444,952 1,671,501,870 1,010,933,188 1,074,441,570
The Notes to the Financial Statements set out on pages 70 to 104 form an integral part of these Financial Statements.
It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.
W A Indunil Rangana Perera Financial Controller
The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board;
H Jayantha C Perera M K W J Seresinhe Director Director 22nd May 2017 Colombo Millennium Housing Developers PLC 68 Annual Report 2016/17
Statement of Changes in Equity
For the Year Ended 31st March Attributable to owners of the Company Stated Capital Capital Retained Total Capital Reserve Redemption Earnings Equity Reserve Rs. Rs. Rs. Rs. Rs.
Group
Balance as at 1st April 2015 293,802,200 41,000,000 25,000,000 376,469,002 736,271,202 Profit for the year – – – 88,460,311 88,460,311 Other comprehensive expenses (Net of tax) – – – (348,349) (348,349) Total comprehensive income for the year – – – 88,111,962 88,111,962 Contribution by and distribution to equity holders Dividend paid – – – (37,037,364) (37,037,364) Capital reserve transfered to – (41,000,000) – 41,000,000 – retained earnings (Note) Balance as at 31st March 2016 293,802,200 – 25,000,000 468,543,600 787,345,800 Profit for the year – – – 148,368,131 148,368,132 Other comprehensive expenses (Net of Tax) – – – 6,244,932 6,244,932 Total comprehensive income for the year – – – 154,613,063 154,613,063 Contribution by and distribution to equity holders Dividend paid – – – (37,037,364) (37,037,364) Balance as at 31st March 2017 293,802,200 – 25,000,000 586,119,299 904,921,499
Company Balance as at 1st April 2015 293,802,200 41,000,000 25,000,000 182,788,281 542,590,481 Profit for the year – – – 48,010,762 48,010,762 Other comprehensive expenses (Net of tax) – – – (340,120) (340,120) Total comprehensive income for the year – – – 47,670,642 47,670,642 Contribution by and distribution to equity holders Dividend paid – – – (37,037,364) (37,037,364) Capital reserve transfered to retained earnings (Note) – (41,000,000) – 41,000,000 – Balance as at 31st March 2016 293,802,200 – 25,000,000 234,421,559 553,223,759 Profit for the year – – – 23,182,493 23,182,493 Other comprehensive expenses (Net of tax) – – – 5,138,282 5,138,282 Total comprehensive income for the year – – – 28,320,775 28,320,775 Contribution by and distribution to equity holders Dividend paid – – – (37,037,364) (37,037,364) Balance as at 31st March 2017 293,802,200 – 25,000,000 225,704,970 544,507,170
Note: Capital Reserve The reserve was created to facilitate the infrastructure activities of the Athurugiriya site of Millennium Housing Developers PLC. The Athurugiriya project has been fully completed during the current financial year. Since the project has been fully completed and no future cost to be incurred, the Board of Directors decided to transfer the reserve to the retained earnings during the year ended 31st March 2016.
Capital Redemption Reserve Capital Redemption Reserve built up is equal to the nominal value of the preference shares already redeemed by Millennium Housing Developers PLC.
The Notes to the Financial Statements set out on pages 70 to 104 form an integral part of these Financial Statements.
Figures in brackets indicate deductions. Millennium Housing Developers PLC Annual Report 2016/17 69
Statement of Cash Flows
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Cash flows from operating activities Profit before tax 198,605,943 117,329,144 28,622,412 61,387,183 Adjustments for: Depreciation on property, plant & equipment 10,078,487 6,229,520 7,443,107 4,521,208 Fair value gain on investment property (2,500,000) (8,601,000) – – Amortisation on intangible assets 778,126 104,062 680,655 104,062 Interest expense 4,740,979 1,102,298 4,385,269 268,814 Provision for retirement benefit obligation 7,353,614 6,771,296 6,117,153 5,386,884 Provision for amount due from related Company – – 42,857 – Interest income (5,580,631) (10,616,431) (2,411,890) (8,562,438) Operating profit before working capital changes 213,476,518 112,318,889 44,879,563 63,105,713 (Increase)/Decrease in inventories (618,002,459) (443,281,052) 220,959,318 (233,698,168) (Increase)/Decrease in trade and other receivables (334,543,909) (11,133,786) (29,260,790) 65,332,513 (Increase)/Decrease in amounts due from related companies – 2,394,036 (63,866,677) 3,126,979 Increase/(Decrease) in trade and other payables 358,116,019 155,407,687 (74,954,515) 14,035,652 Increase/(Decrease) in amounts due to related companies (330,896) 1,409,951 131,834,153 50,753,218 Cash generated from/(used in) operations (381,284,727) (182,884,271) 229,591,052 (37,344,093) Income tax paid (26,234,804) (45,120,011) (5,729,212) (27,486,545) Gratuity paid (841,501) (196,250) (240,000) (100,000) Interest paid (4,740,979) (1,102,298) (4,385,269) (268,814) Net cash flow (used in)/generated from operating activities (413,102,011) (229,302,830) 219,236,571 (65,199,452)
Cash flows from investing activities Purchase of property, plant & equipment (10,155,633) (28,879,251) (4,428,777) (21,792,340) Purchase of intangible assets (435,387) (2,555,121) – (2,307,621) Interest received 5,580,631 10,616,431 2,411,890 8,562,438 Investment in shares in subsidiaries – – (74,999,200) (75,000,800) Cash used in investing activities (5,010,389) (20,817,941) (77,016,087) (90,538,323)
Cash flows from financing activities Loans obtained 631,850,000 283,000,000 40,000,000 171,000,000 Repayment of borrowings (135,281,500) (47,581,000) (108,792,500) (39,040,000) Dividend paid (37,037,364) (37,037,364) (37,037,364) (37,037,364) Lease rentals paid (1,077,122) (931,458) (1,077,122) (931,458)
Cash generated from/(used in) financing activities 458,454,014 197,450,178 (106,906,986) 93,991,178 Net increase/(Decrease) in cash and cash equivalents 40,341,614 (52,670,593) 35,313,498 (61,746,597) Cash and cash equivalents at the beginning of the year (10,294,190) 42,376,403 (24,544,686) 37,201,911 Cash and cash equivalents at the end of the year (Note 20) 30,047,424 (10,294,190) 10,768,812 (24,544,686)
The Notes to the Financial Statements set out on pages 70 to 104 form an integral part of these Financial Statements.
Figures in brackets indicate deductions. Millennium Housing Developers PLC 70 Annual Report 2016/17
Notes to the Financial Statements
1. Corporate Information 2.3 Functional and Presentation 1.1 Domicile and Legal Form Currency The Consolidated Financial Statements are presented in Millennium Housing Developers PLC is a public listed Sri Lankan Rupees, which is also the Group’s functional company incorporated and domiciled in Sri Lanka. The currency. These Financial Statements are presented in registered office of the Company is situated at No. 28, Sri Lanka Rupees (Rs.), unless stated otherwise. Sir Lester James Peiris Mawatha, Colombo 5.
The consolidated Financial Statements of Millennium 2.4 Use of Estimates and Judgments Housing Developers PLC for the year ended 31st March 2017 comprises the Company and its subsidiaries (together The preparation of the Financial Statements in conformity with referred to as ‘Group’). Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the All the subsidiaries of the Group are limited liability application of accounting policies and the reported amounts companies, incorporated and domiciled in Sri Lanka. of assets, liabilities, income and expenses. Actual results may differ from these estimates.
1.2 Principal Activities and Nature of Estimates and underlying assumptions are reviewed on Operation an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised The principal activities of the Company and its subsidiaries and in any future period affected. Information about critical are construction and sale of constructed houses, land sales judgments in applying accounting policies that have the most and apartments. significant effect on the amounts recognised in the Group’s Financial Statements is included in the respective notes. 1.3 Parent Company and Ultimate Parent Company 2.5 Transactions in Foreign Currencies The Company does not have an identifiable parent on its All transactions in foreign currencies are translated at the own. However, two companies in Nawaloka Holdings, Ceyoka rate of exchange prevailing at the time the transaction was (Private) Limited and Nawaloka Construction Company effected. All monetary assets and liabilities denominated in Limited collectively hold more than 50% of stated capital. foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.
2. Basis of Preparation Non-monetary assets and liabilities which are carried in terms of historical cost denominated in foreign currencies are 2.1 Statement of Compliance translated using the exchange rate at the date of transaction. The resulting gains or losses on translations are dealt with The consolidated Financial Statements have been prepared in the Statement of Profit or Loss and Other Comprehensive in accordance with Sri Lanka Accounting Standards issued Income. by The Institute of Chartered Accountants of Sri Lanka and requirements of the Companies Act No. 07 of 2007. 3. Significant Accounting Policies 2.2 Basis of Measurement The accounting policies set out below have been consistently applied to all periods presented in these consolidated The Financial Statements of the Group are prepared Financial Statements and have been applied consistently and presented on the historical cost basis except for the by group entities, unless otherwise indicated. The Directors available-for-sale financial assets which are measured at fair have made an assessment of the Group’s ability to continue value and defined benefit liability measured at present value as a going concern in the foreseeable future, and they do not of obligations to employees. The Financial Statements have intend either to liquidate or cease trading. been prepared on a going concern basis. Millennium Housing Developers PLC Annual Report 2016/17 71
Notes to the Financial Statements
3.1 Basis of Consolidation The acquisition of an additional ownership interest or a disposal of ownership interest in a subsidiary without a (a) Business combinations change of control is accounted for as an equity transaction. Business combinations are accounted for using the Any excess or deficit of consideration paid over the carrying acquisition method as at the acquisition date, which is the amount of the non-controlling interests is recognised in equity date on which control is transferred to the Group. of the parent. No adjustment is made to goodwill as a result of such transactions. The Group measures goodwill at the acquisition date as: (c) Subsidiaries •• the fair value of the consideration transferred; plus Subsidiaries are entities controlled by the Group. The Group •• the recognised amount of any non-controlling interests in controls an investee when it is exposed, or has rights, to the acquire; less variable returns from its involvement with the investee and •• if the business combination is achieved in stages, the fair has the ability to affect those returns through its power over value of the pre-existing equity interest in the acquire; less the investee. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from The net recognised amount (generally fair value) of the the date that control commences until the date that control identifiable assets acquired and liabilities assumed. ceases.
When the excess is negative, a bargain purchase gain is The Group considers all relevant facts and circumstances recognised immediately in profit or loss. in assessing whether it has power over an investee which includes; The contractual arrangement with the other vote The consideration transferred does not include amounts holders of the investee, Rights arising from other contractual related to the settlement of pre-existing relationships. Such arrangements and the Group’s voting rights and potential amounts are generally recognised in the profit or loss. voting rights over the investee.
Transaction costs, other than those associated with the The Group reassesses whether or not it controls an investee issue of debt or equity securities, that the Group incurs in if facts and circumstances indicate that there are changes to connection with a business combination are expensed as one or more of the three elements of control. Consolidation incurred. of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of Any contingent consideration payable is measured at fair the subsidiary. Assets, liabilities, income and expenses of value at the acquisition date. If the contingent consideration is a subsidiary acquired or disposed of during the year are classified as equity, then it is not remeasured and settlement included in the consolidated Financial Statements from the is accounted for within equity. Otherwise, subsequent date the Group gains control until the date the Group ceases changes in the fair value of the contingent consideration are to control the subsidiary. recognised in profit or loss. Summarised financial Information in respect of subsidiaries If share based payment awards (replacement awards) are that have non-controlling interests that are material to the required to be exchanged for awards held by the acquiree’s reporting entity (i.e., the Group) are disclosed separately employees (acquiree’s awards) and relate to past services, when applicable. then all or potion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred (d) Loss of control in the business combination. This determination is based on the market based value of the replacement awards compared On the loss of control, the Group derecognises the assets and with the market based value of the acquiree’s awards and the liabilities of the subsidiary, any non-controlling interests and extent to which the replacement awards relate to past and/or the other components of equity related to the subsidiary. Any future service. surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value as at (b) Non-controlling interests the date that control is lost. Subsequently it is accounted for For each business combination, the Group elects to measure as an equity accounted investee or as an available-for-sale any non-controlling interests in the acquiree either: financial asset depending on the level of influence retained.
•• at fair value; or •• at their proportionate share of the acquiree’s identifiable (e) Intra-group transactions net assets, which are generally at fair value. Pricing policies of all intra-group sales are identical to those adopted for normal trading transactions, which are at market prices. Millennium Housing Developers PLC 72 Annual Report 2016/17
Notes to the Financial Statements
(f) Transactions eliminated on consolidation Cash and cash equivalents
Intra-group balances and transactions, and any unrealised Cash and cash equivalents comprise cash balances and call income and expenses arising from intra-group transactions and fixed deposits with original maturities of three months or are eliminated in preparing the consolidated Financial less. Bank overdrafts that are repayable on demand and form Statements. Unrealised gains arising from transactions an integral part of the Group’s cash management are included with equity accounted investees are eliminated against as a component of cash and cash equivalents for the purpose the investment to the extent of the Group’s interest in the of the Statement of Cash Flows. investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (ii) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that 3.2 Financial Assets and Financial are not classified as any of the other financial assets. The Liabilities Group’s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial (a) Non-derivative financial assets recognition, they are measured at fair value and changes The Group initially recognises loans and receivables and therein, are recognised in other comprehensive income and deposits on the date that they originated. All other financial presented within equity in the fair value reserve. When an assets are recognised initially on the trade date at which the investment is derecognised, the cumulative gain or loss in Group becomes a party to the contractual provisions of the other comprehensive income is transferred to profit or loss. instrument. Available-for-sale financial assets comprise group instrument in equity securities. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or Investments in unquoted shares are measured at cost less it transfers the rights to receive the contractual cash flows on provision for impairment since the fair value cannot be the financial asset in a transaction in which substantially all determined reliably. the risks and rewards of ownership of the financial assets are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate (b) Non-derivative financial liabilities asset or liability. The Group initially recognises debt securities issued on the date that they are originated. All other financial liabilities Financial assets and liabilities are offset and the net amount are recognised initially on the trade date at which the presented in the Statement of Financial Position when, and Group becomes a party to the contractual provisions of the only when, the Group has a legal right to offset the amounts instrument. intends either to settle on a net basis or realise the assets and settle the liability simultaneously. The Group derecognises a financial liability when its contracted obligations are discharged, cancelled or expired. The Group has the following non-derivative financial assets: loans and receivables and available-for-sale financial asset. The Group classifies non-derivative financial liabilities in to the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable (i) Loans and receivables transaction costs. Subsequent to initial recognition these Loans and receivables are financial assets with fixed or financial liabilities are measured at amortised cost. determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value (c) Non-derivative Financial Liabilities plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at Other financial liabilities comprise: loans and borrowings, amortised cost using the effective interest method, less any bank overdraft, debt securities and trade and other payables. impairment losses. Loans and receivables comprise cash and cash equivalents, investment in debenture and trade and other receivables, including related party receivables. Millennium Housing Developers PLC Annual Report 2016/17 73
Notes to the Financial Statements
3.3 Impairment The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs 3.3.1 Financial assets to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax A financial asset not carried at fair value through profit or loss discount rate that reflects current market assessments of is assessed at each reporting date to determine whether there the time value of money and the risk specific to the asset. is objective evidence that it is impaired. A financial asset is or the purpose of impairment testing, assets are grouped impaired if objective evidence indicates that a loss event has together into the smallest group of assets that generates occurred after the initial recognition of the asset, and that the cash inflows from continuing use that are largely independent loss event had a negative effect on the estimated future cash of the cash inflows of other assets or groups of assets (the flows of that asset that can be estimated reliably. ‘cash generating unit’). The goodwill acquired in a business combination, for the purpose of impairment testing, is Objective evidence that financial assets are impaired can allocated to cash-generating units that are expected to benefit include default or delinquency by a debtor, restructuring of from the synergies of the combination. an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will An impairment loss is recognised if the carrying amount of enter bankruptcy, or the disappearance of an active market an asset or its cash-generating unit exceeds its estimated for a security. In addition, for an investment in an equity recoverable amount. Impairment losses are recognised in security, a significant or prolonged decline in its fair value profit or loss. below its cost is objective evidence of impairment.
Impairment losses recognised in respect of cash-generating The Group considers evidence of impairment for receivables units are allocated first to reduce the carrying amount of any at a specific asset level. All individually significant receivables goodwill allocated to the units and then to reduce the carrying are as assessed for specific impairment. amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its Impairment losses recognised in prior periods are assessed carrying amount and the present value of the estimated future at each reporting date for any indications that the loss has cash flows discounted at the asset’s original effective interest decreased or no longer exists. rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on An impairment loss is reversed if there has been a change the impaired asset continues to be recognised through the in the estimates used to determine the recoverable amount. unwinding of the discount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount When a subsequent event causes the amount of impairment that would have been determined, net of depreciation or loss to decrease, the decrease in impairment loss is amortisation, if no impairment loss had been recognised. reserved through profit or loss. Impairment losses on available-for- sale investment securities are recognised by transferring the cumulative loss that has been recognised in Other Comprehensive Income and presented in the fair value 3.4 Property, Plant & Equipment reserve in equity, to profit or loss. The cumulative loss that is Items of property, plant & equipment are stated at cost less removed from other comprehensive income and recognised accumulated depreciation and accumulated impairment in profit or loss is the difference between the acquisition losses. cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously The cost of property, plant & equipment comprises its recognised in profit or loss. Changes in impairment provisions purchase price and any directly attributable costs of bringing attributable to time value are reflected as a component of the asset to working condition for its intended use. This also interest income. includes costs of dismantling and removing the items and restoring the site on which they are located.
3.3.2 Non-financial assets Where parts of an item of property, plant & equipment have The carrying amounts of the Group’s non-financial assets different useful lives, they are accounted for as separate other than inventories and deferred tax assets, are reviewed items of property plant & equipment which can be measured at each reporting date to determine whether there is any reliably. All other costs are recognised in the Statement of indication of impairment. If any such indication exists, then the Comprehensive Income as an expense as incurred. asset’s recoverable amount is estimated.
Millennium Housing Developers PLC 74 Annual Report 2016/17
Notes to the Financial Statements
3.4.1 Subsequent expenditure to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. The Group recognises in the carrying amount of an item of property, plant & equipment the cost of replacing part of an For operating leases the leased assets are not recognised on item when that cost is incurred if it is probable that the future the Group’s Statement of Financial Position. economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other cost are recognised in the Statement of Comprehensive 3.5 Investment Property Income as an expenses as incurred. Investment Property, principally comprise freehold land and building held either to earn rental income or for capital 3.4.2 Derecognition appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or The carrying amount of an item of Property, Plant & Equipment services or for administrative purposes. Investment property is derecognised upon disposal or when no future economic is measured at cost on initial recognition and subsequently at benefits are expected from its use or disposal. fair value with any change therein recognised in profit or loss.
Gains and losses on disposal of an item of property, plant Cost includes expenditure that is directly attributable to & equipment are determined by comparing the proceeds the acquisition of the investment property. The cost of from disposal with the carrying amount of property, plant & self-constructed investments property includes the cost equipment, and are recognised net within ‘other income’ in of materials and direct labour, any other costs directly profit or loss. attributable to bring the investment property to a working condition for their intended use and capitalised borrowing 3.4.3 Depreciation costs. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from Depreciation is recognised in profit and loss on a straight disposal and the carrying amount of the item) is recognised in line basis over the estimated useful lives of each component. profit or loss. Depreciation is not provided on free hold land and assets under construction. Leased assets are depreciated over the When an investment property that was previously classified shorter of the lease term and their useful lives unless it is as Property, Plant & Equipment is sold, any related amount reasonably certain that the Group will obtain ownership by the included in the revaluation reserve is transferred to retained end of the lease term. Land is not depreciated. earnings.
Depreciation of an asset begins when it is available for When the use of a property changes such that it is reclassified use and ceases at the earlier of the date that the asset is as Property, Plant & Equipment, its fair value at the date of classified as held-for-sale and the date that the asset is reclassification becomes its cost for subsequent accounting. derecognised. Investment property is carried at fair value determined The estimated useful lives are as follows: annually by an independent valuer. A gain or loss arising
Class of Assets Useful Lifetime (years) from a change in the fair value of investment property is recognised in profit or loss for the period in which it arises. Building 5 Motor vehicles 5 Furniture and fittings 5 3.6 Intangible Assets Generator 5 All software licensed for use the Company, not constituting an Air conditioner and installation 5 integral part of related hardware are included in the Statement Office equipment 5 of Financial Position under the category intangible assets and carried at cost less accumulated amortisation and any Play equipment 5 impairment losses. Computers 4 The initial acquisition cost comprises license fee paid at the inception, import duties, non-refundable taxes and levies, cost 3.4.4 Leased assets of customising the software to meet the specific requirements of the Company and other directly attributable expenditure Leases in terms of which the Group assumes substantially all in preparing the assets for its intended use. All software the risks and rewards of ownership are classified as finance acquired is amortised over a period of four years. leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent Millennium Housing Developers PLC Annual Report 2016/17 75
Notes to the Financial Statements
3.7 Inventories Retiring gratuity Inventories are valued at the lower of cost and net realisable The Retirement Benefit Plan adopted is as required under the value. Net realisable value is the estimated selling price less Payment of Gratuity Act No. 12 of 1983. This item is grouped estimated cost of completion and estimated costs necessary under Retirement Benefit Obligation in the Statement of to make to the sale. Financial Position. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on Cost incurred in bringing inventories to its present location completion of five years of continued service. The Company and condition, are accounted for as follows: and Group has adopted Sri Lanka Accounting Standard 19 – ‘Employee Benefits’.
3.7.1 Raw materials Defined benefit plans define an amount of benefit that an employee will receive on retirement, usually dependent Raw material stock is valued at lower of cost and net on one or more factors such as age, years of service and realisable value. compensation.
The liability recognised in the Statement of Financial Position 3.7.2 Work-in-progress in respect of defined benefit plans is the present value of the Work-in-progress represents the cost of partly constructed defined benefit obligation at the reporting date, together with houses and the cost of other infrastructure facilities incurred adjustments for unrecognised past service cost. as at the reporting date. The key assumptions used in the computation are stated in Note 24 to the Financial Statements. 3.7.3 Finished goods The Company recognises all the remeasurements of the net Finished goods include the fully completed houses which are defined benefit liability in Other Comprehensive Income. not sold as at the Balance Sheet date these are valued at cost Remeasurement of the net defined benefit liability comprises of construction plus attributable over heads. actuarial gain or loss.
However, according to the Payment of Gratuity Act No. 12 of 3.8 Employee Benefits 1983, the liability for gratuity to an employee arises only on completion of five years continued service with the company. (a) Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which contributions are made into a separate fund Short-term benefits and the entity will have no legal or constructive obligation to Short-term employee benefit obligations are measured on an pay further amounts. Obligations for contributions to defined undiscounted basis and are expensed as the related service contribution plan are recognised as an employee benefit is provided. expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a 3.9 Provisions reduction in future payments is available. Provisions are recognised if as a result of a past event the Group has a present legal or constructive Obligation that Defined Contribution Plans – Employees Provident can be estimated reliably and it is probable that an outflow Fund and Employees Trust Fund of economic benefit will be required to settle the Obligation. Provisions and liabilities are recognised in the Statement of All employees who are eligible for Employees’ Provident Financial Position. Fund contribution and Employees’ Trust Fund contribution are covered by relevant contribution funds in line with respective statutes and regulations. The Group contributes 12% and 3% of gross emoluments of employees to Employees’ Provident 3.10 Statement of Profit or Loss and Fund and Employees’ Trust Fund respectively. Other Comprehensive Income 3.10.1 Revenue (b) Defined benefit plan – Gratuity Houses A defined benefit plan is a post-employment benefit plan The income from sale of houses and extra works are other than a defined contribution plan. recognised when the risks and rewards incidental to ownership is transferred to the buyer. It is deemed to have been transferred when the sale agreement is signed between the buyer and the Group and 100% of the construction of the house is completed. Millennium Housing Developers PLC 76 Annual Report 2016/17
Notes to the Financial Statements
Land (a) Current taxation
The income from sale of land is recognised when the risks Current tax is the expected tax payable on the taxable income and rewards incidental to ownership is transferred to the for the year, using tax rates enacted or substantively enacted buyer. It is deemed to have been transferred when the sale at the reporting date, and any adjustment to tax payable in agreement is signed between the buyer and the Group and respect of previous years. Current tax payable also includes the 30% of the sale value received from the customer. any tax liability arising from the declaration of dividend.
3.10.2 Finance income and expenses (b) Deferred taxation Finance income comprises interest income on easy payment Deferred tax is recognised in respect of temporary differences loans granted and interest on fixed deposits and related party between the carrying amounts of assets and liabilities for receivables, Interest income is recognised as it accrues in financial reporting purposes and the amounts used for profit or loss using effective interest method. taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of Finance expenses comprise interest expense on borrowings. assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in 3.10.3 Other income subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Other income comprises dividend income, gains on the fair value changes in investment property and sundry income. Deferred tax is measured at the tax rates that are expected Other income is recognised as it accrues in profit or loss to be applied to temporary differences when they reverse, on the date that the Group’s right to receive payment is based on the laws that have been enacted or substantively established. enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to 3.10.4 Expenditure recognition offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same (a) All expenditure incurred in running of the business and in taxable entity, or on different tax entities, but they intend to maintaining the Property, Plant & Equipment in a state of settle current tax liabilities and assets on a net basis or their efficiency has been charged to revenue in arriving at the tax assets and liabilities will be realised simultaneously. profit for the year. (b) or the purpose of presentation of Statement of A deferred tax asset is recognised to the extent that it is Comprehensive Income, the Directors are of the opinion probable that future taxable profits will be available against that the function of expenses method present fairly the which the temporary difference can be utilised. Deferred tax elements of the enterprise’s performance, Hence such assets are reviewed at each reporting date and are reduced presentation method is adopted. to the extent that it is no longer probable that the related tax benefit will be realised.
3.10.5 Borrowing costs Income tax expense for the year comprises current and deferred tax. Income tax is recognised in the Income Borrowing costs are recognised as an expense in the period Statement except to the extent that it relates to items in which they are incurred, except to the extent that they recognised directly in equity, in which case it is recognised in are directly attributable to the acquisition, construction or equity. production of a qualifying asset, in which case they are capitalised as part of the cost of that asset. 3.11 Earnings Per Share 3.10.6 Income tax expense The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing Income tax the profit or loss attributable to ordinary shareholders of the Income tax expense comprises current and deferred tax. Company by the weighted average number of ordinary shares Income tax expense is recognised in profit or loss except outstanding during the period. to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or Other Comprehensive Income. Millennium Housing Developers PLC Annual Report 2016/17 77
Notes to the Financial Statements
3.12 Related Party Transactions 3.15 Commitments and Contingencies Disclosure has been made in respect of the transactions Commitments and contingencies as at the reporting date are in which one party has the ability to control or exercise disclosed in the Financial Statements. significant influence over the financial and operating policies/ decisions of the other, irrespective of whether a price is being charged. 3.16 Comparative Information The comparative information is re-classified wherever 3.13 Cash Flow Statement necessary to conform with the current year's presentation in order to provide better presentation. The Cash Flow Statement is prepared under the Indirect Method. Interest paid is classified as operating cash flows whereas interest received and dividend received are 4. New Accounting Standards classified as investing cash flows. Issued But Not Effective as at the Reporting Date 3.14 Events after the Reporting Date The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards All material events after the reporting date have been which will become applicable for financial periods beginning considered and where appropriate adjustments or on or after 1st January 2018 or at a later date. Accordingly, Disclosures have been made in the Financial Statements. these Standards have not been applied in preparing these Financial Statements.
New or amended Summary of the requirements Possible impact on consolidated standards Financial Statements
SLFRS 9 SLFRS 9, issued in 2014, replaces the existing guidance in LKAS The Group is assessing Financial 39 Financial Instruments: Recognition and Measurement. SLFRS 9 the potential impact on Instruments includes revised guidance on the classification and measurement of its consolidated Financial financial instruments, including a new expected credit loss model for Statements resulting from the calculating impairment on financial assets. application of SLFRS 9.
SLFRS 9 is effective for annual period beginning on or after 1st January 2018 with early adoption permitted.
SLFRS 15 SLFRS 15 establishes a comprehensive framework for determining The Group is assessing Revenue from whether, how much and when revenue is recognised. It replaces the potential impact on Contracts with existing revenue recognition guidance, including LKAS 18 – its consolidated Financial Customers ‘Revenue’, LKAS 11 – ‘Construction Contracts’. Statements resulting from the application of SLFRS 15. SLFRS 15 is effective for annual reporting periods beginning on or after 1st January 2018, with early adoption permitted.
SLFRS 16 Leases SLFRS 16 sets out the principles for the recognition, measurement, The Company is assessing the presentation and disclosures of leases for both parties to a lease potential impact on its Financial contract. SLFRS 16 is effective for annual reporting period beginning Statements resulting from the on or after 1st January 2019, with early adoption permitted. application of SLFRS 16. Millennium Housing Developers PLC 78 Annual Report 2016/17
Notes to the Financial Statements
5. Revenue
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Income from sale of houses 1,213,531,683 752,902,944 309,225,780 303,653,081 Income from sale of land 48,196,550 48,895,050 148,956,550 31,225,050 Income from extra work of houses 44,009,557 18,467,192 20,529,345 8,363,604 1,305,737,790 820,265,186 478,711,675 343,241,735
6. Other Operating Income
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Dividend income – 75,000 10,028,200 9,156,250 Sundry income 15,846,363 21,996,688 6,724,383 15,896,403 Fair value change in investment property 2,500,000 8,601,000 – – 18,346,363 30,672,688 16,752,583 25,052,653
7. Results from Operating Activities Results from operating Activities is stated after charging all expenses including the following:
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Directors’ remuneration 13,630,000 11,145,000 13,330,000 10,820,000 Auditors’ remuneration – Audit 1,202,000 1,042,000 760,000 650,000 Depreciation on property, plant & equipment – Non-audit 10,078,487 6,229,520 7,443,107 4,521,208 Amortisation on intangible assets 778,126 104,062 680,655 104,062 Provision for amount due from related Companies – – 42,857 – Personnel costs (Note 7.1) 81,124,117 82,657,735 17,713,628 29,794,694
7.1 Personnel costs Salaries and wages 63,179,805 55,456,593 8,958,586 12,631,425 Defined contribution plan cost – EPF and ETF 10,590,698 9,568,021 2,637,889 3,255,274 Defined benefit plan cost – Retirement gratuity 7,353,614 7,253,975 6,117,153 5,859,274 Bonus – 10,379,146 – 8,048,721 81,124,117 82,657,735 17,713,628 29,794,694 Millennium Housing Developers PLC Annual Report 2016/17 79
Notes to the Financial Statements
8. Net Finance Income/(Costs)
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Finance income Interest on easy payment schemes 836,490 2,701,948 417,121 2,113,877 Interest on money market investments 4,359,141 1,991,666 1,734,769 1,185,745 Interest on Nation Lanka Equities (Private) Limited – Loan – 128,194 – 128,194 Interest on Anilana Hotels & Properties Limited – – 2,046,007 – 2,046,007 Commercial paper Interest on Investor Access (Private) Limited – Loan – 2,888,615 – 2,888,615 Interest on customer late payments 385,000 860,001 260,000 200,000 5,580,631 10,616,431 2,411,890 8,562,438
Finance expense Overdraft interest 267,422 184,495 3,969 14,114 Loan interest 4,473,557 917,803 4,381,300 254,700 4,740,979 1,102,298 4,385,269 268,814 Net finance income/(cost) 839,652 9,514,133 (1,973,379) 8,293,624
9. Income Tax Expense
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Recognised in the profit or Loss Current Income Tax (Note 9.2) 51,864,216 33,797,260 7,052,180 17,126,621 Over Provision with respect to the previous year (865,463) (4,258,966) (626,813) (3,082,341) Reversal of deferred taxation (Note 23) (760,941) (669,461) (985,448) (667,859) 50,237,812 28,868,833 5,439,919 13,376,421 Recognised in the Other Comprehensive Income Reversal of deferred taxation (Note 23) 2,274,884 (134,327) 1,998,221 (132,269) 2,274,884 (134,327) 1,998,221 (132,269) 52,512,696 28,734,506 7,438,140 13,244,152
9.1 Details of Current Tax Computation Millennium Housing Developers PLC The Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 26th November 1998. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit has been exempted from income tax for a period of 12 years reckoned from the year of assessment 1999/2000 till 2010/2011. After the expiration of the exempt period, the taxable income of the Company will be taxed based on the applicable provisions of the Inland Revenue Act. Millennium Housing Developers PLC 80 Annual Report 2016/17
Notes to the Financial Statements
Millennium Housing Limited The Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 21st May 2003. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit has been exempted from income tax for a period of 3 years reckoned from the year of assessment 2004/2005 till 2006/2007. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years from the year of assessment 2007/2008 till 2008/2009. After the expiration of the aforesaid concessionary tax rate of 10%, the profits and income of the Company shall be charged at the rate of 20% for any year of assessment.
Millennium Villa Housing Development Limited The Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 12th February 2003. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit has been exempted from income tax for a period of 3 years reckoned from the year of assessment 2004/2005 till 2006/2007. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years from the year of assessment 2007/2008 till 2008/2009. After the expiration of the aforesaid concessionary tax rate of 10%, the profits and income of the Company shall for any year of assessment be charged at the rate of 20%.
Millennium Housing Construction Limited The Company is liable for income tax at the rate of 28% (2013 : 28%) in terms of the provisions of the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto.
MC Urban Developers Limited The Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 10th December 2015. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit will be exempted from income tax for a period of five years reckoned from the year starting the commercial Operations. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years. After the expiration of the exempt period, the provisions of the Inland Revenue Laws for the time being in force shall apply to the Company in relation to the said business.
MC Universal Limited The Company has entered into an agreement with the Board of Investment of Sri Lanka (BOI) on 10th December 2015. Under Section 17 of the BOI Law No. 4 of 1978, the Company’s profit will be exempted from income tax for a period of five years reckoned from the year starting the commercial Operations. After the expiration of the aforesaid tax exemption period, the profits and income of the Company shall be charged at the rate of 10% for a period of two years. After the expiration of the exempt period, the provisions of the Inland Revenue Laws for the time being in force shall apply to the Company in relation to the said business.
9.2 Reconciliation of the Accounting Profit to Income Tax Expense
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Accounting profit before taxation 198,605,943 117,329,144 28,622,412 61,387,183 Add: Aggregate disallowed expenses 32,346,050 30,771,017 16,976,479 17,626,007 Less: Aggregate allowable expenses (17,068,702) (11,564,140) (9,714,333) (8,690,436) 213,883,291 136,536,021 35,884,558 70,322,754 Exempt income (14,624,525) (17,037,661) (12,432,969) (15,812,990) Interest income 3,256,325 7,462,661 1,734,769 6,656,740 Taxable profit from business 202,515,091 126,961,021 25,186,358 61,166,504 Other income liable for tax @ 28% 911,771 2,089,545 485,735 1,863,887 Business income liable for tax @ 20% & 28% 50,952,445 31,707,715 6,566,445 15,262,734 Income tax expense 51,864,216 33,797,260 7,052,180 17,126,621 Millennium Housing Developers PLC Annual Report 2016/17 81
Notes to the Financial Statements
10. Basic Earnings per Share Basic earnings per share is calculated based on the profit after tax attributable to the ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the year.
Group Company
For the Year Ended 31st March 2017 2016 2017 2016
Profit attributable to ordinary shareholders (Rs.) 148,368,131 88,460,311 23,182,493 48,010,762 Weighted average number of ordinary shares 134,681,320 134,681,320 134,681,320 134,681,320 Basic earnings per share (Rs.) 1.10 0.66 0.17 0.36
11. Property, Plant & Equipment
COMPANY Freehold Freehold Office and Site Play Containers Leasehold Total Land Buildings Equipment Equipment Motor Vehicles Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Cost Balance as at 1st April 2015 2,724,468 3,997,168 37,544,935 9,960,017 2,155,497 – 56,382,085 Additions during the year – 2,541,306 8,328,435 1,382,600 2,465,000 7,075,000 21,792,341 Balance as at 31st March 2016 2,724,468 6,538,474 45,873,370 11,342,617 4,620,497 7,075,000 78,174,426 Balance as at 1st April 2016 2,724,468 6,538,474 45,873,370 11,342,617 4,620,497 7,075,000 78,174,426 Additions during the year – 699,303 2,938,274 325,200 466,000 – 4,428,777 Write-off during the year – – (24,000) – – – (24,000) Balance as at 31st March 2017 2,724,468 7,237,777 48,787,644 11,667,817 5,086,497 7,075,000 82,579,203
Accumulated depreciation Balance as at 1st April 2015 – 3,494,386 28,452,663 8,557,558 2,155,497 – 42,660,104 Charge for the year – 971,740 2,529,875 404,943 130,900 483,750 4,521,208 Balance as at 31st March 2016 – 4,466,126 30,982,538 8,962,501 2,286,397 483,750 47,181,312 Balance as at 1st April 2016 – 4,466,126 30,982,538 8,962,501 2,286,397 483,750 47,181,312 Charge for the year – 1,252,976 3,658,155 619,976 497,000 1,415,000 7,443,107 Write-off during the year – – (24,000) – – – (24,000) Balance as at 31st March 2017 – 5,719,102 34,616,693 9,582,477 2,783,397 1,898,750 54,600,419
Net book value Balance as at 31st March 2016 2,724,468 2,072,348 14,890,832 2,380,116 2,334,100 6,591,250 30,993,114 Balance as at 31st March 2017 2,724,468 1,518,675 14,170,951 2,085,340 2,303,100 5,176,250 27,978,784
Note Land owned by the Company depicted in plan No. 2327 Lot No. 01, situated at Piliyandala, Kahapola. Land extent 58 perch. Millennium Housing Developers PLC 82 Annual Report 2016/17
Notes to the Financial Statements
GROUP Freehold Freehold Office & Site Play Motor Containers Leasehold Total Land Buildings Equipment Equipment Vehicle Motor Vehicles Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Cost Balance as at 1st April 2015 2,724,468 7,271,232 39,427,299 222,000 9,960,017 2,155,497 – 61,760,513 Additions during the year – 2,991,791 14,654,741 – 1,382,600 2,775,119 7,075,000 28,879,251 Balance as at 31st March 2016 2,724,468 10,263,023 54,082,040 222,000 11,342,617 4,930,616 7,075,000 90,639,764 Balance as at 1st April 2016 2,724,468 10,263,023 54,082,040 222,000 11,342,617 4,930,616 7,075,000 90,639,764 Additions during the year – 699,303 6,898,630 – 325,200 2,232,500 – 10,155,633 Write-off during the year – – (24,000) – – – – (24,000) Balance as at 31st March 2017 2,724,468 10,962,326 60,956,670 222,000 11,667,817 7,163,116 7,075,000 100,771,397
Accumulated depreciation Balance as at 1st April 2015 – 4,460,902 29,085,061 222,000 8,557,558 2,155,497 – 44,481,018 Charge for the year – 1,940,508 3,206,307 – 437,043 161,912 483,750 6,229,520 Balance as at 31st March 2016 – 6,401,410 32,291,368 222,000 8,994,601 2,317,409 483,750 50,710,538 Balance as at 1st April 2016 – 6,401,410 32,291,368 222,000 8,994,601 2,317,409 483,750 50,710,538 Charge for the year – 2,222,588 5,040,316 – 619,976 780,607 1,415,000 10,078,487 Write-off during the year – – (24,000 ) – – – – ( 24,000) Balance as at 31st March 2017 – 8,623,998 37,307,684 222,000 9,614,577 3,098,016 1,898,750 60,765,025
Net book value Balance as at 31st March 2016 2,724,468 3,861,613 21,790,672 – 2,348,016 2,613,207 6,591,250 39,929,226 Balance as at 31st March 2017 2,724,468 2,338,328 23,648,986 – 2,053,240 4,065,100 5,176,250 40,006,372
Note Land owned by the Company depicted in plan No. 2327 Lot No. 01, situated at Piliyandala, Kahapola. Land extent 58 perch.
11.1 Cost of fully depreciated property, plant & equipment still in use at the reporting date is as follows:
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Freehold building 4,998,065 3,452,435 4,998,065 3,452,435 Office and site equipment 30,000,479 28,142,165 28,541,260 27,691,260 Play equipment 222,000 222,000 – – Motor vehicle 8,361,377 8,361,377 8,361,377 8,361,377 Container 2,155,497 2,155,497 2,155,497 2,155,497 45,737,418 42,333,474 44,056,199 41,660,569
12. Investment Property 12.1. Reconciliation of Carrying Amount
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Balance as at 1st April 45,000,000 36,399,000 – – Change in Fair Value 2,500,000 8,601,000 – – Balance as at 31st March 47,500,000 45,000,000 – –
The investment property of the Group includes the following, which was valued by Chartered Valuer Mr. D C Sosa, chartered valuer on 21st March 2017. Millennium Housing Developers PLC Annual Report 2016/17 83
Notes to the Financial Statements
Owning Company Location Land in Extent 2017 2016 Rs. Rs.
Millennium Housing Limited Athurugiriya 0A-2R-20.0P 47,500,000 45,000,000 47,500,000 45,000,000
Change in fair value is recognised as gain in profit or loss and included in ‘other income’ and gain represent the unrealised amount.
12.2 Measurement of Fair Values The fair value of investment property was determined by external, independent property valuer, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued.
The fair value measurement of the investment property has been categorised as a Level 3 fair value based on the inputs used to the valuation.
12.3 Valuation Techniques and Significant Unobservable Inputs Valuation technique Significant unobservable Inter-relationship between key unobservable inputs and fair inputs value measurement. Market comparable method Transaction prices of The estimated fair value would increase/(decrease) if: comparable properties Transaction price of comparable land increase/(decrease).
12.4 Sensitivity Analysis of Perch Price The following table demonstrates the sensitivity to a reasonably possible change in the per perch price in the investment property value measurement.
Comprehensive Investment Income Increase/ Property Increase/ (Decrease) (Decrease) Rs. Rs.
Increase in per perch price (10%) 4,750,000 4,750,000 Decrease in per perch price (10%) (4,750,000) (4,750,000)
13. Intangible Assets
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Cost Balance at the beginning of the year 2,970,121 415,000 2,722,621 415,000 Additions during the year 435,387 2,555,121 – 2,307,621 Balance at the end of the year 3,405,508 2,970,121 2,722,621 2,722,621
Accumulated amortisation Balance at the beginning of the year 232,812 128,750 232,812 128,750 Additions during the year 778,126 104,062 680,655 104,062 Balance at the end of the year 1,010,938 232,812 913,467 232,812 Balance as at 31st March 2,394,570 2,737,309 1,809,154 2,489,809
The intangible assets represent cost of acquisition of computer software. Millennium Housing Developers PLC 84 Annual Report 2016/17
Notes to the Financial Statements
14. Investment in Subsidiaries
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Millennium Housing Limited – – 25,010,000 25,010,000 Millennium Villa Housing Development Limited – – 132,460,000 132,460,000 Millennium Housing Construction Limited – – 3,500,000 3,500,000 MC Urban Developers Limited – – 75,000,000 800 MC Universal Limited – – 75,000,000 75,000,000 – – 310,970,000 235,970,800 Less: Provision for impairment (Note 14.1) – – (3,500,000) (3,500,000) – – 307,470,000 232,470,800
14.1 Provision for Impairment Balance as at beginning of the year – – 3,500,000 3,500,000 Balance as at 31st March – – 3,500,000 3,500,000
14.2 Analysis of Subsidiaries
As at 31st March
Name of the company Nature of the Location Ownership Carrying Value. Business Percentage Rs.
Millennium Housing Limited (MHL) Property Ja-ela/Piliyandala/ 100% 25,010,000 development Seeduwa Millennium villa Housing Development Limited (MVHDL) Property Ja-ela 100% 132,460,000 development Millennium Housing Construction Limited (MHCL) Construction Ja-ela 100% – MC Urban Developers Limited Property Kirulapone 100% 75,000,000 development MC Universal Limited (MCUC) Property Rajagiriya 100% 75,000,000 development 307,470,000
Summarised information of subsidiary companies of the Group
MHL MVHDL MHCL MC Urban MC Universal Rs. Rs. Rs. Rs. Rs.
Revenue 252,046,362 707,979,753 – – – Profit/(loss) after tax 34,259,826 128,927,363 (102,857) (25,353,041) (1,890,310) Other comprehensive income/expenses 876,547 230,103 – – – Total comprehensive income/expenses 35,136,373 129,157,466 (102,857) (25,353,041) (1,890,310) Total comprehensive income Attributable to non-controlling interests – – – – – Attributable to the Group 35,136,373 129,157,466 (102,857) (25,353,041) (1,890,310) 35,136,373 129,157,466 (102,857) (25,353,041) (1,890,310) Millennium Housing Developers PLC Annual Report 2016/17 85
Notes to the Financial Statements
Summary of the statement of financial position of subsidiary companies
MHL MVHDL MHCL MC Urban MC Universal Rs. Rs. Rs. Rs. Rs.
Non-current assets 86,668,763 9,695,701 – 1,363,879 75,786 Current assets 196,039,243 638,775,639 5,466,828 1,054,581,664 414,569,312 Total assets 282,708,006 648,471,340 5,466,828 1,055,945,543 414,645,098 Non-current liabilities 2,820,562 1,160,237 – 120,000,000 146,027,000 Current liabilities 47,570,080 290,429,559 18,240,374 894,916,214 196,713,920 Total liabilities 50,390,642 291,589,796 18,240,374 1,014,916,214 342,740,920
Net assets Attributable to non-controlling interests – – – – – Attributable to the Group 232,317,365 356,881,544 (12,773,545) 41,029,331 71,904,178 232,317,365 356,881,544 (12,773,545) 41,029,331 71,904,178
Summary of the statement of cash flow of subsidiary companies
MHL MVHDL MHCL MC Urban MC Universal Rs. Rs. Rs. Rs. Rs.
Net cash flow/(out flow) from operation activities 13,549,370 (14,785,123) – (521,363,831) (99,304,024) Net cash flow/(out flow) from investing activities (365,700) 2,649,252 – 45,488 (39) Net cash flow/(out flow) from financing activities (10,823,210) 3,195,214 – 542,850,000 100,831,000 Net increase/(decrease) of cash and cash equivalents 2,360,460 (20,629,589) – 21,531,657 1,526,937
15. Held to Maturity Investment
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Investment in Preference Shares (Note 15.1) – – – – – – – – 15.1 Investment in Preference Shares Tropical Foliage and Flowers Limited 2,500,000 2,500,000 2,500,000 2,500,000 Less: Provision for impairment (2,500,000) (2,500,000) (2,500,000) (2,500,000) – – – – Millennium Housing Developers PLC 86 Annual Report 2016/17
Notes to the Financial Statements
16. Available-for-Sale Investments
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Seraka Investment Limited 250,000 250,000 250,000 250,000 Ceylinco Investments Limited 125,000 125,000 125,000 125,000 CeylincoTravels and Tours Limited 400,000 400,000 400,000 400,000 CEG Holdings (Private) Limited 125,000 125,000 125,000 125,000 Ceylinco Profit Sharing Investment Corporation Limited 125,000 125,000 125,000 125,000 Ceylinco CISCO Ranawiru Services (Private) Limited 125,000 125,000 125,000 125,000 E.Ceylinco Company Limited 87,500 87,500 87,500 87,500 IC & CS Software Solution Co. (Private) Limited 50,000 50,000 50,000 50,000 The Finance & Guarantee Co. Limited 250,000 250,000 250,000 250,000 Corporate Finance Limited 250,000 250,000 250,000 250,000 Ceylinco Venture Capital Limited 140,000 140,000 140,000 140,000 CTV Creation (Private) Limited 40,000 40,000 40,000 40,000 Economic Resurgence Association (Private) Limited 1,000,000 1,000,000 1,000,000 1,000,000 Ceylinco Niranjan Invention (Private) Limited 37,500 37,500 37,500 37,500 Ceylinco Coloured Stone (Private) Limited 1,400,000 1,400,000 1,400,000 1,400,000 Ceylinco Cellular Communications (Private) Limited 200,000 200,000 200,000 200,000 The Sitar (Private) Limited 65,000 65,000 65,000 65,000 People's Realty Limited 29,516 29,516 29,516 29,516 Ceylinco Pharmaceuticals Limited 250,000 250,000 250,000 250,000 Nation Lanka Promotions Limited 13,000,000 13,000,000 13,000,000 13,000,000 17,949,516 17,949,516 17,949,516 17,949,516 Less: Provision for impairment (4,949,516) (4,949,516) (4,949,516) (4,949,516) 13,000,000 13,000,000 13,000,000 13,000,000
17. Inventories
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Raw materials 96,681,623 72,733,954 19,745,590 27,997,989 Work-in-progress 433,547,067 310,323,850 64,643,582 73,955,961 Finished goods – Houses – 6,508,824 – – Land stock 1,157,018,894 679,678,497 273,019,337 476,413,877 1,687,247,584 1,069,245,125 357,408,509 578,367,827 Less: Provision for slow moving inventories (Note 17.1) (1,123,942) (1,123,942) (756,072) (756,072) 1,686,123,642 1,068,121,183 356,652,437 577,611,755
17.1 Provision for Slow Moving Inventories Balance at the beginning of the year 1,123,942 1,123,942 756,072 756,072 Balance at the end of the year 1,123,942 1,123,942 756,072 756,072
17.2 Borrowing cost Capitalisation The Group has capitalised borrowing cost amounting Rs. 46.5 Mn under the inventory work-in-progress as at 31st March 2017 (2016 Rs. 22.4 Mn) Millennium Housing Developers PLC Annual Report 2016/17 87
Notes to the Financial Statements
18. Trade and Other Receivables
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Trade receivables 648,231,831 348,375,926 126,849,856 104,860,921 Other receivables 151,983,375 117,295,371 85,576,179 78,304,324 800,215,206 465,671,297 212,426,035 183,165,245 Less: Provision for Impairment (Note 18.1) (15,387,210) (15,387,210) (15,387,210) (15,387,210) 784,827,996 450,284,087 197,038,825 167,778,035
18.1 Provision for Impairment Balance at the beginning of the year 15,387,210 15,387,210 15,387,210 15,387,210 Balance at the end of the year 15,387,210 15,387,210 15,387,210 15,387,210
19. Amount due from Related Companies
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Millennium Housing Limited – – – 6,879,454 Millennium Housing Construction Limited – – 15,584,815 15,541,958 MC Universal Limited – 12,008,652 – Nawaloka Construction (Private) Limited – – – – Millennium Villa Housing Development Limited – – 72,908,265 14,213,643 – – 100,501,732 36,635,055 Less: Provision for impairment (Note 19.1) – – (15,584,815) (15,541,958) – – 84,916,917 21,093,097
19.1 Provision for Impairment Balance at the beginning of the year – – 15,541,958 15,407,798 Provision for the year – – 42,857 134,160 Balance at the end of the year – – 15,584,815 15,541,958
20. Cash and Cash Equivalents
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Favourable balances Cash in hand 17,757,175 7,768,430 11,010,810 7,156,280 Cash at bank 30,540,844 36,853,339 5,039,402 14,819,048 Fixed deposits – – – – 48,298,019 44,621,769 16,050,212 21,975,328 Unfavourable balances Bank overdrafts (18,250,595) (54,915,959) (5,281,400) (46,520,014) Cash and cash equivalents for the cash flows purpose 30,047,424 (10,294,190) 10,768,812 (24,544,686) Millennium Housing Developers PLC 88 Annual Report 2016/17
Notes to the Financial Statements
21. Stated Capital
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Ordinary shares (Number of shares 134,681,320) 293,802,200 293,802,200 293,802,200 293,802,200
22. Interest-Bearing Borrowings
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Bank Loans (Note 22.1) 783,683,500 287,115,000 103,002,500 171,795,000 Finance Lease Liability (Note 22.2) 3,991,420 5,068,542 3,991,420 5,068,542 787,674,920 292,183,542 106,993,920 176,863,542 Amount payable within one year 468,226,896 70,856,886 53,572,896 46,136,886 Amount payable after one year 319,448,024 221,326,656 53,421,024 130,726,656 787,674,920 292,183,542 106,993,920 176,863,542
22.1 Bank Loans Hatton National Bank PLC (Note 22.1.1) 93,331,000 112,000,000 – – Hatton National Bank PLC (Note 22.1.2) 120,000,000 – – – Hatton National Bank PLC (Note 22.1.3) 60,000,000 – – – Hatton National Bank PLC (Note 22.1.4) 59,500,000 – – – Commercial Bank of Ceylon PLC (Note 22.1.5) – – – – Commercial Bank of Ceylon PLC (Note 22.1.6) – 3,320,000 – – Commercial Bank of Ceylon PLC (Note 22.1.7) – 35,839,000 – 35,839,000 Commercial Bank of Ceylon PLC (Note 22.1.8) 20,087,000 39,706,000 20,087,000 39,706,000 Sampath Bank PLC (Note 22.1.9) 48,750,000 71,250,000 48,750,000 71,250,000 Sampath Bank PLC (Note 22.1.10) – 25,000,000 – 25,000,000 Sampath Bank PLC (Note 22.1.11) 34,165,500 – 34,165,500 – Sampath Bank PLC (Note 22.1.12) 347,850,000 – – – 783,683,500 287,115,000 103,002,500 171,795,000
22.1.1 Hatton National Bank PLC Loan 01 – 112 Mn Balance at the beginning of the year 112,000,000 – – – Loan obtained during the year – 112,000,000 – – Repayments during the year (18,669,000) – – – Balance at the end of the year 93,331,000 112,000,000 – – Security Primary mortgage of land owned by MC Universal Limited, depicted in plan No. 6241.
22.1.2 Hatton National Bank PLC Loan 01 – 120 Mn Balance at the beginning of the year – – – – Loan obtained during the year 120,000,000 – – – Repayments during the year – – – – Balance at the end of the year 120,000,000 – – – Security Primary mortgage of land owned by MC Urban Developers Limited, depicted in plan No. 3285. Millennium Housing Developers PLC Annual Report 2016/17 89
Notes to the Financial Statements
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
22.1.3 Hatton National Bank PLC Loan 01 – 60 Mn Balance at the beginning of the year – – – – Loan obtained during the year 60,000,000 – – – Repayments during the year – – – – Balance at the end of the year 60,000,000 – – – Security Primary mortgage of land owned by MC Universal Limited, depicted in plan No. 6632.
22.1.4 Hatton National Bank PLC Loan 01 – 64 Mn Balance at the beginning of the year – – – – Loan obtained during the year 64,000,000 – – – Repayments during the year (4,500,000) – – – Balance at the end of the year 59,500,000 – – – Security Primary mortgage of land owned by MC Universal Limited, depicted in plan No. 1557.
22.1.5 Commercial Bank of Ceylon PLC Loan 01 – 50 Mn Balance at the beginning of the year – 1,869,000 – – Loan obtained during the year – – – – Repayments during the year – (1,869,000) – – Balance at the end of the year – – – – Security Primary mortgage of land owned by Millennium Housing Limited, depicted in plan No. 5537.
22.1.6 Commercial Bank of Ceylon PLC Loan 02 – 20 Mn Balance at the beginning of the year 3,320,000 9,992,000 – – Loan obtained during the year – – – – Repayments during the year (3,320,000) (6,672,000) – – Balance at the end of the year – 3,320,000 – – Security Primary mortgage of land owned by Millennium Housing Limited, depicted in plan No. 6534.
22.1.7 Commercial Bank of Ceylon PLC Loan 03 – 50 Mn Balance at the beginning of the year 35,839,000 45,835,000 35,839,000 45,835,000 Loan obtained during the year – – – – Repayments during the year (35,839,000) (9,996,000) (35,839,000) (9,996,000) Balance at the end of the year – 35,839,000 – 35,839,000 Security Primary mortgage of land owned by Millennium Housing Developers PLC depicted in plan No. 3285. Millennium Housing Developers PLC 90 Annual Report 2016/17
Notes to the Financial Statements
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
22.1.8 Commercial Bank of Ceylon PLC Loan 04 – 50 Mn Balance at the beginning of the year 39,706,000 – 39,706,000 – Loan obtained during the year – 50,000,000 – 50,000,000 Repayments during the year (19,619,000) (10,294,000) (19,619,000) (10,294,000) Balance at the end of the year 20,087,000 39,706,000 20,087,000 39,706,000 Security Primary mortgage of land owned by Millennium Housing Developers PLC depicted in plan No. 2488.
22.1.9 Sampath Bank PLC Loan 01 – 90 Mn Balance at the beginning of the year 71,250,000 – 71,250,000 – Loan obtained during the year – 90,000,000 – 90,000,000 Repayments during the year (22,500,000) (18,750,000) (22,500,000) (18,750,000) Balance at the end of the year 48,750,000 71,250,000 48,750,000 71,250,000 Security Primary mortgage of land owned by Millennium Housing Developers PLC depicted in plan No. 4895.
22.1.10 Sampath Bank PLC Loan 02 – 25 Mn Balance at the beginning of the year 25,000,000 – 25,000,000 – Loan obtained during the year – 25,000,000 – 25,000,000 Repayments during the year (25,000,000) – (25,000,000) – Balance at the end of the year – 25,000,000 – 25,000,000 Security Primary mortgage of land owned by Millennium Housing Developers PLC depicted in plan No. 4895.
22.1.11 Sampath Bank PLC Loan 02 – 40 Mn Balance at the beginning of the year – – – – Loan obtained during the year 40,000,000 – 40,000,000 – Repayments during the year (5,834,500) – (5,834,500) – Balance at the end of the year 34,165,500 – 34,165,500 – Security Primary mortgage of land owned by Millennium Housing Developers PLC depicted in plan No. 4895. Millennium Housing Developers PLC Annual Report 2016/17 91
Notes to the Financial Statements
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
22.1.12 Sampath Bank PLC Loan 02 – 347.85 Mn Balance at the beginning of the year – – – – Loan obtained during the year 347,850,000 – – – Repayments during the year – – – – Balance at the end of the year 347,850,000 – – – Security Primary mortgage of land owned by MC Urban Developers PLC depicted in plan No. 6335.
22.2 Finance Lease Liability Balance at the beginning of the year 5,068,542 – 5,068,542 – Lease obtained during the year – 6,000,000 – 6,000,000 Repayments during the year (1,077,122) (931,458) (1,077,122) (931,458) Balance at the end of the year 3,991,420 5,068,542 3,991,420 5,068,542
23. Deferred Tax Asset
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Balance at the beginning of the year 7,808,296 7,004,508 7,029,632 6,229,504 Recognised in the profit and loss Charge during the year 760,941 669,461 985,448 667,859 Recognised in other comprehensive income Reversal (Charge) during the year (2,274,884) 134,327 (1,998,221) 132,269 Balance at the end of the year (Note 23.1) 6,294,353 7,808,296 6,016,859 7,029,632 Millennium Housing Developers PLC 92 Annual Report 2016/17
Notes to the Financial Statements
23.1 The provision for deferred tax of the Group and Company is attributable to the followings:
2017 2016 2017 2016
Temporary Tax Effect Temporary Tax Effect Difference Difference Rs. Rs. Rs. Rs.
Group On property, plant & equipment (11,165,856) (3,090,397) (7,050,657) (1,865,306) On retirement benefit obligation 33,516,962 9,384,750 35,524,665 9,673,602 22,351,106 6,294,353 28,474,008 7,808,296
Company Property, plant and equipment (8,047,385) (2,253,268) (5,689,686) (1,593,112) Retirement benefit obligation 29,536,164 8,270,126 30,795,514 8,622,744 21,488,779 6,016,858 25,105,828 7,029,632
24. Retirement Benefit Obligation
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Balance at the beginning of the year 35,524,665 28,466,943 30,795,514 25,036,241 Recognised in the profit and loss Current service cost 3,142,149 4,001,121 2,362,940 2,928,100 Interest cost 4,211,465 2,770,175 3,754,213 2,458,784 Recognised in other comprehensive income Actuarial (gain)/loss (8,519,816) 482,676 (7,136,503) 472,389 Payments made during the year (841,501) (196,250) (240,000) (100,000) Balance at the end of the year 33,516,962 35,524,665 29,536,164 30,795,514
The Retirement Benefit Obligation of the Company as at 31st March 2017 is based on an internally-developed method in accordance with Sri Lanka Accounting Standard No. 19 – (Revised 2014) ‘Employee Benefits’.
Key assumptions used in the computation include the following:
2017 2016
Rate of discount 12.5% 10.00% Salary incremental rates 12% 12.00% Employee turnover factor 10% 10.00% Retirement age 55 Years 55 Years Millennium Housing Developers PLC Annual Report 2016/17 93
Notes to the Financial Statements
24.1 Sensitivity of Assumptions Employed in the Valuation of the Retirement Benefit Obligation The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement.
The sensitivity of the total comprehensive income and financial position is the effect of the assumed changes in discount rate and salary increment rate on to total comprehensive income and employment benefit obligation for the year.
Total Employment Comprehensive Benefit Income obligation Increase/ Increase/ (Reduction) (Reduction) In the Liability Rs. Rs.
Increase in discount rate (1%) 1,524,885 (1,524,885 ) Decrease in discount rate (1%) (1,641,592) 1,641,592 Increase in salary escalation rate (1%) (1,634,057) 1,634,057 Decrease in salary escalation rate (1%) 1,544,737 (1,544,737)
25. Trade and Other Payables
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Trade payables 143,974,745 115,947,647 38,534,329 45,099,870 Accrued expenses 79,098,410 65,407,038 43,478,566 41,648,544 Advance received from customers 601,609,595 281,374,943 42,209,504 107,676,900 Other payables 17,291,836 21,128,939 948,448 5,700,048 841,974,586 483,858,567 125,170,847 200,125,362
26. Debentures
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Matured debentures 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000
The Company has issued these debentures at an interest rate of 13.5% per annum and they were matured on 31st March 2009. The Company has not accrued interest on these debentures from the date of maturity since the management is of the view that interest need not be accrued since they are already matured.
27. Amounts Due to Related Companies
Group Company
As at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Millennium Villa Housing Development Limited – – – – Millennium Housing Limited – – 43,749,223 – MC Urban Developers Limited – – 148,285,973 42,111,619 MC Universal Limited – – – 17,758,528 Nation Lanka Finance PLC 1,079,055 1,409,951 248,118 579,014 1,079,055 1,409,951 192,283,314 60,449,161 Millennium Housing Developers PLC 94 Annual Report 2016/17
Notes to the Financial Statements
28. Related Party Disclosures 28.1. Transactions with Related Parties
Name of the Company Names of Directors Relationship Nature of the Transactions Amount Outstanding as at 31st March
2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Nawaloka Construction Mr. J Dharmadasa Associate Payments made By Company (Private) Limited – (923,010) – – Mr. U H Dharmadasa Millennium Housing Limited Mr. S S Weerabahu Subsidiaries Payments made on behalf of 38,879,867 19,123,161 (43,749,222) 6,879,453 Mr. M K W J Seresinhe Payments made by (38,590,044) (42,093,475) Mr. Gihan De Zoyza Fund Transfers made by (85,500,000) (81,100,000) Fund Transfers to 200,000 39,500,000 Material Transfers from (2,028,353) (5,254,200) Material Transfers to 12,588,269 26,069,247 Expenditure Apportionment 23,821,585 27,692,489
Millennium Villa Housing Mr. S S Weerabahu Subsidiaries Payments made on behalf of 58,196,146 16,249,789 72,908,264 14,213,643 Development Limited Mr. M K W J Seresinhe Payments made By (40,539,188) (10,925,857) Mr. Gihan De Zoyza Fund Transfers made by 9,700,000 19,515,000 Fund Transfers to (49,700,000) (61,817,000) Material Transfers from 40,392,948 (14,490,562) Material Transfers to (13,334,390) 47,008,219 Expenditure Apportionment 53,979,104 28,369,997 Millennium Housing Construction Mr. S S Weerabahu Subsidiaries Payments made on behalf Limited 42,857 134,160 15,584,815 15,541,958 Mr. Gihan De Zoyza MC Urban Developers Limited Mr. U H Drarmadasa Subsidiaries Payment made on behalf of 167,311,349 18,641,700 (148,285,973) (42,111,618) Mr. S S Weerabahu Payment made by (88,087,138) (12,799,228) Mr. M K W J Seresinhe Fund transfers to 7,400,000 500,000 Mr. Gihan De Zoyza Fund transfers from (192,800,000) (49,550,000) Mr. Rajiv Perera Material Transfers to 1,435 741,077 MC Universal Limited Mr. U H Drarmadasa Subsidiaries Payment made on behalf of 20,388,438 154,746,172 12,008,652 (17,758,528) Mr. S S Weerabahu Payment made by (621,260) (57,745,009) Mr. M K W J Seresinhe Fund transfers to 20,000,000 1,000,000 Fund transfers from (10,000,000) (66,500,767) Payment made for BOI – 741,075 Investment in – (50,000,000) Nation Lanka Finance PLC Mr. J Dharmadasa Common Director Payment made on behalf of – 25,081 (248,118) (579,014) Mr. U H Dharmadasa Head Office Rent and Electricity - Expense (3,945,585) (3,328,519) Mr. V Ramanan Settlements 4,276,482 3,500,000 Mr. J Rudra Store Rent - Income – 135,000 Mr. J Perera Mr. Lalith Karunarathne Mr. S Kandegedara Millennium Housing Developers PLC Annual Report 2016/17 95
Notes to the Financial Statements
28. Related Party Disclosures 28.1. Transactions with Related Parties
Name of the Company Names of Directors Relationship Nature of the Transactions Amount Outstanding as at 31st March
2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Nawaloka Construction Mr. J Dharmadasa Associate Payments made By Company (Private) Limited – (923,010) – – Mr. U H Dharmadasa Millennium Housing Limited Mr. S S Weerabahu Subsidiaries Payments made on behalf of 38,879,867 19,123,161 (43,749,222) 6,879,453 Mr. M K W J Seresinhe Payments made by (38,590,044) (42,093,475) Mr. Gihan De Zoyza Fund Transfers made by (85,500,000) (81,100,000) Fund Transfers to 200,000 39,500,000 Material Transfers from (2,028,353) (5,254,200) Material Transfers to 12,588,269 26,069,247 Expenditure Apportionment 23,821,585 27,692,489
Millennium Villa Housing Mr. S S Weerabahu Subsidiaries Payments made on behalf of 58,196,146 16,249,789 72,908,264 14,213,643 Development Limited Mr. M K W J Seresinhe Payments made By (40,539,188) (10,925,857) Mr. Gihan De Zoyza Fund Transfers made by 9,700,000 19,515,000 Fund Transfers to (49,700,000) (61,817,000) Material Transfers from 40,392,948 (14,490,562) Material Transfers to (13,334,390) 47,008,219 Expenditure Apportionment 53,979,104 28,369,997 Millennium Housing Construction Mr. S S Weerabahu Subsidiaries Payments made on behalf Limited 42,857 134,160 15,584,815 15,541,958 Mr. Gihan De Zoyza MC Urban Developers Limited Mr. U H Drarmadasa Subsidiaries Payment made on behalf of 167,311,349 18,641,700 (148,285,973) (42,111,618) Mr. S S Weerabahu Payment made by (88,087,138) (12,799,228) Mr. M K W J Seresinhe Fund transfers to 7,400,000 500,000 Mr. Gihan De Zoyza Fund transfers from (192,800,000) (49,550,000) Mr. Rajiv Perera Material Transfers to 1,435 741,077 MC Universal Limited Mr. U H Drarmadasa Subsidiaries Payment made on behalf of 20,388,438 154,746,172 12,008,652 (17,758,528) Mr. S S Weerabahu Payment made by (621,260) (57,745,009) Mr. M K W J Seresinhe Fund transfers to 20,000,000 1,000,000 Fund transfers from (10,000,000) (66,500,767) Payment made for BOI – 741,075 Investment in – (50,000,000) Nation Lanka Finance PLC Mr. J Dharmadasa Common Director Payment made on behalf of – 25,081 (248,118) (579,014) Mr. U H Dharmadasa Head Office Rent and Electricity - Expense (3,945,585) (3,328,519) Mr. V Ramanan Settlements 4,276,482 3,500,000 Mr. J Rudra Store Rent - Income – 135,000 Mr. J Perera Mr. Lalith Karunarathne Mr. S Kandegedara Millennium Housing Developers PLC 96 Annual Report 2016/17
Notes to the Financial Statements
28.2 Transactions with Key Management Personnel According to the Sri lanka Accounting Standard 24 (LKAS 24)”Related Party Disclosures”,Key Management Personnel (KMP) are those having responsibility for planing,directing and controlling the Activities of the Entity. Accordingly, The Board of Directors (including non Executive and executive Directors) have been classified as KMP of the Company.
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Short term employee benefits 13,300,000 12,019,000 12,730,000 11,694,000
29. Financial Risk Management
Overview The Group has exposure to the following risk arising from the financial instruments:
a. Credit risk b. Liquidity risk c. Market risk
The note presents information about the Group’s exposure to each of the above risks, the Group’s risk management objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.
Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. Parent Company has established the Risk Management Committee, which is responsible for developing and monitoring the Group’s risk management policies. The Committee reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. Millennium Housing Developers PLC Annual Report 2016/17 97
Notes to the Financial Statements
29.1 Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.
Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Available-for-sale investments 13,000,000 13,000,000 13,000,000 13,000,000 Trade and other receivables 800,215,206 465,671,297 197,038,828 167,778,036 Amounts due from related companies – – 84,916,917 21,093,097 Cash at bank 30,540,844 36,853,339 5,039,402 14,819,048 843,756,050 515,524,636 330,967,169 247,619,348
The maximum exposure to credit risk for loans and receivables at reporting date by geographic region was:
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Athurugiriya 15,111,422 20,813,495 15,111,426 20,813,495 Ja-Ela 494,058,773 231,714,970 3,390,127 36,355,906 Homagama 73,659,106 47,691,520 73,659,106 47,691,520 Piliyandala 38,942,530 6,362,441 34,689,197 – Seeduwa 26,460,000 41,793,500 – – 648,231,831 348,375,926 126,849,856 104,860,921
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’s customer base, as these factors may have an influence on credit risk. The majority of the Group’s revenue was attributable to sales transactions with Ja-Ela geographical region. However, there is no concentration on credit risk attributable to a single customer.
Properties are sold subject to retention of title causes, so that in the event of non-payment the Group have a secured claim. Hence, the Group does not keep an additional collateral in respect of trade receivable.
When granting easy payment loan facility, the Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes earning patterns of individuals and bank references. Millennium Housing Developers PLC 98 Annual Report 2016/17
Notes to the Financial Statements
Impairment losses The aging of trade and other receivables at the reporting date is as follows:
Gross Impairment Gross Impairment
2017 2016 2016 2015 Rs. Rs. Rs. Rs.
Group Current balance 418,522,744 – 211,602,854 – Past due 1 ≥ 3 months 47,797,541 – 53,117,706 – Past due 3 ≥ 6 months 8,016,381 – 21,324,638 – Past due 6 ≥ 9 months 26,852,547 – 21,273,051 – Past due 9 ≥ 12 months 1,869,411 – 2,852,906 – Over 12 months 145,173,207 – 38,204,771 – 648,231,831 – 348,375,926 –
Gross Impairment Gross Impairment
2017 2016 2016 2015 Rs. Rs. Rs. Rs.
Company Current balance 33,500,007 – 60,388,037 – Past due 1 ≥ 3 months 22,567,340 – 16,888,556 – Past due 3 ≥ 6 months 7,049,215 – 9,712,375 – Past due 6 ≥ 9 months 26,755,923 – 4,373,201 – Past due 9 ≥ 12 months 1,322,787 – 2,096,657 – Over 12 months 35,654,584 – 11,402,095 – 126,849,856 – 104,860,921 –
Considering prevailing market conditions, the Group has mutually agreed with some of its customers to revise the terms of its receivables. Included in the Group receivables are customer balances which are past due but not impaired at the reporting date for which no allowance has been provided for as there was no significant change in the credit quality of the customers and the amounts are still considered as recoverable.
Cash and cash equivalents The Group held cash and cash equivalents of Rs. 48,298,019/- as at 31st March 2017, which represents its maximum credit exposure on these assets. The cash and cash equivalents are held with bank and financial institution counterparties.
29.2 Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring an acceptable losses or risking damage to the Group's reputation. Millennium Housing Developers PLC Annual Report 2016/17 99
Notes to the Financial Statements
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:
As at 31st March 2017 Carrying Contractual 6 months 6-12 months 1-2 years 2-5 years More than amount cash flows or less 5 years Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Group Non-derivative financial liabilities Trade and other payables 841,974,586 841,974,586 841,974,586 – – – – Interest bearing borrowings 787,674,920 787,674,920 404,590,000 64,636,896 147,306,000 171,142,024 – Debentures 3,250,000 3,250,000 3,250,000 – – – – Income tax payable 37,777,335 37,777,335 37,777,335 – – – – Amounts due to related companies 1,079,055 1,079,055 1,079,055 – – – – Bank overdraft 18,250,595 18,250,595 18,250,595 – – – – 1,690,006,491 1,690,006,491 1,306,921,471 64,636,896 147,306,000 171,142,024 –
As at 31st March 2016 Carrying Contractual 6 months 6-12 months 1-2 years 2-5 years More than amount cash flows or less 5 years Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Group Non-derivative financial liabilities Trade and other payables 483,858,567 483,858,567 483,858,567 – – – – Interest-bearing borrowings 292,183,542 292,183,542 39,659,000 31,197,886 58,719,200 162,607,456 – Debentures 3,250,000 3,250,000 3,250,000 – – – – Income tax payable 13,013,386 13,013,386 13,013,386 Amounts due to related 1,409,955 1,409,955 1,409,955 – – – – companies Bank overdraft 54,915,959 54,915,959 54,915,959 – – – – 848,631,409 848,631,409 596,106,867 31,197,886 58,719,200 162,607,456 –
As at 31st March 2017 Carrying Contractual 6 months 6-12 months 1-2 years 2-5 years More than amount cash flows or less 5 years Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Company Non-derivative financial liabilities Trade and other payables 125,170,847 125,170,847 125,170,847 – – – – Interest-bearing borrowings 106,993,920 106,993,920 36,338,000 17,234,896 32,502,000 20,919,024 – Debentures 3,250,000 3,250,000 3,250,000 – – – – Income tax payable 3,910,373 3,910,373 3,910,373 Amounts due to related 192,283,314 192,283,314 192,283,314 – – – – companies Bank overdraft 5,281,400 5,281,400 5,281,400 – – – – 436,889,854 436,889,854 366,233,934 17,234,896 32,502,000 20,919,024 – Millennium Housing Developers PLC 100 Annual Report 2016/17
Notes to the Financial Statements
As at 31st March 2016 Carrying Contractual 6 months 6-12 months 1-2 years 2-5 years More than amount cash flows or less 5 years Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Company Non-derivative financial liabilities Trade and other payables 200,125,362 200,125,362 200,125,362 – – – – Interest-bearing borrowings 176,863,542 176,863,542 23,000,000 23,136,886 47,315,200 83,411,456 – Debentures 3,250,000 3,250,000 3,250,000 – – – – Income tax payable 3,214,218 3,214,218 3,214,218 Amounts due to related 60,449,161 60,449,161 60,449,161 – – – – companies Bank overdraft 46,520,014 46,520,014 46,520,014 – – – – 490,422,297 490,422,297 336,558,755 23,136,886 47,315,200 83,411,456 –
The gross inflows/(outflows) disclosed in the above tables represent the contractual undiscounted cash flows relating to financial liabilities held for risk management purposes and which are usually not closed out prior to contractual maturity.
29.3 Market Risk Market risk is the risk that changes in market prices, such as interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Interest rate risk At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments are as follows:
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Fixed rate instruments Financial Assets – – – – – – – –
Variable rate instruments Bank over draft 18,250,595 54,915,959 5,281,400 46,520,014 Financial liability – Term loans 783,683,500 287,115,000 103,002,500 171,795,000 801,934,095 342,030,959 108,283,900 218,315,014
Cash flow sensitivity analysis for variable rate instruments The Company is exposed to changes in market interest rates through Bank overdraft borrowings which were borrowed at a variable interest rate.
Group Company
100 bp increase 100 bp decrease 100 bp increase 100 bp increase RS. RS. Rs. Rs.
31st March 2017 Variable rate instruments (8,019,341) 8,019,341 (1,082,839) 1,082,839 Cash flow sensitivity (Net) (8,019,341) 8,019,341 (1,082,839) 1,082,839
31st March 2016 Variable rate instruments (3,420,310) 3,420,310 (2,183,150) 2,183,150 Cash flow sensitivity (Net) (3,420,310) 3,420,310 (2,183,150) 2,183,150 Millennium Housing Developers PLC Annual Report 2016/17 101
Notes to the Financial Statements
Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares and retained earnings of the Group. The Board of Directors monitors the return on capital as well as the level of dividend to ordinary shareholders.
The Group’s main objective is when managing capital are: 1. to safeguarded the Group ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. 2. to provide an adequate return to shareholders by pricing products commensurately with the level of risk.
Further, the Board seeks to maintain a balance between higher targeted returns that might be possible with higher level of borrowing, and the advantages and security afforded by the strong capital position of the Group.
The Group’s net debt to adjusted equity ratio at the reporting date was as follows:
Group Company
For the Year Ended 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Total liabilities 1,723,523,453 884,156,070 466,426,018 521,217,811 Less: Cash and cash equivalents (48,298,019) (44,621,769) (16,050,212) (21,975,328) Net debt 1,675,225,434 839,534,301 450,375,806 499,242,483 Total equity 904,921,499 787,345,800 544,507,170 553,223,759 904,921,499 787,345,800 544,507,170 553,223,759 Net debt to adjusted equity ratio at 31st March 1.85 1.07 0.83 0.90
30. Fair values The Company and Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
Level I: Quoted market price (unadjusted) in an active market for an identical instrument.
Level II: Valuation techniques based on observable inputs, either directly – i.e., as prices or indirectly – i.e., derived from prices. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Level III: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices similar instruments where significant unobservable adjustments or assumptions are required for reflect difference between instruments.
Available-for-sale investments as at the reporting date includes unquoted equity investments whose fair value cannot be reliably measured. So they are subsequently measured at historical cost in accordance with LKAS 39 – ‘Financial Instruments Recognition and Measurement’ Millennium Housing Developers PLC 102 Annual Report 2016/17
Notes to the Financial Statements
30.1 Fair Values Versus the Carrying Amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follow:
Group Company
For the Year Ended 31st March 2017 Carrying Amount Fair Value Carrying Amount Fair Value Rs. Rs. Rs. Rs.
Assets carried at amortised cost Trade and other receivables 784,827,996 784,827,996 197,038,825 212,426,035 Amounts due from related companies – – 84,916,917 84,916,917 Cash and cash equivalents 48,298,019 48,298,019 16,050,212 16,050,212 833,126,015 833,126,015 298,005,954 298,005,954
Liabilities carried at amortised cost Trade and other payables 841,974,586 841,974,586 125,170,847 125,170,847 Debentures 3,250,000 3,250,000 3,250,000 3,250,000 Borrowings 787,674,920 787,674,920 106,993,920 106,993,920 Amounts due to related company 1,079,055 1,079,055 192,283,314 192,283,314 Bank overdraft 18,250,595 18,250,595 5,281,400 5,281,400 1,652,229,256 1,652,229,256 432,979,481 432,979,481
30.2 Financial Instruments not Valued at Fair Value The table below analyses fai value of the financial instruments measured at amortised cost at the end of the reporting date, by the level of the fair value hierarchy.
As at 31st March 2017 Note Level 1 Level 2 Level 3 TOTAL Rs. Rs. Rs. Rs.
Group Assets Cash and cash equivalents 20 – 48,298,019 – 48,298,019 Trade and other receivable 18 – – 784,827,996 784,827,996 Amounts due from related companies 19 – – – – 48,298,019 784,827,996 833,126,015
Liabilities Bank overdraft 20 18,250,595 – 18,250,586 Trade and other payables 25 – – 841,974,586 841,974,586 Debentures 26 – – 3,250,000 3,250,000 Borrowings 22 – – 787,674,920 787,674,920 Amounts due to related company 27 – – 1,079,055 1,079,055 – 18,250,695 1,633,978,561 1,652,229,256
There were no Transfers between Level 1, Level 2 and Level 3 during the year 2016/17 for the financial instrument. Millennium Housing Developers PLC Annual Report 2016/17 103
Notes to the Financial Statements
As at 31st March 2017 Note Level 1 Level 2 Level 3 TOTAL Rs. Rs. Rs. Rs.
Company Assets Cash and cash equivalents 20 – 16,050,212 – 16,050,212 Trade and other receivable 18 – – 197,038,825 197,038,825 Amounts due from related companies 19 – – 84,916,917 84,916,917 – 16,050,212 281,955,742 298,005,954
Liabilities Bank overdraft 20 5,281,400 – 5,281,400 Trade and other payables 25 – – 125,170,847 125,170,847 Debenture 26 – – 3,250,000 3,250,000 Borrowings 22 – – 106,993,920 106,993,920 Amounts due to related company 27 – – 192,283,314 192,283,314 – 5,281,400 427,698,081 432,979,481
There were no transfers between Level 1, Level 2 and Level 3 during the year 2016/17 for the financial instrument.
31. Categorisation of Financial Assets and Liabilities as at the Reporting Date The Group has classified the following financial assets and liabilities to each respective financial instrument category explained in LKAS 39 – ‘Financial Instruments – Recognition and Measurement.’:
Classification
Loans and Available Receivables for Sale Investments RS. RS.
Company Financial Assets Available for-sale investment – 13,000,000 Trade and other receivables 197,038,825 – Amounts due from related companies 84,916,917 – Cash at bank and in hand 16,050,212 –
Classification
Amortised cost RS.
Financial Liabilities Trade and other payables 125,170,847 Debt securities 3,250,000 Amounts due to related companies 192,283,314 Income tax payable 3,910,373 Bank overdraft 5,281,400 Millennium Housing Developers PLC 104 Annual Report 2016/17
Notes to the Financial Statements
Classification
Loans and Available Receivables for Sale Investments RS. RS.
Group Financial Assets Available for-sale investment – 13,000,000 Trade and other receivables 784,827,996 – Cash at bank and in hand 48,298,019 –
Classification
Amortised Cost RS.
Financial Liabilities Trade and other payables 841,974,586 Debentures 3,250,000 Borrowings 787,674,920 Income tax payable 37,777,335 Amounts due to related company 1,079,055 Bank overdraft 18,250,595
32. Contingent Liabilities There were no significant contingent liabilities at the reporting date which require adjustment to or disclosure in the Financial Statements.
33. Commitments 33.1 Capital Commitments There are no capital commitments outstanding as at the reporting date.
33.2 Lease Commitments Future minimum lease payments under operating leases as at the reporting date are as follows:
Group Company
As at 31st March 2017 2017 2016 2017 2016 Rs. Rs. Rs. Rs.
Not later than one year 6,570,169 6,570,169 2,181,304 2,181,304 Later than one year and not later than five years 26,280,675 26,280,675 8,725,217 8,725,217 Later than five years 2,218,641 10,959,033 – 2,181,304 35,069,485 43,809,877 10,906,521 13,087,825
34. Events Occurring after the Reporting Date No Material events have occurred since the reporting date which would require any adjustments to or disclosure in the Financial Statements.
35. Comparative Figures Comparative figures have been reclassified to conform to the current year presentation. Millennium Housing Developers PLC Annual Report 2016/17 105
ANNEXES Ten Year Summary 106 / Shareholder and Investor Information 108 / Notice of Meeting 110 / Form of Proxy 111 Millennium Housing Developers PLC 106 Annual Report 2016/17
Ten Year Summary
2016/17 * 2015/16 * 2014/15 * 2013/14 * 2012/13 * 2011/12 * 2010/11 * 2009/10 ** 2008/09 ** 2007/08 ** 2006/07 **
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Result Revenue 1,305,737,790 820,265,186 688,963,588 714,363,392 578,745,720 320,234,240 218,421,221 150,889,212 337,407,533 646,875,417 833,027,854 Net profit/(loss) before tax 198,605,943 117,329,144 153,387,091 169,535,542 130,206,892 34,312,166 14,943,279 (64,403,303) (147,657,539) (20,105,043) 76,945,717 Income tax (50,237,811) (28,868,833) (39,459,706) (42,454,090) (32,674,170) (3,132,367) (113,732) (525,552) (1,978,900) (3,532,816) (1,279,905) Net profit/(loss) after tax 148,368,131 88,460,311 113,927,385 127,081,452 97,532,722 31,179,799 14,829,547 (64,928,855) (149,636,439) (23,637,859) 75,665,812
Equity and liabilities Ordinary share capital 293,802,200 293,802,200 293,802,200 293,802,200 197,802,200 197,802,200 98,901,100 98,901,100 98,901,100 98,901,100 98,901,100 Preference share capital – – – – – – – – 9,000,000 Capital reserves 25,000,000 25,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 123,385,334 Available-for-sale – – – 19,977,512 – – – – Revenue reserves 586,119,299 468,543,600 376,469,002 263,888,686 182,449,844 104,697,737 91,940,031 119,849,203 186,040,572 321,531,911 281,090,957 Equity attributable to owners of the Company 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 276,818,643 284,750,303 350,941,672 486,433,011 512,377,391 Non-controlling interest – – – 35,635,063 51,378,438 – 16,240,036 – Total equity 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 312,453,706 336,128,741 350,941,672 502,673,047 512,377,391 Borrowings (both long & short-terms) 805,925,515 347,099,501 67,243,417 32,671,000 33,248,000 37,924,575 41,152,874 16,217,019 24,463,521 262,490,562 679,114,107 Debentures 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,388,116 8,480,000 50,090,000 75,069,000 1,714,097,014 1,137,659,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580 355,733,876 383,885,193 815,253,609 1,266,560,498
Assets employed Non-current assets 109,195,295 108,474,831 73,969,253 64,256,181 24,219,084 8,814,751 64,169,945 46,195,683 83,743,241 164,177,749 321,597,802 Current assets 2,519,249,657 1,563,027,039 1,118,308,287 956,411,510 869,952,654 761,884,214 583,666,119 601,291,116 698,826,712 1,986,574,994 2,599,598,777 Current liabilities net of borrowings* (880,830,976) (498,281,903) (357,045,978) (339,532,174) (396,310,405) (348,737,444) (280,627,955) (279,585,734) (384,588,720) (1,318,798,527)(1,640,360,701) Deferred liability* (33,516,962) (35,524,667) (28,466,943) (21,523,631) (15,111,289) (12,287,009) (10,351,529) (12,167,189) (14,096,041) (16,700,607) (14,275,380) Capital employed* 1,714,097,014 1,137,659,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580 355,733,876 383,885,193 815,253,609 1,266,560,498
Cash flow Net Cash inflow/(outflow) from operating activities (413,102,211) (229,302,380) (127,484,090) 40,228,429 62,496,491 (78,909,910) 913,664 (64,612,771) (138,273,605) 268,591,191 (17,200,415) Net Cash inflow/(outflow) investing activities (5,010,389) (20,817,941) 10,162,939 (13,952,713) 6,771,018 10,971,624 8,551,097 80,732,629 108,341,598 65,834,567 (11,453,497) Net Cash inflow/(outflow) financing activities 458,454,014 197,450,178 25,025,000 49,857,508 (24,457,190) 79,842,739 (14,067,413) (13,600,545) (165,235,579) (105,217,040) 25,286,872 Increase/(decrease) in cash and equivalents 40,341,614 (52,670,593) (92,296,151) 76,133,224 44,810,318 11,904,454 (4,602,652) 2,519,313 (195,167,585) 229,208,718 (3,367,038)
Key indicators Earnings per share (basics) (Rs.) 1.10 0.66 0.85 1.06 0.82 0.28 1.50 (6.57) (13.70) (2.39) 7.65 Net assets per share (Rs.) 6.72 5.85 5.47 5.18 3.76 3.36 27.99 28.79 35.48 49.18 51.81 Return on equity (%) 16.40 11.24 15.47 20.38 21.86 8.46 5.36 (22.80) (42.64) (4.86) 14.77 Return on capital employed (Equity+Debt) (%) 8.66 7.81 14.12 19.27 20.20 7.61 4.16 (18.25) (38.98) (2.90) 5.97 Return on gross assets (%) 5.46 5.29 9.56 12.45 10.91 4.05 2.29 (10.03) (19.12) (1.10) 2.59 Dividend per share (Rs.) 0.275 0.275 0.275 0.25 0.17 0.75 – – – – – Current ratio (times) 1.84 2.49 2.88 2.68 2.14 2.03 1.80 2.06 1.74 1.33 1.31 Quick ratio (times) 0.61 0.79 1.27 1.22 0.78 0.72 0.52 1.03 0.97 0.59 0.61 Turnover to equity (times) 1.44 1.04 0.94 1.15 1.30 0.87 0.79 0.53 0.96 1.33 1.63 Property, plant & equipment to equity (%) 4.42 5.07 2.35 1.34 1.63 1.26 1.71 2.81 3.74 17.31 38.31 Turnover to property, plant & equipment (Rs.) 32.64 20.54 39.87 85.26 79.34 69.00 46.03 18.86 25.74 7.68 4.24 Borrowings to equity ratio (%) 89.42 44.50 9.57 5.76 8.18 11.17 16.04 6.89 9.39 64.26 147.19 Equity to total assets ratio (%) 54.14 47.10 61.75 61.11 49.91 47.81 42.73 43.98 44.84 22.62 17.54
* Figures are based on new Sri Lanka Accounting Standards (SLFRSs) ** Figures are based on Previous Sri Lanka Accounting Standards (SLASs) Millennium Housing Developers PLC Annual Report 2016/17 107
Ten Year Summary
2016/17 * 2015/16 * 2014/15 * 2013/14 * 2012/13 * 2011/12 * 2010/11 * 2009/10 ** 2008/09 ** 2007/08 ** 2006/07 **
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Result Revenue 1,305,737,790 820,265,186 688,963,588 714,363,392 578,745,720 320,234,240 218,421,221 150,889,212 337,407,533 646,875,417 833,027,854 Net profit/(loss) before tax 198,605,943 117,329,144 153,387,091 169,535,542 130,206,892 34,312,166 14,943,279 (64,403,303) (147,657,539) (20,105,043) 76,945,717 Income tax (50,237,811) (28,868,833) (39,459,706) (42,454,090) (32,674,170) (3,132,367) (113,732) (525,552) (1,978,900) (3,532,816) (1,279,905) Net profit/(loss) after tax 148,368,131 88,460,311 113,927,385 127,081,452 97,532,722 31,179,799 14,829,547 (64,928,855) (149,636,439) (23,637,859) 75,665,812
Equity and liabilities Ordinary share capital 293,802,200 293,802,200 293,802,200 293,802,200 197,802,200 197,802,200 98,901,100 98,901,100 98,901,100 98,901,100 98,901,100 Preference share capital – – – – – – – – 9,000,000 Capital reserves 25,000,000 25,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 66,000,000 123,385,334 Available-for-sale – – – 19,977,512 – – – – Revenue reserves 586,119,299 468,543,600 376,469,002 263,888,686 182,449,844 104,697,737 91,940,031 119,849,203 186,040,572 321,531,911 281,090,957 Equity attributable to owners of the Company 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 276,818,643 284,750,303 350,941,672 486,433,011 512,377,391 Non-controlling interest – – – 35,635,063 51,378,438 – 16,240,036 – Total equity 904,921,499 787,345,800 736,271,202 623,690,886 446,252,044 368,499,937 312,453,706 336,128,741 350,941,672 502,673,047 512,377,391 Borrowings (both long & short-terms) 805,925,515 347,099,501 67,243,417 32,671,000 33,248,000 37,924,575 41,152,874 16,217,019 24,463,521 262,490,562 679,114,107 Debentures 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000 3,388,116 8,480,000 50,090,000 75,069,000 1,714,097,014 1,137,659,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580 355,733,876 383,885,193 815,253,609 1,266,560,498
Assets employed Non-current assets 109,195,295 108,474,831 73,969,253 64,256,181 24,219,084 8,814,751 64,169,945 46,195,683 83,743,241 164,177,749 321,597,802 Current assets 2,519,249,657 1,563,027,039 1,118,308,287 956,411,510 869,952,654 761,884,214 583,666,119 601,291,116 698,826,712 1,986,574,994 2,599,598,777 Current liabilities net of borrowings* (880,830,976) (498,281,903) (357,045,978) (339,532,174) (396,310,405) (348,737,444) (280,627,955) (279,585,734) (384,588,720) (1,318,798,527)(1,640,360,701) Deferred liability* (33,516,962) (35,524,667) (28,466,943) (21,523,631) (15,111,289) (12,287,009) (10,351,529) (12,167,189) (14,096,041) (16,700,607) (14,275,380) Capital employed* 1,714,097,014 1,137,659,301 806,764,619 659,611,886 482,750,044 409,674,512 356,856,580 355,733,876 383,885,193 815,253,609 1,266,560,498
Cash flow Net Cash inflow/(outflow) from operating activities (413,102,211) (229,302,380) (127,484,090) 40,228,429 62,496,491 (78,909,910) 913,664 (64,612,771) (138,273,605) 268,591,191 (17,200,415) Net Cash inflow/(outflow) investing activities (5,010,389) (20,817,941) 10,162,939 (13,952,713) 6,771,018 10,971,624 8,551,097 80,732,629 108,341,598 65,834,567 (11,453,497) Net Cash inflow/(outflow) financing activities 458,454,014 197,450,178 25,025,000 49,857,508 (24,457,190) 79,842,739 (14,067,413) (13,600,545) (165,235,579) (105,217,040) 25,286,872 Increase/(decrease) in cash and equivalents 40,341,614 (52,670,593) (92,296,151) 76,133,224 44,810,318 11,904,454 (4,602,652) 2,519,313 (195,167,585) 229,208,718 (3,367,038)
Key indicators Earnings per share (basics) (Rs.) 1.10 0.66 0.85 1.06 0.82 0.28 1.50 (6.57) (13.70) (2.39) 7.65 Net assets per share (Rs.) 6.72 5.85 5.47 5.18 3.76 3.36 27.99 28.79 35.48 49.18 51.81 Return on equity (%) 16.40 11.24 15.47 20.38 21.86 8.46 5.36 (22.80) (42.64) (4.86) 14.77 Return on capital employed (Equity+Debt) (%) 8.66 7.81 14.12 19.27 20.20 7.61 4.16 (18.25) (38.98) (2.90) 5.97 Return on gross assets (%) 5.46 5.29 9.56 12.45 10.91 4.05 2.29 (10.03) (19.12) (1.10) 2.59 Dividend per share (Rs.) 0.275 0.275 0.275 0.25 0.17 0.75 – – – – – Current ratio (times) 1.84 2.49 2.88 2.68 2.14 2.03 1.80 2.06 1.74 1.33 1.31 Quick ratio (times) 0.61 0.79 1.27 1.22 0.78 0.72 0.52 1.03 0.97 0.59 0.61 Turnover to equity (times) 1.44 1.04 0.94 1.15 1.30 0.87 0.79 0.53 0.96 1.33 1.63 Property, plant & equipment to equity (%) 4.42 5.07 2.35 1.34 1.63 1.26 1.71 2.81 3.74 17.31 38.31 Turnover to property, plant & equipment (Rs.) 32.64 20.54 39.87 85.26 79.34 69.00 46.03 18.86 25.74 7.68 4.24 Borrowings to equity ratio (%) 89.42 44.50 9.57 5.76 8.18 11.17 16.04 6.89 9.39 64.26 147.19 Equity to total assets ratio (%) 54.14 47.10 61.75 61.11 49.91 47.81 42.73 43.98 44.84 22.62 17.54
* Figures are based on new Sri Lanka Accounting Standards (SLFRSs) ** Figures are based on Previous Sri Lanka Accounting Standards (SLASs) Millennium Housing Developers PLC 108 Annual Report 2016/17
Shareholder and Investor Information
Twenty-One Largest Shareholders
Name of Shareholder As at 31st March 2017 As at 31st March 2016
Shareholding Percentage (%) Shareholding Percentage (%)
1. Ceyoka (Pvt) Ltd. 38,090,670 28.28 38,090,670 28.28 2. Mr. V R Ramanan 36,904,173 27.40 36,904,173 27.40 3. Nawaloka Construction Company (Private) Ltd. 24,384,672 18.11 24,384,672 18.11 4. Pan Asia Banking Corporation PLC/ 5,000,000 3.71 5,000,000 3.71 Mr. U H Dharmadasa 5. Richard Pieris Financial Services (Pvt) Ltd./ 4,665,760 3.46 4,665,760 3.46 Mr. H J C Perera Mr. H J C Perera 1,000,000 0.74 1,000,000 0.74 6. Mr. R N R Kurukulasuriya 2,500,000 1.86 2,500,000 1.86 7. Mrs. S M E Perera 2,250,000 1.67 2,250,000 1.67 8. Mr. M M Fuad 2,181,113 1.62 3,210,331 2.38 Seylan Bank PLC/Mr. M.M.Fuad 983,783 0.73 – – 9. Trading Partners (Pvt) Ltd. 1,849,780 1.37 1,377,686 1.02 10. Arrow International (Pvt) Ltd. 1,490,000 1.11 2,350,000 1.74 11. Mr. K C C Perera 1,300,000 0.97 1,300,000 0.97 12. The Finance Company PLC A/C No. 1 1,200,000 0.89 1,200,000 0.89 13. Mr. F N Herft 1,006,223 0.75 540,000 0.40 14. Ceylinco Homes International Ltd. 900,000 0.67 900,000 0.67 15. Mr. K D H Palihakkara 841,429 0.62 696,671 0.52 16. J.B. Cocoshell (Pvt) Ltd. 691,446 0.51 391,797 0.29 17. Mr. M V Rudra 613,786 0.46 613,671 0.46 18. Mr. S S Poholiyadde 323,884 0.24 323,884 0.24 19. Richard Pieris Financial Services (Pvt) Ltd./ 306,274 0.23 – – Mr. M M Fuad & Mrs. F F Haniffa 20. Golden Key Company Ltd. 300,000 0.22 300,000 0.22 21. The Finance & Guarantee Company Ltd. 300,000 0.22 300,000 0.22
Public and Non-Public Shareholdings
As at 31st March 2017 As at 31st March 2016
Description No. Of Shares No. of Percentage No. Of Shares No. of Percentage Shareholders Shareholders
Issued number of ordinary shares 134,681,320 659 100.00 134,681,320 627 100.00 and number of shareholders Less – Shares held by non-public Ceyoka (Pvt) Ltd. 38,090,670 1 28.28 38,090,670 1 28.28 Nawaloka Construction Company 24,384,672 1 18.11 29,384,672 1 21.82 (Private) Ltd./Pan Asia Banking Corporatin PLC Directors’ shareholdings 49,069,933 7 36.43 44,039,933 6 32.70 Directors’ family members 1,725,215 3 1.28 300,000 1 0.22 shareholdings No. of shares in the hand of non-public 113,270,490 12 84.10 111,815,275 9 83.02 and No. of shareholders Shares held by the public and 21,410,830 647 15.90 22,866,045 618 16.98 number of shareholders Millennium Housing Developers PLC Annual Report 2016/17 109
Shareholder and Investor Information
Distribution of Shareholders As at 31st March 2017
Shareholdings Resident Non Resident Total
No. of No. of Percentage No. of No. of Percentage No. of No. of Percentage Share Shares (%) Share Shares (%) Share Shares (%) -Holders -Holders -Holders
1 – 1,000 447 109,585 0.08 3 1,110 0.00 450 110,695 0.08 1,001 – 5,000 81 239,458 0.18 – – – 81 239,458 0.18 5,001 – 10,000 25 213,433 0.16 – – – 25 213,433 0.16 10,001 – 50,000 46 1,132,207 0.84 1 27,682 0.02 47 1,159,889 0.86 50,001 – 100,000 18 1,358,823 1.01 1 79,000 0.06 19 1,437,823 1.07 100,001 – 500,000 17 3,408,899 2.53 1 283,688 0.21 18 3,692,587 2.74 500,001 – 1,000,000 6 5,030,444 3.74 0 – – 6 5,030,444 3.74 1,000,001 – 50,000,000 11 84,886,595 63.03 2 37,910,396 28.15 13 122,796,991 91.18 50,000,001 – 75,000,000 – – – – – – – – – 75,000,001 – 100,000,000 – – – – – – – – – Total 651 96,379,444 71.56 8 38,301,876 28.44 659 134,681,320 100.00
Categories of Shareholders
Year 2016/2017 Year 2015/2016
Categories of Shareholdings No. of Shares Shareholders No. of % No of Shares Shareholders No. of %
Individuals 50,790,267 621 37.71 54,439,589 590 40.42 Institutions 83,891,053 38 62.29 80,241,731 37 59.58 Total 134,681,320 659 100.00 134,681,320 627 100.00
Performance at the CSE
Year Ended 31st March 2017 31st March 2016
Price Price
Highest 8.40 10.00 Lowest 6.20 7.00 Last traded price 7.40 7.20
Shareholdings of Directors
Name of the Director 31st March 2017 31st March 2016
No. of Shares Percentage No. of Shares Percentage (%) (%) 1. Mr. U Harshith Dharmadasa – Chairman 5,000,000 3.71 – 0.00 2. Mr. V R Ramanan – Deputy Chairman 36,904,173 27.40 36,904,173 27.40 3. Mr. S S Weerabahu – CEO 20,000 0.01 20,000 0.01 4. Mr. M K W J Seresinhe 50,000 0.04 50,000 0.04 5. Mr. Gihan De Zoysa – 0.00 – 0.00 6. Mr. U H Palihakkara 130,000 0.10 100,000 0.07 7. Mr. Rajiv Perera – 0.00 – 0.00 8. Mr. J Rudra – 0.00 – 0.00 9. Mr. K C C Perera 1,300,000 0.97 1,300,000 0.97 10. Mr. H J C Perera 5,665,760 4.21 5,665,760 4.21 Millennium Housing Developers PLC 110 Annual Report 2016/17
Notice of Meeting
Notice is hereby given that the 18th Annual General Meeting of the shareholders of Millennium Housing Developers PLC will be
held on 30th June 2017 at 10.45 a.m. at the Cinema hall of the Bandaranaike Memorial International Conference hall (BMICH)
situated at Bauddaloka Mawatha, Colombo 07 for the following purposes:
Agenda 1. To read the Notice convening the Meeting. 2. To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31st March 2017, with the report of the auditors thereon. 3. To re-appoint Mr. U H Palihakkara, as a Director who is over Seventy years of age. 4. To re-elect Mr. V R Ramanan, who retires by rotation at the Annual General Meeting, a Director. 5. To re-elect Mr. H Jayantha C Perera, who retires by rotation at the Annual General Meeting, a Director 6. To re-elect Mr. K C Chandana Perera, who retires by rotation at the Annual General Meeting, a Director 7. To authorised the Directors to determine contributions to charities for the financial year 2017/18. 8. To re-appoint Messrs KPMG, Chartered Accountants as Auditors of the Company for the ensuing financial year 2017/18 and to authorise the Board of Directors to determine their remuneration. 9. To consider any other business of which due notice has been given.
By Order of the Board,
First Corporate Solutions Ltd. Company Secretaries
22nd May 2017 Colombo Millennium Housing Developers PLC Annual Report 2016/17
Form of Proxy
I/We………………………………………………………...... ………..
(NIC No. …………………...... …...... ………….) of ...... being a shareholder/shareholders* of MILLENNIUM HOUSING DEVELOPERS PLC hereby appoint,
Mr./Mrs./Ms. ……………………………………………………......
...... of ......
...... or failing him/them,*
1. UGITHA HARSHITH DHARMADASA (Chairman of the Company) of Colombo, or failing him, one of the Directors of the Company as my/our* Proxy to attend and vote as indicated hereunder for me/us* and on my/our* behalf at the 18th Annual General Meeting of the Company to be held on Friday, 30th June 2017 and at every poll which may be taken in consequence of the aforesaid meeting and at any adjournment hereof:
For Against 1. To read the Notice convening the Meeting.
2. To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31st March 2017, with the report of the auditors thereon. 3. To re-appoint Mr. U H Palihakkara, as a Director who is over Seventy years of age.
4. To re-elect Mr. V R Ramanan, who retires by rotation at the Annual General Meeting, a Director.
5. To re-elect Mr. H Jayantha C Perera, who retires by rotation at the Annual General Meeting, a Director 6. To re-elect Mr. K C Chandana Perera, who retires by rotation at the Annual General Meeting, a Director 7. To authorised the Directors to determine contributions to charities for the financial year 2017/18. 8. To re-appoint Messrs KPMG, Chartered Accountants as Auditors of the Company for the ensuing financial year 2017/18 and to authorise the Board of Directors to determine their remuneration. 9. To consider any other business of which due notice has been given.
(**) The proxy may vote as he thinks fit on any other resolution brought before the Meeting.
As Witness my/our* hands this ...... day of ...... 2017.
...... NIC/REG No. Signature of Shareholder Millennium Housing Developers PLC Annual Report 2016/17
Instructions for the Completion of the Form of Proxy 1. Please perfect the form of proxy overleaf, after filling in legibly your full name and address, by signing in the space providing of filling the date of signature and your National Identity Card No. 2. The completed form of Proxy should be deposited at the office of the company Secretaries, First Corporate Solutions Ltd No. 540, R A De Mel Mawatha, Colombo 03, 48 hours before the time appointed for the holding of the meeting. 3. If an Attorney has signed the form of Proxy, the relative Power of Attorney should also accompany the completed form of proxy for registration, if such Power of Attorney has not already been registered with the Company. 4. If the shareholder is a company or a corporate body, the proxy should be executed under its common seal in accordance with its Articles of Association or constitution. 5. If there is any doubt as to how to vote is to be exercised, by reason of the manner in which the form of proxy has been completed, no vote will be recorded by the form of proxy. Corporate Information
Name of the Company Auditors Millennium Housing Developers PLC KPMG – Chartered Accountants No. 32A, Sir Mohamed Macan Markar Mawatha, Statutory Status Colombo 03 A public limited Liability Company incorporated on Internal Auditors 28th July 1998 under the Companies Act No. 17 of 1982 and Re-Registered under the Companies Act No. 07 of 2007. Sarukkali Associates – Chartered Accountants The Company obtained BOI status on 26th November 1998 and its Ordinary shares are listed at the Colombo Bankers Stock Exchange on 19th February 2014. Commercial Bank of Ceylon PLC Registration No. Hatton National Bank PLC Sampath Bank PLC PB 376 PQ Seylan Bank PLC DFCC Bank PLC Board of Directors Subsidiaries U Harshith Dharmadasa – Chairman V R Ramanan – Deputy Chairman Millennium Housing Ltd. S S Weerabahu – Director/CEO Millennium Villa Housing Development Ltd. Gihan De Zoysa – Director Millennium Housing Construction Ltd. Rajiv Perera – Director MC Urban Developers Ltd. M K W J Serasinhe – Director Marketing MC Universal Ltd. U H Palihakkara – Director Jayaprakash Rudra – Director K C Chandana Perera – Director H Jayantha C Perera – Director Secretaries First Corporate Solutions Ltd. No. 540, R A De Mel Mawatha, Colombo 03 Registered Office No. 28, Sir Lester James Peiris Mawatha, Colombo 05 Site Office/s Millennium City – Athurugiriya M D H Jayawardene Mawatha, Oruwala, Athurugiriya
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Millennium City – Piliyandala This Millennium Housing Developers PLC annual report No. 117/UR-1, Abeyrathne Mawatha, has been produced by Smart Media The Annual Report Makuluduwa, Piliyandala Company, a certified carbon neutral organisation. Additionally, the greenhouse gas emissions resulting from Millennium City – Homagama activities outsourced by Smart Media in the production of this annual report, including the usage of paper and No. 55, Wekanda Road, printing, are offset through verified sources. Homagama
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