TRANS ASIA HOTELS PLC Annual Report 2013/14 Consultants (Private) Limited ... performance on matters...
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Transcript of TRANS ASIA HOTELS PLC Annual Report 2013/14 Consultants (Private) Limited ... performance on matters...
TRANS ASIA HOTELS PLC |
Annual Report 2013/14
Corporate Information
Name of the CompanyTrans Asia Hotels PLC
Legal FormA Public Limited Liability Company incorporated in Sri Lanka on 17th July, 1981 and quoted on the Colombo Stock Exchange
Company Registration NumberPQ 5
Registered OfficeNo. 115, Sir Chittampalam A. Gardiner Mawatha,Colombo 2Tel: +94 11 2491000, Fax: +94 11 2449184 E-mail: [email protected]: http://www.cinnamonhotels.com/cinnamonlakeside.htm
Board of DirectorsMr. Susantha Chaminda Ratnayake - Chairman Mr. Ajit Damon GunewardeneMr. James Ronnie Felitus PeirisMr. Navindra Lal GooneratneMr. Cholmondeley John Lloyd PintoMr. Eranjit Harendra Wijenaike Ms. Jhansi Carryl Ponniah Audit CommitteeMr. C. J. L. Pinto (Chairman)Mr. E. H. WijenaikeMs J. C. Ponniah Mr. J. R. F. Peiris (Resigned with effect from 02nd October 2013)
Secretaries and RegistrarKeells Consultants (Private) Limited 117, Sir Chittampalam A Gardiner Mawatha,Colombo 02Tel: +94 11 2306245Fax: +94 11 2439037
AuditorsKPMG Chartered Accountants 32A, Sir Mohamed Macan Markar Mawatha, Colombo 03
BankersCitibank NADeutsche Bank AGSampath Bank PLCThe Hongkong and Shanghai Banking Corporation LtdNations Trust Bank PLC People’s Bank PLC
Design & Concept by: Optima Designs (Pvt) Ltd.Printed by: Aitken Spence Printing & Packaging (Pvt) Ltd.
Cinnamon Lakeside Colombo is the epitome of style, indulgence and sophistication. The luxurious hotel overlooking the peaceful waters of the Beira Lake and beautifully landscaped gardens, offers rooms with a modern elegant décor that continuously delivers comfort, opulence and excellence to all its patrons. Recognised as one of the leading luxury hotels in Sri Lanka by the Business Destinations Travel Awards, its unique blend of warmth, luxury and personalised service gives you the opportunity to start the day stress free and at your own pace; regardless of whether you are visiting for a business luncheon or dropping in for a quick coffee; planning your dream wedding, organising a conference; attending to important business or on a well-deserved vacation.
ContentsOrganisational Structure 6Our First Integrated Annual Report 7Integrated View of Highlights of the Year 10Chairman’s Statement 14Directors’ Profiles 16General Manager’s Review 20Report Profile 23
Management Discussion & Analysis
Overview 30Business Environment 30Economic Impact 34Operational Review 40Financial Review 53Environmental Impact 60
Our Associates 67Caring for the Community 79Future Outlook 84
Corporate GovernanceCorporate Governance Report 88Information to Shareholders & Investors 110Integrated Risk Management 116GRI Index 120
Financial Reports
Annual Report of the Board of Directors 132Statement of Directors’ Responsibility 137Audit Committee Report 138Independent Auditors’ Report 141Statement of Comprehensive Income 142Statement of Financial Position 143Cash Flow Statement 144Statement of Changes in Equity 145Notes to the Financial Statements 146
Supplementary InformationQuarterly Financial Data for the Financial Year Ended 31st March 2014 169Five Year Financial Summary & Key Indicators 170Glossary of Financial Terms 172Notice of Meeting 174Form of Proxy 175
Trans Asia Hotels PLC is one of the premier five star hotels operating in the City of Colombo. Eloquently located on an approximately 7.5 acres of lakefront land, the hotel offers its patrons 346 plush rooms, 9 food & beverage outlets including the floating restaurant and 6 banquet venues among others. Trans Asia Hotels PLC, the owning company of the hotel was incorporated on 17th July 1981 as a Public Limited Liability Company and quoted on the Colombo Stock Exchange, with Insurance Corporation of Sri Lanka being the largest shareholder. At the commencement of its commercial operation on 15th August 1985, the hotel was operated under the name “Ramada Renaissance Hotel” through a Management Agreement with “Ramada Pacific Limited.
Over the years, the hotel went through many ownership and name changes. In 1993, Insurance Corporation of Sri Lanka divested its equity and Asian Hotels Corporations Limited and Hotel Properties Limited of Singapore became the majority shareholders of the Company. With the cessation of the Management Agreement with Ramada Pacific Limited in September 1995, the hotel was re-named as “Trans Asia Hotel”.
In September 2003, with the acquisition of a majority shares of the Asian Hotels and Properties Limited by John Keells Holdings PLC (JKH) and the subsequent purchase of Trans Asia Hotel’s shares by JKH on the Colombo Stock Exchange, John Keells Holdings PLC and Asian Hotels Properties PLC became the largest shareholders of the hotel.
The hotel operated under the name “Trans Asia Hotel” till 2009. However, upon the unforeseen and unfortunate circumstances experienced by the hotel in February 2009, the hotel was closed for refurbishment for three and a half months. With the refurbishment, it was brought under “Cinnamon Hotels and Resorts” brand and the Hotel’s gates were re-opened to the public on the 1st September 2009 re-branded as “Cinnamon Lakeside Colombo”. This brought about changes, not just structurally, but also in the products and services offered throughout the hotel, making 2009/2010, a year of transformation for the hotel.
Since then, it is one of the front runners in the evolving recovery of the tourism industry in Sri Lanka, continuously reviewing and monitoring its performance and brand standards to ensure consistence and quality in service and is well known today as one of the leading Five Star City Hotels in Sri Lanka.
About Us
Vision“We will always be the hospitality trendsetter”
I will get it right the first time all the timeI will careI will stand out wherever I amI will empowerI will be green
Our Pledges
Anuradhi Bulathsinghala2 ½ years as a Guest Relations Officer
““
As the first point of interaction with the guests, we are delighted to ensure that their initial perception is an exceptional one. A positive attitude is a way of life at Cinnamon Lakeside. We are empowered to do whatever it takes to ensure our guests experience the epitome of luxury, thereby making their stay unforgettable. It is our honour to match our quality service with our guests’ lifestyle.
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Organisational Structure
Trans Asia Hotels PLC
F&B
Restaurant & Bars
Banquets & Conferences
Membership (Library)
ROOMS
Superior Rooms
Premium Rooms
Executive Rooms
Suites
OTHERS
Spa
Power Drome
Laundry
Investment Property & Shopping Arcade
Finance Human Resources Engineering Security Certification &
SustainabilityMarketing &
Communication
Sports Club Committee
C.S.R. Committee
Welfare Committee
PRIM
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REVE
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SSU
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NCTI
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Orga
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Reporting approach
We are pleased to present our first integrated Annual Report to our stakeholders. In appreciation of our most treasured asset - our people and our purpose to create ‘bliss’ for people today and generations to come, inspired us to feature this Annual Report for the financial year 2013/2014 as ‘Escape to Bliss’. Our values underscore the reporting process; and the statements given by our people describe actions which portray the core values held by most individuals within the organisation.
During the financial year, we have made every effort to perform well within our strategic framework giving emphasis to:
0 deeply understand key global trends that are driving societies, markets and customers;0 be green in our interactions with the environment;0 create safer, healthier and inclusive environment;0 give back to the society we live in and 0 create sustainable shared value for all stakeholders, now and in the future.
Our hotel is continuously improving its combined assurance model. Assurance for elements of this Annual Report has been provided through a combination of external and internal sources. We have been guided by KPMG Sri Lanka, our external auditors on the applicable financial reporting framework and integrated reporting; and PwC Sri Lanka, our internal auditors provided us independent assurance on the overall system of internal control, risk management and governance.
Scope and Boundaries
This Report encompasses the management perspective of environment, society and economic facets of our hotel for the twelve months ending 31st March 2014. This also provides a consolidated review of our financial and non-financial performance on matters material to our strategy; and our ability to create and sustain value and of interest to our key stakeholders.
The financial scope and boundaries of this Report are in compliance with the applicable laws and regulations and cover the period from 1st April 2013 to 31st March 2014.
Financial Statements
Following the convergence during the financial year 2012/13 we have provided summarised financial statements for 2013/14 in accordance with the Sri Lanka Accounting Standards (SLFRS/LKAS) and the Financial Reporting Standards of The Institute of Chartered Accountants of Sri Lanka, Companies Act No. 7 of 2007, the Sri Lanka Accounting and Auditing Standards and the Continuing Listing Rules of the Colombo Stock Exchange.
We also continue to follow the requirements of the Code of Best Practice on Corporate Governance updated and issued in 2013 jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. As was the case in the preceding year, we report on our sustainability performance aligned to the Global Reporting Initiative (GRI) 3.1 guideline at an applicable level of B.
Our First Integrated Annual Report
Our F
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Nazeem Cadre10 years as a Bellman
““
Our guests come from every corner of the globe; they look to us for counsel on our diversified culture and we guide them through their choice of experiences. We are the ambassadors who will inspire our guests to come back to our vibrant country and spread the word of the Pearl of the Indian Ocean.
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Integrated View of Highlights of the Year
Inte
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11/12 12/13 13/14
Creating Operational Excellence Occupancy % 55 60 61 Room Available Number 125,538 126,290 126,290 Room Nights Sold Number 69,616 76,199 76,790 Average Room Rate Rs. 14,964 17,794 18,224 Room Sales per Employee per Month Rs. 000 104 135 143Creating Financial ValueWealth Creation Value Generated by the Company Rs. Mn 1,621 2,267 1,973 Market Value Added Rs. Mn 8,144 8,026 9,881 Economic Value Added Rs. Mn 83 276 57 Net Asset Value per Share Rs. 26.2 30.3 30.5 Market Capitalisation Rs. Mn 13,380 14,080 15,980 Market Price of Share as at 31st March Rs. 66.90 70.40 79.90Shareholder Return Earning Based Earnings per Share (EPS) Rs. 3.12 5.33 3.72 EPS Growth % (5) 71 (30) Price Earnings Ratio (PE) Times 21 13 21 Return on Assets % 10.73 16.47 10.69 Total Shareholder Return % (29.6) 9.7 18.5 Dividend Based Dividend per Share Rs. 2.00 3.00 3.50 Dividend Cover Times 1.56 1.78 1.06 Dividend Yield % 3.0% 4.3% 4.4% Dividend Payout Ratio % 64% 56% 94%
Profitability on Investment Return on Capital Employed % 15% 21% 14% Return on Equity % 12% 19% 12% Revenue Rs. Mn 2,375 2,840 2,939 Gross Profit Margin % 63% 64% 63% Profit from Operating Activities Rs. Mn 628 858 816 Profit Before Tax (PBT) Rs. Mn 743 1,211 872 Profit After Tax (PAT) Rs. Mn 625 1,066 743Earning the Trust of Customers Trip Adviser Rating Ranking 6 6 6 Food & Beverage Guest Satisfaction Survey % 92.1 98.1 97.8Nurturing PeopleEmployee Satisfaction Voice of the Employee Survey Satisfaction - 81% 86% Employee Turnover Ratio % 12 7 10 No. of Employees in Service for over 10 years Number 310 302 298Knowledge and Skills Development Total No. of Training Hours per Employee Hours 64.8 70.8 93.6Having Great Relationships with Business Partners No. of Travel Agents Number 299 388 418 No. of Booking Engines Number 2 5 6Playing by the Rules Tax paid to Government Rs. Mn 382 512 483Serving the CommunityInvesting in Community Community Development Investments (CSR) Rs. 000 3,704 4,096 7,104Development of Youth No. of Hotel School Trainees Number 75 80 95Being Friendly Towards the EnvironmentCombating Climate Change Total Carbon Footprint (Metric Tons) MT 6,383 6,453 6,354 Waste Generated per Guest Night Kg 11.4 5.3 3.8Position and Liquidity ended 31st MarchLiquidity Current Ratio Times 1.88 2.43 2.09 Quick Asset Ratio Times 1.78 2.35 2.01
Assets Position Total Assets Rs. Mn 6,036 6,901 6,999 Equity Assets Ratio % 87% 88% 87% Total Equity Rs. Mn 5,236 6,054 6,099 No. of Shares in Issue Mn 200 200 200 Debt to Equity Times - - - Interest Cover Times 32,256 12,628 22,900
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Rs. 79.92012/13: Rs. 70.4 Market Price per Share
61%2012/13: 60%
Occupancy
Rs. 0.9 Bn2012/13: Rs. 1.2 Bn Profit Before Tax
Rs. 2.9 Bn2012/13: Rs. 2.8 BnRevenue
Rs. 1.1 Bn2012/13: Rs. 1.0 Bn Cash from Operating Activities
Rs. 3.722012/13: Rs. 5.33Earnings per Share
09/10
10/11
11/12
12/13
13/14
Gross Profit (Rs. Mn)
1,859
1,819
1,503
1,187
537
09/10
10/11
11/12
12/13
13/14
Room Occupancy %
61%
60%
55%
62%
41%
09/10
10/11
Earnings per share Price Earning Multiples
11/12
12/13
13/14
Earnings Per Share (Rs.) Vs Price Earnings Ratio (Times)
21
13
21
30
85
3.30
3.12
5.33
3.72
0.52
09/10
10/11
Market Price (Adjusted for the sub division of shares) Net Asset per Share
11/12
12/13
13/14
Net Asset Value Per Share Vs Market Price Per Share (Rs.)
31
30
26
22
97.9
66.9
70.4
79.9
44.1
25
09/10
10/11
11/12
12/13
13/14
Total Revenue (Rs. Mn)
2,939
2,840
2,375
1,972
1,067
Inte
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09/10
10/11
11/12
12/13
13/14
Return on Capital Employed %
14.3%
21.5%
14.6%
14.9%
2.2%
D. R. S. Dissanayake4 years as Desk in Charge (Laundry)
““
Every detail counts, impeccable and timely service are of utmost importance. Going the extra mile is always a pleasure, replacing a button, lending cuffs or assisting in dressing for that special evening is part of going that extra mile that will provide our guest with a feeling of belonging to our family.
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During the ensuing year, the Leisure industry group will consolidate its overall branding strategy where all resorts will be brought under the ‘Cinnamon’ brand resulting in Cinnamon Hotels and Resorts having 14 hotel properties and over 2,400 rooms under its umbrella. The Group is also conscious of the need to further inculcate the desired “lifestyle”service culture within our staff through the re-invention of our standard operating procedures and processes.
“
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It is with pleasure that I present to you the first Integrated Annual Report and Financial Statements of Trans Asia Hotels PLC (Cinnamon Lakeside Colombo) for the financial year 2013/14. The integrated nature of this Report underlines the Company's commitment towards fulfilling its financial, social and economic responsibilities in a responsible and a transparent manner.
Global LandscapeThe global economy witnessed a steady recovery in the year 2013 resulting in improving prospects for sustained growth and lower levels of unemployment in the advanced economies. According to initial estimates released by the UNWTO, world tourism reached a record of 1,087 million international tourist arrivals in the calendar year 2013, corresponding to a growth of 5 percent over the preceding year. The growth in international tourist arrivals was driven by Asia Pacific, led by South East Asia, Africa and Europe, demonstrating the continuous change in demographics. Tourism receipts are projected to post double-digit growth while the outlook for world tourism in the year 2014 is anticipated to be positive.
Sri Lanka Tourism ProspectsSri Lanka tourism is well positioned in the post-conflict setting to be amongst the most sought after destinations in the world. Arrivals to Sri Lanka grew 27 per cent to reach 1.2 million tourists for the calendar year 2013 with Western Europe and South Asia continuing to be the dominant generating markets. While all key markets demonstrated appreciable growth, Eastern Europe, South Asia and East Asia, in particular, grew at a rapid pace. Tourism receipts were recorded at USD 1.7 billion.
A buoyant outlook is projected for the future of tourism in Sri Lanka. The recent infrastructure development projects implemented by the government, particularly the expressway to the main international airport,
and other expressway networks, will provide the necessary impetus in strengthening Sri Lanka’s position as a leading tourism destination.
Financial performanceDuring the year under review, a focused operational and marketing strategy enabled the hotel to record an occupancy of 61 percent, against the city occupancy of 53 percent, while achieving an average room rate of USD138. Room revenue grew by 3 percent year on year while food and beverage revenue posted a growth of 2 percent, which amounted to Rs. 1.4 billion and Rs. 1.3 billion respectively.
The consolidated net revenue increased to Rs. 2.94 billion from Rs. 2.84 billion in the previous year. However, this modest revenue gain was eroded by the increase in operational expenses. The operational expenses were adversely impacted by the increase in HLP (Heat, Light and Power) cost due to the price revision of electricity tariffs and on increased investment on sales and marketing promotional activities to attract guests from emerging markets such as India and China. This led to profit from operations declining to Rs. 816 million from Rs. 857 million last year. The recurring net profit attributable to shareholders declined to Rs. 743 million against a comparable figure of Rs. 777 million last year which is after excluding the investment property valuation gain of Rs. 289 million.
Investment in property, plant and equipment increased by Rs. 373 million primarily on account of the cost of the new Human Resource Complex which provides staff with a modern training environment containing fully-fledged facilities.
Net assets per share stood at Rs. 30.50, which was slightly higher than the Rs. 30.27 in the previous year primarily due to the increase in property, plant and equipment.
Chairman’s Statement
Chai
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Accolades During the year under review, the hotel continued to receive accolades and certifications. The Annual Report of Trans Asia Hotels PLC for the financial year 2012/13 received the Bronze Award in the Hotel Companies category at the Annual Report Awards 2013 conducted by The Institute of Chartered Accountants of Sri Lanka. In recognition of the consistent quality and standards of the product and services offered, the hotel was presented with a certificate of excellence by “Trip Advisor LLC”. Following the hotel Hygiene Classification Audit 2013 conducted by the Colombo Municipal Council, the hotel received an “A+” grade certificate, being the highest grade possible, while also obtaining re-certification for ISO 22000 for its food safety management systems and OHSAS 18001 for its health and safety management systems. The hotel also succeeded in winning Five out of Five crowns at the “Crowns for Food Hygiene” Awards Ceremony jointly organised by the National Chamber of Industries and the National Chamber of Exporters of Sri Lanka. Showcasing the wealth of talent they possess, our F&B Team continued their winning streak from last year annexing several awards at the Colombo Region Marie Brizard Cocktail Competition and the Midori Cocktail Competition in Year 2013.
The hotel continued to reduce its carbon footprint and was privileged to receive the Merit Award for the second consecutive year at the EU Switch-Asia Greening Sri Lankan Hotels Awards 2013 organised by the Ceylon Chamber of Commerce. Cinnamon Lakeside is the only hotel in Sri Lanka to be re-certified for its sustainability initiatives for the fourth year in succession by Green Globe Certification Inc., U.S.A.
Strategic Perspective and OutlookDuring the ensuing year, the leisure industry group will consolidate its overall branding strategy where all resorts will be brought under the ‘Cinnamon’ brand resulting in Cinnamon Hotels and Resorts having 14 hotel properties and over 2,400 rooms under its umbrella. The Group is also conscious of the need to further inculcate the desired ‘lifestyle’ service culture within our staff through the re-invention of our standard operating procedures and processes.
In conjunction with above, and in keeping with the evolving trends and technology, the hotel, as part of the John Keells Leisure Group, has embarked on a comprehensive Online and Social Media Strategy. This will enable ‘Cinnamon’ to launch a new and revamped website, establishing its presence across all social media platforms.
The above initiatives will be augmented with the implementation of a new property management system across all hotels, improving the availability of guest information and enhancing the ability to improve satisfaction which should augur well for the future.
ConclusionI take this opportunity to welcome Ms. Jhansi Ponniah to the Board of Directors and place on record my gratitude to my colleagues on the Board for the guidance and support extended during the year.
I extend my sincere appreciation to our shareholders for the trust and confidence placed in the Company; customers for their loyalty and patronage; suppliers and business partners for their valuable contribution to the operations; and finally, employees at all levels for their hard work and professionalism which contributed to the continued success of the hotel.
Susantha RatnayakeChairman
27th May 2014
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Susantha Ratnayake ChairmanMr. Ratnayake was appointed as Chairman of Trans Asia Hotels PLC and has been a member of the Board since September 2003. Mr. Ratnayake is also the Chairman and CEO of John Keells Holdings PLC and has over 36 years of management experience, all of which is within the John Keells Group. He is the Chairman of Ceylon Tobacco Company PLC., Vice Chairman of the Employers’ Federation of Ceylon and serves as a member of several clusters of the National Council of Economic Development. A past Chairman of the Sri Lanka Tea Board, Immediate Past Chairman of the Ceylon Chamber of Commerce, Mr. Ratnayake also serves on the Board of the national carrier - Sri Lankan Airlines.
Ajit GunewardeneDirectorMr. Gunewardene was appointed to the Board of Directors of Trans Asia Hotels PLC in September 2003. He is also the Deputy Chairman of John Keells Holdings PLC and has been a member of the Board for over 20 years. He is a Director of many companies in the John Keells Group and is the Chairman of Union Assurance PLC. He is a member of the Board of SLINTEC, a company established for the development of nano technology in Sri Lanka under the auspices of the Ministry of Science and Technology and is a Member of the Advisory Committee of COSTI, the Co-ordinating Secretariat for Science, Technology and Innovation under the purview of the Senior Minister of Scientific Affairs. He has also served as the Chairman of the Colombo Stock Exchange. Mr. Gunewardene has a Degree in Economics and brings over 31 years of management experience.
Ronnie Peiris DirectorMr. Peiris was appointed as a Director of Trans Asia Hotels PLC in September 2003. As the Group Finance Director of John Keells Holdings PLC, Mr. Peiris has overall responsibility for the Group’s Finance and Accounting, Taxation, Corporate Finance, Treasury, Group Initiatives and the Information Technology functions. He is also a Director of several companies in the John Keells Group and was previously the Managing Director of Anglo American Corporation (Central Africa) Limited in Zambia.
He has over 41 years finance and general management experience in Sri Lanka and abroad. He is a Fellow of the Chartered Institute of Management Accountants, UK, Association of Chartered Certified Accountants, UK, and the Society of Certified Management Accountants, Sri Lanka and holds an MBA from the University of Cape Town, South Africa. He is a member of the Committee of the Ceylon Chamber of Commerce, and serves on its Economic, Fiscal and Policy Planning Sub Committee.
Navin Gooneratne Director* Mr. Navin Gooneratne has been a member of the Trans Asia Hotels PLC Board as a Non-Executive Director since 1984 from its inception. He holds a Bachelor of Science Degree in Engineering and is a Member of the Institute of Engineering Sri Lanka. He is the Chairman of 1:2:4 Designs Ltd, Radiance Film International (Pvt) Ltd. and Trans Asia Films (Pvt) Ltd. He is the Honorary Chairman of SAMA International Trust, Help Sri Lanka Consortium Trust, Swarajya Foundation and the Light of Asia Foundation. He is also the Patron of the Mahatma Gandhi Centre in Colombo.
Directors’ Profiles
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Cholmondeley Pinto Director* Mr. Pinto was appointed as a Non-Executive Director and as the Chairman of the Board Audit Committee of Trans Asia Hotels PLC in July 2011. He is a Fellow of the Institute of Chartered Accountants of Sri Lanka with 42 years of post qualifying experience in the profession and in industry. Before returning to Sri Lanka in 2006 after a spell of 32 years abroad, he worked for SABMiller Plc for 23 years, the world’s second largest multinational breweries group, holding CFO positions in its listed subsidiaries in several countries. He currently works as a beverage industry consultant and is semi-retired. He is also a non-Executive Director of Asian Hotels and Properties PLC.
Eranjith Wijenaike Director *Mr. Wijenaike was appointed to the Board of Trans Asia Hotels PLC as a Non Executive Director in June 2012. He is the Managing Director of Central Finance Company PLC, a leading non-banking Financial Institution in the country. Mr Wijenaike is a Director of several other quoted companies within and outside the Central Finance Group and counts over 30 years of management experience. He holds a Bachelor’s Degree in Commerce and a Post Graduate Diploma in Finance and Banking.
Jhansi C. PonniahDirector *Ms. Ponniah was appointed to the Board of Trans Asia Hotels PLC as a Non Executive Director in October 2013. She has been intimately involved in the travel and tourism industry for over 30 years. Ms Ponniah has held directorships in numerous subsidiaries of John Keells Holdings PLC namely Walkers Tours Ltd., Whittalls Travels Limited and Gordon Frazer & Co. Limited. She has also served as the Secretary to the Sri Lanka Association of Inbound Tour Operators and is a recipient of Zonta Club Woman of Achievement Award.
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* Independent Director
Ridma Sandamali4 years in Housekeeping
“
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My job is to provide guests with a cozy place and bed to allow him to have beautiful dreams about the wonderful day he just spent in our great country. After all, it is his home away from home. That is what sets us apart from the rest.
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The financial year 2013/14 was a reflection of the forte that has positioned
Cinnamon Lakeside Colombo at the helm of the hospitality industry in
Sri Lanka. We focused passionately to uphold exceptional quality and
standards, unparalleled service, vitality of the team and social responsibility.
My review hereunder sets out on how the hotel sustained a sound
performance in a rapidly evolving industry coupled with a glimpse to the
future, leading our operations towards greater success.
Strategic ApproachOur strategy is focused on the long term, leveraging on the outstanding
and consistent reputation and sustainable business values that we have
nurtured through the years. Our principal goal is to offer the city a unique
value proposition ‘luxury, boutique and local’. The hotel effectively combines
an up-scale and modern value offer with an authentic, and a personalised
excellence in hospitality service which is deeply instilled in our culture.
Corporate responsibility is certainly not elusive within this strategic
approach. In fact, it is entwined with the operations from the planning
process to rolling out of the action plan. It is an integral part of our forte
which in effect has underscored our success in the city hotel business.
We were cautious in the year to thread carefully on our pricing strategy.
Although we witnessed some of the players in the market compromising
pricing for short-term gains, we upheld business ethics even when the
market conditions were sluggish. This enabled us to embrace a sustainable
plan without ‘cutting corners’ on the essentials that make us smart in the
long run. The hotel also made due investments in learning & development
and corporate social responsibility projects including investments in
advocating environmental stewardship.
Highlight of the YearThe highlight of the year, as was the case for Sri Lanka as a destination,
was hosting the Commonwealth Heads of Government Meeting (CHOGM) in
November 2013. Cinnamon Lakeside as one of the official venues hosted
15 heads of state delegations; we were truly honoured to be selected
as the venue for the Royal Dinner for the Commonwealth leaders and
delegates hosted by the Prince of Wales. CHOGM definitely opened an
excellent opportunity to showcase the hotel with undertones to promote Sri
Lanka as a destination.
CHOGM was a tremendous task, testing our expertise in hospitality at
the highest level. We had a brilliant team on our side that was energised
to deliver the best; my sincere commendation goes out to them for a job
outstandingly performed.
Business PerformanceIn the year, we strived to portray our brand amongst the top-notch city
hotels, growing our market share noteworthy in a competitive market. We
leveraged on our unique location with a breath-taking ambience, high-end
amenities, service quality and our expertise in creating ‘wow’ experiences.
We brought in innovation and creativity combined with vitality and
dynamism of the team to better our offer in accommodation, restaurants
and entertainment whilst showcasing our unique features including our star
venue ‘8° on the Lake’. Our efforts were well rewarded and we attracted
and delighted our discerning guests from corporate and leisure segments.
Our operations during the year under review were challenged given the
current market conditions within the five star city hotel domain. With the
In the year, when we celebrate ‘people’, it is indeed fitting to reiterate our commitment towards our people, now standing at 855, with some of the best talent in the industry. We have embraced a culture and consistently delivered on our values of equality, respect and professionalism, undoubtedly underscoring our passion to be recognised as a ‘preferred’ employer.
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General Manager’s Review
Gene
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entrance of newly renovated rooms in Colombo, the city hotels broadly
witnessed greater competition with implications on the wellbeing of the
city hotel market. Amidst these market complexities, we succeeded to
increase our market share in terms of room nights from 18 percent during
the previous financial year to 19 percent in year under review. The hotel
posted a higher occupancy of 61 percent, sustaining the level achieved in
the preceding year whilst commendably exceeding the market average of
53 percent; the average room rate for the year grew to US dollars 138 from
the previous year value of USD 135.
It is in these settings that we have to appreciate our financial performance
in the year under review. Consolidated net revenue posted Rs. 2,939
million, growing by 3 percent over the preceding year. The room revenue
results accounting for nearly half of the total and led by business and MICE
segments were sound, albeit, modest given the intricacies in the market
as discussed above. The contribution from food and beverage too, was
marginal, yet creditable taken in the context of increasing competition from
number of food outlets in Colombo - stand-alone restaurants as well as
entertainment areas.
With modest results in revenue growth, the focus in the year was to bring
in stringent controls and effective working capital management to cap the
impact of costs on profitability. Hence, we managed to sustain gross profit
and profit from operating activities in absolute terms comparable with
the levels achieved in the previous year at Rs. 1,859 million and Rs. 816
million respectively. In the absence of a revaluation surplus as was the case
in the preceding year which benefitted from a surplus of Rs. 288 million;
profit before tax declined by 28 percent over previous year’s results to Rs.
872 million.
The financial position as at the year end reflected the hotel’s solid
fundamentals in financial management. The asset position was prudently
matched with liabilities and equity though impacted by the absence of
non-operational income - revaluation surplus. The debt to equity position
was exceptionally strong in the absence of borrowings. The return on equity
and return on capital employed were maintained at healthy levels of 14
percent and 16 percent respectively, although representing a decline from
19 percent and 21 percent respectively in the preceding year. Earnings per
share stood at Rs. 3.72. The cash and cash equivalent position as at the
year-end was strong at Rs. 574 million.
Investing in TalentIn the year, when we celebrate ‘people’, it is indeed fitting to reiterate our
commitment towards our people, now standing at 855, with some of the
best talent in the industry. We have embraced a culture and consistently
delivered on our values of equality, respect and professionalism,
undoubtedly underscoring our passion to be recognised as a ‘preferred’
employer.
We continued to give precedence to our identified priorities aiming for skills
development, behavioural enhancements and coaching and mentoring
leading up to effective succession planning. Our learning & development
investment this year reached to Rs. 3.8 million including training for
selected associates at the ‘Dubai - Emirates Academy of Hospitality
Management’. The appraisal system which we have adopted, current and
sophisticated, ensured fair and transparent incentives, recognition and
more so, supported us to identify and address skills gap. Our well-rounded
welfare and incentive package, health and safety initiatives and our policies
on balancing work and life ensured employee wellbeing.
We went a step ahead this year, to further strengthen the work environment
where associates could develop their professional lives and be empowered
to extend their best towards meeting the corporate goals. The Human
Resource complex which was launched in November 2013 is fully equipped
with modern amenities including work areas, training facilities, a language
lab, gymnasium and staff rest rooms. This initiative at a total investment
of Rs. 210 million, aptly demonstrates our commitment towards our
associates.
Social & Environmental Responsibility It is far easier in a business such as ours to be oblivious and indifferent to
the needs of the underprivileged people living around us as well as in deep
peripheries. Our values transcend the commonplace and our corporates
Hotel succeeded in improving its market share amidst greater competition.““
19 %Market Share2012/13 : 18%
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priorities have embraced the responsibility towards community service and
development in keeping with the group’s leisure sector pledge ‘I Will Care’.
Launched in the preceding year, our dedicated CSR programme ‘One
Creed for All Creeds for One’ made famous by the great Alexandre Dumas
has already taken off several mini-projects towards multi-cultural and
religious restoration, in effect, advocating diversity and bringing ethnic and
religious harmony amongst associates, definitely with cascading benefits
to the society. Adding on to this project, we are currently rolling out a
comprehensive village education programme, targeting 30 children in four
rural villages. The investment for this CSR programme is estimated to be
Rs. 5.4 million.
The re-certification we received in 2013 on our sustainable practices from
Green Globe Inc., USA speaks volumes on our responsibility towards a
lesser carbon and greener environment. We are indeed honoured to be the
only Sri Lankan hotel to be re-certified for the fourth successive year. Apart
from the initiatives undertaken to ensure best practices in environmental
management within the property and in operations, we invested a sum
of Rs. 7 million during the year on external corporate social responsibility
projects through the Corporate Social Responsibility Foundation of John
Keells Holdings.
Glimpse the FutureWith firm signs of a rebound in the global economy coupled with Sri
Lanka’s efforts to meet the mid-term goals of 2.5 million tourist arrivals,
the ensuing years will see greater activity in the tourism and hospitality
industry. The market will see an influx of renovated rooms and new
properties of top international hotel chains strengthening the destination.
However, this will bring a host of challenges especially if the demand from
high-end travellers and the local market potential does not match the
growing inventory in the city of Colombo.
The opportunities to gain share for a hotel such as ours, along with the
others in the Cinnamon chain are immense. We are well poised with a
unique proposition - legacy intertwined with modernity that will definitely
support our journey, sustainably in the medium to long term. The brand
enhancements that are being proposed bringing together the entire
Cinnamon Chain as a strong contender in this evolving scenario in the
ensuing years will certainly bear fruit.
Cinnamon Lakeside, renowned for being the ‘best city hotel’ is destined
for greater heights. We have the ‘brick and mortar’ in place and we intend
to fully leverage and promote the property, product offer and our passion
to deliver unparalled service. Whilst reinforcing our traditional markets, we
General Manager’s Review Contd.
will seek to attract the emerging markets like China, India and Japan as
well as the youth market segment. Our changing demographics within the
country will be further explored and leveraged upon. Our marketing mix will
be more focused on social media tools to target the tech-savvy market. We
also look forward to the proposed property management system, linking all
Cinnamon properties on to one platform, opening up greater opportunities
for better customer management and to draw on synergies within the
chain.
Tribute & AppreciationThe essence of Cinnamon Lakeside is not in the elegance and features
of the property nor in the fancy cuisine or entertainment we extend to
our guests; but in the spirit of the team who stand beside me in their
commitment and professionalism to see the hotel continues in its legacy
of being the finest in the industry. This certainly calls for a tribute to all my
people!
I place on record my sincere appreciation to our Chairman and the Board of
Directors for their guidance and support.
My gratitude is extended to all stakeholders.
Thank you.
Denis GruhierGeneral Manager
27th May 2014
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Report Profile
Report ContentOur integrated Annual Report for the financial year ended 31st March 2014 seeks to present information from a strategic perspective, bringing out Cinnamon Lakeside’s commitment towards long term value creation. The Report seeks to establish the critical link between operational and financial performance with sustainability facets covering environmental, social and governance.
The Report sets out our past performance and future expectations on a triple-bottom-line basis - laying emphasis on value creation; on associates who define our operations; environmental management; and community initiatives. Wherever applicable, the year’s performance has been benchmarked to the preceding year’s results. The risk management and the governance reports establish the hotel’s solid fundamentals. The Financial Statements and related notes are set out for the year under review with comparatives of the preceding year. The duly filled GRI (3.1) content index is included on pages 120 to 129.
Report Boundary & ScopeCinnamon Lakeside has been reporting on sustainability since the financial year 2007/08. In the preceding financial year, 2012/13, we adopted the Global Reporting Initiative (GRI) framework for the first time and reported on our sustainability measures based on GRI (3.1) platform; the Sustainability Report was published along with the Annual Report of 2012/13.
This is our first attempt at integrated reporting which is aligned to the GRI (3.1) at self-claimed application level ‘B’, akin to the preceding year’s sustainability reporting. We attempted to comply with specific reporting principles, guidelines and indicator protocols for economic, product responsibility, environmental management, labour practices, human rights and social performance. Reporting is based on the materiality established during the stakeholder engagement process; our strategic priorities perfectly correlate to materiality issues identified. We have not obtained external assurance on this Report.
Recognising the precautionary principle in operations, our hotel has in lace, a firm risk management process and internal controls. We comply with the ISO 22000 standards and the Colombo Municipal Council requirements for food safety, OHSAS 18001 for occupational health and safety, Green Globe and Switch-Asia for sustainable operations and management. The hotel complies to the relevant statutory and regulatory requirements including the Companies Act No. 07 of 2007, Continuing Listing Rules stipulated by the Colombo Stock Exchange revised April 2014 and the updated Code of Best Practice on Corporate Governance 2013, published jointly by the Securities & Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Sri Lanka. The financial statements have been prepared in accordance to Sri Lanka Accounting Standards in line with the International Financial Reporting Standards.
Sustainability Responsibility & Structure
å I WILL GET IT RIGHT THE FIRST TIME ALL THE TIME
å I WILL CARE
å I WILL STAND OUT WHEREVER I AM
å I WILL EMPOWER
å I WILL BE GREEN
Pledges of John Keells Leisure Sector
The hotel has established a Sustainability Task Force, led by the General Manager with departmental representation. Guided by the five pledges adopted by the John Keells leisure sector, the Task Force is responsible to ensure that the hotel engages with key stakeholders, initiates programmes and projects, and adopts measures to address their issues and meet their expectations.
Group Level
Head ofSustainability Task Force
Representation & Champion Sustainability Task Force
John Keells Holdings Sustainabilty and Enterprise Risk Management
Division
General Manager
Heads of Departments
Sustainable Champion
Data Measurement and TechniquesCinnamon Lakeside follows a structured process of data collection, collation, measurement, analysis and reporting. Information on operations and sustainability aspects are daily documented into the system by the respective departments and validated by the relevant heads of department
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Report Profile Contd.
and the General Manager. Subsequently, information thus gathered is sent to the John Keells Head Office for report generation. Information and data are collated, analysed and reported monthly, quarterly, bi-annually and annually. We also follow the guidelines and techniques prescribed by our certification bodies in collecting and measuring data and information.
InquiriesInquiries on the integrated Annual Report 2013/14 and on our sustainability measures and initiatives to be directed to;
Finance DivisionCinnamon Lakeside Colombo115, Sir C.A. Gardiner Mawatha, Colombo 02, Sri Lanka.Email: [email protected] Website: www.cinnamonhotels.com
Stakeholder EngagementIn the present day context, it is crucial that we look inward into our operations and embrace diverse sustainable solutions, so that we are responsive to the varied expectations of our stakeholders. We understand the significance of building strong and mutually beneficial relationships with our key stakeholders which are vital for our sustenance in the long term. We are focused in engaging them with consistent interaction, open interchange of ideas and addressing their issues prioritised on materiality. We seek to uphold the highest levels of accountability and professionalism in our engagement process.
Key Stakeholder Engagement & Materiality Assessments
Investor - Institutional Shareholders & Retail ShareholdersEngagement › Management & financial reports - quarterly & bi-annually › Annual Report › Annual General Meeting › Extraordinary General Meeting › Investor relations arm at the holding company
Materiality › Product and operational efficiency › Profitability & returns › Share performance on the CSE › Risk management & internal controls › Good governance & CSR responsibility › Compliance - statutory and regulatory
Customer - Corporate, MICE, Airline Crew & LeisureEngagement › Feedback forms & comments › Road shows and travel and trade fairs › Print media › Social media & official website › Brochures and leaflets › TripAdvisor
Materiality › Customer privacy & integrity › Product and service quality & standards › Pricing policies › Choice of products › Innovation & creativity
People - Senior Management, Management, Executive, Non-executiveEngagement › Code of Conduct › Staff meetings › Staff circulars and magazines › Voice of Employee Survey and other employee surveys › Feedback during performance evaluations › Training sessions › Associate awards & functions › Welfare & Sports Societies
Materiality › Equal opportunity › Compensation policies › Transparent performance evaluations › Professional development › Health & safety › Work life balance
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Sustainability Model
Capital
FINANCIAL CAPITAL1,460 Shareholders
INTELLECTUAL CAPITALBrand Certifications
HUMAN CAPITAL855 Associates
NATURAL CAPITAL
Environmental Management
SOCIAL CAPITAL Community Projects
Competitive Edge
Brand Cinnamon
Talented Associates
Service Quality
Financial Discipline
Effective Risk Management
Good Governance
Delivery
Profits, Returns & Sound Financial Position
Versatile Product Offer
Best-in-class Service
Current HR Practices
Supplier Linkages
Energy, Water & Solid Waste Management
Neighbourhood Schools Project
Vocational Training for Community Youth
Policy Advocay
Key Stakeholder Engagement & Materiality Assessments
Environment - Central Environmental Authority, Certification Bodies, Non-governmental OrganisationsEngagement › Discussions & consultations › Certification process › Volunteerism by associates
Materiality › Climate change & global warming › Greenhouse gas emissions › Loss of biodiversity › Compliance to laws and regulations
Community - Local and Needy CommunitiesEngagement › Discussions with community & religious leaders › Discussions with principals, teachers and parents of local and village
schools › Collaborating with John Keells Foundation
Materiality › Operations’ impact on communities › Supplier policies › Community development projects – education › Philanthropy
Government, Statutory & Regulatory BodiesEngagement › Formal letters › Participation at meetings › Memberships in associations › Disclosures
Materiality › Contribution to policy making › Transparency & accountability › Responsible tax payments and tourism levy
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Risks & OpportunitiesWe operate in a dynamic business environment, entailing a diverse set of risks that has the potential to dampen our operations, conversely, combining with opportunities present for future growth and prosperity. As set out in the table below, we seek to identify our risks and opportunities on a threefold perspective - economic, environment and social; tailoring our strategies to build resilience to the impacts of risks on operations whilst taking the necessary action to pursue on the opportunities.
Risks, Opportunities & Salient Strategy
Economic Environment Social
Risk
s
› Economic uncertainties in source markets
and domestic macroeconomic fluctuations
› Country’s diplomatic ties with key markets
and travel advisories
› Increasing competition from newly
renovated rooms and entry of international
hotel chains
› Impact of rising costs on capital
investments and operations
› Increasing tendencies towards adverse
pricing strategies
› Increasing levels of consumption of
resources leading to a larger footprint
› Impact of rising energy costs on travel and
hospitality
› Changing legislation on environment
protection
› Demographic changes leading to shrinking
working population
› Lack of skilled labour in the industry
› Greater mobility of labour due to increasing
competition and out-migration
› Trends of the ‘Gen Y’ - demanding greater
facilities and higher mobility
Oppo
rtun
ities
› Global tourism trending towards Asia
› Post conflict settings
› Tourism identified as a thrust sector in the
economy
› Road infrastructure development
› Strong brand, reputation and part of the
John Keells conglomerate
› Versatile product offer with a range
of rooms, speciality restaurants and
entertainment
› Ability to host large-scale events
› Greater consciousness and evolving
customer expectations on eco-friendly
practices
› Alternative energy sources available such
as solar power
› Recycling facilities available in the country
› Greater demand for organic produce
› Ability to source best-in-class employees
given the standing of the hotel
› Acceptance in the industry as a preferred
employer, supported by the parent
› ‘Gen Y’ staff bringing in creative and
innovative ideas
› Stability and loyalty of senior staff
› Good relations with neighbourhood
communities
Salie
nt S
trat
egy
› Leverage on the strength of the brand and synergies with other hotels in the leisure sector.
› Obtain product certification from recognised bodies on par with best international practices.
› Focused marketing and communications targeting key markets.
› Leverage on the ‘new age’ marketing tools - social media marketing.
› Focus on training and development to enhance quality and service levels.
› Extend balanced and professional work culture with remuneration on par with industry standards, and rewards and recognition based on merits.
› Pursue on the well-structured mentor programme and train the trainer programme.
› Extend modern facilities to associates especially to retain the ‘Gen Y’ staff.
› Give trainee opportunities for the Ceylon Hotel School students
› Enhance environmental management techniques to ensure lesser energy usage, water conservation and efficient solid waste management.
› Support the local supplier chain with preferential supplier policies for best practices.
› Support educational needs of the local communities and extend opportunities for youth to join the internship programme at the hotel.
› Continue to exercise financial discipline, effective risk management and good governance practices.
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Revenue Vs Profit After Tax (Rs. Mn)
2013/14 7432,939
2012/13 1,0662,840
Revenue Profit After Tax
Return on Equity Vs Return on Capital Employed (%)
2013/14 1412
2012/13 2119
Return on Equity Return on Capital Employed
Occupancy Rate Vs Market Share (%)
2013/14 19%61%
2012/13 18%60%
Occupancy Rate Market Share
ECONOMIC
ENVIRONMENT
SOCIAL
Snapshot - Sustainability Performance
CO2 per Guest Night (Kg)
2013/14 184
2012/13 243
Earnings per share (Rs.)
2013/14 3.72
2012/13 5.33
Solid Waste per Guest Night (Kg)
2013/14 12
2012/13 21
Training Hours per Employee
2013/14 94
2012/13 71
Occupational injuries
2013/14 19
2012/13 22
Electricity per Guest Night (Kwh)
2013/14 219
2012/13 291
Water Consumption per Guest Night (litres)
2013/14 4,423
2012/13 5,341
Laurence DewaelePatron for 4 ½ years
““
Beautifully located in the city center with shopping and entertainment facilities only a stone throw away. I love coming back to this haven of peace every time I visit Colombo, for business or bringing my family for a holiday. Cinnamon Lakeside team members understand my lifestyle and expectations, they make me feel like a member of the Cinnamon family. They represent the best of modern Sri Lankan hospitality.
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OverviewTrans Asia Hotels PLC reinforced the positioning in the financial year 2013/14 as one of the foremost city hotels, amidst increasing competition in the industry. The hotel was definite in its strategy action and effectively withstood the challenges within the industry. The focus was on leveraging on the brand strength and excellence in quality and standards of the product and service offer; whilst extending strategic opportunities to professionally develop associates and reinforce the best practices in environmental management and social responsibility. We remained focused in our financial astuteness and discipline to ensure better returns and sound financial position.
We continued to be recognised and awarded for our dedication towards upholding highest ideals in business ethics and best practices in management. We maintained certifications from recognised international and local certification bodies whilst receiving some of most coveted awards in the industry.
To place the Hotel’s performance in context, a brief overview of the global and local tourism industry would be pertinent.
Business EnvironmentGlobal EconomyAfter a long-drawn recession that impacted the world economy nearly five years ago, the global economy posted better results in the year 2013. The fundamentals in most of the advanced economies including the United States and the core nations within the Eurozone especially the United Kingdom and Germany were relatively positive. The growth and unemployment levels improved with greater confidence in consumer and investor sentiments. Even the peripheral economies turned-around from the downward spiralling dynamics whilst Japan saw greater activity in its economy, resulting from the fiscal and monetary stimuli and structural reforms programme. However, political tensions, volatilities in the peripheral economies and financial markets still remained a reality with implications on a full recovery. The emerging and developed economies grew at a decelerated pace compared to the growth momentum experienced in the recent past. Although less intense, the Middle Eastern region still grappled with political and civil tension. In this scenario, the world economy grew at 3.0 percent in 2013 compared to 3.2 percent in 2012; forecast is set for higher ground in the year 2014 at 3.6 percent. (World Economic Outlook, April 2014, International Monetary Fund)
Management Discussion & Analysis
America167.9 Mn + 3.2% growth
15% of total arrivals
Europe563 Mn + 5% growth 52% of total Arrivals
Africa55.8 Mn + 5.4% growth
5% of total Arrivals
Asia and the Pacific248 Mn + 6% growth 23% of total Arrivals
Middle East51.6 Mn - 0.2% growth 5% of total Arrivals
International Tourist Arrivals by World Regions
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World TourismInternational tourism marked an excellent year in 2013, showing resilience in its capacity to adjust to the changing market conditions. International tourism continued on its upward trajectory, with significant contributions towards growth and job creation in the economies world over. As per the ‘UNWTO World Tourism Barometer, Volume 12, January 2014’ international tourist arrivals grew by a record 5 percent in 2013, surpassing the target and over the preceding year; adding on 52 million, the total arrivals touched 1,087 million.
RegionsEurope the world’s largest tourism region topped the list in absolute terms with a growth of 29 million tourist arrivals to reach 563 million. In relative terms, Asia and the Pacific led by South East Asia marked the highest in arrivals, with the growth reaching to 6 percent as against the preceding year, to 248 million arrivals. North and Central America were the best-performing sub regions within the Americas. Africa continued to be strong in its performance with a healthy growth of 6 percent, although representing a decline compared to the previous year. Middle East however, given the region’s continuing civil tension posted mixed results, yet, an improvement from the slump witnessed in the previous two years.
Source MarketsIn terms of source markets, emerging economies performed better as compared to the advanced economies. Within the emerging economies, the BRICs posted double digit growth in tourism expenditure except for India. Russia and China remained bullish in its outbound trends. China, the largest outbound market as per 2012 statistics, continued to grow strongly with outbound expenditure expected to increase above 25 percent in 2013. Russian Federation, the 5th largest outbound market in 2012 is also expected to post above 25 percent growth. Other emerging markets including Turkey, Qatar, Philippines, Kuwait, Indonesia, Ukraine and Brazil also posted strong results in terms of outbound expenditure.
Performance from the source markets in advanced economies was less impressive. France rebounded from a weak position in 2012, estimated to grow by 6 percent in its outbound expenditure. United States, United Kingdom, Canada and Australia all grew modestly below 4 percent while Germany, Japan and Italy reported declines in outbound expenditure.
Tourism ReceiptsFollowing the positive trend in tourism, international tourism receipts exceeded US$ 1.4 trillion during 2013, up from US$ 1.3 trillion in 2012. Europe held the largest share of tourism receipts in absolute numbers reaching US$ 489 billion in 2013. This accounted for 42% of the total tourism receipts. Asia and the Pacific followed in the second place with a 31 % share amounting to US$ 359 billion. Americas secured a 20 % share while the Middle East retained a 4 % share. Africa held the least share of 3 %.
Source: UN WTO
Middle East
Africa
2012 2013
Americas
Asia & Pacific
Europe
International Tourist Arrivals - Regions
563.4
248.1
167.9
55.8
51.6
52.9
534.4
233.5
162.7
51.7
Source: UN WTO
15%
23%
52%
10%5%
5%
International Tourist Arrivals - Composition (%)
Europe Asia & Pacific
Middle EastAfrica
AmericasOther
Source: UN WTO 2010/11 2011/12 2012/13
5.4%
International Tourist Arrivals World and Regions - Growth Rates
Overall 4.9% 5%
Middle East
-5.4% -6.1%
Europe 5.4%6.4%
Asia and the Pacific
6.6% 6.9% 6.2%
Americas 3.6% 4.3% 3.2%
Africa 8%-0.6%
4.1%
-0.2%
3.6%
6.6%
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Management Discussion & Analysis Contd.
2014 OutlookIn the backdrop of the world economy due to rebound strongly, world tourism in the year 2014 is projected to sustain its growth momentum. The UNWTO has set its forecast for international tourist arrivals to grow between 4 to 5 percent. The UNWTO Confidence Index affirms this position. Asia and the Pacific are expected to lead this growth at 5 to 6 percent levels, followed by Africa. In this positive scenario, the UNWTO urges tourism authorities and governments to be focused in their national strategies to deliver a sustainable growth in the industry.
Tourism in AsiaChanging demographics and the socio-economic landscape have set the pace for Asia to be amongst the foremost tourism regions in the world. In the recent years, the Asian economies have witnessed a strong growth in tourism, supported by favourable policies and promoted by solid marketing strategies.
The Asia and the Pacific region accounting for 23 percent of the total arrivals recorded an increase of 15 million additional tourists to the region, to reach 248 in 2013. This represented a growth of 6 percent, the highest in a global perspective. South East Asia with a 37 percent share within the region posted a solid double digit year-on-year growth of 10 percent to 92.7 million tourists in comparison to 8.7 percent growth in the preceding year. In absolute terms, North Asia remained the highest with 127 million tourists taking up just over 50 percent of the region’s arrivals; but relative performance was modest at 3.6 percent. South Asia grew at 5.3 percent to reach 15.2 million arrivals whilst Oceania reached 12.7 million arrivals for the year.
Sri Lanka TourismWith the dawn of peace after three-decades of civil conflict in the North and the East of the country, tourism sector has emerged as a potential thrust sector which is rightly identified to support the nation’s development goals. Since 2010, the tourism industry has been on a rapid growth trajectory, bringing in significant contributions to the economy - foreign inflows to strengthen the external front, employment generation and boosting the supplier chain with greater linkages.
Destination PromotionsIn the year under review, Sri Lanka Tourism continued to promote the destination with focused campaigns - trade fairs, road shows, PR initiatives such as the visiting journalists programmes and events to showcase the brand. Sri Lanka Tourism this year participated in 35 travel fairs and exhibitions and 72 media familiarisation tours from 30 countries.
The private sector also initiated several events to promote the destination including the Miss France Pageant 2014 organised by the John Keells Cinnamon Group of Hotels in association with Sri Lankan Airlines. This pageant with 33 contestants brought in immense exposure to Sri Lanka,
Arrivals
Tourism Earnings
Room Occupancy
Guest Nights
Av. Duration of Stay
Av. Spend Per Day
2013: 1.27 Mn2012: 1.01 Mn
2013: US$ 1.72 Bn2012: US$ 1.04 Bn
2013: 71.7%2012: 71.2%
2013: 10.9 Mn2012: 10.0 Mn
2013: 8.6 Days2012: 10 Days
2013: US$ 156.52012: US$ 103.0
Source: Annual Report 2013, Central Bank of Sri Lanka
09/10
10/11
11/12
12/13
13/14
Tourist Arrivals to Sri Lanka
1,274,593
1,005,605
855,975
654,476
447,890
Source: Sri Lanka Tourist Board
33%
15%
40%
5%
7%
10%
5%
Sri Lanka Tourist Arrivals - Regional Composition (%)
AustralasiaOtherWestern Europe
Eastern EuropeNorth America
OtherAsia
Source: Sri Lanka Tourist Board
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showcasing the diverse offer as a destination. Private sector promotions also brought in wildlife documentary film crews including the Discovery Channel, BBC and Animal Planet.
The key most event in the tourism calendar was the prestigious Commonwealth Heads of Government Meeting (CHOGM) held in November 2013 which brought in significant opportunities to add value to the destination brand and promote the country as a foremost tourism destination. The Summit was attended by 27 Heads of Government and their delegations along with the Prince of Wales representing Her Majesty the Queen of England Elizabeth II. The related events including the Youth Forum and Business Forum held in different locations in the country were well attended, opening up further opportunities to promote the destination and the product offer. A special exhibition ‘Reflections of Sri Lanka’ and special tours were organised for this event.
ArrivalsIn 2013, with better sentiments in the rebounding world economy, tourist arrivals in the country moved ahead from its modest performance witnessed in 2012. Tourist arrivals registered 1.27 million at a growth of 26.7 percent in contrast to the 17.5 percent growth in 2012.
The traditional Western European markets continued to be a significant source with a share of 33 percent of the total reaching to 421,037 arrivals. Asia both South and East Asia accounted for the largest share of 40 percent with a cumulative 509,653 arrivals. Eastern Europe contributed to a share of 10 percent with arrivals totalling to 125,695.
Complemented by the focused promotional campaigns, emerging markets posted better results than the traditional markets. Out of the key markets, India remained as the top most performing market with 208,795 arrivals, representing an increase of 18 percent compared to 2012. The United
Kingdom trailing from its traditional positioning at the top further settled at the second slot with 137,416 arrivals; 20 percent increase was registered over the preceding year, clearly signalling its economy’s rebounding confidence leading on to outbound travel. Germany ranked third with 85,470 arrivals. Although in absolute numbers, arrivals from China and Russia remained modest, both countries registered impressive growth levels of 97 percent and 80 percent respectively over the previous year.
Tourism EarningsWith the increase in arrivals and average spending, tourism receipts in the year reached US dollars 1,715 million, surpassing 2012 receipts of US dollars 1,039 million, corresponding to an impressive 65 percent increase. The average spending per tourist per day increased to US dollars 156.5 from US dollars 103 in 2012. Average duration of stay declined to 8.6 days from 10 days in 2012. Room occupancy was 71.7 percent, very similar to the level achieved in the previous year.
AccommodationThere were 279 graded establishments with 10 additions in the year. Within this category, number of rooms increased by 713 to 16,223.
Source: Sri Lanka Tourist Board Source: Sri Lanka Tourist Board
113,208
113,968
110,543
109,202
80,379
71,111
79,456
90,338
65,245
57,506
69,591
122,252
Country Arrivals by Month - Sri Lanka
Mar
Feb
Jan
Nov
Oct
Sep
Aug
July
June
May
Apr
2012/13 2013/14
Dec 153,918
109,420
107,058
90,339
123,269
107,016
90,279
74,838
80,737
141,878
133,038
146,575
Russia
2012 2013
China
France
Maldives
Germany
UK
Arrivals - Key Markets
137,416
India 208,795
85,470
54,288
64,388
79,474
51,235
Australia 51,614
176,340
114,218
71,642
47,572
56.863
27,627
28,402
54,252
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Management Discussion & Analysis Contd.
Establishments categorised under supplementary had 7,373 rooms. During the year under review, 36 new hotel projects with a capacity of 2,547 rooms at an investment of US dollars 372 million were granted approval.
EmploymentEmployment creation was over 270,000 jobs with both direct and indirect employment numbers increasing nearly 66 percent.
Future OutlookSri Lanka Tourism has set out a tourist arrival target of 2.5 million by 2016; earnings are targeted to reach US dollars 2.75 billion, taking the industry to be amongst the top three foreign exchange earners of the country. The ‘Tourism Development Strategy’ formulated by the Ministry of Economic Development sets out plans and targets until 2020 prioritising on infrastructure development, standardisation of products and services, improving the brand awareness and the overall sustainability of the industry.
The recent initiatives on road development are definite pluses for the future of the industry. The Colombo-Katunayake expressway; Southern highway and the recently built extension up to Matara; outer circular expressway; and the on-going Kandy highway project will resolve some of the key issues that were encumbering the industry’s way forward.
Recognising the necessity to enhance the accommodation to meet the targets set for the industry, both private and the public sector stakeholders are making a concerted effort to increase the capacity as well as to strengthen the quality and the standard of products. It is estimated that the country needs around 40,000 additional rooms to cater to the targets with an investment over US dollars 3 billion.
Already, the on-going construction works on properties and renovations have set the pace to cater to the room requirement. Renowned global brands have shown keen and even firm interest in investing in Sri Lanka. Their presence will not only boost the accommodation capacity, but is expected to bring in international and current standards and best practices to the industry. Sheraton, Hyatt Regency, Movenpick, Marriott and Shangri-La have already taken off their projects which are expected to commence operations in the next four to five years. Apart from the high-end accommodation, steps have been taken to bring in the mid-range accommodation facilities including ‘homestays’ especially targeting the youth market and experiential visitors. (Source: Annual Report 2013, Central Bank of Sri Lanka).
Economic ImpactCinnamon Lakeside as one of the key players in the industry, underscored by the ‘Cinnamon’ brand, the strength of the John Keells group and its enduring set of values is well poised to be a key driver in the industry, with cascading benefits to the entire economy. The hotel has significant capacity to reach out to stakeholder aspirations from creating value for shareholders; generating employment and extending opportunities for professional development; leading supplier linkages; paying taxes responsibly; and setting standards and best practices to enrich the industry towards sustainability.
Our ApproachValue creation at Cinnamon Lakeside, aligned to the Group Economic Policy, is approached with a long term perspective; balancing facets of financial viability with corporate responsibility towards our associates, communities and the environment. Our aim is to drive efficiency in operations to optimise on returns whilst upholding the best practices in risk management and governance.
Creating ValueDuring the financial year 2013/14, we operated 346 rooms and nine restaurants along with facilities for banquets. Our total number of resident guests in the year reached to 105,705, in effect, representing almost 8 percent of the tourist arrivals into the country. This generated 76,790 room nights with a market share of 19 percent within the city hotel domain. Our food and beverage segment also generated substantial value within the main restaurant - The Dining Room and other specialty restaurants.
We also played an active role in hosting events. As the hospitality partner in key events this year including the most prestigious in the whole of Asia - the Commonwealth Heads of Government Meeting and hosting the South African national cricket team, our hotel was able to impress upon guests from around the world with the best in class service; thereby bringing visibility to the hotel and to the destination.
As will be discussed in detail in the ensuing section under the operations review of this report, our performance in the reporting year is in line and even exceeded in some facets as compared to the city hotel’s performance and maintained a significant position in terms of the tourism industry.
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Cinnamon Lakeside
City Hotels % Share of City Hotels
Tourism Industry
Room Nights 76,790 420,504 19 10,961,000
Occupancy Rate (%)
61 53 - 71.7
Average Room Rate (USD)
138 124 - -
Employment Generation (Direct)
855 4,350 20 270,150
Value Added Statement
GRI (3.1) EC1
As set out in the value added statement, we generated a total value of Rs. 1,973 million and distributed a total of Rs. 1,724 million amongst our stakeholders, representing 87 percent of the value generated. Value retained within the operations was Rs. 249 million corresponding to 13 percent of the value generated. The value added statement is set out below.
For the year ended 31st March
2012/2013 % 2013/2014 %
Statement of value added
Revenue 2,840,223 2,939,463
Other operating income 12,233 13,285
Finance Income 64,833 55,259
Change in fair value of investment property
288,710 -
Less: Cost of materials and services bought in
(939,159) (1,034,747)
Value added 2,266,840 1,973,260
Value shared with
Employee 500,082 22 534,289 27
Government 512,238 23 482,918 24
Community investments 4,096 0 7,104 0
As payments to providers of funds
Banks as finance expenses 96 0 38 0
Shareholders 600,000 26 700,000 35
Value retained within the business
As depreciation and amortisation
184,610 8 205,731 10
As retained for investment / growth
465,718 21 43,180 2
Total 2,266,840 100 1,973,260 100
Returns to ShareholdersConsolidated revenue in the year reached to Rs. 2,939 million with profit attributable for shareholders at Rs. 743 million. Our share performance mirroring the trends on the Colombo Stock Exchange was relatively stable and performed ahead/on par with of the Hotels & Travels Index. The average share price reached Rs. 80.50 as compared to Rs. 70.30 in the preceding year. The highest price recorded in the year was Rs. 94.90 and the lowest was at Rs. 69.00.
Cinnamon LakesideEconomic Impact - 2013/2014
Industry
Shareholder
Employee
Suppliers
Government
› Room Nights:76,790› Occupancy Rate: 61%› Market Share: 19%› Average Room Rate: USD 138› Tourism Development Levy
Rs. 28.0 Mn
› Net Profits: Rs. 743 Mn › Return on Equity: 14%› Earnings per Share: Rs. 3.72› Dividend per Share: Rs. 3.50
› Employment Generation: 855 Employees
› Remuneration: Rs. 319.8 Mn› EPF & ETF: Rs. 42.2 Mn› Gratuity: Rs. 11.1 Mn
› Local Suppliers: 530 Suppliers
› Local Supplier Payments: Rs. 930.1 Mn
› Local Supplier Payments: 98.5% of the total
› Value Added Tax: Rs. 263.5 Mn
› Nation Building Tax: Rs. 63.1 Mn
› Corporate Taxes: Rs. 127.5 Mn
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Management Discussion & Analysis Contd.
2012/13 2013/14
249
700
7
483
534
650
600
4
512
500
Value Distribution (Rs. Mn)
Retained for investment
/ growth
Providers of funds
Community investments
Government
Employees
Supply Linkages
GRI (3.1) EC6
As a five-star hotel operation, we have the scope to make a significant contribution to build linkages in the supply chain, with ripple effects to the economy. We maintain strong links with our local suppliers accounting for over 98.5 percent of the cost incurred on purchases in the reporting year. We recognised the importance and give preference to local suppliers wherever possible and viable. Supplier payments during the year under review are set out below.
Financial Year 2012/2013 2013/2014
Rs. Mn % Rs. Mn %
Local Suppliers 881 98.8 930 98.5
Agriculture Suppliers 79 8.9 100 10.7
Other 802 89.9 830 87.8
Foreign Suppliers 10 1.2 14 1.5
Apart from extending a solid market for their goods and services, we have the capability to influence our suppliers through our selection criteria to comply with and adopt best practices in management and governance in their operations. Some of our certification programmes such as the Green Globe in effect, recommend giving preferential treatment to suppliers with sustainable practices.
Human Resource Base & Obligations
GRI (3.1) EC3
As a people oriented organisation, our hotel contributes significantly to employment generation. As at the year-end, we have 855 associates and
we extend extensive opportunities for them to grow their professional lives. Our training that comes on-the-job, cross exposures within departments, internal sessions, external training including foreign training have enabled our associates to refine their skills and talents, much needed in an industry such as ours where there is an acute shortage of trained staff, rightly identified as a deterrent to the industry growth aspirations.
We ensure that our associates are well compensated with due remuneration and performance based incentives. We uphold our defined benefit and contribution obligations fully compliant to the terms stipulated by the relevant acts. The hotel in the reporting year provided for Rs. 33.7 million for the Employees’ Provident Fund and Rs. 8.5 million for the Employee Trust Fund as per the Act No.15 of 1958 and the Act No. 46 of 1980 and subsequent amendments respectively. Define benefit obligation (Gratuity) as at year-end amounted to Rs. 106.6 million provided as per the Act No. 12 of 1983.
Financial Year 2011/2012Rs. Mn
2012/2013Rs. Mn
2013/2014Rs. Mn
Defined Contribution Plan Obligations
Employees’ Provident Fund
26.4 31.4 33.7
Employees’ Trust Fund 6.6 7.8 8.5
Defined Benefit Plan Obligations
Gratuity Provision 17.6 10.0 18.5
Gratuity Payments 7.7 11.1 11.1
Environment & Community Responsibility
GRI (3.1) EC2
Being a destination with a key value proposition of ‘sun, sea and sand’, climate change and global warming will have an impact on tourism and related businesses. Already, the country is showing clear signs of erratic weather patterns with torrential rainfall and periods of drought which could pose serious challenges to this industry in the years to come.
We are deeply aware of the impact of our operations on climate change and on the broader environment. We have taken proactive measures to reduce our carbon impact with a target of 10 percent reduction in emissions every year as will be discussed at length under the environment section of this report. We also see a far greater role in advocating best practices in environment management within the industry. The certification we received from the internationally acclaimed Green Globe as the first Sri Lankan hotel in 2010 and subsequently maintained with re-certification in fact has set the pace for the industry to embrace better practices towards greater sustainability.
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Our community initiatives including recruiting and training youth from the vicinity that we operate and our efforts to uplift the village life and bring unity to the nation have become an integral part of our operations.
Responsible Tax PayerGiven our level of value creation, we are able to significantly extend our support towards public finance which we do so conscientiously. In the reporting year, our hotel paid the dues of Rs. 326.6 million as value added and nation building taxes and Rs. 127.5 million as corporate taxes to the Department of Inland Revenue. The total tax paid of Rs. 454.1 million reflected an increase of 4% percent as against the preceding year. Employee PAYE taxes amounted to Rs. 19.6 million, indirectly contributing towards public finance.
Industry Support & Policy Advocacy
GRI (3.1) SO5
Supporting the industry as one of the foremost hotels in the leisure sector, we are conscientious in settling the tourism development levy. This year under review, a sum of Rs. 28.0 million was paid out as levy to the Sri Lanka Tourism Development Authority.
Cinnamon Lakeside plays a focal role in policy advocacy as a member in associations both domestic and international to address issues and support the best practices towards a sustainable industry. Our hotel is an active member of the Tourist Hotel Association of Sri Lanka and has a considerable degree of influence to contribute towards guiding and
lobbying on public policy pertaining to tourism and leisure industry in the country. Our memberships in international associations enable us to represent the destination at a broader level in the region and in a global perspective. These memberships also pave the way to develop strong bi-lateral ties to better the hotel’s business prospects.
Our memberships as at the year-end are set out below: › The Tourist Hotel Association of Sri Lanka › Pacific Asia Travel Association (Sri Lanka) Chapter (PATA) › Sri Lanka Africa and Middle East Business Council › Sri Lanka Canada Business Council › Sri Lanka Maldives Bilateral Business Council › Sri Lanka Malaysia Business Council › Sri Lanka China Business Council › The Council for Business with Britain › Sri Lanka Netherland Business Council › Sri Lanka Australia New Zealand Business Council › Sri Lank Japan Business Council › Sri Lanka Poland Business Council › Sri Lanka France Business Council › Sri Lanka Singapore Business Council › Sri Lanka Italy Business Council › Indo Lanka Chamber of Commerce & Industry (C/o Chamber of
Commerce Sri Lanka) › Sri Lanka Russia Business Council › Sri Lank Pakistan Business Council › Sri Lanka Vietnam Business Council
Scale346 Rooms 126,290 Room
nights
Membership Rewards625 Library memberships
BrandAffordable indulgence
Web6 Language sites
Revenue ManagementStrong internal controls
61% OccupancyRs. 1.4 Bn room revenue 3% growth
Rs. 1.2 Bn F & B revenue with 2% growth
Food & Beverage11 outlets and banquet facilities Effective cost
controlling
Reservations Systems24 Hour call center
Sales ForceProactive & customer centric
Capital ExpenditureRs. 373 Mn in capital
PromotionalRs. 89 Mn investment for
marketing and communication
Gwendoline Leahy4 years as a Nursing Sister
“
“
It is a privilege to perform my duties in an environment promoting a safe and comfortable work place for the associates and guests. Ensuring a healthy lifestyle for the people who will deliver impeccable service to the hotel’s guests is indeed very rewarding.
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Operational Review
Product PerformanceOverall PerformanceDuring the year under review, our products and services sustained their overall performance as compared to the preceding year. Although the competition was strong, we were consistent in the delivery of our product offer and posted a 3 percent increase in net revenue over the preceding year at Rs. 2,939 million; both rooms and food and beverage segments consolidated their operations.
Rooms Room Nights & OccupancyIn keeping with our commitment to timeless luxury, the rooms are exquisitely designed, with up-scale and signature amenities, complemented by the breathtaking ambience of the lakeside and the view of the city skyline. Our property offered 346 rooms and suites as at year end, with superior rooms accounting for 47 percent, followed by premium rooms of 38 percent.
Despite significant competition in the market, the hotel sustained the number of room nights akin to the levels achieved in the previous financial year at 76,790 nights - representing a modest increase of 591 room nights. The occupancy level remained at 61 percent; a marginal increase of a percentage point compared with the level achieved in the previous year; but surpassed, commendably, the average city hotel occupancy of 53 percent which registered a decline from 58 percent from the previous year.
Average Room Rate (ARR)The minimum room rate stipulated by the Sri Lanka Tourism Development Authority for city hotels remained at US dollars 125. Given our strong sense of business ethics, we stayed well in line within this requirement and
Management Discussion & Analysis Contd.
Key Challenges
› Increasing renovated room nights in the market
› Aggressive pricing strategies from the competition
Strategic Focus
› Deliver on quality & standards
› Add value to the rooms on offer
› Maintain & comply with certifications
› Step up marketing & - promotions
› Greater focus on emerging market segment - China, Japan
Key Targets
› Room nights: 79,390› Occupancy rate: 63%› Market share: 21%› Av. room rate: USD 138 › Room revenue per
Available room: USD 87
Actuals
› Room nights: 76,790› Occupancy rate: 61%› Market share: 19%› Av. room rate: USD 138 › Room revenue per
Available room: USD 84
maintained an ARR for the year at US dollars 138, a modest increase from the previous year ARR of US dollars 135.
Room RevenueRoom revenue accounting for the largest slice of consolidated revenue - 48 percent, reached to Rs. 1,399 million in the reporting year. This represented an year-on-year growth of 3 percent compared to the impressive growth of 30 percent recorded in the previous financial year.
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Room Revenue
1,352 1,399
F & B Revenue
Total Revenue - Segmentation (Rs. Mn)
1,237
Other Revenue
251 275
1,265
2012/13 2013/14
09/10
10/11
Room Revenue Occupancy
11/12
12/13
13/14
Room Revenue (Rs. Mn) Vs Occupancy (%)
61%
60%
55%
62%
41%
800
1,043
1,352
1,399
393
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Market Share Vs. Fair ShareReinforcing the positioning in the market, the hotel managed to secure a further percentage in the market share to 19 percent in terms of room revenue. This growth is noteworthy given the fact that the fair share of the hotel declined during the year under review with the entry of new competition.
Room Mix
› 164 Superior Rooms › 133 Premium Rooms › 29 Executive Rooms › 20 Suites
Room Type AnalysisSuperior rooms performed the best in the year under review. Premium rooms noted a modest performance whilst room nights from the executive floor and the suites noted a decline. The detailed analysis as per room type is set out below:
› Superior: Accounting for the highest share of room nights at 45 percent, superior category generated 31,806 room nights in the year under review. However this corresponded to a 5 percent decrease as against the preceding year, the occupancy of this category was also down from 62 percent in the last financial year to 57 percent in the reporting year.
› Premium: Standing as the second highest in terms of room nights at 42 percent, premium rooms posted a significant performance. This category generated 4,651 extra room nights to reach 31,806 nights. The premium rooms posted the highest level of occupancy at 66 percent, representing a remarkable increase as against 56 percent in the previous year.
› Executive: Accounting for 7 percent of the total room nights, the rooms on the executive floor saw a decline of 1,124 room nights to reach 5,469 nights. Occupancy posted a noteworthy decline of 10 percentage points from the level achieved in the preceding year to 52 percent.
› Suites: Room nights generated from the suites recorded constant at 3,893 nights as compared to the previous financial year. This compressed the share in total room nights to 5 percent same as the preceding year. The suites also under performed in terms of occupancy at 53 percent a marginal drop to the last financial year of 58 percent.
Customer SegmentationThe customer mix was maintained at similar levels as the preceding year. Although the corporate sector remained the dominant segment, the mix saw a gradual change with an increasing share from the MICE segment as discussed below.
› Corporate: The corporate segment continued to hold a dominant position, generating just over 60 percent of room nights. In terms of revenue, corporate customers contributed 62 percent to consolidated room revenue. This segment generated Rs. 868 million, reflecting a modest increase of 3 percent as against the preceding year.
› Leisure: This segment accounted for the second highest share at 22 percent room nights, almost similar to the results recorded in the previous year. With increasing competition from newly renovated rooms that entered the market in the year coupled with compromising pricing strategies from some of the players, the leisure segment saw a decline in revenue by 6 percent to Rs. 291 million.
› MICE: Notwithstanding a drop in room nights by 23 percent, this segment performed well in terms of consolidated revenue. The percentage share in consolidated revenue improved to 13 percent
62%
62%23%
2012/13
2013/14
21%
13%11%
4%4%
Room Revenue Composition
Business / CorporateLeisureMICECrew
2012/13 2013/14
Room Type Occupancy (%)
SUPERIOR 57%62%
EXECUTIVE 52%62%
SUITES 53%53%
PREMIUM 67%57%
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from 11 percent in the previous year. MICE posted a creditable 22 percent growth in revenue to Rs. 181 million from Rs. 148 million in the preceding year, primarily due to revenue generated from hosting the CHOGM in November 2013.
› Crew: In the year, the hotel secured and maintained contracts with three airlines - Turkish Airlines, Oman Air and Royal Jordanian Airlines for crew accommodation. Complemented by flight frequency of these airlines, this segment generated 1,087 extra room nights in the year and revenue posted a satisfactory increase of 16 percent to Rs. 60 million; yet, the contribution to consolidated revenue remained relatively modest at 4 percent.
Key MarketsWith focused marketing and promotions aligned to the tourism strategy of the destination, the hotel in year witnessed greater response from the emerging markets.
The hotel hosted a total of 105,705 room guests in the year from almost 150 countries over the world. India remained the top most performing market with 20,791 guests with 14,735 room nights. This corresponded to 2,414 additional room nights – almost 20 percent growth as compared to the last year’s results. Reversing the pattern, UK came up one slot surpassing Sri Lanka to take up the hotel’s second position in terms of room nights with 6,969 nights. UK room nights saw a growth of almost 13 percent reflecting the rebounding signals of its economy. Sri Lankan guest nights were down by 22 percent to 4,831. China ranking fourth, performed impressively with a growth of nearly 65 percent to 4,565 room nights. Turkey which was not in the top 20 list last year, posted an exceptional performance to be at number five with 3,823 room nights.
Management Discussion & Analysis Contd.
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Food & Beverage Renowned for enticing dining experiences and well geared with specialist and diverse team of chefs headed by Martin Becquart, Executive Chef from France, our restaurants sustained the positioning and remained strong in the dining segment. Food and beverage (F&B) department in the year under review recorded a stable performance, despite the growing competition in the city hotel market as well as from the other fine dining to casual stand-alone outlets and entertainment areas.
Key Challenges
› City hotel competition › Influx of new stand-alone
restaurants › Growing popularity for
entertainment areas
Strategic Focus
› Service enhancements › Themed evenings and
exciting food promotions › Maintain and comply to
certifications › Systematic property
maintenance and interior decor
› Aggressive marketing on social media especally to attract the youth market
Key Targets
› No. of covers: 592,930 › Average check: Rs 2,037 › F & B revenue: Rs. 1,237 › No. of food promotions: 6
Actuals
› No. of covers: 575,507 › Average check: Rs. 2,121 › F & B revenue: Rs. 1,265
Mn › No. of food
Promotions:12
2012/13 2013/14
Room Nights - Top 10 Markets
USA 2,8232,703
Japan 1,8592,361
Germany 2,0382,195
Singapore 2,0921,968
Australia 3,7442,522
Turkey 3,823329
China 4,5652,769
Sri Lanka 4,8316,182
UK 6,9695,720
India 14,73512,321
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Colombo Region Mari Bizard Cocktail Competition 2013
Colombo Region Mari Bizard Cocktail Competition 2013
Midori Bartender Challenge
Tourism & HotelManagement Graduation,
SLITHM
Winner (Classic)Dinusha Wilashini
Winner (Flair)Binoy Perera
ChampionSasiri Ruksala
The Most Outstanding StudentTharaka Appuhamy
Representing 43 percent of the consolidated revenue, F & B in the year posted a 2 percent increase in revenue to Rs. 1,265 million. Restaurants generated the highest revenue of Rs. 686 million, representing 54 percent of the F & B revenue followed by banquets at Rs. 578 million with 46 percent share.
ChampionsShowcasing the culinary talents and caliber of our associates, our F & B team once again, was well recognised and awarded at many of the competitions held during the year. Our focus this year was to give an exposure to our younger associates and therefore, our usual experienced associates refrained from participating in these competitions. Proving our strategy right, our younger associates competed well amongst some of best contenders in the city hotel domain, demonstrating their training, poise and talent.
At the ‘Colombo Region Mari Bizard Cocktail Competition 2013, we emerged victorious with our young talent, Dinusha Wilashini winning the ‘Classic’ category and Binoy Perera wining the ‘Flair’ category. We
also secured the most number of qualifiers selected for the all island competition. Our associate Sasiri Ruksala was the coveted champion of the inaugural Midori Bartender Challenge held in June 2013.
We also celebrated the accomplishments of our associate, Tharaka Appuhamy attached to the Learning and Development team at the Graduation Ceremony of Sri Lanka Institute of Tourism & Hotel Management (SLITHM) held in June 2013.
The Dining RoomThe hotel’s all day dining restaurant – ‘The Dining Room’ continued to offer varied and exquisite cuisine from all over the world. Apart from the daily delectable offers including the Sunday spread, ‘The Dining Room’ further focused on special food promotions indulging and celebrating the diversity
7%
3%
7%
18%
5%7%2%
3%
48%
5%
1%
1%
F&B Revenue Composition (%)
BANQUETS 7° NORTHTHE LOUNGEOTHERTHE DINING ROOMS
POOL MINI BARGOODIES
LONG FENGROYAL THAILIBRARYROOM SERVICE
Rs. 1.3 BnF&B Revenue2012/13 : Rs. 1.2 Bn
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in cuisine from Asia, Europe to the Middle East. The restaurant laid out exotic spreads of authentic and signature cuisine of renowned chefs to make a difference to ‘The Dining Room’ experience.
As the top most revenue generating restaurant, ‘The Dining Room’ during the year under review consolidated its share at 18 percent in F & B revenue. The restaurant growing by 3 percent posted revenue of Rs. 222 million in the year; the covers recorded a marginal decline, but the average check was sustained similar to the levels achieved in the preceding year.
7° NorthOne of the city’s coolest and trendiest bars, ‘7° North’, continued to extend its themed food and beverage coupled with a stylish alfresco dining experience by the lake. Strengthening the team, ‘7° North’ brought in Rodrigo Benedicto, specialty Spanish Chef, with international experience, and flair for creativity in cuisine. From memorable Sunday lunches, ‘Ladies Night’ on Thursdays to Latin barbeque remained strong attractions at the venue.
Management Discussion & Analysis Contd.
The venue’s operations being subject to adverse weather conditions, the total cover dropped by 8 percent during the reporting year; yet, given the improved position in the average check, earnings reached to Rs. 89 million, posting a decline by just 4 percent over the previous year.
Royal Thai & Long FengOur signature restaurants, ‘Royal Thai’ and ‘Long Feng’ were popular choices and delighted the patrons with authentic Thai and Chinese cuisine. Both restaurants with a talented specialty team of chefs including Chef Aree Jitman at Royal Thai and Chef Qiu Zhi Qiang at the ‘Long Feng’ remained strong on the ‘executive’ lunch during weekdays whilst promoting the ‘chef’s special’ to lure the guests to choose different dishes on the menu.‘Royal Thai’ posted better results compared to the preceding year with covers improving by 3 percent whilst earnings by just over 6 percent. A marginal decline was noted in the covers of ‘Long Feng’ along with the average check leading up to a 5 percent decline in earnings.
Lebanese Cuisine
Italian Cuisine
German Fiesta
Iftar Buffet
Vietnamese Promotion
Indonesian Food FestivalFrench Cuisine
Mediterranean Food Promotions
Malaysian Food Festival
Mexican Cuisine
Kerala Food Promotion
Turkish Food Festival
Celebrating authentic and signature Lebanese dishes
July 2013
Authentic flavours and culture with guest chef Riccobono Gabriele,
Italy September 2013
With guest chef Julia Komp Hamzaoul, Cologne Chefs
Association for authentic German cuisine
December 2013
Marking the Holy month of Ramadan, with an array of Iftar
specialties July 2013
Exotic cuisine with guest chef Luong Duc Dung, the head chef
of Quan Xua Restaurant, Vietnam March 2014
Celebrating exotic flavours, colours and textures of Indonesian cuisine
August 2013
Celebrating the Bastille Day & French Spring Festival
July 2013
Showcased the hotel’s culinary skills in Mediterranean delights
January 2014
Symphony of flavours and culture from Kuala Lumpur with Guest
chef Kam Suhaimi May 2013
Specialty chefs Rodrigo Benedicto Borges & Anil Rodrigo teamed to offer exotic Mexican dishes
October 2013
Spectacular spread of Kerala dishes created by Bijimon
Thachanamba from New Delhi and the talented team
February 2014
Celebrating Ottoman cuisine from Istambul
June 2013
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The Lounge‘The Lounge’ sustained its service quality and appeal as a haven for delightful assortment of sweets and savory goodies at ‘High Tea’. During the year, ‘The Lounge’ re-introduced its popular ‘Crazy Chocolate High Tea’ attracting the ‘chocoholics’ with a selection of specially crafted chocolates, teamed with a spread of delightful treats and a variety of spicy and tangy dishes. The ‘Sushi Bar’ offering the finest in Japanese cuisine at ‘The Lounge’ offered a variety of promotions in the year, whilst the ‘Pool Bar’ continued to draw in the patrons for casual cocktails, snacks and moon-light dinners.
‘The Lounge’ in the year under review posted a revenue increase of 12 percent over the preceding year.
GoodiesThe hotel’s patisserie was well sought after for its treats - pastries and confectioneries with an irresistible offer of cakes catering especially to chocolate fans. ‘The Goodies’ in the year recorded a revenue decline of 7 percent as against the previous year.
The LibraryOur exclusive club keeping its stance as ‘the place to be’ extended a quiet lounge with lively music on certain nights for the members and resident guests. ‘The Library’ hosted several promotions in the year to encourage
the patrons to the venue including a personal bottle bank. Revenue generated from ‘The Library’ remained modest at 2 percent of the total F & B revenue.
BanquetsCinnamon Lakeside sustained its reputation as a perfect banquet venue and remained popular for an array of events from weddings, conferences to meetings despite the new entrants in the city market.
Weddings remained the most significant contributor of over 50 percent to banquet revenue with 359 weddings held at varied venues of the hotel. However, the number of weddings held in the year declined as against the previous year; yet sustained the covers and saw an increase in the average check which resulted in 8 percent growth. Corresponding to this, total banquet revenue modestly grew by 3 percent to Rs. 579 million, notwithstanding a 10 percent drop in the total number of events as against the previous year. Banquets sustained its share within the F & B segment at 46 percent.
8° on the LakeThe hotel’s most celebrated luxury floating venue, ‘8° on the Lake’ maintained its distinct offer combining breathtaking ambience with a unique spread. During the year, ‘8° on the Lake’ continued to be popular for the ‘bubbly’ brunch on Sundays whilst being well acclaimed as an up-
7° North 8° on the Lake Library Goodies
Long Feng The Lounge The Dining Room Royal Thai
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market banquet venue attracting product launches, conferences, weddings and private parties. The revenue generated from this venue was sustained at similar levels achieved in the preceding year and contributed 8 percent to the banquet revenue.
Power DromeOur health club, ‘Power Drome’ is fully equipped with gym facilities, sauna and steam room as well as space for aerobics, squash and tennis with floodlight facilities. Membership in the year reached 611 whilst the revenue declined by a marginal 5 percent over the preceding year. This represented a mere 1 percent of the total revenue.
Other RevenueRevenue clustered as ‘other revenue’ entailing the hotel’s external laundry, spa and rental income from investment property generated Rs. 275 million during the year. This corresponded to an increase of 10 percent compared to Rs. 250 million generated in the previous year. The laundry, the highest contributor to other revenue category of 27 percent, registered a growth of 4 percent over the previous year whilst the Spa recorded a decline of 16 percent.
Capital InvestmentsOur hotel was consistent in following systematic refurbishment and reinvestment to maintain the property and up-keep the highest standards in line with the positioning whilst balancing the returns on investment. This year, further strengthening our commitment to be a ‘preferred employer’ the hotel completed and launched the Human Resource building complex, adjoining the main property in November 2013. This four-storey building, fully equipped and geared with modern amenities including state-of-the-art training facilities, staff rest rooms, clinic, welfare shop and a fully-fledged gymnasium cost Rs. 215 million. Apart from this capital expense, the year recorded Rs. 157 million for other capital expenses including routine maintenance and sustainability initiative projects.
Events
CHOGM 2013Marking one of the most notable events as a nation, we were honoured during the year to be selected as a hospitality partner of the global summit, 23rd Commonwealth Heads of Government Meeting (CHOGM), held in November 2013. The significance of the event was more pronounced since this was the first Asian country to host the summit in 24 years.
We hosted 15 delegations of Heads of Government including foreign ministers, other dignitaries and the Royal Household. We were also the preferred venue - King’s Court for the Royal Dinner hosted by HRH Prince of Wales in place of her Majesty Queen Elizabeth II for the Commonwealth Heads of Government and other dignitaries.
CHOGM proved to be a real test for the hotel’s reputation for service excellence. During this period, our team from the reception, housekeeping, restaurants to banquets came together with sheer determination to deliver the service worthy of our positioning and repute within the industry. We were honoured to be commended and appreciated for our services by several world leaders and dignitaries including compliments from the Master of the Royal Household for a flawless delivery of the Royal Dinner.
Although not stemming from the strategy and the year’s action plan, CHOGM opened immense opportunities for Cinnamon Lakeside to gain significant brand mileage and further reinforce its positioning as a foremost city hotel in the country; whilst supporting to showcase the destination brand amongst the delegates and around the world.
Tour of South AfricaBeing the hospitality partners for the South Africa Tour of Sri Lanka 2013, we hosted the National Cricket Team of South Africa during July 2013. We were also selected as the official dinner venue held at the hotel’s main ballroom Kings Court by Sri Lanka Cricket for Sri Lankan and South African national teams along with other distinguished guests.
Colombo Art Biennale 2014With Cinnamon Hotels & Resorts as the official hospitality partner for the third edition of Sri Lanka’s leading international festival of contemporary art, “Colombo Art Biennale 2014”, our hotel was actively involved in supporting this event. We hosted foreign artists and media personnel from around the world including China, U.S.A., Britain, Italy, Austria, Scotland, France, Sweden, India and Qatar. We organised supplementary events such as discussions on art and special evenings at our restaurants giving an opportunity for our guests to meet the artists.
Corporate PartyOur hotel hosted an elegant white-themed party at the ballroom King’s Court, for representatives of the corporate sector including key decision makers for corporate bookings. The hotel extended a colourful night with delectable dishes, games, entertainment items and exciting gifts. This was organised in appreciation of the support extended by the corporate sector to the hotel.
French Spring FestivalIn celebration of the French Spring Festival of Classical Jazz, the hotel invited French Saxophonist Jean-Pierre Baraglioli to team up with Briget Halpe, renowned Sri Lankan pianist and Peshala Nanoj, the Tabla player, in concert. The trio combining the diversity of cultures with the unity of music attracted and entertained guests whilst ‘The Dining Room’ organised a French Food Festival to complement the festival.
Management Discussion & Analysis Contd.
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Marketing & PromotionsRecognising the competition that is intensifying within the city hotel market, we stepped up our marketing and promotional initiatives to strengthen our brand and reinforce our positioning as the best luxury hotel in Sri Lanka, as adjudged in 2012 by “Business Destinations”. Aligned to the destination marketing strategy, we were bullish on promoting our product offer in the emerging markets whilst securing our presence within the traditional markets and fuelling the interest amongst the local clientele.
Our marketing mix this year entailed print media, participations in travel & trade fairs and road shows, PR activities at events, web-based promotions and social media marketing. The total investment for marketing and communication in the year reached Rs. 89 million, reflecting an increase of 12 percent as against the preceding year.
Print MediaDuring the year, we placed advertisements on the hotel and on our promotions in the print media including popular newspapers, business and leisure magazines and the hotels very own culinary newsletter: ‘Grape
Charles, Prince of Wales and Camilla, Duchess of Cornwall hosting the
Commonwealth Banquet
Mr. Kamalesh Sharma, Secretary General of the Commonwealth of Nation signing the
guest book
General Manager, Mr. Denis Gruhier with the South African Cricket team
Femina, Miss India 2014 contestants at a cocktail party
Kumar Sangakkara at a gala dinner in honour of the Sri Lankan Cricket team
Celebrity Chef, Peter Kuruvita with the Public Relations team
wine’. We incurred a sum of Rs. 2.2 million in the year for 260 articles in the print media. Apart from this investment, we received free media coverage from 377 articles on the hotel for a value estimated at Rs. 12.3 million.
Cinnamon Lakeside housed 15 delegations of Heads of Government and the Royal Household.““
CHOGM2013
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Travel Fairs & RoadshowsWe participated in number of travel and trade fairs and road shows in collaboration with our partners - destination management companies as set out below.
Trade Fair/Road Show Target Market Partnering Companies Cost (Rs)
Travel Click Presentation and Road show Hong Kong Travel Click 126,147
Cinnamon Hotels Promotion with Walker Tours China Walkers Tours 315,988
Travel Click Sales visit Singapore Travel Click 110,929
IITM & Sales Visit India - 55,200
Arabian Travel Mart Dubai - 693,046
Korea Road Show Korea - 487,203
BITE 2013 China/ Beijing Sri Lanka Tourism 384,932
OTM 2014 India Walkers Tours 333,942
IATA Conference India Walkers Tours 164,210
Total 2,671,597
WebsiteThe hotel this year focused on further strengthening the official website and was successful in tapping business by way of web based bookings. The Certificate of Excellence awarded by TripAdvisor during the year stands as a testament to our efforts. The number of room nights generated via web based bookings increased to 10,113 this year from 7,036 room nights posted in the last financial year. This was a commendable growth of 43 percent generating revenue of Rs. 198 million.
Web Agents 2012/13 2013/14
Room Nights Revenue (Rs. Mn)
Room Nights Revenue (Rs. Mn)
Direct Web 3,255 70.2 3,923 77.5
Agoda 1,115 21.7 1,285 25.2
Booking.Com 1,857 40.9 3,231 63.0
Expedia 807 16.4 1,655 32.9
Make My Trip.Com 2 34.7 5 0.01
Touricoholidays.Com - - 14 0.24
Total 7,036 183.9 10,113 198.9
Management Discussion & Analysis Contd.
Social MediaOur marketing and communication team was also active on social media especially targeting the tech-savvy ‘Y generation’. Food promotions, events and the latest news on Cinnamon Lakeside were duly uploaded on Facebook, Twitter and LinkedIN keeping up the momentum - ‘the place to be’.
Product Responsibility Aligned to the John Keells Group’s Quality Policy, we were focused on upholding the highest ideals in business practices and responsibility - a hallmark of the Cinnamon Lakeside culture, setting the hotel well apart from the competition within the city hotel domain. We sought in the year to keep raising the bar on quality and standards, vital for the sustenance of our operations as a five-star city hotel.
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Group’s Quality Policy
The John Keells Group will strive to maintain products and services at the highest standards through embracing industry and corporate best practice and compliance with all relevant local and international statutory and regulatory requirements in the markets we serve. All products and services will be assessed for any environmental and social impact through communications, services, operations and supply chain.
We have in effect embraced the current best practices in the industry and are compliant with the relevant statutory and regulatory requirements on products and services including health and safety, environmental and social facets as well as marketing and communication ethics. Certifications and awards we have received from both local and internationally reputed bodies endorse our commitment towards product responsibility.
Guest Satisfaction
GRI (3.1) PR5
Our highest priority is our patrons and therefore, we seek at all times to tailor our products and services to their needs. We strive to keep abreast of the latest industry trends whilst being creative and innovative in our solutions to give the best to our patrons.
Our accommodation facilities cater to diverse needs and affordability levels of our patrons. Our rooms come in four categories, offering the most luxurious and indulgent experiences to the leisure segment whilst extending the most practical facilities for our corporate clientele. We have a range of restaurants that offer fine-dining experiences as well as more casual and easy-going options tailored to capture the different moods of our guests. Our specialty restaurants supported by the best-in-class chefs, both local and international ensure that our patrons are given an array of choices on cuisine. To top up our product offer, we extend a variety of entertainment items and events themed to mark special occasions.
We keep a track and address on a daily basis the comments and the feedback we receive from our patrons through feedback cards in rooms and in our restaurants; our guest relations officers are well trained to engage the patrons and obtain their feedback on the products and services and promptly extend the most appropriate support and solutions to any issues that may be of concern. The morning meetings held daily at the operational level and at the senior management level address customer feedback and rectify complaints, proactively reaching out to ensure that patrons leave the property delighted with a positive ‘word of mouth’.
Customer Privacy
GRI (3.1) PR8
As a registered entity, our hotel obtains basic personal details of guests at the time of check-in for accommodation. Our IT systems are fully geared with required security features to ensure the information given is kept confidential. Our associates are well trained and abide by our Code of Ethics to ensure customer privacy. During the reporting year, the hotel did not record any substantiated complaints on breaching customer privacy and loss of customer data.
3%23%74%
6%32%62%
6%18%76%
3%29%68%
3%27%70%
4%36%60%
Guest Satisfaction Survey - Rooms %
Not Met
Staf
fF&
BLa
undr
yP’
Drom
eHK
FO
25%
Met 25%
Exceed 50%
Not Met 28%
Met 34%
Exceed 38%
Not Met 27%
Met 39%
Exceed 34%
Not Met 25%
Met 41%
Exceed 34%
Not Met 29%
Met 36%
Exceed 35%
Not Met 10%
Met 43%
Exceed 48%
2012/13 2013/14
4%52%44%
5%45%50%
1%20%79%
2%48%50%
2%38%60%
Guest Satisfaction Survey - F&B %
Not Met
*VFM
Ambi
ence
Serv
ice
Bev
Food
3%
Met 50%
Exceed 47%
Not Met 4%
Met 45%
Exceed 51%
Not Met 0%
Met 24%
Exceed 75%
Not Met 2%
Met 46%
Exceed 52%
Not Met 2%
Met 41%
Exceed 57%
2012/13 2013/14 * VFM - Value For Money
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Premium Product, Health & Safety
GRI (3.1) PR1 & PR2
Our properties are well maintained with periodic and systematic refurbishments and interior decoration aligned to the branding and to bring out the ‘desired’ ambience. We have in place a state-of-the art building maintenance system that ensures consistent and timely maintenance on structures, electrical and plumbing systems.
We give precedence to upkeep the safety and well-being of our guests including hygiene within the property and food preparation, medical facilities, fire safety measures and lifeguards for the pool. Necessary measures are taken as will be discussed in the ensuing environment section in this report to minimise harmful and hazardous emissions from operations and waste disposal is well planned with minimum damage to the environment and to the communities around us.
We seek to comply and uphold the standards as prescribed by our certification bodies including the ISO Standard, Green Globe and Public Health Department of the Colombo Municipal Council. Periodic audits are conducted by our auditors - external and internal as well as by the certification bodies; we are proactive in adopting the recommended measures for further improvement.
During the reporting year, our hotel did not record any incidents of non-compliance to regulations and to the certification requirements in terms of health and safety of products and services. Re-certification obtained from the certification bodies as discussed below aptly demonstrates our compliance.
Ethics in Marketing & Communications
GRI (3.1) PR3, PR4, PR6 & PR7
The corporate communication team of the John Keells Holdings PLC plays a crucial role in keeping the brand consistency and promotions aligned to the overall marketing strategy of the Cinnamon leisure sector. Our marketing communications are transparent and uphold the best practices in marketing ethics.
We disseminate relevant and material information on products and services through above the line tools and direct promotions - trade fairs and road-shows. We have a well-thought out and informative set of brochures, leaflets, official website with interactive features and a strong social media marketing presence. Our official website carries comprehensive information on products including room rates, facilities offered, dining options and on the latest promotions. The reporting year did not record any incidents of non-compliance to product and service information requirements as per regulations and certification bodies.
Management Discussion & Analysis Contd.
We are meticulous in our efforts to deliver what we promise and ensure that our communications are non-manipulative and non-coercive. We also ensure that all marketing and communication initiatives are within the legal and regulatory boundaries prescribed by the relevant bodies. During the reporting year, our hotel did not record any incidents of non-compliance to regulations with regard to marketing communications.
Key Product Responsibility Initiatives
Health & Food Safety › Dedicated Hygiene Manager to oversee and control food safety
standards and related food borne diseases. › Food handlers are certified by the Colombo Municipal Council. › Extended training for 35 staff members at the Institute of Food Safety
as certified food handlers in 2013/14. › Obtain and comply to certification standards on health & food safety. › Extends special menus for functions, diverse spread to
accommodate dietary preferences .
Differently-abled Persons › Special rooms and other facilities are available for physically
challenged or differently-abled persons. › Associates are well trained to assist the special needs of differently-
abled persons.
Guest Safety › A doctor and a nurse on call for emergencies. › Fire safety & fire fighting equipment available. › Well-trained life guards are in attendance at the pool. › Round-the-clock hotel security provided. › Digital CCTV system is in place covering key areas. › Action plans are in place for emergency room potential scenarios (5
natural & 20 manmade)
Supplier Policies › Preferential treatment for suppliers with food safety certificates
aligned to ISO 22000 and Green Globe certification standards.
Guest Satisfaction › Luxurious and modern product offer in accommodation and dining
experiences › Customer feedback obtained at restaurants and in rooms are
collated and evaluated and due action taken on a monthly basis. › Customer comments on feedback forms are deliberated and
addressed on a daily basis at morning meetings at the operational level.
› Customer complaints are handled daily at the morning meetings with the heads of departments.
› Expatriate associates fluent in different languages support guests to overcome language barriers.
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ISO 22000
Re-certification
Star Crescent
Merit Award
OHSAS 18001 Certification
Green Globe Re-certification
Certificate of Excellence
“A+” Grade
Five Crowns
Bronze
For food safety management
system
Crescentrating Singapore for Halal
certification
EU Switch-Asia Greening
Sri Lankan Hotels Awards 2013
For health and safety
management system
For sustainable operations and management
TripAdvisor LLC
CMC Hotel Hygiene Classification Audit
2013
Food hygiene certification Ind-
expo Certifications
Annual Report Awards 2013
Institute of Chartered Accountants of
Sri Lanka
Key Product Responsibility Initiatives
Staff Training › Intensive training extended to associates on guest relations and
service. › Training extended at Emirates Academy of Hospitality Management in
Dubai for international exposure. › Comprehensive training for all associates in minimum quality
standards and standard operating procedures. › Code of Ethics internalised amongst the associates.
Marketing Communications › Strictly maintain marketing communication ethics by disseminating
accurate and factual information on products and services. › Product information including rates, promotions and offers are
extended through direct marketing - trade fairs, road shows, official website, social media.
› Audit team carries out bi-annual brand audits to ensure that there is brand consistency and values are embedded into operations.
Certifications › Relevant certifications are in place from recognised international and
local bodies. › Comply with standards prescribed by the certification bodies to
ensure current best practices are applied in operations.
Awards & Certification Our hotel marked many renowned accomplishments in the year 2013/14 and maintained certifications from recognised bodies, demonstrating the commitment towards sustainable and responsible business practices. The following are the awards and certifications received endorsing our hotel’s product responsibility initiatives.
› ISO Certification: The hotel was recertified for ISO 22000:2005 Food Safety Management System Standard for the third consecutive time in year 2013. This certification covers the hotel’s entire food manufacturing operations including materials, purchasing, stores, kitchens, stewarding, restaurants, bars, human resources, maintenance and waste disposal.
› OHSAS 18001: Our proactive measures to ensure health and safety in our workplace were recognised and we received certification for standards prescribed by OHSAS 18001, an international occupational health and safety management system.
› Crowns: Cinnamon Lakeside was awarded Five Crowns at the ‘Crowns for Food Hygiene Awards’ held on 15th August 2013. This prestigious award was conferred subject to an extensive pre and final assessment carried out by the Sri Lanka Tourism Development
Authority in partnership with Ind-Expo Certification (Pvt) Ltd., a joint venture of the Ceylon National Chamber of Industries and the National Chamber of Exporters of Sri Lanka. The Crowns scheme measured and assessed the hotel’s food safety management systems, infrastructure, environment, cleanliness, food preparation procedures, storage, personal hygiene, use of clean water and effective use of raw materials.
› Colombo Municipal Council: The Hotel was awarded a Certificate of Commendation with ‘A +’ Grade at the Hotel Hygiene Classification Audit 2013 carried out by the Public Health Department of the Colombo Municipal Council.
› Crescentrating Singapore: We have certification in place from Cresentrating Singapore, an international rating standard for Halal friendly travel services, upholding our responsibility towards meeting faith based needs of our guests.
› Green Globe: This is a well acclaimed international certification programme for sustainable tourism, entailing 41 standard criteria
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and 137 compliance indicators. The certification programme lays emphasis on conserving energy and water resources, reducing operational costs, positively contributing to local communities and the environment. Having obtained the initial certification in 2010, our hotel continued to be compliant in the year to the mandatory standards and sought to better the score to be eligible for re-certification. After an on-line audit by Green Globe including a detailed evaluation of the submissions of our sustainability initiatives and measures adopted, our hotel was granted re-certification for the fourth year in succession, in effect, as the only Sri Lankan hotel thus far to do so.
› TripAdvisor LLC: Cinnamon Lakeside was recognised by TripAdvisor, the world renowned internet based travel site with a Certificate of Excellence 2013 which is based on customers’ perspective, recognition reviews and feedback on the site. The hotel was ranked amongst the top ten island-wide in the TripAdvisor Travellers Choice Award.
› EU Switch-Asia: Our initiatives and measures in energy, water and waste management were well recognised with a Merit Award
Management Discussion & Analysis Contd.
at the EU Switch-Asia Greening Sri Lankan Hotels Awards 2013, implemented by the Ceylon Chamber of Commerce and supported by the European Union.
› Reporting Standards: Cinnamon Lakeside was adjudged the ‘Bronze’ winner of the Hotel Sector Category at the Annual Report Awards 2013 conducted by The Institute of Chartered Accountants of Sri Lanka, signifying the excellence in presentation and disclosure of high quality, relevant, reliable and objective financial statements in accordance with the framework stipulated by the International Accounting Standards Board (IASB).
Compliance
GRI (3.1) PR9
As mentioned above, the hotel gives precedence to responsibility and accountability in its products and service offer. The reporting year did not record any monetary fines for non-compliance with laws and regulations pertaining to products and services.
Leading the way in sustainable tourism with four consecutive Green Globe Certifications
Director of Finance receiving the Hotel Companies Bronze Award at the 49th Annual
Report Awards
Winner of the Tripadvisor Certificate of Excellence 2013
The Merit Award at the EU SWITCH-Asia Greening Sri Lankan Hotels Awards
Raising public awareness on environmental issues through social media
Five Crowns out of Five for Food Hygiene
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Financial Review
RevenueThe hotel recorded a consolidated net revenue of Rs. 2,939 million during the financial year which is a 03 percent increase against the Rs. 2,840 million achieved during the corresponding year. With new competition entering the city five star market,room revenue and food and beverage (F&B) revenue grew only marginally during the year whilst revenue clustered as other revenue grew impressively.
Composition of RevenueThe composition of revenue remained constant in comparison to the previous financial year with room revenue contributing 48 percent to the total revenue, F&B revenue contributing 42 percent and revenue clustered as other revenue contributing 10 percent.
Room RevenueThe Rs. 1,399 million room revenue generated for the year was a 3 percent increase from the previous year value of Rs. 1,352 million. The hotel’s occupancy for the year remained constant at 61 percent. However given the city occupancy at only 53 percent, this is a significant achievement. Also the hotel’s room market share has grown to 19 percent from 18 percent in the corresponding year despite the fair share drop to 16 percent from 17 percent with the entry of newly renovated room nights of Kingsbury Colombo to the city during the financial year. The average room rate for the year was flat at USD 135. This is mainly caused by the drop in the city occupancy from 58 percent to 53 percent and aggressive pricing strategies adopted by competition.
Composition of Room RevenueThe strong performance in the business segment continued this year as well contributing to 62 percent of the total room revenue. The total room revenue generated from the business segment grew by 01 percent amounting to Rs. 849 million. With competition following aggressive pricing strategies in the price sensitive leisure market, the hotel was negatively impacted. The segment generated Rs. 290 million, a 6 percent decrease compared to the previous financial year and contributed only 21 percent to the total room revenue. Positively impacted by being one of the lead hotels to house the Commonwealth Heads of Government as well as the South African cricket team, the MICE segment enjoyed a growth of 22 percent. The segment generated a revenue of Rs. 180 million, contributing 13 percent to the total room revenue. The crew segment performed impressively during the year growing by 16 percent. The hotel housed three international crews during the year generating a revenue of Rs. 59.8 million, contributing 04 percent to the total room revenue.
Room Type AnalysisThe occupancy level of superior rooms reduced to 59 percent from the
BeverageF&B OtherLaundry
Other IncomePowerdromeRental on Investment Property
5%
1%
3%
7%
48%
36%
1%
2%
4%
Composition of Revenue
OtherRoomsFood
previous year occupancy of 62 percent whilst the occupancy of premium rooms grew impressively from 57 percent to 67 percent. The suites remained constant at an occupancy of 53 percent and the Executive floor rooms experienced a decline in occupancy to 52 percent as against the previous year’s occupancy of 62 percent.
F&B RevenueFood and beverage ( F& B) revenue of the hotel reached Rs. 1,265 million during the year under review, an increase of 02 percent in comparison to the last year’s revenue of Rs. 1,235 million. Even though single digit, the growth in F & B revenue can be considered commendable despite new standalone restaurants and culinary entertainment areas available for the variety seeking customer. The total city five star F & B dimension also saw a drastic change during the year under review with the entry of dining and banquet options at Kingsbury Colombo. With this addition, the growth of city five star hotels’ F & B revenue was commendable at 17 percent. This led to composition of F & B revenue to the total hotels’ revenue
2012/13 2013/14
City Five Star Occupied Rooms Night
Q1
Q2
Q4
Q3 107,068
107,946
87,499
118,121
93,641
110,847
96,484
110,113
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Management Discussion & Analysis Contd.Management Discussion & Analysis Contd.
dropping from 44 percent in year 2012/13 to 42 percent during the year.
F & B outlets generated a revenue of Rs. 632 million during the year under review, contributing 54 percent to the total F & B revenue as against revenue of Rs. 629 million during the corresponding previous year. Impacted by the entry of new options available to the variety seeking customers this segment of revenue did not benefit from any growth during the year under review. The marginal increase in the revenue was augmented by the favorable increase in the average check from Rs. 1,481 the previous year to Rs. 1,534. Impacted by the factors said before, the total number of outlet covers saw a drop from 425,120 during the year 2012/13 to 411,999 covers during 2013/14.
Banquets revenue contributed 46 percent to the total F & B revenue. It grew by a steady 03 percent from Rs. 560 million in 2012/13 to Rs. 578 million. The revenue was augmented mainly from the increase in average rate from Rs. 3,067 in the previous year to Rs. 3,304 during the year under review. The hotel was proud to be part of 1,594 banquet events including the Royal dinner hosted by Prince Charles the Prince of Wales during the Commonwealth Heads of Government Meeting held in Colombo in November 2013.
Other RevenueRevenue clustered as ‘other revenue’ along with rental income from investment property generated Rs. 275 million during the year. This is a growth of 10 percent in comparison to Rs. 250 million generated in the previous year. The main contributor to other revenue, external laundry generated revenue of Rs. 75 million, a marginal growth of 0.4 percent from the previous year’s revenue of Rs. 72 million. Investment property rental income increased to Rs. 61 million from Rs. 34 million in the previous year. The main reason for this increase was the investment property being in transition from one tenant to another during the year 2012/13. Impacted by the low spending pattern of customers, the hotel spa and the sports centre generated Rs. 16 million and Rs. 26 million respectively as against the previous year revenue of Rs. 18 million and Rs. 27 million. Other revenue contributed 10 percent to the total revenue of the hotel.
Income and Expenditure DistributionFood and commodity prices continued to increase throughout the year driven by the increases in fuel and energy prices. Direct cost of sales of the hotel increased by 6 percent during the year and is largely in line with the operational requirements linked with increased occupancy levels, special requirement to meet the Commonwealth Heads of Government Meeting and general price increase experienced during the period under review.Administration expenses of the Company was largely impacted by the depreciation cost. The depreciation cost increased to Rs. 205 million against Rs. 184 million which is an increase of 11 percent from the previous year. The main cause for the increase can be attributable to the
newly built Human Resource Complex commencing to depreciate from the year under review. Sales and marketing expenses were adversely impacted in the short run due to the Parent Company level strategy to penetrate business from India and China. Other operating expenses were adversely impacted with the electricity and the fuel price revision encountered during the year.
Financial Year 2012/13 2013/14
Rs.’000 % Rs.’000 %
Revenue 2,840,223 100 2,939,463 100
Cost of sales 1,021,348 36 1,080,326 37
Gross profit 1,818,875 64 1,859,137 63
Other operating income
12,233 0 13,285 0
Administrative expenses
601,695 21 649,426 22
Sales and Marketing expenses
79,794 3 89,330 3
Other operating expenses
291,854 10 317,168 11
Profit from operations 857,765 30 816,498 28
29%
10%
36%
22%
3%
4%
25%
Income Distribution (%)
Administrative Expenses Distribution Expenses Other Operating Expenses
Profit for the Year Income Tax Expense
OtherCost of Sales
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Finance Expense/Finance IncomeThe hotel enjoyed a surplus in cash flow during the year contributed by funds generated from its operations, efficient working capital management and conducive exchange rate .The average exchange rate applicable for the year saw an increase from Rs. 131.80 during the previous year to Rs. 132.30 in the current financial year. The hotel was able to maintain debtors days of 25, a marginal increase compared to the previous year’s debtors collection period of 22 days. It was able to control its inventory turnaround days to an impressive 11 days for food, 22 days for general store items and 85 days for beverages. Despite the significant drop in interest rates the hotel achieved an interest income of Rs. 55.3 million. This is a drop of 14 percent from the previous year’s value of Rs. 64.8 million. Capital expenditure spent by the hotel during the year including the Human Resource Complex was fully funded by internally generated cash. The hotel in keeping with the group policy primarily invested in interest bearing instruments.
ProfitabilityAggressive competition among the players in the market coupled with general price increases led to the incremental revenue increase of 03 percent, lower than the incremental cost increase which stood at 7 percent. This led to the hotel generating an operating profit of Rs. 816 million, a growth of 05 percent compared to the Rs. 857 million during 2012/13. With M/s. P.B. Kalugalgedara and Associates confirming the value of the investment property constant the hotel did not enjoy a revaluation surplus during the year under review as comparison to the revaluation surplus of Rs. 288 million enjoyed during 2012/13.
Cascading from above factors, profit before tax for the year declined by 28 percent from Rs. 1,211 million to Rs. 872 million during the year. The profit after tax also declined by 30 percent from Rs. 1,065 million to Rs. 743 million during the year. The percentage decrease in profit after tax was higher than the percentage decrease in profit before tax due to the higher rental income during the current financial year attracting more tax at the standard rate as well as the revaluation surplus during 2012/13 attracting lower tax rate.
TaxationAs per the current tax regulation, hoteliering income and other non-operational income are taxed separately. The profits generated from hoteling activities are subject to a tax percentage of 12 percent whilst the tax percentage of non-operational income is at 28 percent. The overall effective tax rate for the year under review was at 15 percent affected by non operational income such as investment property rent income and interest income which attracts tax at the standard tax rate.
Statement of Financial PositionThe Company reported a strong financial position for the year under review improving on the sound fundamentals built over the years through sustainable business practices and operational performance.Property, plant and equipment additions during the year amounted to Rs. 372 million which includes the cost of building the new Human Resource Complex and routine capital expenditure of the company.
Return on equity for the year under review decreased from 19 percent to 14 percent while the return on capital employed (ROCE) decreased to 16 percent from 21 percent. The main contributing factor for this decrease was the absence of the revaluation surplus during the year under review.
09/10
10/11
Total Revenue Net Profit Before Tax Net Profit After Tax
11/12
12/13
13/14
Total Revenue, Net Profit before tax Vs Net Profit After Tax (Rs. Mn)
743872
1,0661,211
625743
660
104128
1,972
2,375
2,840
2,939
1,067
686
Administrative Expenses
602 649
2012-13 2013-14
Expense Analysis (Rs. Mn)
Other Operating Expenses
292 317
Sales and Marketing Expenses
80 89
Balance Sheet Structure (Rs. Mn)
2012/13 2012184296,054
2013/14 2072494446,099
2013/14 62829036116,035
2012/13 66032533155,869
ASSETSProperty, plant and equipmentOther Non-current assetsInventoriesTrade and other receivablesCash in hand and at bank
EQUITY AND LIABILITIESShareholders’ funds Non-current liabilitiesTrade and other payableCurrent liabilities
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Management Discussion & Analysis Contd.
Cash Flow StatementThe net movement in cash and cash equivalents for the year under review was an outflow of Rs. 46 million. Cash generated from operating activities amounted to Rs. 1,110 million as against Rs. 1,084 million in the previous year. This was achieved through the performance of the hotel and prudent management of working capital. With the change in the exchange control legislation, the hotel holds remittances both in local currency as well as in US dollars. The hotel had adopted internal risk mitigation policies such as matching receipts & payments, leading and lagging payments to successfully minimise its risk exposure due to currency fluctuations. Cinnamon Lakeside invested Rs. 372 million in property plant and equipment during the year. This is an increase of 80 percent compared to the previous financial year value of Rs. 207 million.
The cash used for financing activities amounted to Rs. 700 million. This was due to the increase in dividend payment from Rs. 600 million to Rs. 700 million in the current financial year. During the year, a final dividend of Rs. 400 million for the financial year 2012/13 and an interim dividend of Rs. 300 million for the financial year 2013/14 were paid out by the hotel. The hotel ended the year in a strong cash position holding cash and cash equivalent for a value of Rs. 573 million as at 31st March 2014.
Cash Generated from Operations (Rs. Mn)
09/10 10/11 12/13 13/14
Cash Generated from Operations
301
629
854
1,0841,110
11/12
Statement of Changes in EquityShareholders’ funds as at 31st March 2014 was at Rs. 6,099 million as against Rs. 6,054 million as at 31st March 2013.
Quarterly PerformanceSlowdown in the market and high competition cascading down to the hotel, profit before tax of all four quarters were adversely impacted during the year under review. The hotel experienced a growth in quarter two and four in revenue while a marginal decline in revenue was experienced in quarter one and three. The revenue growth experience in quarter two and four was mainly attributable to the growth in room nights during this period and F&B revenue enjoying a successful festive season.
Share Price and Market CapitalisationThe Colombo Stock Exchange experienced an upward trend during the first half of the year with the All Share Price Index (ASPI) going up to 6,121 points in June 2013 an increase of 3 percent from the beginning of the financial year. The Bourse somewhat stabilised during the remaining part of the year with the ASPI closing at 5,968 points by end of March to post an increase of mere 15 points during the year under review. The Company share also could be said to have followed this same trend and gained 13 percent during the year with a final trading price of Rs. 79.9 per share.
Spurred by the lower profit after tax during the year earnings per share (EPS) declined significantly by 30 percent to Rs. 3.72 from Rs. 5.33 the preceding year. The Price Earnings Ratio (PER ) for the year was 21.47 times as against the previous year value of 13 times. However, due to the strong financial position, net asset per share increased to Rs. 30.50 as at 31st March 2014 from Rs. 30.27 reported in the previous year. The total market capitalisation as at 31st March 2014 was Rs. 15,980 million. This is an impressive increase of 13 percent from the previous year market capitalisation of Rs. 14,080 million.
09/10 10/11 12/13 13/14
Dividends Per Share Earning Per Share Adjusted for the sub division of shares
Dividends Per Share Vs Earning Per Share (Rs.)
2.00
0.52
3.30
3.00
3.12
2.00
5.33
3.00
3.72
3.50
11/12
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Turnover Expenses PBT PAT
Quarterly Revenue, Expenses & Profitability (Rs. Mn)
Q4 236
Q3 264
Q1 145
Q2 226767 554 194
812 563 227
748 531 200
613 488 122
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DividendThe dividend policy of the hotel seeks to ensure a dividend payout correlated with profits; while ensuring sufficient funds are retained for future in a high growth industry and thereby shareholder returns are sustainable in the short, medium and long term.
During the year directors recommended and paid out an interim dividend of Rs. 1.50 per share on 7th January 2014. Directors also recommend a final dividend of Rs. 2.00 per share payable on 17th June 2014. The proposed dividend is a 16 percent increase from the dividend per share of Rs. 3.00 in 2012/13 and will amount to a cash outflow of Rs. 700 million, increasing the dividend payout ratio to 94 percent from 56 percent in the preceding year.
09/10
10/11
11/12
12/13
13/14
Shareholders’ Funds (Rs. Mn)
6,099
6,054
5,236
4,919
4,355
Economic Value Added (EVA) (Rs. Mn)
2012/13 2766,054 1,066 789
2013/14 576,999 743 686
Total Capital Employed at the Beginning of the year Profit After Tax
Economic Charge Economic Value Added
Subsequent EventsThere are no matters or circumstances arising since 31st March 2014, not otherwise dealt with in the financial statements that would materially affect the operations or results of the hotel.
Value Based ManagementEVA is a measure that indicates the wealth that has been created by a business to its shareholders. EVA takes in to account economic cost of the sums invested as equity in to the business.
The following table illustrates our computation of EVA in 2013/14, we have created Rs. 57 million (Rs. 276 million in 2012/13) of wealth.
Economic Value Added (EVA)As at 31st March 2013/14
Rs.0002012/13
Rs.000Change %
Total Capital SuppliedEquity at the Beginning of the year 6,053,525 5,236,098 16%Long-term Interest Bearing Loans & Borrowings - - - Total Capital Employed at the Beginning of the year 6,053,525 5,236,098 16%EarningsProfit After Tax 743,180 1,065,718 (30%)Add: Interest on Long-term Borrowings - -Adjusted Earnings 743,180 1,065,718 (30%)Weighted Average Cost of Capital (%) 11.33 15.07 (25%)Economic Charge 685,864 789,229 (13%)Economic Value Added 57,315 276,489 (79%)
SourceAverage Risk Free Rate ( Avg. Treasury Bill Rate) Central Bank 9.61 12.34 (22%)Beta Factor CSE 0.86 1.37 (37%)Risk Premium (%) Assumed 2 2 0%Cost of Equity = WACC (Based on CAPM) Computed 11.33 15.07 (25%)
Sunil Kalupahane24 years as a Gardener
““
Guests are pleasantly surprised to see an organic rooftop garden. We are proud to grow our own herbs and vegetables in the heart of the city. Growing our own products and promoting organic food makes us proud. This is another fine example of us being the hospitality trendsetter and fully living up to our pledge of being green.
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Environmental Impact
å ‘I WILL BE GREEN’
Pledge - John Keells Leisure Sector
As a five-star city hotel, our business proposition is to indulge and delight our guests with the highest standards in accommodation facilities, catering, banquets and entertainment. Our consumption levels of resources from renewable to non-renewable are inherently high within the operations, with a considerable environmental footprint. As a responsible hotel, we fully understand this and have taken the necessary steps, engaging our associates and guests, towards striking a balance between operations and our footprint and ensuring the well-being of the environment.
Environment Policy
ApproachBeing committed to take forward a sustainable business, our hotel has formulated an environmental policy that sets out the approach for best practices to be followed in our operations - optimise on resource utilisation; reduce greenhouse gas emissions; and advocate environmental campaigns amongst our associates and the society at large. Our approach in environmental management consistently strives to meet the relevant regulations and statutory requirements prescribed by the legislation, the Central Environmental Authority of Sri Lanka and other certification bodies.
The hotel is proactive in monitoring, evaluating and reporting on our environmental performance as against the identified key performance indicators as drawn up in the five-year action plan, comprising measures and timelines that reduce carbon emissions. The environmental task force (Green Team) in collaboration with the engineering department of the hotel champions this cause and advocates sustainable environment practices within the operations.
CertificationsAs discussed under the product responsibility section of this report, we have in place re-certification for the fourth successive year from Green Globe, the renowned global body for sustainable tourism, for our initiatives and measures adopted in environmental management. We also work closely with the EU SWITCH-Asia ‘Greening Sri Lankan Hotels’ project towards energy and water utilisation efficiency, waste reduction and productivity improvements. We are also an honoured recipient of the Merit Award in the ‘Large Hotels (over 50 rooms) & Boutique Hotels’ category at the EU SWITCH-Asia Greening Sri Lankan Hotels Awards - 2013 for the second successive year. Energy Conservation Sustainable energy management continues to be a strategic facet within the hotel operations, making business sense in terms of cost as well as upholding our commitment towards lesser greenhouse gas emissions.
We sought in the year to reinforce the measures we have already adopted whilst seeking to explore and action the possibilities towards greater efficiency in energy utilisation and conservation. To this end, the Building Management System continued to be crucial in our efforts towards managing energy; the property and equipment were well maintained in a timely manner, controlled and calibrated to ensure optimum levels of energy efficiency. We also strived to actively engage our associates and our guests through awareness building initiatives.
Nearly 60-70 percent of energy within our operations is accounted for by air conditioning of the property. In the reporting year, we replaced the single- compressor air conditioning system with a more environmentally-friendly multi-compressor system that enables load sharing and thereby resulting in energy efficiency.
We also looked into the option of commencing a solar power project with net metering, at an estimated cost of Rs. 8.2 million. The pilot project was commissioned during the year and a survey was carried out to ascertain the feasibility of the project.
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Earth Hour
Once again for the 2nd consecutive year, our hotel joined the world to mark the ‘Earth Hour’ on 29th March 2014 from 8.30 pm - 9.30 pm. We organised several initiatives as listed out below:
› Switched off all lighting in public areas of the hotel during the ‘Earth Hour’. › Adjusted air conditioning temperature to 26° C from 23° C. › Organised a candle lighting ceremony with the participation of our associates and patrons at the Lobby. › Entertainment was given by an unplugged band. › Gifted reusable cloth bags made out of discarded linen to our patrons. › Distributed leaflets amongst the guests with information and tips on sustainable living in Sinhala and English. › An ‘Earth Hour Pledge’ book was distributed to all 818 employees of the hotel. › Served an assortment of ‘eco-friendly’ food and beverages made with organic and sustainable ingredients at The Dining Room. › Treated guests with ‘green drinks’ in a romantic candle lit ambience at 7˚ North.
Candle lighting during Earth Hour Educational Booklets for associates and guests Sustainable cloth bags made out of discarded material given to guests
Earth Hour Electricity Saving 800 KwH
Key Challenges
› Climate change › Global warming › Carbon footprint › Environmental pollution › Loss of biodiversity
Strategic Focus
› Energy conservation › Minimise water usage › Solid waste management › Use eco-friendly products › Environmental advocacy
campaigns
Key Targets
› Carbon footprint per guest night: 60 Kg
› Electricity usage per guest night: 70 Kwh
› Water usage per guest night: 1400 L
› Waste per guest night: 4 Kg
Actuals
› Carbon footprint per guest night: 56.45 Kg
› Electricity usage per guest night: 66.99 kwh
› Water usage per guest night: 1343 L
› Waste per guest night: 3.84 Kg
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Key Energy Saving Measures
Building Management System › Preventive maintenance for property and equipment. › Automatic and efficient temperature settings for various areas of the
hotel. › Outdoor and parking lot lights controlled by a timer.
Lighting › Property is built with an emphasis on visual compatibility with the
natural environment to maximise on sunlight for lighting purposes (natural lighting).
› Incandescent lighting for stairways and gardens. › Use of energy efficient light-emitting diode (LED) bulbs or halogen
bulbs in place of compact fluorescent lamps (CFL). › Designed T-5 Tube LED lights for wardrobes in guest rooms.
Guest & Associate Awareness › Message boards and signage displayed to engage guests and
associates to support environmental and energy saving efforts.
Energy Usage
GRI (3.1) EN3 & EN4
With hands-on energy management practices, our hotel was able to reduce energy used from all sources except furnace oil which increased by 4 percent over the previous year. Other fossil fuels – petrol and diesel recorded a decline of 4 percent and 13 percent respectively; electricity usage noted a 2 percent decline. As per guest nights, as illustrated in the chart, electricity used for the first, second and the fourth quarters in the reporting year was consistently below that of the performance in the preceding year; the third quarter however, maintained similar levels achieved in the preceding year.
Energy Sources Unit of Measure
2012/13 2013/14
Usage % Change
Direct
Diesel Litres 17,422 16,727 (4)
Petrol Litres 7,201 6,237 (13)
Furnace Oil Litres 349,487 364,295 4
Liquid Petroleum Gas
Kilograms 95,510 95,120 (0.4)
Indirect
Electricity KwH 7,734,526 7,541,726 (2)
Energy Savings
GRI (3.1) EN5
Supported by key measures implemented to conserve energy, during the reporting year, the hotel posted savings of 169,000 KwH electricity and 19,200 litres furnace oil.
Energy Sources Unit of Measure 2013/14
Direct
Furnace Oil Litres 19,200
Indirect
Electricity KwH 169,000-
Emissions & Carbon Footprint
GRI (3.1) EN16 & EN17
Greenhouse gas emissions in the hotel are measured as per Greenhouse Gas Protocol - World Resource Institute & World Business Council for Sustainable Development. The measurement takes into account the greenhouse gas emissions and further global warming effects of the property as well as business related travel including contrail formation of flights according to Intergovernmental Panel on Climate Change 1999.
The scope of measurement is two pronged: the first measuring direct emissions from the source that are owned and controlled by the hotel and the second measuring indirect emissions mainly from electricity usage which is sourced from the main grid.
In the reporting year, supported by conscious efforts and measures taken to minimise the greenhouse gas emissions, our hotel was able to reduce the total carbon footprint by almost 2 percent to 6,354 CO2eq. This
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2012/13 2013/14
Electricity Per Guest Night (Kwh)
Q2 42.667.0
Q1 51.984.2
Q3 64.664.4
Q4 59.675.4
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corresponded to a reduction in indirect emissions resulting from a decline in electricity usage which accounts for over 80 percent of the total footprint. CO2 per guest night reflected a declining trend on a quarterly performance basis with a marginal increase in the third quarter as against the preceding year.
Emission Factor 2011/12 2012/13 2013/14
Diesel GJ->TJ->MT CO2 74,100 17 39 38
Petrol GJ->TJ->MT CO3 69,300 16 14 12
Furnace oil GJ->TJ->MT CO4 78,000 836 863 900
Liquid Petroleum Gas (LPG) GJ->TJ->MT CO5 63,100 255 265 264
Electricity GJ->TJ->MT CO6 1 5,259 5,272 5,140
CO2 Footprint - direct energy through primary Sources (Scope 1)
MT 1,123.66 1,181 1,213
CO2 Footprint - indirect energy through primary Sources (Scope 2)
MT 5,259.47 5,272 5,140
Total CO2 Footprint MT 6,383.13 6,453 6,354
Basis of Calculation: Greenhouse Gas Protocol - World Resource Institute (WRI) & World Business Council for Sustainable Development (WBCSD)
Key Water Saving Measures
In-house › Towel and linen reuse programme in all guest rooms. › Timely detection and repairing leaking toilets, faucets and
showerheads in guest rooms. › Motion sensors on men’s urinals in public restrooms, employee
locker rooms & fitness centre. › Dual flush toilets with 6/3 litres per flush (1.6/0.8 gallons per flush)
or less. › Low flow showerheads - 9.5 lpm/2.5 gpm or less.
Gardens › Rainwater harvesting for gardening purposes. › Using native plants or plants that require less water in landscaping › Irrigation takes place early morning or evening ie., before 10 am and
after 5 pm.
Water Management
GRI (3.1) EN8 & EN10
Having recognised the significance of conserving water as part of our commitment to be ‘green’, we have taken some key steps to reduce water usage and saving adjustments within our operations, including rainwater harvesting, proper maintenance of plumbing system and simple reminders to associates and guests to be conscious of using water sparingly.
During the reporting year, we used 151,149 cubic metres of water from three sources - ground water, rainwater harvested & the main pipe-line of the Colombo Municipal Council.
2012/13 2013/14 % Change
Usage (Cubic Metres) 142,338 151,149 6
Ground water 1,928 2,201 14
Rainwater harvest 123 58 (53)
Municipality line 140,287 148,890 6
Water consumption per guest night (litres)
1,319 1,343 2
2012/13 2013/14
CO2 Per Guest Night
Q2 55.87
Q1 42.9569.8
Q3 55.4753.56
Q4 49.7263.36
35.89
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Waste Water TreatmentThe hotel uses the facilities provided by the Colombo Municipal Council to discharge waste water. Although a treatment plant is not available, our hotel seeks to ensure that water disposed meets the parameter levels specified by the Central Environmental Authority of Sri Lanka. In the ensuing year, we intend to initiate a ‘flat-trap’ system to further improve the quality of the waste water discharged.
Solid Waste Management The hotel has in place a structured process to manage solid waste sustainably based on the well accepted concept of 3Rs - reduce, reuse and recycle. This process entails waste collection, segregation, storage and disposal including 3R initiatives of managing biodegradable and non-bio-degradable and hazardous waste.
During the year under review, our hotel generated a total of 321,496 kilograms of waste; bio-degradable waste accounted for the largest share mainly that of food waste accounting for 90 percent. Paper represented around 1.5 percent whereas non-biodegradable waste - plastic, glass, and aluminium took up 5 percent. Hazardous waste - electronic waste represented just 0.05 percent.
We continued with our efforts to dispose solid waste responsibly. Nearly 70 percent of food waste was recovered as supplies to the neighbourhood piggeries whilst the balance 30 percent was sent in for landfill through the Colombo Municipal Council. Most of the paper waste and non-biodegradable waste - plastics, glass and aluminium cans were recycled through recycling partnering companies viz. Neptune Papers (Pvt) Ltd and Viridis (Pvt) Ltd. Electronic waste was also fully recycled through Green Links, a company licensed by the Central Environmental Authority of Sri Lanka and in compliance to internationally recognised standards and BASEL convention.
Solid Waste Generated
2012/13 2013/14
Kgs % Share Kgs % Share
Non-hazardous Waste
Food 550,046 96.1 401,765 90.2
Newspapers 2,401 0.4 2,045 0.6
Other papers 2,900 0.5 3,000 0.9
Plastic bottles 1,437 0.3 2,353 0.7
Glass bottles 7,564 1.3 13,120 4.1
Cardboard 2,413 0.4 4,830 1.5
Aluminum cans - - 755 0.2
Used oil 5,321 0.9 5,103 1.6
Solid Waste Generated
2012/13 2013/14
Kgs % Share Kgs % Share
Hazardous Waste
Electronic 300 0.05 156 0.05%
Total 572,382 100.0 432,964 100.0
Waste generated per guest night (Kg)
5.30 - 3.80 -
Waste Disposal
F.Y. Ended 2012/2013 2013/2014
Kg % Share Kg % Share
Non-hazardous Waste
Reused 5,321 1 208,024 48
Recycled 16,715 3 26,174 6
Recovered 385,032 67 78,142 18
Land filled 165,014 29 120,468 27
Hazardous Waste
Recycled 300 0.05 156 0.04
Total Disposed 572,382 100 432,964 100
Key Solid Waste Management Initiatives
Reduce › Telephone books available by request and not a standard feature in
every room. › Print policy advocates double-sided printing with grey scale and draft
setting as default features on all printers and copiers where duplex printing is available.
› Manual double-sided printing used for select print jobs for equipment without duplex capabilities.
Re-use › Using old linen to make laundry bags for the management team. › Waste cooking oil re-used in heating boilers to reduce the
dependence on furnace oil. › Re-use steam generated from the laundering process to heat water
in guest rooms. › Garden waste is made into compost › Reuse coat hangers from employee uniforms and guests in dry
cleaning.
Recycle › Recycling cardboard, glass, plastic, aluminium and waste papers. › Recycling of hazardous waste - e-waste responsibly.
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Eco-Friendly ProductsAs our environmental policy advocates, we are increasingly moving towards using eco-friendly alternative products made with lesser resources or less environmentally harmful substances. This in turn supports our efforts to uphold health and safety standards of our property and product offer. Our purchasing policy therefore, encompasses environmental and sustainability selection criteria and gives preferential treatment to suppliers adhering to best practices in their production processes.
This year under review, we also stepped up our organic farming programme under the guidance of our qualified garden curator and even supplied to our kitchens especially catering for special requests from our guests. We intend to take this initiative forward in the ensuing years, well aligned to the growing demand for such services from our guests and also addressing concerns on food contamination with chemicals and ensuring food safety within our hotel operations.
Moving Towards Eco-friendly Products
Purchasing Policy › Preference given to certified suppliers or suppliers following best
environmental and social practices. › Environmentally-friendly products are purchased, such as recycled or
non-traditional paper, organic food and certified wood. › Purchasing preferences given to locally produced goods, products or
services, wherever possible. › Preference given to product suppliers who provide and take back
re-usable packaging and shipping containers/pallets. › Fairtrade certified coffee is used. › Amenities offered such as soap, shampoo, creams etc in guest
rooms, employee locker rooms, public bathrooms, spa, fitness centre are bio-degradable and produced as per European Eco Label standards or similar local standard .
› VOC and lead free paints are used during renovations.
Organic Farming › Commenced organic farming on 1st floor terrace with exotic fruits
and vegetables such as eggplant, cauliflower, Chinese cabbage, green chili, spinach, Thai kankun and mint leaves.
› Purchase approximately 10 percent of vegetable and food supplies from organic farmers.
Protecting Biodiversity
GRI (3.1) EN14
Our hotel has always sought to operate on a green platform, protecting biodiversity especially within the premises and in our immediate surroundings bordering the Beira Lake. We take special care of the on-site
flora and fauna; in our gardening and landscaping, we consciously select native plants, trees and grass wherever possible, to ensure adaptation to the local climate and minimise the dependence on fertiliser, pesticides and water. This also helps to prevent invasive species spreading into our ecosystem.
Our hotel supports conservation and management of the natural area located within business influence zone especially the border of the Beira Lake. Our gardeners are assigned to clean-up this border on a daily basis.
Awareness Building We recognise our role and is proactive in advocating awareness campaigns to protect bio-diversity and abate climate change. We engage our associates and extend training on green practices; during the reporting year, we extended 15 ‘green’ training programmes for 450 associates, representing 55 percent of the total cadre. The training hours reached to 27,000 associate hours.
We also target our guests, public and school children mainly from the communities around us with structured programmes to disseminate information on environmental best practices.
Key Measures - Awareness on Green Practices
Associates › Awareness on energy, water conservation & waste management
through training sessions, e-mails and posters. › Green training extended to associates on current and best practices
on sustainability issues. › Company environmental policy is internalised through display at
common staff areas and through the internet.
Guests › Place framed pictures with eco-friendly slogans in all guest
bathrooms/guest rooms.
Public › Maintain and display message boards and posters on good
environmental practices at the round-a-bout assigned to the hotel. › Organise environmental awareness campaigns amongst school
children. › Celebrate environmental calendar events advocating solutions for
pertinent environmental issues.
City Naturalist AwardOur hotel supported Cinnamon Nature Trails to launch an edutainment programme for children - ‘City Naturalist Award’ in May 2013. This award designed to inspire children on studying and conserving bio-diversity in the city of Colombo was conducted by leading experts in the field of eco-tourism.
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The programme encompassed a three pronged approach - lessons in flora and fauna found in the city, study of birds and butterflies and assessed nature walks. Participants received City Naturalist Award and Badge along with immense exposure to enhance skills in team work, leadership, creativity, photography, public speaking and communication skills. 25 children participated in this programme which spanned three days.
Teaching children the importance of conservation and biodiversity
World Environment DayThe World Environment Day 2013 as declared by the United Nations and themed ‘Think.Eat.Save’ focused on anti-food waste and food loss campaign. Our hotel which has been advocating anti-food waste in the recent years with proactive initiatives to encourage the associates as well as guests to consume responsibly was well attuned to this year’s theme.
Celebrating this event, an awareness programme on ‘Protecting the Environment for the Future Generations’ was organised on 11 June 2013. The programme was facilitated by Dr. Waruna Fernando, a world renowned expert on environmental management systems. The programme which disseminated information and long term solutions on common waste related issues was attended by 350 students from five neighbouring schools: T.B. Jayah Maha Vidyalaya, Saripuththa Maha Vidyalaya, Al Iqbal Balika Maha Vidyalaya, Holy Rosary Sinhala School and Holy Rosary Tamil School together with 100 students from the Sri Lanka Institute of Tourism and Hotel Management.
Raising associates awareness on anti-food waste
Facts: ‘Think.Eat.Save’
World: › 1.3 billion Tonne of food is wasted every year. › One in every seven people in the world is starving. › More than 20,000 children under the age of five die from
hunger daily.
Source: UN Food and Agriculture Organization (FAO)
Cinnamon Lakeside Response:
› Educate associates on the collective impact of food wastage by collecting and weighing wasted food at the hotel.
› Associates are trained, to advise diners on sufficient quantities when taking orders.
› At buffet meals, chefs are conscious to prepare smaller portions, replenishing dishes as they are consumed.
Reduction of food wastage - 259,912(from 550,046 Kg in 2012/13 to 290,134 Kg in 2013/14.)
Investment
GRI (3.1) EN30
For the reporting year, our hotel invested a sum of Rs. 58 million on environmental initiatives as given below.
Financial Year 2012/13 Rs. Mn
2013/14 Rs. Mn
Initiatives
Energry Conservation 1.2 57.65
Water Conservation - 0.02
Solid Waste Management - -
Training Associates on Green Practices - -
Total Investment 1.2 57.67
Compliance
GRI (3.1) EN28
Cinnamon Lakeside is fully compliant to environmental laws, rules and regulations stipulated by the relevant regulatory and statutory bodies. Our hotel was not pensalised with fines or sanctions during the reporting year for non compliance pertaining to environmental legistation and regulations prescribed by the relevant bodies.
Management Discussion & Analysis Contd.
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Our Associates
å I WILL EMPOWER
Pledges of John Keells Leisure Sector
Our associates with their dedication to service excellence play a pivotal role in the success of our operations. At Cinnamon Lakeside, we have rightly identified this and ensure that our associates are given the right platform to unleash their true potential, to grow their professional lives, in turn supporting the hotel to stand its positioning in the industry.
Approach
Group Policy on Equal Opportunity
The John Keells Group is an equal opportunity employer. Accordingly, the group is committed to hiring, developing and promoting individuals who best meet the requirements of available positions, possess the required competencies, experience and qualifications to carry out assigned tasks and have the potential for growth within the organization; and has put in processes and systems that ensure the same.
As an equal opportunity employer, our objective is to attract the best in the industry and extend an empowering work culture to our associates; to progress in their careers whilst strategically supporting the operations to uphold the best in service, aspired as a top-notch city hotel in Colombo.
Our HR management approach embraces structured personnel planning, performance evaluations, training and development and maintaining collaborative relations with our associates with due remuneration, incentives and wellbeing measures. Our HR policies, procedures and practices are established in line with the John Keells philosophy ‘to stand out as a preferred employer’ and in compliance to applicable legislation in the country. We are committed to uphold the highest ideals in work ethics and professionalism.
Personnel Planning
GRI (3.1) LA1
Cadre StructureAs at 31st March 2014, the staff strength of Cinnamon Lakeside touched 855 with a four layer structure– senior management including assistant vice presidents, management, executive and non-executive. Out of the total cadre, 88 percent comprised non-executive level staff whilst 11 percent accounted for by executives and assistant managers reflecting the strength of the operations. Management comprised just below one percent.
As at 31st March 2014
Employee Category Male Female Total
Assistant Vice President& Above 2 2 4
Manager 3 3
Assistant Manager 9 1 10
Executive 64 17 81
Non-Executive 692 65 757
Total 770 85 855
Key Challenges
› Industry shortage of trained labour
› Increasing competition resulting in; › Higher turnover › Loss of trained / experienced personnel
› Opportunity cost › Loss of time and material cost
Strategic Focus
› Personnel planning › Performance evaluation › Succession planning › Training & development › Associate wellbeing › Work-life › Health & safety › Welfare & sports › Cordial relations
Targets
› Performance evaluations: 80% of cadre
› No. of associates trained: 750
› Training hours: 66 hour per employee
› Attrition rate:10%
Actuals
› Performance evaluations:81% of cadre
› No. of associates trained:764
› Training hours: 94 hours per employee
› Attrition rate:9.78%
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Cadre Composition Analysis
GRI (3.1) LA13
The operations in the hospitality industry demand a team that is dynamic to meet the expectations of diverse stakeholders. The strength of Cinnamon Lakeside stands on its team, laying claim to expertise and versatility that best-fit the strategic goals of the hotel.
› Employment Type: Given the nature of our operations which is subject to seasonality inherent in the tourism and leisure industry, we seek to maintain a healthy balance between permanent and contract employees. Over 70 percent of our cadre is employed on permanent basis, whereas, 30 percent mainly within the non-executive grades are employed on contract basis. However, we extend opportunities for contract staff to come into the permanent cadre based on their performance and deliverables.
› Nationality: Our hotel is firm in its employment policy in extending job
opportunities to Sri Lankan nationals. However, being a world-class five star hotel, it is imperative that we embrace international standards into our operations. We seek to combine a small percentage of foreign nationals to our team with renowned credentials;they in effect, have brought in a wealth of experience and expertise from international
hotel chains to enhance the quality of our workforce. As at the reporting year end, we had nine foreign employees,representing just one percent - complementing the local representation of 99 percent.
› Gender: Gender distribution is askew towards male associates,
representing 89 percent of the total cadre. As an equal opportunity employer, we seek to move towards and foster a greater balance in gender representation. We recruited 17 female employees in the year, taking the representation from 9 percent in the preceding year to 10 percent. We also have representation of females in the senior management grades. In fact, as displayed above under the Cadre Structure, we have established a balance representation of gender at the vice president and above level.
› Age Group: Our hotel continues to have a strong team of associates
with a dynamic mix between the age groups. The team displays stability of more senior employees combined well and supporting the vitality and ‘new age’ thinking of the generation ‘Y’ staff; 62 percent is below 40 years whilst 38 percent is between 41-55 years. In our management practices, we strive to extend modern work practices and facilities to engage the generation ‘Y’ staff effectively, to bring out their true creativity and innovation. We also encourage collaborative relations between the senior staff and the generation ‘Y’ staff.
Management Discussion & Analysis Contd.
1%
1%
99%
99%
Nationality Analysis (%)
LocalForeign
2012/13
2013/14
9%9%
91%
91%
Gender Analysis (%)
MaleFemale
2012/13
2013/14
24%
30%
70%
76%
Employment Type Analysis (%)
ContractPermanent
2012/13
2013/14
31%
13%0%0%
2%
40%
38%
28%
27%
31%
Age Analysis (%)
18 - 2021 - 3031 - 4041 - 55Over 55
2012/13
2013/14
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Non-Discrimination
GRI (3.1) HR4
Aligned to the group’s policies, Cinnamon Lakeside is steadfast in its HR policy to extend equal opportunities to all,based purely on merits; applied across the board in terms of recruitments, training exposure, remuneration and incentives, recognition and rewards. The hotel does not resort to any sort of discrimination of employees on social prejudices. In the reporting year, our hotel did not report on any such incidence of discrimination.
Recruitment & Retention
GRI (3.1) LA2
RecruitmentUpholding equal opportunity, our recruitment policy encourages sinclusivity without resorting to socio-economic prejudices. Our primary aim is to attract, identify and bring on board the ‘right’ profiled and ‘best-fit’ candidates for the vacancies as per the relevant job descriptions. Our selection criteria therefore, focus on skills, experience but more so on personality traits including creativity and attitude.
Our external recruitment process is dynamic and modern. Apart from the more traditional advertisements on the newspapers, we seek to source our candidates through accepted employment opportunity sites online, head-hunters, official website and social media. Our short-listing and selection process is competitive and challenging, combined well with a personalised approach to ensure that the best-in-class joins the team.
During the year under review, 119 new associates joined the team mainly for the front office, sales, and Food & Beverage departments. This corresponded to 8 percent increase in recruitments as against the preceding year.
In keeping with our preference for local sourcing, out of the new recruits, 114 comprised Sri Lankan nationals whilst the balance of five were foreign nationals assigned primarily for the kitchen and food & beverage departments. We also extended training and employment opportunities under the engineering department for 02 youths who live in the vicinity which will be discussed in detail under the Community section of this Report.
Precedence is given to internal recruitments which are duly based on the individual’s performance, personal traits and level of commitment. Internal recruitments are sourced through staff circulars and the intranet, and during performance evaluations. Suitable associates are encouraged to apply with necessary training support to take on their new duties. During the year, our hotel recorded a total of 52 internal recruitments and promotions, this was representing 6 percent of the total cadre including 4 promotions of female associates.
Recruitments/Promotions
External Internal
2012/13 2013/14 2012/13 2013/14
Gender
Male 99 102 56 48
Female 11 17 3 4
Age Group
18-20 15 19
21-30 47 52 22 14
31-40 31 41 14 20
41-50 17 7 21 18
Above 50 - 2 -
Nationality
Sri Lankan 105 114 59 52
Foreign 5 5 - -
91%
91%
9%
9%
Attrition Gender Analysis (%)
MaleFemale
2012/13
2013/14
49%
24%
27%16% 0%
27%
32%
25%
Attrition Age Analysis (%)
20 - 3031 - 4041 - 55Over 55
2012/13
2013/14
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RetentionIn a rapidly evolving industry with many opportunities for job mobility, retaining skilled staff is a significant part of our strategy, ensuring that the hotel sustains its positioning above the competition. Hence, we continue to focus on engaging and building relationships with our associates;seeking to extend career prospects; training;due recognition, incentives, welfare and their well-being as will be discussed in the ensuing sections.
The attrition level at Cinnamon Lakeside was well maintained at 9.78 percent, reflecting an increase of 2.8 percentage points from 6.98 percent in the last financial year. This is commendable in comparison to the city hotel average of 12 percent.
Recruitments/Promotions
Retention Rate Attrition Rate
2012/2013 2013/14 2012/13 2013/14
Gender
Male 90.72 87.72 5.68 8.18
Female 2.3 2.5 1.3 1.6
Female Retention - Maternity Leave
GRI (3.1) LA 15
During the year, the hotel registered three female associates on maternity leave. This represented 3 percent of the total female associates. In the year, two female associates returned to duty while one is still on maternity leave. The retention rate of female associates with regard to maternity leave during the past three years is 100 percent.
Child Labour
GRI (3.1) HR6
Group’s Policy on Child Labour
John Keells Group does not engage children in employment. As a general practice, the Group does not employ any person below the age of 18 (eighteen) years at the workplace.
Firmly guided by the group policy on child labour, the minimum age of employment is 18 years and above. We have in place a stringent verification process to ensure that our employees are in line with this
policy at the onset of the recruitment process. We also keep a firm check on the minimum age in out-sourcing labour at peak-times and when we take on trainees from the Ceylon Hotel School. We are conscious and are necessitated by our certification bodies to ensure that our supplier policies keep a close tab on child labour practices amongst our suppliers and business partners as discussed under the Economic Impact section of this report.
Forced or Compulsory Labour
GRI (3.1) HR7
Group’s Policy on Forced or Compulsory Labour
All employees have the right to remain in and terminate employment voluntarily and freely in terms of their contracts of employment.
The group has also institutionalized a process by which sexual harassment of any form could be brought to the notice of the management for redress.
Our hotel is conscientious in safeguarding the highest ethical standards as advocated by the group and does not resort to employ any person under coercion or compulsory conditions. All associates are given the opportunity and encouraged to exercise their free-will; a structured process is in place and institutionalised to report to the management or to the independent committee at the group level and obtain redress on any form of grievances, harassment and intimidation including sexual harassment . In the year under review, the hotel did not record any reporting of incidents with regard to forced or compulsory labour.
Remuneration, Rewards & Statutory ObligationsRemuneration and benefits are in line with the market levels whilst rewards and incentives are determined impartially and transparently,on the basis of performance evaluated bi-annually. Apart from the monthly compensation package, we offer our employees annual performance increments and bonus.
We are also meticulous in our statutory contributions - 12 percent of the basic salary to Employee Provident Fund (EPF), 3 percent of basic salary to Employee Trust Fund (ETF) and gratuity payments discussed in detail under the Economic Impact section of this Report.
Management Discussion & Analysis Contd.
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Performance Evaluation
GRI (3.1) LA12
Competency Framework
Salient Criteria Executive Assistant Manager
Manager AVP VP and SVP EVP President
A A B B C D E
- B C D D E E
B B C D D E E
A B C C D E E
B B C D E E E
A B C C D E E
A B C D D E E
B - - - - - -
Executives › Strategic ability and sound business judgement › Developing high performance teams › Customer focus › Innovation and change management › Decision making and problem solving › Communicate initiatives effectively and follow through
Remark : Graded on a scale from A-E ( A been the lowest and E been the highest)
Our performance objectives are set at the group level, cascading down to collective targets for the hotel and at the individual level. Performance evaluations for all levels of employees are based on a Competency Framework which was developed with the support of the Emirates Academy of Hospitality Management.
Evaluations on competencies as against objectives and targets for the executive grades are carried online,bi-annually. The self-evaluations carried out by the employees are validated at the General Manager level and subsequently, refined by the Career Committee with due ratings and employee feedback. At the non-executive level, evaluations are carried out manually with self-evaluation forms validated at the supervisory and the departmental level with the final ratings and feedback given by Sub-Career Committee.
Performance feedback and ratings are used to determine recognition, rewards and incentives. During this process, the competency gaps and
training needs are accordingly identified to support the formulation of the annual training calendar. During the reporting year, 685 associates representing 81 percent of the total workforce were evaluated and duly rated by the Career Committees; 59 of the evaluations were females. All promotions and incentives offered to the associates in the year were based on the ratings ascertained during this process. As mentioned above, a total of 33 associates were promoted with rewards and recognition given to high-performers.
Performance Evaluations 2012/13 2013/14
Male 614 626
Female 58 59
Total 672 685
Performance Evaluations Competency Framework vs. Pre-agreed Targets
Executive/Management
Self Evaluation Online
Heads of Department
General Manager
Career Committee
Rating & Feedback
Non Executive
Self Evaluation - Manual
Immediate Supervisor
Heads of Department
Sub-Career Committee
Rating & Feedback
Performance Evaluations Competency Framework Vs. Pre-agreed Targets
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Succession Planning & Mentoring The Career Committee identifies talented associates with potential for growth and leadership and extends a structured mentoring programme to empower such associates.
Our mentoring programme for selected associates in the management and executive level grades has created a positive work environment,with the necessary morale boost and confidence to work independently and emerge as our future leaders. We have a selected panel of mentors and resources persons responsible for the successful implementation of the mentor programme. Our ‘train, assess and develop’ programme (TAD) ensures that the mentors and resource persons are well trained to train the future
leaders. Therefore, succession planning within the organisation is continuous, consistent and firm. The top talent in the hotel is given the best of training opportunities and as discussed above, prioritised for promotions internally when vacancies arise. Our management trainee programme is also well structured and targeted to enhance our succession planning programme.
Currently, we have with us 33 specially selected mentors with 55 associates under their guidance at the executive, supervisory and management levels; we have one management trainee working with us under permanent employment.
Learning & Development (L & D)
GRI (3.1) LA 10 & LA11
Learning and development is one of most strategic facets that are perfectly correlated to the core business in hospitality - serving and delighting guests. Having recognised this, our hotel invests heavily and spends quality time extending the best and structured training opportunities;focusing on hotel operations and improving the confidence, flair and finesse of our associates. This in effect has paid great dividends- taking the hotel to the helm of the hospitality industry.
The L & D Department plays a central role in extending the most tactical training internally as well as externally for Cinnamon Lakeside associates. In consultation with heads of department and the Career Committee and based on the performance evaluations, the L & D Department ascertains training needs; prioritises them aligned to the strategic goals of the hotel and employee aspirations; and develops an annual training calendar. This covers proposed training programmes, budgetary allocations, time lines and training outcomes. Stemming from the annual calendar, the L & D
Management Discussion & Analysis Contd.
Ascertain Competency Gap
Assess Training Needs
Prioritise Training
Develop Annual Training Calendar
Prepare Monthly Training Plans
Prior Notice to Departments
Action Training Plan Internal & External
Feedback Trainers & Trainees
Monitor Outcomes & Refine Training Plan
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Internal Vs External Training Hours
Internal External
Mar-14 1278,286
Feb-14 515,498
Jan-14 276,326
Dec-13 455,542
Nov-13 536,183
Oct-13 566,705
Sep-13 6186,706
Aug-13 466,970
July-13 3606,948
June-13 3264,733
Apr-13 4,707 12
May-13 7,253 16
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Department formulates a monthly detailed plan which is circulated to all departments with prior notice,enabling the departments to make necessary arrangements for associates to participate in the programmes effectively. Timely feedback is obtained from both trainers and trainees to further the training process - ‘train, assess and develop’.
During the reporting year, we invested a sum of Rs. 3.8 million on learning and development. A total of 855 associates, i.e. 99 percent of the total cadre were trained in the year for 95 training hours per associate. The target for the year was 72 hours per associate. Out of the training programmes conducted, over 80 percent were organised internally, with the balance 20 percent on external training.
2012/13 2013/14
Training No. of Associates
Hours No. of Associates
Hours
Employee Category
Assistant Vice Presidents
4 80 4 269
Manager 3 135 3 142
Assistant Manager
11 756 10 406
Executive 70 4,216 81 2,150
Non- Executive 754 55,356 757 54,963
Total 842 60,543 855 57,930
Gender
Male 758 54,503 780 55,093
Female 84 6,040 75 2,837
Internal TrainingInternal training is carried out by in-house resource persons and on a monthly basis, training details including hours, outcomes and feedback are reported to the L & D Department for necessary monitoring and assessments. Currently, we have in our panel 90 well trained resource persons at the departmental level. Internal programmes focus primarily on technical training and developing soft skills.
Key training programmes carried out in the financial year 2013/14 are as follows: › Induction & Orientation: All new recruits are given the necessary
exposure through our comprehensive induction and orientation programme to carry out their responsibilities effectively. This programme offers the new associates a preview to the hotel ethos, processes and procedures including safety, security & emergency procedures. The programme also extends on-the-job opportunities as suitable, to cross-department and group exposures. This enables new associates to understand, learn and adapt to the Cinnamon Lakeside culture and meet the expectations at an individual and on a collective level. The programme also gives the new recruits an opportunity to meet the leadership team and network with the other colleagues. Apart from this programme, new executives are extended with an opportunity to attend a two-day programme at the group level.
› Language Training: A special training programme is extended to improve proficiency of the English language amongst the associates. This programme structured as a classroom training for groups as well as at an individual level primarily focuses on spoken English especially relating to their daily communication needs in carrying out their duties.
Engineering associates at a soft skills training session Associates attending a first-aid training session
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› Soft Skills Training: The L & D Department lays emphasis on training associates on interpersonal skills such as communication and negotiation skills, presentations, IT skills, customer care, etiquette, networking, team work and positive attitude. This is to enhance the quality of the service level provided to guests.
› E-Learning: Given time constraints, our associates in executive grades and above are encouraged to access the e-learning portal and carry out self-study programmes. The e-learning programmes are well structured with relevant and modulated study courses, training material and interactive features.
› Trainee/Internship Programme: Our trainees recruited mainly from the Ceylon Hotel School for a period of 6 months are given on-the-job training at Housekeeping, Front Office and F & B Departments. We also extend internship certification and top performers are given opportunities for further training and subsequent opportunities to absorb them into the permanent cadre.
External Training - ForeignApart from comprehensive training offered internally, we collaborate with Emirates Academy of Hospitality Management in Dubai, U.A.E. of the Jumeriah Group to give strategic exposure to our most potential associates on internationally acclaimed and current practices in hospitality operations and management. This institution which is an academic affiliation with Ecole Hoteliere de Lausanne, Switzerland, as our training partner over the years has been a definite ace in our efforts to give the best training to our associates.
External Training - LocalOur associates are also given an exposure to some of the key local training programmes carried out by the finest resource persons in the industry. In the reporting year, 102 associates obtained local training for 1,738 hours at an investment of Rs. 2.2 million.
Code of Ethics & Anti-Corruption
GRI (3.1) SO2, SO3 & SO4, HR3
Our hotel has in place a Code of Ethics which together with the Standard Operating Manual guides associates in their daily duties and ensures integrity and professionalism in operations. Our associates are well aware of our business ethics. A comprehensive training is extended at time of recruitment and consistently embedded in subsequent training sessions as well as through regular meetings and staff circulars to ensure adherence to the Code of Ethics. During the reporting year, we conducted 21 training programmes aiming to enhance professionalism and integrity of our associates with a participation of 417 and 834 associate training hours. This programme covered aspects of human rights relevant to our
operations including discrimination, child labour and forced labour.
We have in place a structured process for disciplinary action if required for any form of corrupt transactions including show-cause and inquiries. Our audit function both internally carried out bi-annually and externally, on an annual basis, plays a significant role in this process. In the reporting year, the audit function covered all departments within the hotel; any form of incidents relating to corruption was not recorded.
Associate Well-being
GRI (3.1) LA3
As a five-star hospitality entity providing the highest standards in service, it is critical that we set a positive, safe and healthy work platform for our associates, ensuring their wellbeing and boosting their morale and productivity levels. To this end, our hotel takes up a holistic approach promoting work-life; extending comprehensive welfare benefits; ensuring occupational health and safety; and nurturing their vitality individually and collectively. The recently launched HR building complex with state-of-art facilities for training, recreation and healthy lifestyle complements are efforts to ensure the well-being of our associates.
Permanent Staff Benefits
› Free meals at staff cafeteria with special meals during festive days › Discounts at the ‘Goodies’ for all associates, at the coffee shop for
middle management & at restaurants for senior management › Staff birthday celebrations on a monthly basis › Hotel-stay with family as a birthday gift for staff with 5 years or
above in service › Laundry facility for senior management and for uniforms of all grades › Prayer room facilities for Muslim staff › Official mobile phones for selected staff › Transport service for females associates working late hours › Hotel taxis for emergencies › Gift vouchers for children of staff from leading bookshops twice a
year › Dry rations for family funerals as per requirement › Modern recreation facility for all associates › JKH University Scholarship & English Scholarship programmes for
children of non-executive staff › Annual get-together for staff and their families › Recognition award/gifts for assoicates completing 5-25 years in
service
Work-Life BalanceIn a ‘24-hour’ operation, it is crucial that we encourage our associates to strike a healthy balance between work and personal life. We ensure that we
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have a sufficient team for work to be reasonably delegated, that the shifts and rosters and leave are appropriately planned well ahead. We engage our associates and allow a degree of flexibility and choice on shift and roster hours and leave.
We give comprehensive benefits including recreation facilities within the hotel to ensure a healthier lifestyle. We also encourage our associates to enjoy their work and bring their families and network as a team during special staff occasions and events. We extend exposure to staff families, especially to their children through programmes specifically organised to enhance their experiences and thinking horizon. This year, we carried out a Motivational Programme targeting children of our associates especially those who sit for Ordinary Level and Advanced Level examinations, motivating them to perform at their optimum at the examinations and supported them to deliberate on a suitable career path.
Health & Safety
GRI (3.1) LA6, LA7 & LA8
In our industry, it is critical that we pay due attention to health and safety hazards that may impact our associates at work. We have in place a comprehensive health and safety system to identify health issues and occupational hazards whilst taking the necessary measures and implementing programmes to prevent them and to be compliant to the relevant legislation and regulations. Our health and safety team of 32 associates representing 4 percent of the total workforce, with departmental representation, champions this cause and actively collaborates with others in implementing these measures. Regular meetings are held to deliberate on the progress and improvements that can be addressed to ensure that highest standards are maintained in occupational health and safety.
Certification
The hotel’s occupational health and safety management is certified by the British standard - OHS 18001:2007 which is also aligned to the ISO certification. The certification period is valid up to 19th July 2014.
Health Measures Safety Measures
› Comprehensive medical check-ups for executives and above grades annually
› Free medical check-ups and follow up for all food handlers annually
› Free worm treatment and typhoid vaccine for food handlers annually.
› Medical clinic with two visiting doctors and nurse for consultations and essential medication for common ailments for all associates
› Awareness programmes on diseases, nutrition & healthy lifestyle
› Fire safety equipment and facilities
› Periodic staff fire drills › Trained Fire Rescue Team › First aid training for associates › First Aid Team › Safety shoes for operational
staff › Security services & CCTV
cameras › Awareness training on safety
Issues
2013/14 Key InitiativesAs part of our health and safety programme, we organised some key initiatives as set out below for the year under review:
› Cancer Awareness Programme: Marking the cancer awareness month in October 2013, an awareness programme was organised including a Breast Cancer Awareness Programme to coincide with the breast cancer month in October 2013. This included free screening
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and clinical breast examination, mammography & referrals for further investigations for all female associates of the hotel. Fifty female associates participated and benefited from this initiative.
› Dental Check-up: In collaboration with Sensodyne, a dental check-up was organised for all staff in July 2013. Over 150 associates benefited from this programme.
› First-Aid Team: Cinnamon Lakeside Colombo created the first hotel based advanced Accidental Emergency Risk Management and Occupational First Aid Team with 12 associates from various departments. This team was given comprehensive training and certification by the Sri Lanka Red Cross Society and they are expected to support the in-house medical facilities both for guests as well as associates.
› Food Handlers Certification: The Institute of Food Safety under the purview of the Colombo Municipal Council continued in the year to train and certify food handlers as discussed under the Product Responsibility section of this report. Over 50 food handlers were certified under this programme during the year.
› Diabetes Awareness: This programme was organised in March 2014 to educate associates on diabetes, early warning signs, risk factors and prevention. 250 associates participated in this programme.
Injury & Absenteeism Our initiatives and the measures adopted in health and safety paid dividends in the year. We marked a firm improvement in the rate of injury and absenteeism. A total of 11 associates were exposed to occupational injuries in contrast 28 recorded in the preceding year; in terms of lost days, the year recorded 105 total man days lost reflecting an improvement as against 164 in the preceding year. The hotel did not record any fatalities in
Free dental check-up for all associates July 2013
Blessings for associates and the hotel, Gangarama Temple
March 2014
the year under review due to occupational health and safety issues.
Health & Safety KPIs 2012/2013 2013/2014
Total number of man days 213,840 244,800
No of occupational injuries 28 11
Total man days lost 164 105
Lost days % of total man days 0.08 0.04
Welfare SocietyOur Welfare Society actively advocates team spirit and extends welfare support to all member associates including loan facilities, disability payments, terminal benefit scheme, concessionary provisions at the welfare shop, medical facilities, eye care, assistance from the Blood Bank if required and contributions and cash rewards for achievements at competitions.
Apart from the welfare support, the Welfare Society in collaboration with the HR department organises staff events enabling networking to build fellowship amongst the associates. During the year, the Welfare Society took the lead to organise a staff get together for staff who has worked for over 20 years in the hotel , many religious ceremonies, and organized easy payment sales schemes for household items and motor cycles for staff.
Sports SocietiesThe hotel advocates and encourages associates to be active members of sports societies, sports houses and participate in competitive games leading up to personality development and healthier lifestyles. During the year, our sports societies organised inter-house tournaments in four teams - Dukes, Earls, Kings and Emperors; Cinnamon Lakeside team also represented inter-company and travel trade tournaments, showcasing their athleticism in these competitions.
Management Discussion & Analysis Contd.
Donations to a school by the Welfare Society
First AERM & Occupational First Aid Team in the Hotel Industry
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Mercantile D-Division Cricket Tournament Winners
Inter-Company Rugby 7’s
Travel Trade Swimming Meet 3rd Place
Inter-Company Badminton Over 40 Team: Runners-up
Inter-Company Netball Runners-up
Inter-Company Swimming Runners-up
Travel Trade Badminton Champions
Inter-House Carrom Tournament
Poson Dansela in JuneSinhala and Tamil New Year
celebrationsMotivational programme for
Associates’ ChildrenAssociates Christmas Carolling
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Awards & CompetitionsIn recognition of our associates for their top performance and loyal service, we organised the following award ceremonies during the year under review:
› Quarterly Awards: Nominated by the heads of department, quarterly awards celebrate associates both at the individual and team levels for their service excellence, hard work and diligence. During the year, eight individual and team awards were presented to top-associates with letters of commendation.
› V SPARC Awards: Initiated at the group level, top performers with exceptional service standards were recognised and rewarded at the V SPARC Awards held on each month at Cinnamon Lakeside;109 associates were recognised at these Awards.
› Long Service Associates Awards: This awards ceremony celebrated 104 associates who have been serving the hotel for over 10 years or more. In appreciation and in recognition of their long-standing service, awards and tokens of gratitude were presented at the ceremony held on 01st October 2013.
Freedom of Association & Collective Bargaining
GRI (3.1) LA4 & LA5
Cinnamon Lakeside is a member of the Employer’s Federation of Sri Lanka and abides by the governing framework prescribed for members. The hotel has not established collective bargaining agreements with trade unions. Anyhow, the work ethics we have upheld over the years have laid down a solid foundation to nurture trust, loyalty and cordial relations with our associates. We openly discuss and keep our associates informed at regular intervals on operational performance, future plans and any proposed changes to the operational structure.
Associates Quarterly Awards Long Service Associates Awards 2013 V-SPARC Awards
Cordial Relations & Grievance Handling Cinnamon Lakeside culture has always nurtured interactive and open relations with associates. We encourage our associates to be forthright in sharing their ideas and expressing their issues and grievances. We are consistent in obtaining feedback at all levels and associates have recourse from the grievance handling mechanism which is in place both at the hotel and at the group level to redress any issues and grievances.
The Great Place to Work (GPW) employee survey is conducted once in two years. This survey was carried out during the year under review which is a comprehensive and structured intervention across the organisation to understand and measure employee thinking. Based on the rating, focused Group Discussions with various categories of staff were conducted and action plans developed in collaboration with department heads. The developed action plans implemented will be continuously monitored to further enhance the working environment of our people.
The Voice of Employee (VOE) survey which is a dipstick survey is conducted annually to gather the pulse in the organisation. The score of 86% of this year indicates that the action taken by the hotel to enhance employee satisfaction has paid dividend.
To give a holistic perspective, assistant manager level and above, take part in a 360-degree feedback process. A questionnaire is passed on to the employee, his/her peers, subordinates and superior which is then rated and tabulated.
All above surveys are used as a people index which are shared with the staff, consolidated at the leisure group level and finally at John Keells group level to measure the level of employee engagement and satisfaction with the organisation.
Management Discussion & Analysis Contd.
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Caring for the Community
å I WILL CARE
Pledge - John Keells Leisure Sector
As one of the premier city five-star hotels, we are well aware of the catalytic role we could play to support the communities in which we operate, bringing positive changes to their lives, with ripple effects towards society progress. Our business strategy is fully attuned to this and we seek at all times to build solid relationships with community stakeholders which have become an integral part of our business success.
ApproachOur business strategy has effectively integrated socially responsible activities especially in areas where we can make a ‘true’ difference to empower the communities we operate in and the underprivileged people in the remote villages across the country. Aside the role in boosting the community supplier chain as discussed under the Economic Impact section of this report, our CSR initiatives are primarily focused on supporting education - uplifting the standards of neglected and needy neighbourhood and village schools and giving a morale boost to students; vocational training for youth living in the vicinity; and philanthropic activities. We also advocate religious CSR projects under our programme ‘One Creed for All Creeds for One,’ strongly setting a message of unity in diversity. In effect, in all our CSR initiatives, we strive to ensure inclusivity by bringing in participants from diverse ethnic, religious and socio-economic backgrounds.
Our community responsibility projects are championed by our dedicated CSR team and the Welfare Society with volunteerism from our associates; whilst some of our key projects are undertaken at the group level in collaboration with the John Keells Foundation, the group’s social service organisation. Educational CSRNeighbourhood Schools Cinnamon Lakeside continued to focus its CSR initiatives on the Neighbourhood Schools Project carried out in collaboration with the John Keells Foundation. As part of this project and celebrating the Children’s Day on 1st October 2013, our CSR team led by the General Manager invited 60 students from multi-ethnic and religious backgrounds from the neighbouring schools for a workshop organised at the hotel; Al Iqbal Balika Vidyalaya, T.B. Jayah Maha Vidyalaya and Sri-Sariputhra Maha Vidyalaya. The objective of this initiative was to give the students an exposure to the hospitality industry, inculcate career planning and motivate them to be responsible and respectful future leaders.
During the event, the management addressed and inspired the children with thought-provoking ideas on social issues viz. racial discrimination at schools and at the workplace and barriers against women employment in the hospitality industry. Our young interns who are from the neighbouring communities joined the celebrations; Master Muditha Chathuranga shared his thoughts on our community internship programme and his working experience at Cinnamon Lakeside, encouraging the students to build a vision for the future. The participating students were treated with delicious snacks and gifts.
Key Challenges
› Increasing socio-economic disparities
› Lack of opportunity for youth empowerment
› Inciting disharmony and bias towards of socio-cultural diversity
Strategic Focus
› Educational CSR › Vocational Training › Philanthropy › Religious CSR › Supporting &
collaborating with the John Keells Foundation
Targets
› CSR programmes: 6 › Beneficiaries : 30 direct
and 250 indirect › Volunteering
Associates: 200 › CSR investment: Rs 4.5
Mn
Actuals
› CSR programmes: 5 › Beneficiaries: 2 direct and
260 indirect › Volunteering
Associates:180 › CSR investment: Rs 7.1
Mn
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Management Discussion & Analysis Contd.
Internship programme for neighbourhood students
Beneficiaries: 60 students
Volunteer Hours: 250
Volunteering Associates: 20
Investment: Through the John Keells
Foundation
Philanthropy › CMC-HOPE Children Resource Centre: Our associates organised
another Children’s Day charity programme at CMC-HOPE Children Resource Centre in Kirulapona on 1st October 2013. The hotel donated exercise books and stationery to 100 children with the participation of 10 associates.
› Welfare Society CSR: › Charity - Balagolla Vidyalaya - Meegahakiula: Initiated by the
Welfare Society in conjunction with the ‘Children’s Day’, our associates organised a charity programme for the children of Balagolla Vidyalaya - Meegahakiula, Mahiyanganaya in the Uva Province. The Society donated clothing and stationery items to 200 underprivileged students with the participation of member associates. This school is earmarked by the Society for further charity support in the ensuing years. The Society also offered cash donations for two top-performing students at the Grade Five Scholarship Examination conducted by the Department of Examination.
Beneficiaries: 200 students
Volunteer Hours: 450
Volunteering Welfare Society
Associates: 45
Investment: Rs. 200,000
› Charity - Mullattivu: The Welfare Society organised a charity
targeting the needy householders and their children in Oddusudan in the Mullattivu area in the North. The Society donated clothes, school uniforms, exercise books and stationery in collaboration with the Sri Lanka Army - ‘642 Brigade’ in Maullattivu. 15 associates from the hotel participated at the charity programme.
Vocational TrainingAs a key CSR initiative in collaboration with the John Keells Foundation, we commenced our vocational training programme targeting school leavers, primarily from the neighbouring schools.
As our first step, we extended internship opportunities to Master Muditha Chaturanga and Master Thiruchelvam Dilrukshan for a period of six months. During their internship, our training department gave an overall exposure to them on the hotel operations, enabling them to select a department for specialisation. The training department closely mentored them on technical skills, proficiency in English and personality development; and
Children’s Day participants with the General Manager
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encouraged and motivated the two interns to uplift their thinking horizon and their quality of life. The hotel also arranged bank accounts, inculcating the habit of savings as a stepping stone to their adult life. The two interns successfully and eagerly completed this programme and currently, they are serving the hotel under the purview of the engineering department.
Internship and Employment
02 Youth from the Neighbouring Community
Community Investment
GRI (3.1) SO9
During the reporting year, we spent a sum of Rs. 7.1 million on community initiatives as set out below which represents a 77 percent increase as against the preceding year. The investment on such initiatives accounted for 0.6 percent of our operational cost.
Financial Year 2012/13Rs.
2013/14Rs.
Educational CSR - 66,880
Philanthropy 72,000 16,454
Vocational Training - -
Religious CSR 523,815 -
Funding Support - John Keells Foundation
3,500,000 7,000,000
Other - 20,804
Total 4,095,815 7,104,138
Note: The values given above are as per the cost to the company; voluntary contribution is not accounted.
Charity project for children of Balagolla Vidyalaya, Mahiyanganaya
Uthpala Nanayakkara2 years as a Waitress
“
“
We treat our guests like family. Providing an efficient friendly service with a smile to our guests is important. There is no second chance to impress our guests; we deliver on our pledge of doing it right the first time.
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Management Discussion & Analysis Contd.
Future OutlookWith stronger signs of a full recovery from the gloom witnessed in the world economy over the past five years and international tourism firm in its course, Sri Lanka tourism is well set to move forward, playing a significant role as a thrust sector in the country. The ensuing years are expected to bring greater prosperity to the industry, steadily reaching out to the road map targets envisaged for the destination.
In this landscape, the hospitality industry is called upon to gear itself to meet the demands entailed in a rapid growth scenario. Responding positively, the industry has already moved ahead - adding on refurbished rooms and international hotel chains firmly taking root in the country. Best practices in hotel management with emphasis on quality and standards are advocated amongst the industry players.
Brand Cinnamon - Proposed Enhancements
Cinnamon Lakeside, as a top-notch five-star city hotel stands strong in this emerging scenario. The hotel sees great opportunities to further progress, yet is mindful on the challenges that will be posed from the competition. Carefully outweighing these challenges, the plans for the ensuing years seek to further explore the opportunities strategically and strengthen the positioning in the city hotel market, amidst the growing competition.
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Cinnamon Lakeside looks forward to being a significant part of the leisure sector’s collective strategy which aims to secure a sustainable competitive edge. As part of the Cinnamon Hotels & Resorts - 14 property chain spreading across Sri Lanka and the Maldives, Cinnamon Lakeside intends to reap benefits from the proposed brand enhancement campaign; seeking to pitch ‘Cinnamon’ as a premier lifestyle brand in Sri Lanka with a regional presence. Along with the other players in the chain, we will revamp our processes, policies and standards to ensure that our product and service offer reflect the ‘lifestyle service culture’ in line with brand expectations.
Cinnamon Lakeside has set out its strategic plans and targets for the financial year 2014/15. Salient plans and targets are set out below which are expected to underscore the operations to meet the next phase of the industry.
Occupancy2013/14 : 61%
71%
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Snapshot - Strategic Action Plan - 2014/15
Property › Maintain the property with systematic refurbishments › Focus on preventive maintenance through the Building Management System
Product Rooms › Target Chinese and Japanese corporate clientele, focusing on the ‘Home-Away-From-Home’ concept with customised products and
Chinese/Japanese nationals for sales calls and coordination › Focus marketing for corporate clients in the construction, telecom, casino, manufacturing and IT sectors › Concentrate to attract leisure travellers from India, Middle East, China, Japan and Europe
Food & Beverage › Introduce ‘Cinnamon Ambassador’ to attend to guests at venues › Menu changes & presentation › All inclusive offers - ‘Under one Roof’ › International food festivals, food promotions & themed evenings › Co-host events especially targeting the youth market › Enhance ambience in restaurants and common areas, aligned to the Brand Cinnamon and differentiating the offer from day and night › Enhance efficiency in banquets through close monitoring of wedding business and improve dinner covers and beverage revenue
Product Responsibility › Continue with product certifications including ISO certification & Colombo Municipal Council food safety requirements
Marketing & Communications
› Branding to be reinforced in all venues › Revamp the official website to reflect the brand look and feel › Focus online and social media marketing for key markets › Build a database and engage customers › Resort to effective advertising › Participate in travel fairs and road shows in key markets with partner DMCs › Support events of significant scale and value › Efficient public relations with a track on media ratings and benchmark
Information Technology
› Integrate into the Cinnamon chain’s proposed ‘Property Management System’, enabling efficient customer relationship management and seamless integration with online marketing channels
Associates › Focus on service and technical skills training – internal & external › Cross exposure within departments for selected staff › Maintain certification from OHSAS 18001 for occupational health and safety
Environment › Implement the 1st Phase of the solar power project › Further develop the organic farming project › Investment in a more energy efficient new chiller air-conditioning system › Continue to comply with the Green Globe certification requirements and EU-Switch Asia
Community › Further develop the neighbourhood schools CSR project in collaboration with the John Keells Foundation › Continue with the vocational training internship programme for the neighbourhood youth. › Roll-out a comprehensive village education programme, targeting 15 children in four rural villages
Targets - 2014/2015
Financial Environmental & Social
› Occupancy Rate: 71% › Market Share: 21 › Real Revenue Growth: 11% › Profit After Tax Growth : 13% › Return on Equity: 14% › Return on Capital Employed: 16%
› Training Investment: Rs. 14.2 Mn › Training Hours: 62,500 training hours › Associates Trained: 868 › Health & Safety Programmes: 15 › Environmental Investment: Rs. 28.6 Mn › Reduce Carbon Emissions: 6,000 › Community Investment: Rs. 5.4 Mn
Y. PrematilakeSupplier for 11 years
“
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I am proud to say that I have been partnering with Cinnamon Lakeside for eleven years now. The hotel’s vision of helping to develop and guide the local industry has sustained the livelihood of an entire village of farmers dedicated to providing fresh produce for the hotel.
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Corporate Governance Report
Trans Asia Hotels PLC (the Company) has strived to maintain highest level of transparency when reporting on both financial and non-financial information which has facilitated and enhanced the trust stakeholders have in the Company. The Company has been structured and controlled internally through a process of continuous review in facilitating the observance of the key principles of corporate governance. Whilst the Company is governed by an internal process which ensures integrity and professionalism in all its activities and relationships, ethical values are also lived through every day in a constant effort to set high standards of social responsibility. This philosophy has been ingrained through the Company by means of a strong set of corporate values and a formal Code of Conduct which the staff at all levels, management and the Board of Directors are required to observe in the performance of their official duties. As a subsidiary of John Keells Holdings PLC - the ultimate parent company, the Company displays these values and policies in its day-to-day activities as a fundamental requirement at all times, following the best practices of the parent company. The staff members of the Company are expected to live out these values, which are reinforced through recognition schemes of the parent company which insist, as a minimum, that all nominees have modelled the values.
In this report, the corporate governance framework of the Company is outlined enabling the Board of Directors to provide assurance to its
investors that they have discharged their duties responsibly through the governance processes in place. The framework is confirmed to be in full compliance with the code of best practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka as well as the continuing Listing Rules of the Colombo Stock Exchange. Any permitted deviations have been explained in detail. In identifying that good governance entails the long term sustainability of the Company, a detailed report of its sustainability initiatives is included on page 30 of the integrated Management Report outlining the Company activities with society at large. The reporting of financial and non-financial performance measures have been integrated along the line of the Global Reporting Initiative (GRI) and displays our commitment to governance, ethical, social, environmental and sustainability issues.
Integrated Corporate Governance FrameworkThis integrated corporate governance report is structured in the following sequence to highlight the different elements that are adopted by the Company to ensure robust governance framework.
› Internal Governance Structure › External Governance Structure
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Integrated Corporate Governance Framework
REGULATORY FRAMEWORK
Internal Governance StructureExternal Governance
Structure
GOVERNANCE STRUCTURE
› Chairman & Board of Directors
› Board Committees
› Resource & Management
STAKEHOLDER MANAGEMENT
› Stakeholders
ASSURANCE
› Employee participation
› Internal Control
› JKH Code of Conduct
› External Audit
› IT Governance
› Risk Management
› Code of Best practice on Corporate Governance issued jointly by the Security & Exchange Commission of Sri Lanka (SEC) and Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)
› Continuing Listing Rules of the Colombo Stock Exchange
› Company Act No. 07 of 2007
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The Internal Governance Structure encompasses; Board of Directors, Board Committees, General Manager and the Senior Management Team, complemented by internal governance systems which act as the enablers and drivers of the Company’s business strategy. These mechanisms within the internal governance structure ensure upholding of the Company’s Corporate Governance framework.
Governance StructureChairman & The Board of DirectorsRole of ChairmanThe Chairman is a Non Executive, Non Independent Director whose main responsibility is to lead and manage the Board and its Committees so that they can function effectively. He represents the Company externally and is the focal point of contact for shareholders on all aspects of corporate governance.
While leading the Board, effectively executing its duties towards all stakeholders, the Chairman, with the assistance of the Board Secretaries, Keells Consultants (Private) Limited, ensures that:
› Board procedures and duties are followed. The agenda for the Board meeting, reports and papers for discussion are dispatched at least one week in advance so that the Directors are in a position to study the material and arrive at sound decisions.
› Directors receive timely, accurate and clear information and updates on matters arising between meetings.
› A proper record of all proceedings of Board meetings is maintained.
The Chairman also sets the tone for the governance and ethical framework of the Company, facilitates and solicits the views of all Directors and by keeping in touch with local and global industry developments, ensures that the Board is alert to its obligations to the Company’s shareholders and other stakeholders.
The Board of DirectorsThe Board of Trans Asia Hotels PLC holds responsibility to shareholders of the Company to discharge its stewardship obligations, in the best interests of the Company and its stakeholders. This is achieved by,
› Maximising shareholder wealth-creation on a sustainable basis while safeguarding the rights of multiple stakeholders
› Building and enhancing stakeholder relationships which are considered an integral aspect of Board effectiveness and a responsible approach to business
› Ensuring that one person does not have unfettered powers of decision making
› Ensuring that the methods employed to achieve goals are as important as the goals themselves
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Internal Governance Structure
Chairman
Board of Directors
Audit Committee
Nominations Committee
Human Resources & Compensation
Committee
Related Party Transaction Review
Committee
Group Business Process Review
Division
Sustainability and Enterprise Risk Management
Division
President Leisure Group
General Manager
Senior Management
Team
Provides advice to the General Manager on key decisions made under management delegation
Management delegated authority
Availability of independent advice and assurance
Delegated authority
Accountability through reporting obligations
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› Making business decisions and resource allocations in an efficient and timely manner, within a framework that ensures transparent and ethical dealings which are compliant with the laws of the country
› Actively participating in discussions with the relevant regulatory bodies in the formation and implementation of governance regulations, accounting standards, and economic reforms
› Opting for the early adoption of accounting standards and best practices in governance regulations, when practical.
› Resolving to maintain strong governance practices which result in strengthened stakeholder confidence, particularly that of both institutional and individual investors.
The Board of Trans Asia PLC has, subject to pre-defined limits, delegated its executive authority to the President of the Leisure Industry Group for the implementation of strategies approved by the Board and developing and recommending to the Board the business plans and budgets in keeping with group strategy.
Board ResponsibilitiesThe Board of Directors are accountable › to shareholders for the governance of the Company. › for sharing responsibility in ensuring the highest standards of
disclosure, reporting, ethics and integrity across the group. › for the proper stewardship of the Company’s resources and the
effectiveness of the Company’s systems of internal control and the management of risk
› for compliance with laws and regulations of the countries in which the Group’s subsidiaries operate
› for the formulation and approval of the Company’s medium and long-term strategy, annual investment budgets, significant financial and operational policies
Board CompositionAt the last Annual General Meeting (AGM) of Trans Asia Hotels PLC, held on 27th June 2013, the Board consisted of six Directors comprising of;
› Three Non-Executive, Non-Independent Directors, (NED/NID) including the Chairman
› Three Non-Executive, Independent Directors (NED/ID)
As at 31st March 2014, the Board consisted of three Non Executive Non Independent Directors (NED/NID) and Four Non Executive Independent Directors (NED/ID), as given below:
› Mr. S C Ratnayake - NED/NID › Mr. A D Gunewardene - NED/NID › Mr. J R F Peiris - NED/NID › Mr. N L Gooneratne - NED/ID
› Mr. C J L Pinto - NED/ID › Mr. E H Wijenaike - NED/ID and › Ms. J C Ponniah - NED/ID (Appointed to the Board w.e.f. 2nd October
2013)
In accordance with the criteria for “Independence” specified by section 7.10.4 of the listing rules of the Colombo Stock Exchange and as identified by the Code, the Board affirms that the aforesaid four Non-Executive Independent Directors satisfy the criteria for independence and have satisfied the requirements under clause 7.10.2 (b).
The Board has determined that although Mr. N.L Gooneratne has been a member of the Board for a period exceeding 9 years and does not satisfy the “number of years on the Board” criteria, given all the circumstances, in fact that Mr. N. L Gooneratne is Independent especially as he does satisfy the other qualifying criteria in terms of independence.
Furthermore the Board having considered the fact that Mr. C. J. L. Pinto is a Director of Asian Hotels & Properties PLC, is of the opinion that he does satisfy the other qualifying criteria of independence, and given all the circumstances and having considered other relevant factors, is of the holistic view that Mr. C J L Pinto is an independent Director of the Company despite his directorship on the Board of Asian Hotels and Properties PLC.
The Board, having also considered all relevant factors, was therefore of the holistic view that Ms. J C Ponniah and Mr. E H Wijenaike are independent and the Board has received respective declarations of their independence.
The biographical details of the Directors are set out on pages 16 to 17 of this report.
Non Executive/Independent Directors and Board BalanceThe Board is of the view that its present composition ensures a healthy balance between executive expediency and independent judgment. This is based on the following:-
› Collectively, the Non-Executive Directors possess proven business experience and expertise in their respective fields.
› The present composition of the board represents an appropriate mix of skills and experience.
› The Independent Directors possess strong financial acumen and by virtue of their membership on external boards, are able to assess the integrity of the group’s financial reporting systems and internal controls, continually review, critique and suggest changes in keeping with best practice.
› The Board is also conscious of the need to progressively refresh its composition over time and notes the qualitative contribution of the Independent Directors to the governance of the Hotel.
Corporate Governance Report Contd.
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Name of Director/ Capacity
Shareholding (i) Management / Director (ii)
Material Business Relationship (iii)
Employee of Company (iv)
Family Member a Director or GM (v)
Continuous Service for nine
years (vi)
Non Executive, Non Independent Director (NED/NID)
Mr. S C Ratnayake Yes Yes No No No Yes*
Mr. A D Gunewardene Yes Yes No No No Yes*
Mr. J R F Peiris Yes Yes No No No Yes*
Non Executive, Independent Director (NED/ID)
Mr. N L Gooneratne Yes No No No No Yes**
Mr. C J L Pinto Yes No No No No No***
Mr. E H Wijenaike No No No No No No****
Ms. J C Ponniah No No No*****
Definitionsi. Shareholding in the companyii. Director of a listed Company in which they are employed, or having a significant share
holding or have a material business relationshipiii. Income/Non cash benefits derived from the Company is equivalent to 20% of the
director’s annual incomeiv. Director is employed by the Company two years immediately preceding appointmentv. Immediate family member who is a director or General Managervi. Has served the Board for a continuous period exceeding 9 years
* Appointed to the Board in September 2003 and has continuously served the Board since then.
** Appointed to the Board in October 1984*** Appointed to the Board in July 2011**** Appointed to the Board in June 2012***** Appointed to the Board in October 2013
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PRIOR TO APPOINTMENT
Nominees are requested to disclose their various interests that could potentially conflict with the
interest of the Company
DURING BOARD MEETINGS
Directors who have disclosed an interest in a matter under discussion excuse themselves from deliberation on the
subject matter and refrain from voting on the subject matter (such abstentions from Board decisions are duly recorded)
ONCE APPOINTED
Directors who are appointed are expected to inform the Board and obtain Board clearance prior to accepting
any position or engaging in any transaction that could create a potential conflict of interest
Conflict of interest and independenceEach Director holds continuous responsibility to determine whether he or she has a potential or actual conflict of interest arising from external associations, interests or personal relationships in material matters which are considered by the Board from time to time.
In order to mitigate any potential or actual conflict of interest or independence of directors throughout the term of their membership on the Board, the Company has adopted the following processes.
Details of companies in which board members hold board or board committee membership is available with the Company for inspection by shareholders on request.
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Board meetings, agenda and attendanceThe Board of Trans Asia Hotels PLC met once in every quarter and the Directors’ attendance is as tabulated below:-
Attendance at Meetings
Name of Director 29.04.13 25.07.2013 30.10.2013 27.01.2014 Meetings Attended
Mr. S C Ratnayake NED/NID √ √ √ × 3/4
Mr. A D Gunewardene NED/NID √ √ √ √ 4/4
Mr. J R F Peiris NED/NID √ √ √ √ 4/4
Mr. N L Gooneratne NED/ID √ √ × √ 3/4
Mr. C J L Pinto NED/ID √ √ √ × 3/4
Mr. E H Wijenaike NED/ID √ √ √ √ 4/4
Ms. J C Ponniah* NED/ID N/A N/A √ √ 2/2
Appointed to the Board on 2nd October 2013
Corporate Governance Report Contd.
Board AgendaA typical Board agenda in 2013/14 was: › Confirmation of previous meeting minutes › Circular resolutions › Board subcommittee reports and other matters exclusive to the board › Matters arising from the previous minutes › Status updates of major projects › Review of performance - in summary and in detail, including high level
commentary on actuals and outlook › Summation of strategic issues discussed at pre-board meetings › Approval of Quarterly and Annual financial statements › Ratification of capital expenditure and donations › Ratification of the use of the company seal and share certificates
issued › New resolutions › Report on corporate social responsibility › Review of Group risks, sustainability, HR practices/updates › Any Other business
Supply of information and Board inductionNewly appointed Non-Executive Directors are apprised of › The operations of the Company and it’s strategies › The operating model of the Company › Company values and culture › Company policies, governance framework and processes › Their responsibilities as Directors in terms of prevailing legislation › The Code of Conduct expected by the Company
The updating of all Directors’ skills and knowledge is progressive and ongoing. This is achieved by keeping them fully informed on significant developments in the business activities of the Company and by providing them access to
› External and Internal Auditors,Periodic reports on performance › Updates on topics that range from proposed/new regulations to
industry best practices › Senior Management in a structured setting › Industry experts and other external professional advisory services › The Legal, Tax and Finance Divisions of the John Keells Group › The services of the Company Secretary
Non Executive Directors have the opportunity of gaining further insight into the Company s’ business by visiting the Hotel.
The Directors devote sufficient time and make every effort to ensure that in proportion with their knowledge and experience, they discharge their responsibilities to the Company. This is achieved by reviewing Board papers, business visits to understand risk exposures and operating conditions, attending Board meetings and participating in discussions with the Senior Management of the Company. Senior management of the Company on invitation attend Board meetings and update the Board on the performance of the Company.
Board Secretary The Keells Consultants (Pvt) Ltd functions as the Secretaries and registrars of the Company and provides the Secretarial input for Board proceedings in addition to maintaining Board minutes and Board records.
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Board and General Manager’s performance appraisalThe Human Resources and Compensation Committee of the ultimate parent company appraises the performance of the Chairman on an organizational and individual basis as approved by the Board.
The Chairman evaluates the performance of the Board. There is a formalised process of self-appraisal which enables each member to self-appraise on an anonymous basis, the performance of the Board, using a very detailed checklist / questionnaire covering areas such as;
› Role clarity and effective discharge of responsibilities › Systems and procedures › Quality of participation › Board image
The scoring and open comments are collated and the results are analysed to give the Board an indication of its effectiveness as well as areas that require addressing and/or strengthening.
The Non Independent, Non Executive Chairman of the Audit Committee evaluates the effectiveness of the Audit Committee based on feedback from Committee Members and regular invitees to the Committee, which includes the General Manager, Finance Director of the Hotel, Chief Financial Officer of the Leisure Group, Sector Financial Controller, Head of Group Business Process Review and the Internal and External Auditors.
The annual appraisal of the General Manager is carried out at parent level and is based on pre-agreed performance criteria, covering the following broad aspects:-
Chairman’s Role Chief Executive Officer’s/General Manager Role
Leads the Board for its effectiveness
Executes strategies and policies of the Board
Sets the tone for governance and ethical framework
Guides and supervises the Senior Management Team
Ensures that constructive working relations are maintained between the Members of the Board
Ensures that the operating model of the Company is aligned to the short term and long term strategies pursued by the Ultimate Parent Company
Ensures with the assistance of the Board Secretary that: › Board procedures are
followed › Information is
disseminated in a timely manner to the Board
Ensure that succession at the senior management level is planned
Board Committees and Delegation of authorityCertain functions of the Board are delegated through Board Committees, enabling the Committee members to focus of their designated areas of responsibility and impart knowledge in areas where they have greatest expertise. As permitted by the listing rules, Nomination Committee and Human Resources Compensation Committee of the ultimate Parent Company, John Keells Holding PLC, also function in the capacity of Board Committees of the Company. Notwithstanding functioning of the Board Committees the Board of Directors is collectively responsible for the decision taken by these sub Committees.
Nominations Committee and Board appointmentsThe Nomination Committee of the ultimate Parent Company John Keells Holdings PLC (JKH) functions as the nomination committee of the Company. The Nomination Committee holds responsibility to identify and propose suitable candidates for appointment as Non-Executive Directors to the Board of JKH, in keeping with the target Board composition and skill requirements. The Board of JKH after due consideration of such recommendations, determines and appoints the new director.
Shareholders must formally approve all new appointments at the first opportunity after their appointment, as provided by Article 90 of the Articles of Association of the Company.
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CONTINUOUS PERFORMANCE MONITORING
Formulating Business Strategy, Objectives and
Risk Management
Board Approval/GEC (JKH) Approval
Business Performance
Evaluation of the first 6 Months
against Targets
Reforecasting the Targets for the Second
Half of the Year
Performance Evaluation of the Second Half/Full
Year
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The Nominations Committee of John Keells Holdings PLC comprises four Independent Directors and one Non Independent Director namely:
Mr. T Das Chairman
Mrs. S Tiruchelvam Resigned w.e.f. 9th September 2013
Mr. S C Ratnayake
Mr. M A Omar Appointed w.e.f. 7th November 2013
Mr. E F G Amerasinghe Appointed w.e.f. 7th November 2013
Mr. D A Cabraal Appointed w.e.f. 7th November 2013
Tenure, retirement and re-electionOne third of the Directors except the Chairman, retire by rotation on the basis prescribed in the Articles. A Director retiring by rotation is eligible for re-election. The tenure of office for Non independent Directors is limited by their prescribed company retirement age.
Independent Directors, on the other hand, can be appointed to office for three consecutive terms of three years, which however, is subject to the age limit set by statute at the time of re-appointment following the end of a term.
The proposal for the re-appointment of Directors is set out in the Directors Report as well as the Notice of Meeting on page 174 of this Report.
RemunerationHuman Resources & Compensation CommitteeThe Human Resource & Compensation Committee of the ultimate Parent Company JKH functions as the Human Resource & Compensation committee of the Company, as permitted by the listing rules of the Colombo Stock Exchange.The Human Resources & Compensation Committee of John Keells Holdings PLC comprises of Five Independent directors:
Mr. E F G Amerasinghe Chairman
Dr. I Coomaraswamy
Mr. A R Gunasekara
Mrs. S Tiruchelvam Resigned w.e.f. 9th September 2013
Mr. M A Omar Appointed w.e.f. 28th May 2013
Mr. A N Fonseka Appointed w.e.f. 7th November 2013
The remuneration policy adopted by the Company as recommended by the Human Resources & Compensation Committee of its ultimate parent, JKH is formulated to attract and retain high calibre executives where motivating and grooming them to develop and implement the business strategy helps optimise long term Shareholder value creation. The Committee also recommends the remuneration of the General Manager of the Hotel.
Having conducted market surveys, obtained expert opinion and having considered the management complexities of the Company, on the recommendation of the Human Resource & Compensation Committee, the Company has adopted the following remuneration policy designed to provide an appropriate balance between fixed remuneration and variable ‘risk’ reward which includes, › a fixed element; › a variable element in the form of a short term incentive which is based
on both individual performance and an organizational performance metric which covers revenues and PAT; and
› a long term incentive in the form of employee share options at John Keells Holdings PLC for applicable senior executives
A customised “pay for performance” scheme based on individual and organizational performance ratings is carried out for employees at Assistant Manager level and above, while only individual performance ratings govern remuneration at Executive level and below. The rationale for excluding the organizational performance rating at the lower levels is that individuals at this level have little direct impact on the bottom line of the business unit. These varied performance measures have contributed towards generating a more robust alignment between reward and performance.
Board RemunerationRemuneration for Non-Executive, Non-Independent DirectorsCompensation for Non-Executive, Non Independent Directors (NED/NID’s) is determined by reference to fees paid to other NED/NID’s of comparable companies. Director Fees applicable to Non-Executive Directors nominated by JKH are paid directly to the company and not to individuals.
Remuneration for Non-Executive, Independent DirectorsCompensation for Non-Executive, Independent Directors (NED/IDs) is determined by reference to fees paid to other NED/ID’s of comparable companies. NED/ID’s receive a fee for devoting time and expertise for the benefit of the Company. Nevertheless, NED/ID’s fees are not time bound or defined by a maximum/minimum number of hours committed to the Company per annum and hence is not subject to additional/lower fees for additional/lower time devoted. NED/ID’s do not receive any performance/incentive payments.
The Company does not have an employee share option scheme.
The aggregate remuneration paid to Directors is disclosed on page 162 of this report.
Audit CommitteeThe Audit Committee comprises of a majority of Independent and Non-Executive Directors. As prescribed in the Listing Rules of the Colombo Stock Exchange, the Chairman of the Audit Committee is a member of
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a professional accounting body - a fellow of the Institute of Chartered Accountants of Sri Lanka with several years of experience in financial auditing and accounting.
The Audit Committee focuses principally in assisting the Board to fulfil its duties by providing an independent and objective view of the financial reporting process, internal controls, risk review and the audit function. It is governed by a Charter that encompasses the review and monitoring of internal control, operational and business risks, adequacy and fairness of disclosures, procedures relating to statutory, regulatory and related compliances as well as the working of the committee. The Committee is responsible for the consideration and recommendation of the External Auditors.
The Audit Committee met on four occasions during the year and the attendance was as follows:-
Attendance at Meetings
Name of Director 10.05.2013 23.07.2013 28.10.2013 24.01.2014 Meetings Attended
Mr. C J L Pinto (Chairman) NED/ID √ √ √ √ 4/4
Mr. E H Wijenaike NED/ID √ √ √ √ 4/4
Mr. J R F Peiris* NED/NID √ √ √ N/A 3/3
Ms. J C Ponniah** NED/ID N/A N/A √ √ 2/2
* Resigned from the Audit Committee on 2nd October 2013** Appointed to the Board and as a member of the Audit Committee on 2nd October 2013
The regular invitees to the Audit Committee are the Chief Financial Officer of Leisure Group - JKH, Sector Financial Controller of JKH, General Manager & Director Finance of Trans Asia Hotels PLC, the Head of Business Process Review of JKH and the External and Internal Auditors of the Company.
The Director Finance of Trans Asia Hotels PLC is required to confirm compliance with financial standards and regulations by means of a quarterly self certification programme. The managers of the Company are required to confirm operational compliance with statutory and other regulations, risk management and other key control procedures.
In order to ensure effectiveness and best corporate governance, the Company implemented an ‘Audit Committee Effectiveness Evaluation’ system from April 2011. This process collates feedback from all participants to the Audit Committee including the Chairman of the Committee who is expected to convey his independent opinion on the functionality and any potential areas for improvements. All these views and opinions are collated by the Group’s Business Process Review division and are used to further enhance the effectiveness of the Audit Committee. The detailed Audit Committee report including the areas reviewed during the financial year 2013/14 is found on page 138 of the Annual Report.
Related Party Transaction Review CommitteeThe Related Party Review Committee was adopted voluntarily from 1st April 2014 in line with the Code of Best Practice for Listed Companies of the
Security Exchange Commission of Sri Lanka at John Keells Holdings PLC. This Parent Level Committee will act on behalf of the whole Group including the Company.
The scope of this sub-committee in broad terms is :
› Developing, and recommending for adoption by the Board of Directors of JKH and its listed subsidiaries inclusive of the Company, a Related Party Transaction Policy consistent with that proposed by the SEC and is in synchronization with the Operating Model and the delegated Decision Rights of the Group.
› Updating the Board of Directors on the related party transaction of each of the listed companies of the Group on a quarterly basis.
The Related Party Transaction Review Committee of John Keells Holdings PLC comprises three Independent Directors and two Non Independent Directors namely:
Mr. A N Fonseka Chairman
Mr. E F G Amerasinghe
Mr. D A Cabraal
Mr. S C Ratnayake
Mr. J R F Peiris
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Resource ManagementThe Board has delegated certain of its financial authority to the General Manager and the Senior Management of the hotel.
General ManagerThe General Manager of the Hotel serves as the head of the business unit and is responsible to the Board for the attainment of the Company’s overall objectives and formulation of strategy. The General Manager coordinates and guides the different functional heads of the Company to streamline the different functional units and achieve goal congruence.
Senior Management TeamThe Senior Management team consists of the Heads of the different functional units of the Company and holds responsibility to the General Manager for attainment of functional objectives through effective utilisation of resources and competencies.
Stakeholder ManagementThe Company underlines effective management of different stakeholder groups as a vital aspect in safeguarding the Company’s corporate governance philosophy. Therefore, numerous mechanisms are in place, including those that have cascaded down from the Ultimate Parent Company to enhance the relationship between the Company and different stakeholders.
Shareholder relationsShareholders have the opportunity at the Annual General Meeting (AGM), to put forward questions to the Board to gain a better understanding of the Company’s business and operational workings and future plans, while at the same time giving the Directors the opportunity to understand the issues and concerns of shareholders. The content of this Annual Report will enable existing and prospective stakeholders to make better informed decisions in their dealings with the Company.
All necessary steps are taken to facilitate protection of shareholder rights at the AGM, which include the receipt of the notice of the AGM and related documents within the specified time period, voting for the election of new Directors, new long term incentive schemes or any other issue of materiality that requires a shareholder resolution.
Company SecretaryThe Company Secretary is responsible for inducting new Directors, assist the Chairman and the Board of Directors in determining the annual Board Plan, guide the Board and the individual Directors in the proper discharge of their responsibilities and act as a central source of guidance on matters of ethics and governance. In addition to the many duties, the company secretary is responsible for making necessary disclosures on related party transactions required by law and regulations and also acts as a
channel of communication with shareholders to ensure good shareholder relations. The shareholders can contact Keells Consultants (Private) Limited, the Company secretaries on 011-2306245 for any Company related information requirements.
Other stakeholders: Corporate Social Responsibility and SustainabilityThe Company recognises that emphasis should not only be on maximising long term shareholder value, but it should also look after the rights and appropriate claims of many non-shareholder groups such as employees, consumers, clients, suppliers, lenders, environmentalists, host communities and governments. A detailed description of the Company’s CSR activities can be found on the Management Discussion & Analysis of this Annual Report, laid down on pages 30 to 85.
AssuranceThe ‘Assurance’ element is the supervisory module of the Company’s Corporate Governance Framework, where a range of mechanisms such as monitoring, benchmarking and effectiveness tests are carried out in order to ensure continued accuracy and to implement corrective action where necessary.
Employee ParticipationHuman Resource unit is designed in a manner that enables high accessibility by any employee to every level of management. Structured ‘skip level’ meetings are held where employees are given the opportunity to discuss matters of concern with superiors who are at a level higher than their own immediate supervisor in an open but confidential environment. Through the participation of 360 Degree surveys and Voice of Employee ( VOE) surveys which are conducted annually, employees are able to voice their opinion about the company and their respective superiors. The employees also have the opportunity to take part in the Great Place To Work (GPTW) survey conducted at the Parent Company level every once in four years giving them the opportunity to voice their opinion on the overall work environment.
Human Resource Governance (Performance Management)The Performance Management System (PMS) continued to evolve positively in catering to, and fashioning, employee empowerment in meeting current and emerging needs.
Following linkages of PMS were further strengthened:
› Learning and development, › Career development, › Succession planning, › Talent management, › Reward and recognition, and › Compensation and benefits
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Whistleblower PolicyThrough a communication link named ‘Chairman Direct’, concerns about any unethical behaviour or violation of group values could be reported by employees to the Chairman of JKH. Employees reporting such incidents are guaranteed complete confidentiality and such complaints are investigated and addressed via a selected committee under the direction of the Chairman.
OmbudspersonIn order to deal with a situation in which an employee or group of employees feel that an alleged violation has not been addressed satisfactorily using the available/existing procedures and processes, an Ombudsperson has been appointed by JKH being the ultimate Parent Company to entertain such concerns.
The Ombudsperson’s duty ceases upon the confidential written communication of the findings of the Ombudsperson and recommendations to the Chairman or the Senior Independent Director of JKH, as the case may be.
The Chairman or the Senior Independent Director, as the case may be, will place before the Board.
› the decision and the recommendations of the Ombudsperson › the action taken based on the recommendations › the areas of disagreement and the reasons adduced in instances
where the Chairman or the Senior Independent Director disagrees with any or all of the findings and/or recommendations. In such cases, the Board shall consider the areas of disagreement and determine the way forward.
The Chairman or the Senior Independent Director is expected to take such steps as are necessary to ensure that the complainant is not victimised for having invoked this process.
These open door policies facilitate constant dialogue, communication, transparency and ultimately employee confidence, which would help retain existing talent whilst attracting new.
JKH CODE OF CONDUCTThe written Code of Conduct, to which employees at all levels and the Board of Directors are bound by, engraves the desired behaviour of JKH staff at executive level and above. This is being constantly and rigorously monitored.
JKH Code of Conduct
Allegiance to the Company and the Group
Compliance with rules and regulations applying in the territories that the Group operates in
Conduct of business in an ethical manner at all times and in keeping with acceptable business practices
Exercise of professionalism and integrity in all business and ‘public’ personal transactions
The Chairman of the Board affirms that there have not been any material violations of any of the provisions of the Code of Conduct. In the instances where violations did take place, or were alleged to have taken place, they were investigated and handled through the Company’s established procedures.
INTERNAL CONTROLMonitoring of financial data: › Financial results are evaluated against the Annual Plan and
subsequent Reforecast on a monthly basis at all management levels. › The Board reviews the financial results on a quarterly basis. › The Chairman and Group Finance Director are able to view key
financial information of the Company on a real time basis via the group wide ERP system.
› The IT systems in place facilitate the online display of information relevant to the needs of Company Managers and Functional Heads pertinent to their areas of responsibility.
Going concern and financial reportingThe Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. In the unlikely event that the net assets of the Company fall below a half of shareholders funds, shareholders would be notified and an extraordinary resolution passed on the proposed way forward.
The going concern principle has been adopted in preparing the financial statements. All statutory and material declarations are highlighted in the Annual Report of the Board of Directors in this Annual Report. Financial statements are prepared in accordance with the Sri Lanka Accounting Standards commonly known as SLFRSs and comply with the requirements of the Companies Act 07 of 2007.
Information in the financial statements of the Annual Report are supplemented by a detailed Management Discussion & Analysis on pages 30 to 85 which explains to shareholders the strategic, operational, investment and risk related aspects of the Company that have translated into the reported financial performance and are likely to influence future results.
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The Statement of Directors’ Responsibilities in relation to financial reporting is given on page 137 of the Annual Report. The Directors’ interests in contracts of the Company are addressed on page 132 of the Annual Report.
The Directors have taken all reasonable steps in ensuring the accuracy and timeliness of published information and in presenting an honest and balanced assessment of results in the quarterly and annual financial statements. Price sensitive information has been disclosed to the Colombo Stock Exchange, shareholders and the press in a timely manner and in keeping with the regulations.
Investment appraisal process and investment decisionsOver the years, the Company has refined the process of investment appraisal which ensures the involvement of the relevant persons when investment decisions are made. In this manner, several views, opinions and advice are obtained prior to the investment decision. Experience has proven that a holistic and well debated view of the commercial viability and potential of proposed projects including operational, financial, funding, risk and tax implications has most of the time culminated a good result. All investment decisions are routed through a committee structure which safeguards against one individual having unfettered decision making powers in such decisions.
Major transactionsThe directors ensure that any corporate transaction that would materially affect the net asset base of the Company is communicated to shareholders. There were no major transactions as defined under Section 185 by the Companies Act 07 of 2007 during the year under review.
Integrity of systems & processesThe Board has taken necessary steps to ensure the integrity of the Company’s accounting and financial reporting systems, internal control systems and also reviews and monitors such systems on a periodic basis. Systems and processes covering risk management, financial and operational control, ethical conduct, compliance with legal and regulatory requirements and corporate social responsibility are described below.
Internal controlThe Company’s systems are designed to provide the Directors with reasonable assurance that assets are safeguarded, transactions are authorized and properly recorded and that material errors and irregularities are either prevented or detected in a timely manner. Key elements of such procedures are as follows:
› Formal policies and procedures are defined which include the documentation of key systems and rules relating to delegation of financial authority. This restricts the unauthorized use of the Company’s assets and ensures the monitoring of controls.
› The annual budgets are approved by the Board after detailed management review. There is a detailed budgeting process for the Company. Budgets are prepared in a manner that facilitates management to monitor the key business and financial activities. Results are regularly reviewed against budget and revised forecasts for the year are prepared on a half yearly basis.
› The Enterprise resource planning system; SAP has ensured that monthly management accounts are prepared promptly providing relevant, reliable and up-to-date financial and other information.
› Capital Expenditure is subject to formal authorization procedures. › Experienced and suitably qualified staff takes responsibility for
important business functions. Annual appraisal procedures have been established to maintain standards of performance.
› To further strengthen internal control and have independent assurance, the Company has enlisted the services of Messrs. PwC, an internationally reputed firm of Chartered Accountants, to monitor and report on the adequacy of the financial and operational systems. The scope included:
› Assessment of the adequacy of accounting and operational control systems in terms of economy, efficiency and effectiveness.
› Examination of compliance with statutory requirements, management policies and procedures.
› Review and monitor operational and financial controls in order to ascertain adherence to such controls.
The internal audit reports are firstly discussed by the externally appointed internal auditor with management of the Company. The Head of Risk & Control Division of Ultimate Parent Company attends these meetings as the moderator. After which these reports are forwarded to the Audit Committee. Internal Audit reports are structured in a manner that facilitates the resolution of the concerns highlighted and follow up action is monitored by the Board on an ongoing basis.
Internal AuditorsThe internal audit function of the Company is outsourced to PwC, Chartered Accountants. The role of the internal audit has transformed into a value adding function instead of merely a ‘warning’ function, where audit findings are regarded a valuable contribution in modifying and strengthening our internal processes.
External AuditKPMG, Chartered Accountants serve as the external auditors of the Company.
The Company has attempted always to separate the internal auditors from the external auditors in order to maintain external auditor independence.
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The appointment / re-appointment of these auditors were recommended by the Audit Committees to the Boards of Directors.
The audit fees paid by the Company to KPMG is separately classified on page 153 in the Notes to the Financial Statements of the Annual Report.
The Auditors’ report on the financial statements of the Company for the year under review is found on page 141 of the Annual Report.
Sustainable Business ModelTo ensure a sustainable business model, the Company has identified that it is a prerequisite to have an effective risk management model and a duly up-to-date business continuity plan.
Risk ManagementThe Board has adopted a Company-wide risk management programme to identify, evaluate and manage significant risks while stress-testing for various risk scenarios. This programme ensures that a multitude of risks, arising as a result of the Company’s operations, are effectively managed in creating and preserving shareholder and other stakeholder wealth. The detailed Integrated Risk Management report on page 116 of the Annual Report describes the process of risk management as adopted by the Group and the key risks impacting the achievement of the Group’s strategic business objectives.
Business Continuity PlanningThe Business Continuity Planning (BCP) is an essential part of the Company’s response planning. The carefully articulated BCP of the company sets out how it will operate following an unforeseen incident and how it is expected to return to “business as usual “in the quickest possible time. The Company has an effective BCP developed with the support of an external consultant and expert in the said field enabling the company to be well prepared to respond to any unforeseen disaster situation, minimising any potential economic, social and environmental impact. The BCP is updated on a regular basis to ensure that all information is current at all times.
Securities Trading PolicyThe JKH’s securities trading policy prohibits all employees and agents engaged by Trans Asia Hotels PLC who are aware of unpublished price sensitive information from trading in Trans Asia Hotels PLC shares or the shares of other companies in which the Company presently has business interests.
Information Technology (IT) GovernanceThe Company identifies that in an era where technology is critical to business, corporate governance is incomplete without adequate IT
governance. With this basic premise the Company’s IT Governance has evolved in the years to deliver and embrace the new technologies which have aligned with the overall business objectives of the hotel. The efforts of IT governance in the hotel are to improve the efficiency and effectiveness of delivering reliable information to all of its valuable stakeholders. The IT division has been successful in improving the service quality and mitigating IT risks through internally developed IT policy guidelines as well as going through stringent internal and external audits and compliance requirements which are conducted yearly based on the group’s information security management guidelines. The IT governance framework of the Company is reviewed at the BAC on a periodic basis.
IT Governance
IT Governance
IT Value and Alignment
Deliver business value
Sustainability of business value
Accountability
Deliver business value
Performance Management
Sustainability of business value
Risk Management
External Governance StructureCompliance with Regulatory FrameworkThe Board of Directors have taken reasonable measures in ensuring that all financial statements are prepared in accordance with the Sri Lanka Accounting Standards and the requirements of the Colombo Stock Exchange and other applicable authorities.
This Report has been prepared as per the rules and regulations stipulated by the Corporate Governance Listing Rules published by the Colombo Stock Exchange (revised in April 2014) and also by the Companies Act No. 07 of 2007.
The Company has also adhered to the Code of Best Practice on Corporate Governance Reporting guidelines jointly set out by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission in preparation of this Corporate Governance Report, and where necessary deviations have been explained as provided within the rules and
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regulations. The company’s governance framework is confirmed to be in full compliance with,
› Companies Act No. 7 of 2007 - Mandatory Compliance › The Continuing Listing Rules of the Colombo Stock Exchange (Revised
April 2014) - Mandatory Compliance › The Code of Best Practice on Governance published by the Securities
and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka - Voluntary Compliance
Regulatory Compliance Sign OffA regulatory compliance check list is signed off on a quarterly basis by the respective Head of Department ensuring compliance with the applicable laws and regulations. Changes in the regulation are monitored both by the ultimate parent company level as well as the company level and are updated on a regular basis. The compliance reports are tabled and discussed at the board Audit committee meetings.
Corporate Governance Report Contd.
ConclusionThe Company’s robust and sound governance helps it to create and maintain trust with employees, investors, government, business partners, guests and other stakeholders. Within this framework, the hotel’s goal is to run its business sustainably, engaging with society in a way that leads to the creation of shared value over the long term.
A detailed report on the extent of our adherence to best practices with appropriate reference is given below;
Corporate Governance Checklist
Compliant Non Compliant
Rule No. Subject Applicable requirement Compliance Status
Applicable Section in the Annual Report
7.10 Compliancea./b./c. Compliance with Corporate
Governance RulesThe Company is compliance with the Corporate Governance Rules and any deviations are explained where applicable
Corporate Governance
7.10.1 Non Executive Directors
a./b./c. Non Executive Directors (NED)
2 or at least 1/3 of the total number of Directors should be NEDs
Corporate Governance
7.10.2 Independent Directors
a. Independent Directors (ID) 2 or1/3 of NEDs, whichever is higher, should be independent
Corporate Governance
b. Independent Directors Each NED should submit a declaration of independence or non independence
Available with the Secretaries for review
7.10.3 Disclosures relating to Directors
a./b. Disclosure relating to Directors
The Board shall annually determine the independence or otherwise of the NEDs
Corporate Governance
c. Disclosure relating to Directors
A brief resume of each Director should be included in the AR including the Director’s areas of expertise
Board of Directors (profile) section in the Annual Report
d. Disclosure relating to Directors
Provide a brief resume of new Directors appointed to the Board along with details
Corporate Governance
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Rule No. Subject Applicable requirement Compliance Status
Applicable Section in the Annual Report
7.10.4 Criteria for defining independence
(a-h) Determination of Independence
Requirements for meeting criteria to be an Independent Director
Corporate Governance
7.10.5 Remuneration Committee
7.10.5 Remuneration Committee (RC)
The RC of the listed parent company may function as the RC
Corporate Governance
a. Composition of Remuneration Committee
Shall comprise of NEDs, a majority of whom will be independent
Corporate Governance
b. Functions of Remuneration Committee
The RC shall recommend the remuneration of the General Manager (GM) and NEDs
Corporate Governance
c. Disclosure in the Annual Report relating to Remuneration Committee
› Names of Directors comprising the RC › Statement of Remuneration Policy › Aggregated remuneration paid to NED/NIDs and NED/IDs
Corporate Governance, Corporate Governance of Holding Company and Notes to the Financials.
7.10.6 Audit Committee
a. Composition of Audit Committee
› Shall comprise of NEDs a majority of whom will be Independent
› A NED shall be appointed as the Chairman of the Committee
› GM and Director Finance TAH should attend AC meetings › The Chairman of the AC or one member should be a
member of a professional accounting body
Corporate Governance and the Board Committee Reports
b. Audit Committee Functions Overseeing of the - › Preparation, presentation and adequacy of disclosures
in the financial statements in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS)
› Compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements
› Ensuring the internal controls and risk management are adequate to meet the requirements of the SLFRS/LKAS
› Assessment of the independence and performance of the external auditors
› Make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors, and approve the remuneration and terms of engagement of the external auditor
Corporate Governance and the Board Committee Reports
c Disclosure in Annual Report relating to Audit Committee
› Names of Directors comprising the AC › The AC shall make a determination of the
independence of the Auditors and disclose the basis for such determination
› The AR shall contain a Report of the AC setting out the manner of compliance with their functions
Corporate Governance and the Board Committee Reports
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Adoption of Joint Code of Best Practice - Check List
Compliant Non Compliant
Code Ref. Subject Applicable requirement Adoption Status
Applicable Section in the Annual Report
A. 1 DIRECTORS - Board
A.1 The Board › Company to be headed by an effective Board to direct and control the Company
Corporate Governance
A.1.1 Frequency of Board Meetings › Board should meet regularly, at least once in every quarter
Corporate Governance / Director’s Report
A.1.2 Responsibilities of the Board › Formulation and implementation of strategy,Skill adequacy of management and succession,Integrity of information, internal controls and risk management
› Compliance with laws, regulations and ethical standards
› Code of conduct › Adoption of appropriate accounting policies
Corporate Governance
A.1.3 Access to professional advice › Procedures to obtain independent professional advice Corporate Governance
A.1.4 Company Secretary › Ensure adherence to board procedures and applicable rules and regulations
› Procedure for Directors to access services of Company Secretary
Corporate Governance
A.1.5 Independent judgement › Directors should exercise independent judgement on issues of strategy, resources, performance and standards of business judgement
Corporate Governance
A.1.6 Dedication of adequate time and effort by Directors
› Directors should devote adequate time and effort to discharge their responsibilities to the Company satisfactorily
Corporate Governance
A.1.7 Training for Directors › Directors should receive appropriate induction, training, hone skills and expand knowledge to more effectively perform duties
Corporate Governance
A. 2 DIRECTORS - Chairman & Chief Executive Officer A.2. Division of responsibilities
to ensure no individual has unfettered powers of decision
› A balance of power and authority to be maintained by separating responsibility for conducting board business from that of executive decision making
Corporate Governance
A. 3 DIRECTORS - Role of ChairmanA.3 Ensure good corporate
governance › Chairman to preserve order and facilitate effective
discharge of Board functions by proper conduct of Board meetings
Corporate Governance
A. 4 DIRECTORS - Financial Acumen A.4 Possession of adequate
financial acumen › Board to ensure adequacy of financial acumen and
knowledge within BoardCorporate Governance
A. 5 DIRECTORS - Board BalanceA.5.1 Composition of Board › The Board should include a sufficient number of non-
executive, independent directors Corporate Governance
Corporate Governance Report Contd.
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Applicable Section in the Annual Report
A.5.2 Proportion of Independent Directors
› Two or one third of the non-executive directors should be independent
Corporate Governance
A.5.3 Test of independence › Independent Directors should be independent of management and free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgement
Corporate Governance
A.5.4 Declaration of independence › Non-executive Directors should submit a signed and dated declaration of their independence / non-independence
Corporate Governance / Director’s Report
A.5.5 Annual determination of criteria of independence / non-independence and declaration of same by Board
› The Board should annually determine and disclose the names of directors deemed to be independent
Corporate Governance
A.5.6 Appointment of an alternate Director
› If an alternate Director is appointed by a non-executive director, such alternate director should not be an executive of the company
N/A N/A
A.5.7 Appointment of Senior Independent Director (SID)
› If the roles of Chairman / CEO are combined, a non-executive Director should be appointed as a Senior Independent Director
N/A N/A
A.5.8 Availability of Senior Independent Director to other Directors
› If warranted, the SID should be available to the other Directors for confidential discussions.
N/A N/A
A.5.9 Interaction between Chairman and non-executive, independent Directors
› The Chairman should meet the non-executive, independent Directors at least once a year
Corporate Governance
A.5.10 Directors concerns to be recorded
› When matters are not unanimously resolved, directors to ensure their concerns are recorded in Board minutes
N/A N/A
A. 6 DIRECTORS - Supply of Information
A.6.1 Provision of adequate information to Board
› Management to ensure the Board is provided with timely and appropriate information
Corporate Governance
A.6.2 Adequacy of Notice and formal agenda to be discussed at Board meetings
› Board minutes, agenda and papers should be circulated at least seven days before the Board meeting
Corporate Governance
A. 7 DIRECTORS - Appointments to the BoardA.7 Appointments to the Board › Formal & transparent procedure for Board
appointmentsCorporate Governance
A.7.1 Nomination Committee › Nomination committee of the ultimate Parent Company may function as such for the Company and make recommendations to the Board on new Board appointments
Corporate Governance
A.7.2 Annual assessment of Board composition
› Nomination committee or Board should annually assess the composition of Board
Corporate Governance
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Applicable Section in the Annual Report
A.7.3 Disclosure of new board appointments
› Profiles of new Board appointments to be communicated to Shareholders
Corporate Governance Notice of Meeting
A. 8 DIRECTORS - Re-electionA.8.1/ A.8.2 Appointment of non-executive
Directors › Re-election at regular intervals and should be subject
to election and re-election by shareholdersCorporate Governance / Director’s Report
A. 9 DIRECTORS - Appraisal of Board PerformanceA.9.1 Annual appraisal of Board
performance › The Board should annually appraise how effectively it
has discharged its key responsibilities Corporate Governance
A.9.2 Self evaluation of Board and Board Committees
› The board should evaluate its performance and that of its committees annually
Corporate Governance / Audit Committee Report
A.9.2 Declaration of basis of performance evaluation
› The Board should disclose how performance evaluations have been carried out
Corporate Governance
A. 10 DIRECTORS - Disclosure of information in respect of DirectorsA.10.1 Biographical profiles and
relevant details of Directors to be disclosed
› Annual Report should disclose the biographical details of directors and attendance at board/committee meetings
Board of Directors Corporate Governance / Audit Committee Report
A. 11 DIRECTORS - Appraisal of Chief Executive OfficerA.11.1 Short, medium and long term
objectives, financial and non-financial objectives to be set
› The Board should set out the short, medium and long term objectives, financial and non-financial objectives at the commencement of each year
Corporate Governance
A.11.2 Evaluation of CEO performance › The performance of the CEO should be evaluated by the Board at the end of the year
Corporate Governance
B. 1 DIRECTORS REMUNERATION - Remuneration ProcedureB.1.1 Appointment of Remuneration
Committee › Remuneration Committee of the ultimate Parent
Company may function as such for the Company to make recommendations on directors remuneration
Corporate Governance
B.1.2 Composition of Remuneration Committee
› Board to appoint only non-executive Directors to serve on Remuneration Committee
Corporate Governance
B.1.3 Disclosure of members of Remuneration Committee
› The Annual Report should disclose the chairman and directors who serve on the Remuneration Committee
Corporate Governance
B.1.4 Remuneration of non-executive directors
› Board to determine the level of remuneration of non-executive directors
Corporate Governance
B.1.5 Access to professional advice › Remuneration Committee should have access to professional advice in order to determine appropriate remuneration for executive directors
Corporate Governance
B. 2 DIRECTORS REMUNERATION - Level and Make up of RemunerationB.2.1 Remuneration packages for
executive directors › Packages should be structured to attract, retain and
motivate executive directorsCorporate Governance
B.2.2 Remuneration packages to be appropriately positioned
› Packages should be comparable and relative to that of other companies as well as the relative performance of the company
Corporate Governance
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Applicable Section in the Annual Report
B.2.3 Appropriateness of remuneration and conditions in relation to other Group companies
› When determining annual increases remuneration committee should be sensitive to that of other Group companies
Corporate Governance
B.2.4 Performance related elements of remuneration
› Performance related elements of remuneration should be aligned with interests of Company
Corporate Governance
B.2.5 Share options › Executive share options should not be offered at a discount
Corporate Governance
B.2.6 Remuneration packages for non-executive directors
› Should reflect time commitment and responsibilities of role and in line with existing market practice
Corporate Governance
B. 3 DIRECTORS REMUNERATION - Disclosure of Remuneration B.3.1 Disclosure of details of
remuneration › The Annual Report should disclose the remuneration
paid to directorsFinancial Statements - Note 33.4
C. 1 RELATIONS WITH SHAREHOLDERS - Constructive use and conduct of Annual General Meeting C.1.1 Proxy votes to be counted › The Company should count and indicate the level
of proxies lodged for and against in respect of each resolution
Corporate Governance
C.1.2 Separate resolutions › Separate resolutions should be proposed for substantially separate issues
Corporate GovernanceNotice of Meeting
C.1.3 Availability of Committee Chairmen at AGM
› The Chairmen of Board committees should be available to answer any queries at AGM
Corporate Governance
C.1.4 Notice of AGM › 15 calendar days notice to be given to shareholders Notice of Meeting
C.1.5 Procedure for voting at meetings
› Company to circulate the procedure for voting with Notice of Meeting
Notice of Meeting
C.2.1 Channel of Communication › Channel to reach all shareholders to disseminate timely information
Corporate Governance
C.2.2-C.2.7 Policy and Methodology of Communication
› Policy and Methodology of communication with shareholders and implementation
Corporate Governance
C.3 Major and Material Transactions including major related party transactionsC.3.1 Disclosure of Material
Transactions › Disclosure for all material facts involving all material
transactions including related party transactions Notes to Financial Statements
D.1 ACCOUNTABILITY AND AUDIT - Financial ReportingD.1.1 Presentation of public
reports › Should be balanced, understandable and comply with
statutory and regulatory requirements Management Discussion, Corporate GovernanceRisk ManagementFinancial Statements
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Applicable Section in the Annual Report
D.1.2 Directors Report › The Director’s Report should be included in the Annual Report and confirm that
› the Company has not contravened laws or regulations in conducting its activities
› Material interests in contracts have been declared by Directors
› the Company has endeavoured to ensure equitable treatment of shareholders
› that the business is a “going concern” › that there is reasonable assurance of the effectiveness
of the existing business systems following a review of the internal controls covering financial, operational and compliance
Director’s Report
Audit Committee Report
Director’s ReportFinancial Statements
Corporate Governance
Director’s ReportAudit Committee ReportRisk Management
D.1.3 Respective responsibilities of Directors and Auditors
› The Annual Report should contain separate statements setting out the responsibilities of the Directors for the preparation and presentation of the financial statements and the reporting responsibilities of the Auditors
Respective responsibilities of Directors and Auditors
D.1.4 Management Discussion and Analysis
› Annual Report to include section on Management Discussion and Analysis
Management Discussion
D.1.5 Going Concern › Directors to substantiate and report that the business is a going concern or qualify accordingly
Director’s Report
D.1.6 Serious Loss of Capital › Directors to summon an Extraordinary General Meeting in the event that the net assets of the company falls below 50% of the value of Shareholders Funds
N/A N/A
D.1.7 Related Party Transactions › Disclosure of Related Party Transactions Notes to the Financial Statements
D.2 ACCOUNTABILITY AND AUDIT - Internal Control D.2.1 Effectiveness of system of
internal controls › Directors to annually conduct a review of the
effectiveness of the system of internal controls. This responsibility may be delegated to the Audit Committee
Audit Committee ReportRisk Management
D.2.2 Functionality › Internal Audit Function Corporate Governance
D.2.3 / D.2.4
Continuity of Internal control › Maintaining a sound system of internal control Corporate Governance
D.3 AUDIT COMMITTEED.3.1 Chairman and Composition
of Audit Committee › Should comprise of a minimum of two independent,
non-executive directors › Audit Committee Chairman should be appointed by the
Board
Audit Committee Report
D.3.2 Duties of Audit Committee › Should include › Review of scope and results of audit and its
effectiveness › Independence and objectivity of the Auditors
Corporate Governance
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Code Ref. Subject Applicable requirement Adoption Status
Applicable Section in the Annual Report
D.3.3 Terms of Reference / Charter › The Audit Committee should have a written Term of Reference which define the purpose of the Committee and its duties and responsibilities
Corporate Governance
D.3.4 Disclosures › The Annual Report should disclose the names of directors serving on the Audit Committee
› The Audit Committee should determine the independence of the Auditors and disclose the basis of such determination
› The Annual Report should contain a report by the Audit Committee setting out the manner of the compliance of the Company during the period to which the Report relates
Corporate GovernanceAudit Committee Report
Corporate Governance
Audit Committee Report
D.4 CODE OF BUSINESS CONDUCT AND ETHICSD.4.1 Adoption of Code of Business
Conduct and Ethics › The Company must adopt a Code of Business Conduct
and Ethics for directors and members of the senior management team and promptly disclose any violation of the Code
Corporate Governance
D.4.2 Chairman’s affirmation › The Annual Report must include an affirmation by the Chairman that he is not aware of any violation of the Code of Business Conduct and Ethics
Chairman’s Statement / Director’s Report
D.5 CORPORATE GOVERNANCE DISCLOSURESD.5.1 Corporate Governance
Report › The Annual Report should include a report setting out
the manner and extent to which the Company has adopted the principles and provisions of the Code of Best Practice on Corporate Governance
Corporate Governance
E. INSTITUTIONAL INVESTORSE.1 Share Holder Voting
E.1.1 Structured Dialogue with Shareholders
› A regular and structured dialogue should be conducted with shareholders and the outcome of such dialogue should be communicated to the Board by the Chairman
Corporate Governance
E.2 Evaluation of Governance Disclosures by Institutional Investors
› Institutional investors should be encouraged to consider the relevant factors drawn to their attention with regard to board structure and composition
Corporate Governance
F. OTHER INVESTORS - Investing Divesting decisionsF.1. Individual Investors › Individual shareholders should be encouraged to carry
out adequate analysis and seek professional advice when making their investment/divestment decisions
Corporate Governance
F.2 Shareholder Voting › Individual shareholders should be encouraged to participate and exercise their voting rights
Corporate Governance / Form of Proxy
G. Sustainability ReportingG.1 - G.1.7 Sustainability Reporting › Disclosure on adherence to sustainability principles Annual Report - GRI Index
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Adil Jayakitchialan 1 ½ years as a Trainee Cook
““
I am proud to be part of a creative team that consistently prepares delicious and mouthwatering recipes for which our hotel is renowned for. This is a tremendous opportunity given to me to excel in the career that I have chosen.
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Information to Shareholders & Investors
1. Directors’ Shareholding
As at31.03.2014
As at31.03.2013
Mr. S. C. Ratnayake - Chairman 400 400
Mr. A. D. Gunewardene 400 400
Mr. J. R. F. Peiris 400 400
Mr. N. L. Gooneratne 615,093 662,604
Mr. C. J. L. Pinto (Joint account with Mrs. M.R.C. Pinto ) 7,400 7,400
Mr. E. H. Wijenaike Nil Nil
Ms. J. C. Ponniah - (Appointed on 2nd October 2013) Nil Nil
2. The Company's Issued Ordinary Share Capital of 200,000,000 were held by 1,460 shareholders as at 31st March 2014 (1,494 Shareholders as at 31st March 2013)
2.1 Share Distribution Schedule as at 31.03.2014
Number of Shareholders Percentage of Shareholding Total Number of Shares
Less than or equal to 1,000 1,185 0.12 241,074
1,001 to 10,000 217 0.40 793,018
10,001 to 100,000 44 0.56 1,125,270
100,001 to 1,000,000 10 2.15 4,304,506
1,000,001 to 10,000,000 2 4.72 9,428,848
Over 10,000,001 2 92.05 184,107,284
Grand Total 1,460 100% 200,000,000
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Shareholders’ diary
Meeting
33rd Annual General Meeting 30th June 2014
Interim Financial Statements
1st Quarter Ended 30th June 2013 Released on 25th July 2013
2nd Quarter Ended 30th September 2013 Released on 31st October 2013
3rd Quarter Ended 31st December 2013 Released on 27th January 2014
4th Quarter Ended 31st March 2014 Released on 28th May 2014
Dividend Declared Paid
Interim 13th December 2013 7th January 2014
Final 27th May 2014 17th June 2014*
* Final dividend proposed to be paid
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2.2 Twenty Largest Shareholders
Sharehoding as at 31.03.2014
% Sharehodingas at 31.03.2013
%
1 John Keells Holdings PLC 97,284,256 48.64 97,284,256 48.64
2 Asian Hotels And Properties PLC 86,823,028 43.41 86,823,028 43.41
3 Bank of Ceylon A/C Ceybank Unit Trust 5,132,648 2.57 5,020,059 2.51
4 Employees Provident Fund 4,296,200 2.15 4,296,200 2.15
5 Mr. N. L. Gooneratne 615,093 0.31 662,604 0.33
6 Employees Trust Fund Board 609,721 0.30 610,400 0.31
7 Prof. D. N. L. Alwis 600,107 0.30 588,028 0.29
8 Mr. A. N. G. Wijeyekoon 572,960 0.29 572,960 0.29
9 Bank of Ceylon A/C Ceybank Century Growth Fund 513,481 0.26 498,006 0.25
10 Bank of Ceylon No. 1 Account 477,200 0.24 477,200 0.24
11 Ellawala Exports (Pvt) Ltd. 358,400 0.18 358,400 0.18
12 Mr. G. L. A. Ondaatjie 250,400 0.13 250,400 0.13
13 Mr. D. Gonsalkorale 161,200 0.08 161,200 0.08
14 Mrs. B. J. E. Severin 72,800 0.04 72,800 0.04
15 Mr. T. Rodrigo 54,600 0.03 54,600 0.03
16 A. S. Chartoor (Tea) (Pvt) Ltd 51,185 0.03 60,000 0.03
17 Mr. R. D. Ranatunga 50,112 0.03 50,112 0.03
18 Mr. N. P. Tippala Gamage 49,872 0.02 49,872 0.02
19 Mr. G. G. P. Gunawardena 48,468 0.02 48,468 0.02
20 Mrs. M. I. Wijeyekoon 40,000 0.02 40,000 0.02
198,061,731 99.03 197,978,593 98.99
2.3 Composition of Shareholders
As at 31st March 2014 As at 31st March 2013
Number of Shareholders
Number of Shares
% Number of Shareholders
Number of Shares
%
Directors and Spouses 5 623,693 0.31 5 671,204 0.34
Public non-resident
Institutions 0 0.00% 0 0 0.00% 0
Individuals 12 84,060 0.04 16 99,457 0.05
Public resident
Institutions 50 11,774,925 5.89 58 11,649,814 5.82
Individuals 1,391 3,410,038 1.71 1,413 3,472,241 1.74
Shareholders holding more than 10% 2 184,107,284 92.05 2 184,107,284 92.05
1,460 200,000,000 100.00 1,494 200,000,000 100.00
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3. Market information on Ordinary Shares of the Company
2013/14 Q4 Q3 Q2 Q1 2012/13
Share Information
High 94.90 85.00 94.90 89.80 90.00 99.80
Low 69.00 70.60 78.00 70.00 69.00 50.00
Close 79.90 79.90 79.90 89.70 81.00 70.40
Dividend paid (per share) 3.50 1.50 0.00 0.00 2.00 3.00
Trading Statistics
Number of transactions 982 393 193 193 203 1,287
Number of shares traded ('000) 240 77 36 42 85 442
% of total shares in issue 0.12 0.04 0.02 0.02 0.04 0.22
Value of all shares traded (Rs. Mn) 19.33 6.16 3.02 3.36 6.79 31.07
Average daily turnover (Rs. '000) 109 162 69 82 123 164
Market capitalization (Rs. Mn) 15,980 15,980 15,980 17,940 16,200 14,080
Dividend since 2004/05
Year Ended 31st March Dividend Paid Per Share (Rs.)
Dividend Paid (Rs. ‘000)
2004/05 3.50 175,000
2005/06 5.35 267,500
2006/07 2.40 120,000
2007/08 0.75 37,500
2008/09 1.50 75,000
2009/10 1.00 50,000
2010/11 2.00 100,000
2011/12 3.00 300,000
2012/13 3.00 600,000
2013/14 3.50 700,000
Share capital since 2004/05
Year Ended 31st March Number of Shares in Issue
2004/05 50,000
2005/06 50,000
2006/07 50,000
2007/08 50,000
2008/09 50,000
2009/10 50,000
2010/11* 100,000
2011/12* 200,000
2012/13 200,000
2013/14 200,000
* Sub division of shares
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May13 Jun13Apr13 Aug13 Set13Jul13 Dec13 Jan14 Feb14 Mar14
ASPI S&P HOTELS TAH
Performance of Trans Asia Hotel Share Price against ASPI, S&P and Hotels Sector Index
Oct13 Nov13
25%
Growth
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
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ASPI Index S&P Index HOTELS Index TAH Price
Movement of TAH Share Price against ASPI, S&P and Hotels Sector Index
Apr-13
6,000
7,000
Points
95
Rs.
5,000
90
4,00085
3,00080
2,00075
1,000 70
0 65May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14
09/10 10/11 12/13 13/14
Market Capitalisation (Rs. Mn)
8,813
19,580
13,380
14,080
15,980
11/1209/10 10/11 12/13 13/14
Total Shareholder Return (%)
93%
0%
13%
-30%
10%18%
11/12
Thilak Wijesuriya6 years as a Maintenance Technician
““
My responsibility is to maintain and improve our building and facilities for our guests to enjoy a hassle free stay. We not only care about our guests, but are also concerned about the environment as our role is to reduce the carbon footprint by reducing the energy consumption.
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Integrated Risk Management
Inte
grat
ed R
isk
Man
agem
ent
Ultra High
High
Medium
Low
Insignificant
Top Risk Scenarios
Competitor Risk
Product and Service Quality
Business Goals
Statutory & Legal Risk
Personal
Technology & Information
Internal Process & procedures
Natural & man-made disasters
Credit Risk
Liquidity Risk
Foreign Exchange Risk
Interest Risk
Audit Committee Board
Cinnamon Lakeside Risk Management Team
Strength of current mitigations
Impa
ct to
Com
pany
Likelihood of occurrence
07 08
05 06
09 10
11 1203 04
01
02
01
02
03
04
05
06
07
08
09
10
11
12
Risk Management is an integral part of the organizational process of Trans Asia Hotels PLC and a key factor in ensuring the Company’s success through sustainable growth whilst enhancing stakeholder value. The Company is aware that it operates in a dynamic industry and is subject to frequent change. Therefore Risk Management is intertwined with the Hotel’s strategic planning process and also considered an integral component of Company’s Corporate Governance Framework. Hence Risk Identification, Prioritization and Assessment, Development of Risk Response Strategy, Risk Reporting, Implementation of Risk mitigation strategy and monitoring of Controls are woven into the fabric of the Company’s strategy creating an improved, stable risk profile.
Risk Management Framework
Risk Identification
Risk Prioritisation
& Assessment
Strategy Development
Risk Reporting
Implementation, Controlling and
Monitoring
Risk Management Team and StructureThe Company’s risk management team is headed by the General Manager who is the business unit head. He is assisted by all the Heads of Department and the Assistant manager Sustainability and Risk Management. Whilst the team carries out the risk management
process they are eloquently guided by the framework established by the Sustainability and Enterprise Risk Management Division of John Keells Holdings PLC.
Risk IdentificationIdentification of all possible risk is the initial process of the Company’s Risk management team. It believes than sustainability is a form of overall risk management and should consider not only financial and operational risk faced by the company, but risk faced by the company resulting from
possible impacts on the environment, employees and community due to its operation. The team takes the crucial responsibility for the early identification of such potential risks. Risks are identified through various means including intelligence gathering, quality audits, safety audits, internal audits and means such as customer feedback and incidents.
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Risk Prioritization and AssessmentThe Risk Management Team along with the guidance of the Group Sustainability and Enterprise Risk Management Division will review and assess the identified risk. These risk are then assessed in terms of Implication, Impact to Company, Likelihood of Occurrence, Velocity and Impact from Company. The product of the risk assessment are tabulated in a risk grid that rates the risks in scale of ‘Ultra High’ to ‘Insignificant’, which enables the company to prioritize the risks and to plan out risk mitigation strategies.
Developing Risk Response Strategy and Risk OwnerBased on the score derived by each identified risk the risk management committee decides on the appropriate risk response strategy. There are three board categories of risk response strategies namely classified as preventive, detective and corrective. Based on the field of expertise each of the Risk is assigned to a Risk owner. The risk owner is responsible for the implementation and reporting of the strategy.
Risk ReportingCompany follows a well structures reporting mechanism for the identified risk. The Risk Grid is reviewed on a quarterly basis by the Risk committee. Team members at the end of each quarter signs off a compliance statement .The consolidated financial and operational compliance report is received by the Audit Committee from the President of the Leisure Group. The Audit Committee has also included the Risk Review on the agenda of Audit Committee meetings. The Assistant manager Sustainability and Risk
Management present to the audit committee all the assessed Risk of the company along with the strategies followed by the company to mitigate same. The responsibility of maintaining an effective system of internal control and risk management lies with The Board. The Audit Committee on behalf of the Board reviews the risk management process adopted by the Company.
Implementation of Risk Mitigation strategyImplementation of each Risk mitigation strategy lies with risk owner. He/She is responsible to ensure that all the required resources to implement the strategy is included in the capital expenditure or operational expenditure budget of the company. Subsequent to the resource planning he is responsible for the implementation of the strategy within the agreed date plan and update the committee accordingly.
Monitoring of ControlsCompany does understand that in a dynamic environment that risk does not stay constant. Continuous monitoring of the environment and the assessed risk ensure that the company identifies these changes proactively.
For the financial year ending under review, below are some of the key items included in the risk register of Trans Asia Hotels PLC along with the potential impact and mitigating action plan for each. For ease of understanding each of the risk are broadly categorized under Strategic Risk, Operational Risk and Finance Risk.
Risk Category & Description Potential Impact Control Measures and Action Plans to Mitigate Risks
Strategic RisksCompetitive RiskReduction in market share, failure to be competitive resulting in lower occupancy and room rates.
Reduction in fair share in the market , decrease in revenue and profitability.
Risk Rating -Medium › Strict adherence to service standards to ensure superior quality in service delivery and
value for money. › Ample investments in upgrading and enhancing facilities and services. › Reviewing and monitoring adherence to Brand standards and Standard Operational
Procedures. (SOP) › Anticipate competitor strategies and new entrants to market and formulate strategies
accordingly. › Constant creativity and innovation in products and services. › Continuous review of guest feedback and prompt response to issues in order to create
customer delight.
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Risk Category & Description Potential Impact Control Measures and Action Plans to Mitigate Risks
Product and Service QualityAny event or action that may cause material deviation to promised Product and ServiceQuality.
Reduction in the actual market share and inability to achieve long term business objectives.
Risk Rating -Low › Conduct regular brand audits and mystery audits for guests’ feedback covering both
facilities and services. › Compliance with environmental, health & safety best practices by obtaining HACCP
and other quality certification standards. › Benchmark industry best practices in terms of both product and service. › Development of group wide brand standard and strategies. › Innovative service delivery in keeping with the brand promise. › Ensuring key managerial positions are held by suitably qualified and trained staff with
sufficient experience in the hotel industry. › Continuous training of brand value and brand standards among staff. › Responsible corporate citizenship through CSR initiatives.
Business GoalsInability to meet Company objectives. Failure to implement strategic plan, revenue improvements and cost saving initiatives.
Adverse impact on planned profitability and cash flow.
Risk Rating -Low › Formulation Business Plans on an annual basis and formally approved by the Board. › Formulated business plans are monitored and reviewed on a period basis. › Implementation of stringent cost control process. › Culture of innovative initiatives both in terms of revenue management and cost
efficiency. › Ongoing reviews of cost and expenditure by operational and financial staff to determine
and implement appropriate revision of rates and tariffs.
Statutory & Legal RiskImplications/losses that may arise due to failure or non compliance with existing legislations/regulations.
Implications that can arise due to non-compliance with statutes.
Potential exposure to litigation.
Loss arising from flawed contracts.
Risk Rating -Low › Creating awareness about legal & statutory obligations at all levels. › Internal auditors carrying out specific reviews and checks to ensure that operations
and services remain in compliance with regulations. › Tax / regulatory returns submitted by the company being subjected to regular
monitoring and scrutiny by the Tax Division of the Leisure Group. › The Legal Division of John Keells Group provides guidance and direction to safeguard
the company against any losses or loss of reputation that could arise from any legal consequences of transactions it enters into.
› Participation in industry advisory and policy making forums to voice concerns on envisaged legislation.
Operational RisksPersonnelRisk of losing key personnel and skilled staff, inappropriate labour action.
Risk of injuries / health hazards due to employees being exposed to hazardous work conditions / chemicals.
Risk of productivity.
Failure to deliver brand standards resulting in reduced market share.
Adverse impact on the company’s brand image.
Risk Rating -Low › Structured training programs, cross exposure training opportunities arising from the
performance appraisal process › Emphasis on good employer-employee relationships, employee welfare and an
effective and open communication with the labour union to achieve a ‘win-win’ outcome.
› Fostering a spirit of unity and self belonging through organization of associate gatherings, outings, family get-togethers and religious events.
› Strict adherence to laid down safety standards and procedures.
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Risk Category & Description Potential Impact Control Measures and Action Plans to Mitigate Risks
Technology & InformationRisk of failure of electronic systems and inadequacy of information systems.
Adverse impact on efficiency of operation and loss of competitive advantage.
Continuous investment in new technology to remain competitive.
Loss of data and transactions.
Risk Rating -Low › Implementation of a fully integrated, property management, material management
and a financial information systems, ensuring a seamless flow of information and operational efficiencies
› Existence and continuous improvement of a Disaster Recovery Plan in the event of a disruption or failure to the system.
› The IT Division of the company and John Keells Group have implemented controls to safeguard the computer installations of the hotel to reduce downtime and ensure continuity of operation.
› Continuous review of network protection process is carried out to ensure information security and integrity.
Internal Process & ProceduresThe risk of financial loss and disruption to business due to breakdown in Internal Controls.
Disruption to operation, loss of profitability and return on assets.
Risk Rating -Low › Clearly defined systems & procedures are in place to ensure compliance with internal
controls which are periodically reviewed for their continued effectiveness › An externally sourced independent internal audit firm carries out regular review and
report on the adequacy and effectiveness of these systems and level of compliance.
Natural or man-made disastersLoss of property and equipment resulting in significant losses.
Loss of assets. Risk Rating -Low › Adequacy of insurance covers are reviewed regularly and updated when necessary. › Crisis management and business recovery plans have been adopted to safeguard the
assets and speedy recovery. These are being reviewed periodically.
Financial RisksCredit RiskExposure and losses due to default of settlement by debtors.
Reduced cash flow and profitability.
Risk Rating -Low › Credit policy and stringent controls are in place to mitigate the impact of default. › Credit limits are reviewed on a regular basis. › Constant monitoring and review of debtor balances with collection targets and adapt
progressive action.
Liquidity RiskInability to meet financial commitments on due dates.
Probable penalty charges and adverse credit terms for future business.
› Regular review mechanisms in place to monitor the performance of the company against approved budget targets to achieve a balance between liquidity and profitability.
› Capital investments are planned so as not to adversely impact on Cash Flows and gearing of the Company.
Foreign Exchange Risk Reduced revenue and profitability.
Risk Rating -Low › Transacting revenue in strong currencies. All room bills are invoiced in USD. › Matching payments to collection of the same currency. › Continuous monitoring of the exchange rate updating the conversion rates according.
Interest Rate Risk Reduced income and profitability.
Risk Rating -Low › Working closely with the parent company treasury department to negotiate favorable
terms and conditions for investments. › Keeping abreast of global as well as local interest rate activities
The Board confirms that a process for identifying, evaluating and managing significant risks that endanger the achievement of the strategic objectives of Trans Asia Hotels PLC has been in place throughout the year in accordance with the guidelines set out by the Institute of Chartered Accountants of Sri Lanka and industry best practice. Potential Financial Risk in compliance with the Sri Lanka Accounting Standards (SLFRS) are disclosed on page 146 under notes to the Financial Statement. The Audit Committee has reviewed the Business Risk Management process adopted by the Company and has noted the risk management exercises had been conducted for the year under review.
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GRI (3.1) Content IndexApplication Level : B
Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
STANDARD DISCLOSURES PART I: Profile Disclosures
1. Strategy and Analysis
1.1 Statement from the most senior decision-maker of the organization. Fully Chairman’s Message & CEO’s Review
14 - 20
1.2 Description of key impacts, risks, and opportunities. Fully Risks & Opportunities 26
2. Organisational Profile
2.1 Name of the organisation. Fully Corporate Information 177
2.2 Primary brands, products, and/or services. Fully Company Profile, Management Discussion & Analysis - Operational Review
40 -57
2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries, and joint ventures.
Fully Company Profile 6
2.4 Location of organisation’s headquarters. Fully Corporate Information Inner Back Cover
2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.
Fully Corporate Information Inner Back Cover
2.6 Nature of ownership and legal form. Fully Company Profile, Corporate Information
6 & Inner Back Cover
2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries).
Fully Management Discussion & Analysis - Operational Review
40 - 57
2.8 Scale of the reporting organisation. Fully Company Profile, Corporate Information
6 & 177
2.9 Significant changes during the reporting period regarding size, structure, or ownership.
Fully Annual Report of the Board of Directors, Financial Statements & Notes
132 - 136142 - 168
2.10 Awards received in the reporting period. Fully Management Discussion & Analysis - Product Responsibility
50 - 52
3. Report Parameters
3.1 Reporting period (e.g., fiscal/calendar year) for information provided. Fully About the Report 23
3.2 Date of most recent previous report (if any). Fully About the Report N/A
3.3 Reporting cycle (annual, biennial, etc.) Fully About the Report 23
3.4 Contact point for questions regarding the report or its contents. Fully About the Report 24
3.5 Process for defining report content. Fully About the Report 23
3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance.
Fully About the Report 23
3.7 State any specific limitations on the scope or boundary of the report Fully About the Report 23
3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations.
Fully About the Report 23 - 24
GRI Index
GRI I
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Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report.
Fully About the Report 23
3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement.
Fully About the Report 23
3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report.
Fully About the Report 23
3.12 Table identifying the location of the Standard Disclosures in the report. Fully Content Index 24
3.13 Policy and current practice with regard to seeking external assurance for the report
N/A About the Report N/A
4. Governance, Commitments, and Engagement
4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight.
Corporate Governance 89
4.2 Indicate whether the Chair of the highest governance body is also an executive officer.
Corporate Governance 89
4.3 For organizations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members.
Corporate Governance 91
4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.
Corporate Governance 96 - 97
4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance).
Corporate Governance 88
4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided.
Corporate Governance 91
4.7 Process for determining the composition, qualifications, and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity.
Corporate Governance 90
4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.
Fully Vision, Pledges, Management Discussion & Analysis
30 - 85
4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.
Fully Corporate Governance 88 - 107
4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.
Fully Corporate Governance 88 - 107
4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization.
Fully About the Report 23 - 24
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Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses.
Fully Management Discussion & Analysis - Product Responsibility
23 - 24
4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organizations
Fully Management Discussion & Analysis - Economic Impact
37
4.14 List of stakeholder groups engaged by the organization. Fully Stakeholder Engagement 24
4.15 Basis for identification and selection of stakeholders with whom to engage.
Fully Stakeholder Engagement 24
4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.
Fully Stakeholder Engagement 24
4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting.
Partially Stakeholder Engagement 24
STANDARD DISCLOSURES PART II: Disclosures on Management Approach (DMAs)
DMA Economic
Disclosure on Management Approach EC
Aspects Economic performance Fully Management Discussion & Analysis - Economic Impact
37
Market presence Partially
Indirect economic impacts Partially
DMA Environment
Disclosure on Management Approach EN
Aspects Materials Not Reported Management Discussion & Analysis - Environmental Impact
60
Energy Fully
Water Partially
Biodiversity Partially
Emissions, effluents and waste Partially
Products and services Not Reported
Compliance Fully
Transport Not Reported
Overall Fully
DMA Labour Practices
Disclosure on Management Approach LA
Aspects Employment Fully Management Discussion & Analysis - Our Associates
67 Labour/management relations Fully
Occupational health and safety Fully
Training and education Fully
Diversity and equal opportunity Fully
Equal remuneration for women and men Not Reported
GRI Index Contd.
GRI I
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Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
DMA Human Rights
Disclosure on Management Approach HR
Aspects Investment and procurement practices Not Reported Management Discussion & Analysis - Our Associates
67
Non-discrimination Fully
Freedom of association and collective bargaining Fully
Child labour Fully
Prevention of forced and compulsory labour Fully
Security practices Fully
Indigenous rights Not Reported
Assessment Fully - Direct Response
Remediation Fully
DMA Society
Disclosure on Management Approach SO
Aspects Local communities Fully Management Discussion & Analysis - Caring for the Community, Our Associates, Economic Impact
30 - 85 Corruption Fully
Public policy Fully
Anti-competitive behaviour Not Reported
Compliance Fully - Direct Response
DMA PR Disclosure on Management Approach PR
Aspects Customer health and safety Fully Management Discussion & Analysis - Product Responsibility
48 Product and service labelling Partially
Marketing communications Fully
Customer privacy Fully
Compliance Fully
STANDARD DISCLOSURES PART III: Performance Indicators
Economic
Economic performance
EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.
Fully Management Discussion & Analysis - Economic Impact
37
EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change.
Partially Management Discussion & Analysis - Economic Impact
37
EC3 Coverage of the organisation’s defined benefit plan obligations. Fully Management Discussion & Analysis - Economic Impact
37
EC4 Significant financial assistance received from government. Fully Cinnamon Lakeside did not record any financial assistance from the government
N/A
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Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
Market presence
EC5 Range of ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation.
Not Reported N/A
EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.
Fully Management Discussion & Analysis - Economic Impact
37
EC7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.
Partially Management Discussion & Analysis - Our Associates
67
Indirect economic impacts
EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.
Partially Management Discussion & Analysis - Caring for the Community
79
EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts.
Not Reported N/A
Environmental
Materials
EN1 Materials used by weight or volume. Not Reported N/A
EN2 Percentage of materials used that are recycled input materials. Not Reported N/A
Energy
EN3 Direct energy consumption by primary energy source. Fully Management Discussion & Analysis - Environmental Impact
60
EN4 Indirect energy consumption by primary source. Fully Management Discussion & Analysis - Environmental Impact
60
EN5 Energy saved due to conservation and efficiency improvements. Fully Management Discussion & Analysis - Environmental Impact
60
EN6 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives.
Fully Management Discussion & Analysis - Environmental Impact
60
EN7 Initiatives to reduce indirect energy consumption and reductions achieved.
Fully Management Discussion & Analysis - Environmental Impact
60
Water
EN8 Total water withdrawal by source. Fully Management Discussion & Analysis - Environmental Impact
60
EN9 Water sources significantly affected by withdrawal of water. Not Reported N/A
EN10 Percentage and total volume of water recycled and reused. Fully Management Discussion & Analysis - Environmental Impact
60
Biodiversity
EN11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.
Not Reported N/A
EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.
Not Reported N/A
GRI Index Contd.
GRI I
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Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
EN13 Habitats protected or restored. Not Reported
EN14 Strategies, current actions, and future plans for managing impacts on biodiversity.
Partially Management Discussion & Analysis - Environmental Impact
60
EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.
Not Reported N/A
Emissions, effluents and waste
EN16 Total direct and indirect greenhouse gas emissions by weight. Fully Management Discussion & Analysis - Environmental Impact
60
EN17 Other relevant indirect greenhouse gas emissions by weight. Not Reported
EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved.
Fully Management Discussion & Analysis - Environmental Impact
60
EN19 Emissions of ozone-depleting substances by weight. Not Reported N/A
EN20 NOx, SOx, and other significant air emissions by type and weight. Not Reported N/A
EN21 Total water discharge by quality and destination. Not Reported N/A
EN22 Total weight of waste by type and disposal method. Fully Management Discussion & Analysis - Environmental Impact
60
EN23 Total number and volume of significant spills. Not Reported N/A
EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.
Fully Management Discussion & Analysis - Environmental Impact
60
EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and runoff.
Not Reported N/A
Products and services
EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.
Not Reported N/A
EN27 Percentage of products sold and their packaging materials that are reclaimed by category.
Not Reported N/A
Compliance
EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.
Fully Management Discussion & Analysis - Environmental Impact
60
Transport
EN29 Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce.
Not Reported N/A
Overall
EN30 Total environmental protection expenditures and investments by type. Fully Management Discussion & Analysis - Environmental Impact
60
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Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
Social: Labour Practices and Decent Work
Employment
LA1 Total workforce by employment type, employment contract, and region, broken down by gender.
Fully Management Discussion & Analysis - Our Associates
67
LA2 Total number and rate of new employee hires and employee turnover by age group, gender, and region.
Fully Management Discussion & Analysis - Our Associates
67
LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.
fully Management Discussion & Analysis - Our Associates
67
LA15 Return to work and retention rates after parental leave, by gender. Fully Management Discussion & Analysis - Our Associates
67
Labour/management relations
LA4 Percentage of employees covered by collective bargaining agreements.
Fully Management Discussion & Analysis - Our Associates
67
LA5 Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements.
Fully Management Discussion & Analysis - Our Associates
67
Occupational health and safety
LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs.
Fully Management Discussion & Analysis - Our Associates
67
LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region and by gender.
Fully Management Discussion & Analysis - Our Associates
67
LA8 Education, training, counselling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases.
Fully Management Discussion & Analysis - Our Associates
67
LA9 Health and safety topics covered in formal agreements with trade unions.
Not Applicable
N/A
Training and education
LA10 Average hours of training per year per employee by gender, and by employee category.
Fully Management Discussion & Analysis - Our Associates
67
LA11 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.
Fully Management Discussion & Analysis - Our Associates
67
LA12 Percentage of employees receiving regular performance and career development reviews, by gender.
Fully Management Discussion & Analysis - Our Associates
67
Diversity and equal opportunity
LA13 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity.
Fully Management Discussion & Analysis - Our Associates
67
Equal remuneration for women and men
LA14 Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation.
Not Reported N/A
GRI Index Contd.
GRI I
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GRI I
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Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
Social: Human Rights
Investment and procurement practices
HR1 Percentage and total number of significant investment agreements and contracts that include clauses incorporating human rights concerns, or that have undergone human rights screening.
Not Reported N/A
HR2 Percentage of significant suppliers, contractors and other business partners that have undergone human rights screening, and actions taken.
Not Reported N/A
HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.
Fully Management Discussion & Analysis - Our Associates
67
Non-discrimination
HR4 Total number of incidents of discrimination and corrective actions taken.
Fully Management Discussion & Analysis - Our Associates
67
Freedom of association and collective bargaining
HR5 Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and actions taken to support these rights.
Not Reported N/A
Child labour
HR6 Operations and significant suppliers identified as having significant risk for incidents of child labour, and measures taken to contribute to the effective abolition of child labour.
Fully Management Discussion & Analysis - Our Associates & Economic Impact
67 & 37
Prevention of forced and compulsory labour
HR7 Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of all forms of forced or compulsory labour.
Fully Management Discussion & Analysis - Our Associates
67
Security practices
HR8 Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations.
Not Reported N/A
Indigenous rights
HR9 Total number of incidents of violations involving rights of indigenous people and actions taken.
Not Applicable
N/A
Assessment
HR10 Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments.
Fully Cinnamon Lakeside was not subject to human rights reviews or impact assessments in the year under review
N/A
Remediation
HR11 Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms.
Fully Management Discussion & Analysis - Environmental Impact
60
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Profile Disclosure
Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
Social: Society
Local communities
SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programmes.
Fully Management Discussion & Analysis - Caring for the Community
79
SO9 Operations with significant potential or actual negative impacts on local communities.
Not Reported N/A
SO10 Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities.
Not Reported N/A
Corruption
SO2 Percentage and total number of business units analysed for risks related to corruption.
Fully Management Discussion & Analysis - Our Associates
67
SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures.
Fully Management Discussion & Analysis - Our Associates
67
SO4 Actions taken in response to incidents of corruption. Fully Management Discussion & Analysis - Our Associates
67
Public policy
SO5 Public policy positions and participation in public policy development and lobbying.
Fully Management Discussion & Analysis -Economic Impact
37
SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.
Not Reported N/A
Anti-competitive behaviour
SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes.
Not Reported N/A
Compliance
SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations.
Fully Cinnamon Lakeside was not subject to monetary fines or non-monetary sanctions for non-compliance to laws and regulations
N/A
Social: Product Responsibility
Customer health and safety
PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.
Fully Management Discussion & Analysis - Product Responsibility
48
PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.
Fully Management Discussion & Analysis - Product Responsibility
48
Product and service labelling
PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.
Fully Management Discussion & Analysis - Product Responsibility
48
GRI Index Contd.
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REPORT APPLICATION LEVELWe have self-assessed our report as follows;
C C+ B B+ A A+
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Disclosure Level of Reporting
Location of Disclosure/Direct Response
Page Number
PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes.
Fully Management Discussion & Analysis - Product Responsibility
48
PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.
Fully Management Discussion & Analysis - Product Responsibility
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Marketing communications
PR6 Programmes for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship.
Partially Management Discussion & Analysis - Product Responsibility
48
PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.
Fully Management Discussion & Analysis - Product Responsibility
48
Customer privacy
PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.
Fully Management Discussion & Analysis - Product Responsibility
48
Compliance
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services.
Fully Management Discussion & Analysis - Product Responsibility
48
Samadhi Cooray 4 years as Captain
““
My multiple-award winning team is always eager to impress our loyal guests. Remembering their preferences is second nature to me. Bringing a sparkle to their eyes with an inventive cocktail served alongside the lake inspires me to create wonderful memories.
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Annual Report of the Board of Directors
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The Directors have pleasure in presenting the 33rd Annual Report of your Company together with the Audited Financial Statements for the year ended 31st March 2014.
GeneralThe Company was incorporated on 17th July 1981 as a public limited company. The shares of the Company have been listed on the Colombo Stock Exchange since 17th July 1981. Furthermore in compliance with the provisions of the Companies Act No 7 of 2007 the Company was reregistered on 15th June 2007.
Principal ActivityThe principal activity of the Company is hoteliering and this has remained unchanged. The Company owns Cinnamon Lakeside Hotel, a Five-Star Hotel situated in Colombo. The Company also derives rental income from the Investment property adjoining the Hotel.
Review of the Business and future developmentsThe financial and operational performance during the year ended 31st March 2014 and future business developments of the Company are provided in the Chairman’s Statement on pages 14 to 15 and, the Management Discussion & Analysis appearing on pages 30 to 85. These reports which form an integral part of the Annual Report of the Board of Directors together with the audited financial statements reflect the state of affairs of the Company.
Financial Statements and Auditor’s ReportThe Financial Statements of the Company duly signed by the Directors and the Auditor’s Report on the Financial Statements are provided on pages 141 to 168.
Corporate GovernanceThe Corporate Governance principles and practices of the Company are described from pages 88 to 107 of this report. The Directors confirm that the Company is in compliance with the continuing listing rules of the Colombo Stock Exchange and has adopted the relevant Rules on Corporate Governance issued by the Securities & Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka.
System of Internal Control and Risk ManagementThe Board has implemented an effective and comprehensive system of internal controls which provide reasonable but not absolute assurance that assets are safeguarded and that the financial reporting system may be relied upon in the preparation of the financial statements. The Audit Committee receives and acts upon reports on the results of internal control reviews carried out by independent external auditors. The Board confirms that there is an ongoing process for identifying, evaluating and managing any significant risks faced by the Company and that financial,
operational and compliance controls have been reviewed. Risk assessment and evaluation for the Company takes place as an integral part of the business and the principal risks and mitigating actions in place are reviewed regularly by the Board Audit Committee. The Board, through the involvement of the ultimate parent Company John Keells Holdings PLC, Group Business Process Review and Control Division takes steps to gain assurance on the effectiveness of control systems in place. The Head of the Group Business Process Review Division has direct access to the Chairman of the Audit Committee. Foreseeable risks that may materially impact business are disclosed in the Integrated Risk Management Report on page 116 of this Report and notes to the financial statements on page 146.
Going concernThe Board of Directors after considering the financial position, operating conditions, regulatory and other factors and such matters required to be addressed in the Code of Best Practice on Corporate Governance issued jointly by the Securities & Exchange Commission and the Institute of Chartered Accountants of Sri Lanka have reasonable expectation that the Company possess adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the Going Concern basis in preparing the financial statements.
Accounting PoliciesRespective Responsibilities of Directors and Auditors for the Financial StatementsDetails of accounting policies have been discussed in Note 1 to the financial statements. There have been no changes in the accounting policies adopted by the Company during the year under review.
The Directors are responsible for the preparation of the Financial Statements so that they present a true and fair view of the state of affairs of the Company. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standard (SLFRS), Companies Act No.7 of 2007, the Sri Lanka Accounting and Auditing Standards Act No.15 of 1995 and the Continuing Listing Rules of the Colombo Stock Exchange.
RevenueRevenue generated by the Company amounted to Rs. 2,939 million (2013 - Rs. 2,840 million).
Results & AppropriationsThe profit after tax of the Company and the profit attributable to the equity holders for the year was Rs. 743 million (2013 - Rs. 1,066 million). The synopsis of the Company’s performance is presented in the following table:-
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For the year ended 31st March 2014 2013 In Rs. 000’s
After providing for all known liabilities bad & doubtful debts and depreciation on property, plant and equipment, the profit earned before interest was 816,498 857,765Interest paid during the year was (38) (96)Interest earned during the year was 55,259 64,833Changing fair value of Investment Property - 288,710Profit before tax was 871,719 1,211,212From which was deducted the Provision for taxation including deferred taxation of (128,539) (145,495)Leaving a net Profit after tax of 743,180 1,065,717Loss on defined benefit plans (1,092) -The amount transferred from Revaluation Reserve was 25,134 33,994
When the balance brought forward from the previous year was added 2,856,656 2,356,945The amount available for appropriation was 3,623,878 3,456,656Interim dividend of Rs. 1.50 per share (Rs. 1.00 per share 2012/2013) (300,000) (200,000)Final dividend to be paid of Rs. 2.00 per share (Rs. 2.00 per share 2012/2013) (400,000) (400,000)Leaving a balance to be carried forward next year of 2,923,878 2,856,656
* The final dividend paid for this financial year has not been recognised as at the balance sheet date in compliance with LKAS 10 - Events after reporting period.
DividendsA final dividend of Rs. 2.00 per share for the Financial Year ended 31st March 2013 was paid during the current Financial Year on 17th June 2013. An interim dividend of Rs. 1.50 per share for the six months ending 30th September 2013 was also paid on the 7th January 2014 resulting in a total cash payout for the Financial Year 31st March 2014 amounting to Rs. 700 million (Rs. 600 million paid in 2012/2013).
The Board of Directors recommended a final dividend of Rs. 2.00 per share for the financial year ended 31st March 2014 which will be paid on 17th June 2014 to those shareholders on the register as on 5th June 2014.
As required by Section 56 (2) of the Companies Act No 7 of 2007, the Board of Directors confirmed that the Company satisfied the solvency test in accordance with Section 57 of the Companies Act No. 7 of 2007, and have obtained a certificate from the Auditors, prior to recommending the final dividend of Rs. 2.00 per share for the financial year ended 31st March 2014.
Property, Plant & EquipmentThe book value of Property, Plant & Equipment as at the balance sheet date amounted to Rs. 3,458 million (2013 - Rs. 3,280 million ) for the Company.
Capital expenditure for the year amounted to Rs. 372.7 million (2013 - Rs. 207.1 million).
Details of property, plant and equipment and their movements are given in note 14 to the financial statements on page 155 of this report.
Market Value of PropertiesAll buildings owned by the Company were last revalued as at 31st March 2013. Valuation was carried out by M/s P B Kalugalagedara and Associates, a professional valuer.
All properties classified as investment property were also last revalued as at 31st March 2013 in accordance with the requirements of LKAS 40. This valuation too was carried out by M/s P B Kalugalagedara and Associates. The Directors of the Company obtained the services of M/s P B Kalugalagedara and Associates who have confirmed that the current value of the Building as well as investment property of the Company are at Market value and requires no revaluation for the year ending 31st March 2014.
Details of valuation of property, plant and equipment and investment property are provided in notes 14.1 and 16 of the notes to financial statements on page 156 of this report.
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Investment PropertiesIn accordance with LKAS 40, Investment Property, the net book value of properties held to earn rental income and properties held for capital appreciation have been classified as investment properties. The details of the investment properties are explained in Note 16 of the Notes to Financial Statements on page 156.
Stated CapitalThe total stated capital of the Company as at 31st March 2014 was Rs. 1,113 million (2013 - Rs. 1,113 million). The Stated Capital of the Company comprises of 200 million Ordinary Shares fully paid up.
ReservesTotal reserves as at 31st March 2014 for the Company amounted to Rs. 4,986 million (2013 - Rs. 4,941 million). The movement of reserves during the year is disclosed in the Statement of Changes in Equity on page 145.
Segment ReportingSegment wise contribution to Company revenue, results, assets and liabilities is provided in Note 35 of the Financial Statements.
Contingent Liabilities & Capital CommitmentsCommitments made for capital expenditure as at 31st March 2014 and the contingent Liabilities as at that date are given in Note 36 to the financial statements on page 168.
Events subsequent to the Balance Sheet DateThere have been no events subsequent to the balance sheet date, which would have any material effect on the Company other than those disclosed in Note 37 to the Financial Statements on page 168.
Share Information & ShareholdingThe market value of an ordinary share of the company as at 31st March 2014 was Rs. 79.90.(31st March 2013 - Rs. 70.40). The number of shareholders as at 31st March 2014 was 1,460 (31st March 2013 - 1494). An analysis of shareholders based on shares held, percentage of public holding, the distribution of ownership and details of share transactions during the year are provided on pages 110 to 113 of this report. The list of Twenty Largest Shareholders of the Company as at 31st March 2014 is also provided on page 111 of this report.
DirectorsThe Board of Directors of the Company as at 31st March 2014 and their brief profiles are given on pages 16 to 17 of this report.
Ms. J. C. Ponniah was appointed to the Board of Directors of the Company with effect from 2nd October 2013.
Ms. J C Ponniah retires in terms of the Article 90 of the Article of Association of the Company and being eligible is recommended by the Board for re-election. A brief profile of Ms. J C Ponniah is contained on page 17.
Mr. J R F Peiris and Mr. E H Wijenaike who retire by rotation in terms of Article 83 of the Articles of Association of the Company and being eligible for re-election are recommended by the Board for re-election. Brief profiles of Mr. J R F Peiris and Mr. E H Wijenaike are contained on pages 16 to 17 of the Annual Report.
The Company has recommended the re-election of Mr. N.L. Gooneratne who is 71 years old and retires in term of Section 210 of the Companies Act No. 7 of 2007. The proposed resolution proposes that the age limit stipulated in Section 210 of the Companies Act shall not apply to Mr. N.L. Gooneratne who is 71 years old and that he be re-elected a Director of the Company.
Board CommitteesBoard Audit CommitteeThe following members serve on the Board Audit Committee:
Mr. C J L Pinto Chairman
Mr. E H Wijenaike
Mr. J R F Peiris Resigned w.e.f. 02/10/2013
Ms. J.C. Ponniah Appointed w.e.f. on 02/10/2013
The Audit Committee reviewed the type and quantum of non-audit services provided by the external auditors to the Group to ensure that their independence as auditors has not been impaired.
The report of the Audit Committee is given on page 138 of this report.
Human Resources and Compensation CommitteeAs permitted by the listing rules of the Colombo Stock Exchange, the Human Resources and Compensation Committee of John Keells Holdings PLC, the ultimate parent company of Trans Asia Hotels PLC functions as the Human Resources and Remuneration Committee of the Company. The Human Resources and Compensation Committee of John Keells Holdings PLC comprises five independent Directors:-
Mr. E F G Amerasinghe Chairman
Dr. I Coomaraswamy
Mr. A R Gunasekara
Mrs. S S Tiruchelvam Resigned w.e.f. 9th September 2013
Mr. M A Omar Appointed w.e.f. 28th May 2013
Mr. A N Fonseka Appointed w.e.f. 7th November 2013
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Nominations CommitteeAs permitted by the listing rules of the Colombo Stock Exchange, the Nominations Committee of John Keells Holdings PLC, the ultimate parent company of Trans Asia Hotels PLC functions as the Nominations Committee of the Company. The Nominations Committee of John Keells Holdings PLC comprises four Independent Directors and one Non Independent Director :-
Mr. T. Das Chairman
Mrs. S Tiruchelvam Resigned w.e.f. 9th September 2013
Mr S C Ratnayake
Mr. M A Omar Appointed w.e.f. 7th November 2013
Mr. E F G Amerasinghe Appointed w.e.f. 7th November 2013
Mr. D A Cabraal Appointed w.e.f. 7th November 2013
Interests RegisterThe Company has maintained an Interests Register as contemplated by the Companies Act, No. 7 of 2007.
a) Share dealing
Name of Director Name of Share Dealing
Mr. N. L. Gooneratne Sale of 47,511 shares
b) Interests in ContractsThe Directors have all made a General Disclosure to the Board of Directors as provided for by section 192(2) of the Companies Act No. 7 of 2007 and no additional interests have been disclosed by any Director.
c) Indemnities and RemunerationThe Remuneration Committee of John Keells Holdings PLC (being the holding company of Trans Asia Hotels PLC) has not recommended an increment in fees to the Non-Executive Directors of the Trans Asia Hotels PLC during the year. The fees payable to Non-Executive nominees of John Keells Holdings PLC are paid to the Company and not to the individual Directors.
Further to the appointment of Ms. J. C. Ponniah as a Non-Executive Director of Trans Asia Hotels PLC with effect from 02nd October 2013, the Board approved the payment to Ms. J. C. Ponniah of the standard Non- Executive fees paid by the Board for Non-Executive Directors which fees are commensurate with the market complexities of the Company.
Directors Shareholding in the CompanyThe shareholdings of the Directors and their spouses in the Company are set out below:-
2014 2013
Mr. S C Ratnayake 400 400Mr. A D Gunewardene 400 400Mr. J R F Peiris 400 400Mr. N L Gooneratne 615,093 662,604Mr. C J L Pinto (Joint account with Mrs. M R C Pinto) 7,400 7,400Mr. E H Wijenaike Nil NilMs. J C Ponniah (Appointed w.e.f. 02/10/2013) Nil Nil
Directors’ RemunerationDetails of the remuneration and other benefits received by the Directors are set out in page 162 of the Financial Statements.
Employee Share Option Plan (ESOP)Employees of the Company receive remuneration in the form of sharebased payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). The cost of the employee services received in respect of the shares or share options granted is recognised in the Income statement over the period that employees provide services, from the time when the award is granted up to the vesting date of the options. The overall cost of the award is calculated using the number of share options expected to vest and the fair value of the options at the date of grant.
The employee remuneration expense resulting from the Group’s share option scheme to the employees of Trans Asia Hotels PLC is recognized in the income statement of the company. This transaction does not result in a cash outflow to the company and expense recognized is met with a corresponding equity reserve increase, thus having no impact on the Statement of financial Position (SOFP). The fair value of the options granted is determined by the Group using an option model and the relevant details are communicated by the Group to all applicable subsidiary companies.
EmploymentThe Company has an equal opportunity policy and these principles are enshrined in specific selection, training, development and promotion policies, ensuring that all decisions are based on merit. The group practices equality of opportunity for all employees irrespective of ethnic origin, religion, political opinion, gender, marital status or physical disability.
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Details of the Company’s Human Resource initiatives are detailed on pages 30 to 85. The number of persons employed by the Company as at 31st March 2014 was 855 (2013 - 842).
There were no material issues pertaining to employees and industrial relations during the Financial Year.
Statutory PaymentsThe Directors to the best of their knowledge are satisfied that all statutory payments in relation to the Government, other regulatory institutions and the employees have been either duly paid or appropriately provided for in the Financial Statements. The tax position of the company is disclosed in Note 11 to the Financial Statements.
Supplier PolicyThe Company applies an overall policy of agreeing and clearly communicating terms of payment as part of the commercial agreements negotiated with suppliers, and endeavors to pay for all items properly charged in accordance with these agreed terms. As at 31st March 2014, the trade and other payables of the Company amounted to Rs. 222.8 million (2013 - Rs. 179.4 million).
Sustainability ReportingThe Company is conscious of the impact, direct and indirect, on the environment due to its business activities. Every endeavour is made to minimise the adverse effects on the environment to ensure sustainable continuity of our natural resources. The activities undertaken by the company in recognition of its responsibility as a corporate citizen are disclosed more fully on pages 30 to 85 of this Report.
Related Party TransactionsThere were no related party transactions required to be disclosed under the Listing Rules of the Colombo Stock Exchange other than as disclosed under Note 33 of the Financial Statements.
DonationsTotal donations made by the Company during the year amounted to Rs. 7.1 million (2013 - Rs. 4.0 million) on account of Corporate Social Responsibility (CSR) initiatives. The John Keells Foundation, which operates with funds contributed by each of the companies in the group, handles most of the Group’s CSR initiatives and activities. The Foundation manages a range of programmes that underpin its key principle of acting responsibly in all areas of business to bring about sustainable development. The CSR initiatives, including completed and on-going projects, are detailed in the Management Discussion & Analysis on pages 30 to 85.
In quantifying the Company’s contribution to charities, no account has been taken of ‘in-house’ costs or management time.
AuditorsThe Audit Committee reviews the appointment of the Auditors, their effectiveness, independence and relationship with the Company, including the level of audit.
Messrs KPMG, Chartered Accountants have indicated their willingness to continue as Auditors of the Company, and a resolution proposing their reappointment as auditors will be tabled at the Annual General Meeting.
Details of the Audit Fees paid to the Auditors are set out on page 153 of the Financial Statements.
Further details on the work of the Auditor and the Audit Committee are set out in the Audit Committee Report on page 138.
Annual ReportThe Board of Directors approved the audited financial statements for issue on 27th May 2014. The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board on 5th June 2014.
Annual General MeetingThe Annual General Meeting will be held at the Auditorium of the Ceylon Chamber of Commerce, No 50, Nawam Mawatha, Colombo 02 at 9 am on Monday, 30th June 2014. The Notice of the Annual General Meeting appears on page 174.
This Annual Report is signed for and on behalf of the Board of Directors by:
Director Director
Keells Consultants (Private) LimitedSecretaries
27th May 2014
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137Statement of Directors’ Responsibility
The Responsibility of Directors in relation to the Financial Statement is set out in the following statement. The responsibility of the Auditors in relation to the Financial Statements prepared in accordance with the provision of the Companies Act No 07 of 2007, is set out in the Report of Auditors.
The Financial Statements comprise of:
1) Statement of comprehensive Income of the Company, which present a true and fair view of the profit or loss of the Company for the financial year.
2) A statement of financial position, which presents a true and fair view of the state of affairs of the company as at end of the financial year.
The Directors are required to confirm that the Financial Statements have been prepared: a) using appropriate accounting policies which have been selected and
applied in a consistent manner and material departures, if any, have been disclosed and explained; and
b) in accordance with he Sri Lanka Accounting Standards (SAFRS/ LKAS) and that reasonable and prudent judgements and estimates have been made so that the form and substance of transactions are promptly reflected; and
c) and provide the information required by and otherwise comply with the Companies Act and the Listing Rules of the Colombo Stock Exchange.
The Directors have ensured that the Company has adequate resources to continue in operation to justify applying the going concern basis in preparing these Financial Statements. Further the Directors have a responsibility to ensure that the Company maintains sufficient accounting records to disclose with reasonable accuracy the financial position of the Company.
The Directors are also responsible for taking reasonable steps to safeguard the assets of the Company and of the Group in this regard, to give proper consideration to the establishment of appropriate internal control systems with a view to preventing and detecting fraud and other irregularities.
The Directors are required to prepare the Financial Statements and to provide the auditors with every opportunity to take whatever steps and undertake whatever inspections that may be considered being appropriate to enable them to give their audit opinion. Further, as required by Section 56 (2) of the Companies Act No 07 of 2007, the Board of Directors have confirmed that the company, based on the information, satisfies the
solvency test immediately after the distribution in accordance with Section 57 of Companies Act No 07 of 2007, and have obtained a certificate from the auditors prior to declaring a final dividend of Rs. 2.00 per share for this year to be paid on 17th June 2014.
The Directors are of the view that they have discharged their responsibility as set out in this statement.
Compliance ReportDirectors confirm that to the best of their knowledge all taxes, duties and levies payable by the Company, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and all other known statutory dues as were due and payable by the Company as at the reporting date have been paid or where relevant provided for. By Order of the Board
Keells Consultants (Private) LimitedSecretaries
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27th May 2014
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IntroductionThe Board Audit Committee (BAC) of Trans Asia Hotels PLC is formally constituted as a Sub Committee of the Main Board, to which it is accountable.
The Committee operates pursuant to the Audit Committee Charter which is reviewed at least annually by the committee.
This report focuses on the activities of the Audit Committee for the year under review. A more general description of the Committee’s functions is also given under Integrated Corporate Governance Report on pages 88 to 107.
Role of the Board Audit Committee The BAC in its role, assist the Board in fulfilling their responsibility with regard to;
› Ensuring the integrity of the financial statements of the company and that good financial reporting systems are in place and is managed in order to give accurate, appropriate and timely information to the management, regulatory authorities and shareholders in accordance to the financial reporting standards of The Institute of Chartered Accountant of Sri Lanka, Companies Act No. 7 of 2007, the Sri Lanka Accounting and Auditing Standards and the continuing Listing Rules of the Colombo Stock Exchange.
› Assessing the independence and monitoring the performance of external auditors and external internal auditors.
› Ensuring the company’s internal control and risk management process operates efficiently and effectively.
› Ensure compliance with applicable laws, regulations and policies of the group and company.
› Assess the company’s ability to continue as a going concern in the foreseen future.
Composition of the Board Audit Committee and Meetings The Audit Committee comprised of two Independent Non Executive Directors and one Non Independent Non Executive Director until October 2013. Ms. J C Ponniah was appointed to the Board of Trans Asia Hotels PLC as an Independent Non Executive Director and also as a member of the Audit Committee on 2nd October 2013. Following her appointment, Mr J R F Peiris ceased to be a Member of the Audit committee from the said date and therefore, at the end of the financial year, the Audit Committee comprised of three Independent Non Executive Directors. The composition is in compliance with the requirement to have a minimum of two Independent Non Executive Directors in terms of the Rules on Corporate Governance for Listed Companies issued by the Colombo Stock Exchange. The Director Finance of the company serves as the Secretary to the Audit Committee.
Audit Committee Report
The General Manager of Trans Asia Hotels PLC , Chief Financial Officer, Leisure Group, John Keells Holdings PLC, Sector Financial Controller, Sri Lankan Hotels, John Keells Holdings PLC and Head of Group Business Process Review (Group BPR) , John Keells Holdings PLC attend the meetings of the Audit Committee by invitation. Other officials are invited to attend on a needs basis. The External Auditors and the Outsourced Internal Auditors also attend meetings on a regular basis.
The Board Audit Committee ( BAC) is composed of the following Non Executive Directors who conduct Committee proceedings in accordance with the terms of reference set out in the Audit Committee Charter.
Mr. C J L Pinto* Chairman
Mr. J R F Peiris** Served as a member from July 2012 to October 2013
Mr. E H Wijenaike* Director
Ms. J C Ponniah* Director
* Independent Non-Executive Director**Non Independent Non-Executive Director
Whilst a detailed profile of the Board of Directors is given on Page Nos 16 to 17 a brief description of each Member of the Board Audit Committee is given below :-
Mr C J L Pinto serves as the Chairman of the Board Audit Committee since July 2011. He is a Fellow of the Institute of Chartered Accountants of Sri Lanka and has 41 years of post qualifying experience in the profession and in the industry locally and overseas. He also serves as an Independent Director and the Chairman of the Board Audit Committee of Asian Hotels Properties PLC.
Mr J R F Peiris, Director of TAH and the Group Finance Director of John Keells Holdings PLC served as a member of the Board Audit Committee from July 2012 to October 2013, following the retirement of former Directors as well as Audit Committee members, Mrs Rohini Nanayakkara and Mr D S J Pelpola in June 2012. Mr Peiris is a Fellow of the Chartered Institute of Management Accountants, United Kingdom and has over 31 years of finance and general management experience in Sri Lanka and abroad.
Mr E H Wijenaike was appointed to the Board and as a member of the Audit Committee in June 2012. As the Managing Director of Central Finance Co., a leading non banking Financial Institution in the country and a Director of several other quoted companies, he counts over 30 years of management experience with a Bachelor’s Degree in Commerce and a Post Graduate Diploma in Finance and Banking.
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Ms. Jhansi Ponniah assumed the role of Director and a member of the Audit Committee in October 2013. She has been intimately involved in the travel and tourism industry for over 30 years in several capacities in the subsidiaries of John Keells Group. She has also served as Secretary to the Sri Lanka Association of Inbound Tour Operators.
Meetings of the Board Audit CommitteeThe Audit Committee held four meetings during the financial year 2013/2014. The attendance of the Committee members at these meetings was as follows:
Name of Director Attendance Eligibility to attend
Mr. C J L Pinto 4 4
Mr. J R F Peiris * 3 3
Mr. E H Wijenaike 4 4
Ms. J C Ponniah** 2 2
* Resigned from the Audit Committee on 2nd October 2013 ** Appointed to the Audit Committee on 2nd October 2013
The activities and views of the Committee have been communicated to the Board of Directors by tabling the minutes of the Committee’s meetings at Board Meetings and discussing verbally at Board meetings where necessary.
Financial ReportingThe Audit Committee has reviewed and discussed the Company’s quarterly and annual financial statements prior to publication with management and the external auditors, including the extent of compliance with Sri Lanka Accounting Standards and the adequacy of disclosures required by other applicable laws, rules, and guidelines. The Committee has also regularly discussed the operations of the Company and its future prospects with management and is satisfied that all relevant matters have been taken into account in the preparation of the financial statements.
Internal Audit and control AssessmentThe internal audit plans and scope of work were formulated in consultation with the internal audit function, which at John Keells is termed Group Business Process Review (Group BPR) Division and the Outsourced Internal Auditors and approved by the Committee.
The main focus of the Internal Audit was to provide independent assurance on the overall system of internal controls, risk management and governance, by evaluating the adequacy and effectiveness of internal controls, and compliance with laws and regulations and established policies and procedures of the company.
During the year, reports were received by the Committee from the Outsourced Internal Auditors, which were reviewed and discussed with management, the Outsourced Internal Auditors, PwC (formerly known as Pricewaterhouse Coopers) and Group Business Process Review Division. The recommendations of the Internal Auditors have been followed up and implemented.
Risk AssessmentThe Audit Committee has also reviewed the processes for the identification, evaluation and management of all significant operational risks faced by the Company. The most significant operational risks and the remedial measures taken to mitigate them have been reviewed with management and the John Keells Group Sustainability and Enterprise Risk Management Division.
Formal confirmations and assurances have been received from senior management on a quarterly basis regarding the efficacy and status of the internal control systems and risk management systems, and compliance with applicable laws and regulations.
External AuditThe external auditors’ letter of engagement, including the scope of the audit, was reviewed and discussed by the Committee with the external auditors and management prior to the commencement of the audit.
The external auditors kept the Committee advised on an on-going basis regarding any unresolved matters of significance. Before the conclusion of the audit, the Committee met with the external auditors to discuss all audit issues and agree on their treatment. The Committee also met the external auditors, without the presence of the management, prior to the finalization of the financial statements. The external auditors’ management letter for the year 2012/13, together with management’s responses was discussed with management and the auditors.
The Audit Committee is satisfied that the independence of the external auditors has not been impaired by any event or service that gives rise to a conflict of interest. Due consideration has been given to the level of audit and non-audit fees received by the external auditors from the John Keells Group and confirmation has been received from the external auditors of their compliance with the independence criteria given in the Code of Ethics of the Institute of Chartered Accountants of Sri Lanka.
The performance of the External Auditors has been evaluated and discussed with the senior management of the Company, and the Committee has recommended to the Board that KPMG (formerly known as KPMG Ford, Rhodes, Thornton & Company) be re-appointed as the External Auditors of Trans Asia Hotels PLC for the financial year ending 31st March 2015, subject to approval by the shareholders at the Annual General Meeting.
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Information Technology Risk AssessmentKeeping abreast with international standards, the company seeks the services of Information Technology (IT) to provide customers with a superior service. Adaptation of changes, going concern of the IT infrastructure and the security aspect of data is reviewed and assessed by the committee on a periodic basis. The committee draws conformity of the Leisure Group Head of IT when disseminating this role. The Leisure Group Head of IT makes a presentation to the committee on the above key element on an annual basis. Currently the company as part of the Group’s IT implementation project is in the process of changing the front-end property management system of the hotel.
Insurance AssessmentAn integrated assessment of the adequacy of insurance of the hotel is done by the Committee on a periodic basis. The Committee assesses the adequacy of insurance coverage in terms of Employee well-being, public liability and Economic benefit. The Committee draws conformity of the Group Insurance consultant for the expertise and confirmation of its compliance.
Whistle Blowing AssessmentThe company has an established mechanism for employees to report to the Chairman of John Keells Holdings through a communication link named “Chairman Direct” about any unethical behaviour or any violations to group values. Employees reporting such incidents are guaranteed complete confidentiality. The Committee reviews this process on a periodic basis.
Compliance with Code of Best Practice on Audit CommitteeThe BAC scope and functions are in compliance with the requirements of the Code of Best Practice on Audit Committee.
Compliance with Code of Best Practice on Corporate GovernanceThe BAC has conducted its affairs with the requirements of the code of best practice on Corporate Governance.
Compliance with Corporate Governance Rules as per section 7.10 of the Listing Rules of the Colombo stock ExchangeThe BAC has conducted its affairs with the requirements with Corporate Governance Rules as per section 7.10 of the listing Rules of the Colombo Stock Exchange.
Evaluation of the Board Audit Committee Evaluation of the BAC is done on a periodic basis. The committee seeks the assistance of the Group Business Process Review Team for this purpose. The members of the BAC along with other participants such as General Manager of the hotel, Chief Financial Officer of the Leisure Group, Internal auditors, and external auditors assess the Committee. The assessment is
tabled at the Audit Committee Meeting and communicated to the Board of the Company.
ConclusionBased on the reports submitted by the External Auditors and the outsourced Internal Audit the Company, the assurances and certifications provided by the senior management, and the discussions with management and the auditors both at formal meetings and informally, the Committee is of the view that the control environment within the Company is satisfactory and provides reasonable assurance that the financial position of the Company is adequately monitored and its assets are safeguarded.
C. J. L. Pinto Chairman of the Audit Committee
27th May 2014
Members:C. J. L. Pinto - ChairmanE. H. WijenaikeJ. C. Ponniah
Audit Committee Report Contd.
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141Independent Auditors’ Report
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TO THE SHAREHOLDERS OF TRANS ASIA HOTELS PLCReport on the Financial StatementsWe have audited the accompanying financial statements of Trans Asia Hotels PLC (the “Company”), which comprise the statement of financial position as at March 31, 2014, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 146 to 168 of the Annual Report.
Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.
OpinionIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended March 31, 2014 and the financial statements give a true and fair view of the financial position of the Company as at March 31, 2014 and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
Report on Other Legal and Regulatory RequirementsThese financial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.
Chartered Accountants
27th May 2014Colombo
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Statement of Comprehensive Income
For the year ended 31st March Note 2014 2013 Change %
Revenue 6 2,939,463 2,840,223 3Cost of sales (1,080,326) (1,021,348) (6)Gross profit 1,859,137 1,818,875 2
Other operating income 7 13,285 12,233 9
Administrative expenses (649,426) (601,695) (8)Sales and marketing expenses (89,330) (79,794) (12)Other operating expenses 8 (317,168) (291,854) (9)Profit from operations 9 816,498 857,765 (5)Finance expenses (38) (96) 60Finance income 55,259 64,833 (15)
Net finance income 10 55,221 64,737 (15)Change in fair value of investment property 16 - 288,710Profit before taxation 871,719 1,211,212 (28)Income tax expense 11 (128,539) (145,495) 12Profit for the period 743,180 1,065,717 (30)
Other comprehensive incomeRevaluation of buildings - 399,670 -Deferred tax effect on revaluation of building - (47,960) -Re-measurement gain/loss on defined benefit plans (1,092) - -Other comprehensive income for the period, net of tax (1,092) 351,710 -Total comprehensive income for the period, net of tax 742,088 1,417,427 (48)
Rs. Rs.
Earnings per share 12 3.72 5.33Dividend per share 13 3.50 3.00
The notes to the financial statements form an integral part of these financial statements.Figures in brackets indicate deductions.
All values are in Rupees ’000s, unless otherwise stated
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As at 31st March 2014 2013
AssetsNon-current assetsProperty, plant and equipment 14 3,457,787 3,279,844Leasehold property 15 818,664 831,068Investment property 16 1,758,250 1,758,250Intangible assets 17 4,263 7,455Other financial assets 5,636 6,876Other non-current assets 1,522 404Total non current assets 6,046,122 5,883,897
Current assetsInventories 18 35,874 33,033Trade and other receivables 19 234,456 233,268Other current assets 20 40,750 76,575Amounts due from related parties 21 14,424 14,822Short term investments 22 486,925 559,873Cash in hand and at bank 140,737 99,841Total current assets 953,166 1,017,412Total assets 6,999,288 6,901,309
Equity and liabilitiesStated capital 23 1,112,880 1,112,880Revenue reserves 3,323,878 3,256,656Other components of equity 24 1,662,351 1,683,989Total equity 6,099,109 6,053,525
Non-current liabilitiesOther non current liability 26 - 1,416Employee benefits 27 106,570 98,027Deferred tax liability 28 337,411 329,313Total non-current liabilities 443,981 428,756
Current liabilitiesTrade and other payables 29 222,782 188,130Other current liabilities 30 94,419 96,503Amounts due to related parties 31 26,715 29,565Current tax liability 32 58,318 65,252Bank overdrafts 53,964 39,578Total current liabilities 456,198 419,028Total liabilities 900,179 847,784Total equity and liabilities 6,999,288 6,901,309
Rs. Rs.
Net assets per share 30.50 30.27
Note: The notes to the financial statements form an integral part of these financial statements.
I certify that the financial statements are in compliance with the requirements of the Companies Act No. 7 of 2007.
P. A. P. PereraDirector FinanceThe Board of Directors is responsible for the preparation and presentation of these financial statements.Approved and Signed for and on behalf of the Board;
A. D. Gunewardene J. R. F. PeirisDirector Director
27th May 2014
Statement of Financial Position
All values are in Rupees ’000s, unless otherwise stated
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For the year Ended 31st March 2014 2013
Cash flows from operating activitiesProfit Before Taxation 871,719 1,211,212Adjustments for: Finance income (55,259) (64,833) Finance expenses 38 96 Depreciation of property, plant and equipment 189,812 167,530 Profit on disposal of property, plant and equipment (2,636) (5,055) Amortisation of leasehold properties 12,404 12,404 Amortisation of intangible assets 3,515 4,674 Gratuity provision and related costs 18,523 10,019 Change in fair value of investment property - (288,710) Provision made on slow moving inventory 8 7,174 Provision for impairment of trade and non-trade receivables 7,605 5,532 Share based payment expenses 3,496 -Operating profit before working capital changes 1,049,225 1,060,043
Decrease in inventories (2,849) 9,249Decrease/(Increase) in trade and other receivables (420) 46,310Decrease/(Increase) in other current assets 37,066 (9,430)Decrease/(Increase) in other non-current assets (1,117) (211)(Decrease)/Increase in trade and other payables 30,385 (9,210)(Decrease)/Increase in other current liabilities (1,948) (12,377)Cash generated from operations 1,110,342 1,084,374Finance income received 47,284 29,959Finance expenses paid (38) (96)Tax paid (127,511) (124,245)Gratuity paid (11,072) (11,137)Net cash generated from operating activities 1,019,005 978,855
Cash flows from investing activitiesPurchase and construction of property, plant and equipment (372,386) (205,841)Purchases of intangible assets (323) (1,311)Proceeds from disposal of property, plant and equipment 7,266 8,189Net cash used in investing activities (365,443) (198,963)
Cash flows from financing activitiesDividend paid (700,000) (600,000)Net cash used in financing activities (700,000) (600,000)Net increase in cash and cash equivalents (46,438) 179,892Cash and cash equivalents at the beginning of the year 620,136 440,244Cash and cash equivalents at the end of the year 573,698 620,136
Analysis of cash and cash equivalentsShort term investments 486,925 559,873Cash in hand and at bank 140,737 99,841Bank overdrafts (53,964) (39,578) 573,698 620,136
The notes to the financial statements form an integral part of these financial statements.Figures in brackets indicate deductions.
Cash Flow Statement
All values are in Rupees ’000s, unless otherwise statedCash
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Other components of equity For the year ended 31st March Stated Other capital Revaluation Revenue Total capital reserve reserve reserve equity
Balance as at 1st April 2012 1,112,880 - 1,366,273 2,756,945 5,236,098
Total comprehensive income for the yearProfit for the year - - - 1,065,717 1,065,717Other comprehensive income for the year - revaluation of buildings - - 351,710 - 351,710Total comprehensive income for the year - - 351,710 1,065,717 1,417,427Transferred to accumulated profit - Note (a) - - (33,994) 33,994 -
Transaction with owners of the Company, recognised directly in equityFinal dividend paid - 2011/2012 - - - (400,000) (400,000)Interim dividend paid - 2012/2013 - - - (200,000) (200,000)As at 31st March 2013 1,112,880 - 1,683,989 3,256,656 6,053,525Balance as at 1st April 2013 1,112,880 - 1,683,989 3,256,656 6,053,525
Total comprehensive income for the yearProfit for the year - - - 743,180 743,180Other comprehensive income - - - (1,092) (1,092)Total comprehensive income - - - 742,088 742,088Transferred to accumulated profit - Note (a) - - (25,134) 25,134 -Share based payments (Note 25) - 3,496 - - 3,496
Transaction with owners of the Company, recognised directly in equityFinal dividend paid -2012/2013 - - - (400,000) (400,000)Interim dividend paid -2013/2014 - - - (300,000) (300,000)Balance as at 31st March 2014 1,112,880 3,496 1,658,855 3,323,878 6,099,109
Note (a)As per Sri Lanka Accounting Standard No. 16 on "Property plant and equipment" when the revalued asset is used by an entity the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the assets original cost is transferred from revaluation surplus to retained earnings. This transfer relates to buildings revalued in 2008 and 2013.
The note to the financial statements form an integral part of these financial statements.Figures in brackets indicate deductions.
Statement of Changes in Equity
All values are in Rupees ’000s, unless otherwise stated
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Notes to the Financial Statements
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1. Reporting entityTrans Asia Hotels PLC (the Company) is a public limited liability company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The registered office and principal place of business of the company is located at 115, Sir Chittampalam A. Gardinar Mawatha, Colombo 2.
Principal shareholders of the Company are John Keells Holdings PLC and Asian Hotels & Properties PLC who hold 48.64% and 43.41% respectively. The principal activity of the Company is hoteliering. The Company also derives rental income from the commercial property.
The number of persons employed by the Company as at 31st March 2014 was 855 (2012/2013 - 842)
2. Basis of preparation(a) Statement of complianceThe financial statements have been prepared in accordance with Sri Lanka Accounting Standards (LKAS/SLFRS) laid down by the institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the requirements of Companies Act No. 7 of 2007.
The financial statements were authorised for issue by the Board of Directors on 27th May 2014.
(b) Basis of measurementThe financial statements have been prepared on the historical cost basis and applied consistently with no adjustments being made for inflationary factors affecting the financial statements, except for the following material items in the statement of financial position:
› Buildings are measured at cost at the time of acquisition and subsequently recognised at revalued amounts which are fair values at the date of revaluation less accumulated depreciation and impairment losses if any,
› Investment properties are stated at fair values. › Defined benefit obligations are measured at its present value, based
on an actuarial valuation as explained in note 27.
(c) Presentation and functional currencyThe Company’s financial statements are presented in Sri Lankan Rupees, the Company’s functional and presentation currency, which is the primary economic environment in which the Company operates.
Each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting
Standard-LKAS 1 on ‘Presentation of Financial Statements’.
(d) Use of estimates and judgementsThe preparation of the financial statements in conformity with LKAS/SLFRS requires management to make judgements, estimates and assumptions that effect the application of accounting policies, and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying amount of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Judgements made by management in the application of LKAS/SLFRS that have a significant effect on the financial statements are mentioned below, along with the reference to the relevant accounting policy.
› Valuation of property, plant and equipment - Note(c) › Valuation of investment property - Note(e) › Deferred taxation - Note(p) ii › Defined Benefit Plans - Note(j) ii
3. Comparative informationThe presentation and classification of the financial statements of the previous years have been amended, where relevant for better presentation and to be comparable with those of the current year.
4. Significant accounting policiesThe Accounting Policies set out below have been applied consistently to all periods presented in the financial statements unless otherwise indicated.
(a) Foreign currency(i) Foreign currency transactionsTransactions in foreign currencies are translated to functional currency of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the
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amortised cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities that are measured at fair value in foreign currency are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical costing in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss.
(b) Financial instruments - initial recognition and subsequent measurement(i) Financial assetsInitial recognition and measurementFinancial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition.
All financial assets are recognised initially at fair value plus, in the case of assets not at fair value through Statement of Comprehensive Income, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
However, as at each reporting date, the Company holds on only the financial assets categorized as loans and receivables. The Company initially recognises such loans and receivables on the date that they are originated.
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial asset that is created or retained by the Company is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Subsequent measurementThe subsequent measurement of financial assets depends on their classification and Company only holds financial assets categorized as loans and receivables.
Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement,such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the ElR. The ElR amortisation is included in finance income in the Statement of Comprehensive lncome. The losses arising from impairment are recognised in the Statement of Comprehensive Income in finance costs.
De-recognitionA financial asset is derecognised when: › the rights to receive cash flows from the asset has expired › the Company has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass- through’ arrangement; and either
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Company’s continuing involvement in it. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
(ii) Financial liabilitiesInitial recognition and measurementFinancial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through Statement of Comprehensive Income, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition.
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All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, carried at amortised cost. This includes directly attributable transaction costs.
The Company classifies financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs.
Subsequent measurementThe measurement of financial liabilities depends on their classification and Company only holds financial liabilities categorised as loans and borrowings.
Loans and borrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Statement of Comprehensive Income.
De-recognitionA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Statement of Comprehensive Income.
(c) Property, plant and equipment(i) Basis of recognitionProperty plant and equipment are stated at cost of purchase or valuation less accumulated depreciation, and any accumulated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable cost of bringing the asset to working condition for its intended use.
The Company applies the revaluation model for buildings. Such properties are carried at a revalued amount, being its fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent impairment losses. Revaluations are made once in every five
years to ensure that their carrying amounts do not defer materially from their fair values at the reporting date.
When an asset is revalued, any increase in carrying amount is recognized in other comprehensive income and accumulated in equity under the heading of revaluation reserve unless it reverses a previous revaluation decrease relating to the same asset, which was previously recognised as an expense. ln these circumstances the increase is recognised as income to the extent of the previous write down.
When an asset’s carrying amount is decreased as a result of revaluation, the decrease is recognised as an expense unless it reverses a previous surplus relating to that asset. In such case it is charged against any related revaluation surplus, to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of that same asset. Any balance remaining in the revaluation surplus in respect of an asset, is transferred directly to retained earnings on retirement or disposal of the asset.
The Company applies cost model for other property plant and equipment which are stated at historical cost, less deprecation less any accumulated impairment losses.
(ii) Subsequent measurementThe cost of replacing a part of an item of Property Plant and Equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied with the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is de-recognised. The costs of the day-to-day servicing of Property, Plant and Equipment are recognised in profit or loss.
(iii) DerecognitionAn item of property, plant and equipment are derecognised upon replacement, disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset is included in the Statement of Comprehensive Income in the year the asset is derecognised.
(iv) DepreciationDepreciation is calculated by using a straight- line method on the cost or valuation of all property, plant and equipment, other than freehold land, in order to write off such amounts over the estimated useful economic life of such assets.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that asset is derecognised.
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The estimated useful life of assets is as follows:
Assets Years
Plant and machinery 20
Computer equipment 5
Kitchen and laundry equipment 15
Hotel equipment 15
Motor vehicles 5
Motor vehicles - floating restaurant 18
Base stock 10
Circulating assets 3
Furniture and fittings 15
Buildings are depreciated using reducing balance method in order to depreciate over the balance lease period of 66 years.
The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end.
(d) Leasehold property(i) Basis of recognitionLeasehold property comprises of land use rights and is amortised on a straight line basis over the period of the lease. Leasehold property is tested for impairment annually and is written down where applicable.
(ii) AmortisationThe lease period is for 99 years commencing 7th August 1981 and the leasehold land is being amortised over a period of 94 years which commenced from 1st April 1986. The impairment loss if any is recognised in the Statement of Comprehensive Income.
(e) Investment property(i) Basis of recognitionInvestment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in profit and loss.
Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self - constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.
Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
(f) lntangible assets(i) Recognition and MeasurementAn intangible asset is an identifiable non-monetary asset without physical substance held for use in the production or supply of goods or other services, rental to others or for administrative purpose.
An intangible asset is initially recognised at cost, if it is probable that future economic benefits will follow to the enterprise, and the cost of assets can be measured reliably. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Computer SoftwareAll computer software costs incurred, licensed for use by the Group, which are not integrally related to associated hardware, which can be clearly identified, reliably measured and it’s probable that they will lead to future economic benefits, are included in the Statement of Financial Position under the category intangible assets and carried at cost less accumulated amortisation and any accumulated impairment losses.
(ii) Amortisationlntangible assets with finite lives are amortised over the estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. lntangible assets are amortised on a straight line basis in profit or loss from the date on which the asset was available for use, over the best estimate of its useful life. The estimated useful life of software is five years. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end.
(iii) De-recognitionAn intangible asset is de-recognised on disposal or when no future economic benefits are expected from its use and subsequent disposal.
(g) lnventoriesInventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition.
h) Cash and Cash EquivalentsCash and short-term deposits in the statement of financial position comprise cash at banks and in hand and short-term deposits with a maturity of three months or less.
For the purpose of the cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.
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Notes to the Financial Statements Contd.
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(i) Impairment(i) Financial assetsFinancial assets are assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security.
Financial assets measured at amortised costThe Company considers evidence of impairment for financial assets measured at amortised cost (loans and receivables) at specific asset level. All individually significant assets are assessed for specific impairment.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables.
When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
(ii) Non-financial assetsThe carrying amounts of the Company’s non - financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount.
The recoverable amount of an asset or Cash Generating Unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(j) Employee benefits(i) Defined contribution plansA defined contribution plan is a post- employment benefit plan under which an entity pays fixed contributions into a separate entity- and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in future payments is available.
Employees are eligible for Employees’ Provident Fund contributions and Employees Trust Fund contributions in line with respective statutes and regulations. The Company contributes 12% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.
(ii) Defined benefit plansA defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Company is liable to pay retirement benefits under the Payment of Gratuity Act, No. 12 of 1983. The liability recognised in the financial statements in respect of defined benefit plans is the present value of the defined benefit obligation as at the reporting date. The defined benefit obligation is calculated by a qualified actuary as at the reporting date using the Projected Unit Credit (PUC) method as recommended by LKAS 19 -’Employee Benefits’ Such actuarial valuations will be carried out every year, The liability is not externally funded. All Actuarial gains or losses are recognised under other comprehensive Income statement.
Under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.
(iii) Share based paymentIn accounting for employee remuneration in the form of shares, SLFRS 2- Share Based Payments, is effective for the Company’s Parent entity John Keell’s Holdings PLC, from the financial year beginning 2013/14.
Employees of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services as
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consideration for equity instruments of the Parent entity, John Keells Holdings PLC (equity-settled transactions). The cost of the employee services received in respect of the shares or share options granted is recognised in the Income statement over the period that employees provide services, from the time when the award is granted up to the vesting date of the options. The overall cost of the award is calculated using the number of share options expected to vest and the fair value of the options at the date of grant.
The employee remuneration expense resulting from the Group’s share option scheme to the employees of Trans Asia Hotels PLC is recognized in the income statement of the company. This transaction does not result in a cash outflow to the company and expense recognized is met with a corresponding equity reserve increase, thus having no impact on the Statement of financial Position (SOFP). The fair value of the options granted is determined by the Group using an option model and the relevant details are communicated by the Group to all applicable subsidiary companies.
(k) ProvisionsProvisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
(l) Contingent assets and contingent liabilitiesAll contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote.
(m) RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Company, and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and sales taxes.
The following specific criteria are used for recognition of revenue:
(i) Income from HotelRevenue is recognised on the rooms occupied on a daily basis and food and beverages and hotel related sales are accounted for at the time of sale.
(ii) Turnover based taxesTurnover based taxes include Value Added Tax (VAT) and Tourism Development Levy (TDL) payable to the Sri Lanka Tourism Development Authority.
(iii) Rental incomeRental income is recognised on an accrual basis.
(iv) Finance incomeFinance income comprises interest income derived on funds invested as Treasury bills and repurchase agreements (repos). Interest income or expense is recorded as it accrues using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the Statement of Comprehensive income.
(v) Gains and lossesNet gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non-current assets, including investments, are accounted for in the Statement of Comprehensive Income, after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses.
On the disposal of any revalued Property, Plant and Equipment, the amount remaining in the Revaluation reserve, relating to that particular asset is transferred directly to retained earnings.
Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a group of similar transactions, which are not material are aggregated, reported and presented on a net basis.’
(vi) Other incomeOther income is recognised on an accrual basis.
(n) Expenditure recognitionExpenses are recognised in the Statement of Comprehensive Income on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to the Statement of Comprehensive lncome.
For the purpose of presentation of the Statement of Comprehensive Income, the “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the Company performance.
(i) Borrowing costBorrowing costs are recognised as an expense in the period in which they are incurred, except to the extent the borrowing costs that are directly attributable to the acquisition or construction of an asset that takes a substantial period of time to get ready for its intended use, and are capitalized as part of that asset.
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(ii) Finance costsFinance costs comprise interest expense on borrowings, unwinding of the discount on provisions.
(o) Segment reportingA segment is a distinguishable component of the Company that is engaged either in providing products or services which are subject to risks and rewards that are different from those of other segments. The rental income generated from the Commercial Centre which is categorised as Investment Property is shown separately.
(p) Income tax expenseIncome tax expenses comprise of Income tax and deferred tax.
(i) Current taxationThe Company is liable for taxation at a rate of 12% in terms of Section 46(1) of the Inland Revenue Act No. 10 of 2006 and amendments thereto, on its profits derived from “promotion of tourism’ Income Tax for any other income is computed at 28%.
(ii) Deferred taxationDeferred taxation is provided using the Statement of Financial Position liability method providing for temporary difference between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted by the reporting date. Deferred tax assets including those related to tax effects of income tax losses and credits available to be carried forward, are recognised only to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that is no longer probable that the related tax benefit will be realised.
(q) Events after the reporting periodAll material events after the reporting date have been considered and appropriate adjustments or disclosures have been made in the respective Notes to the Financial Statements.
(r) Cash flow statementThe Cash Flow Statement has been prepared using the “Indirect Method” of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard-LKAS 7. The cash and cash equivalent include cash in-hand, balances with banks and money at call and short notice.
(s) Directors’ responsibilityThe Board of Directors is responsible for the preparation and presentation of the financial statements. This is more fully described under the relevant clause in the Directors’ Report.
5. New accounting standards not effective at the reporting dateThe Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards which will become applicable for financial periods beginning on or after 1st January 2014/ 2015. Accordingly, these Standards have not been applied in preparing these financial statements.
Sri Lanka Accounting Standard - SLFRS 13, “Fair Value Measurement”This SLFRS defines fair value, sets out in a single SLFRS a framework for measuring fair value; and requires disclosures about fair value measurements.
This SLFRS will become effective for the Company from 1 April 2014. Earlier application is permitted.
This SLFRS shall be applied prospectively as of the beginning of the annual period in which it is initially applied. The disclosure requirements of this SLFRS need not be applied in comparative information provided for periods before initial application of this SLFRS.
Sri Lanka Accounting Standard - SLFRS 9 “Financial Instruments” The objective of this SLFRS is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. An entity shall apply this SLFRS to all items within the scope of LKAS 39 Financial Instruments: Recognition and Measurement.
The effective date of this standard has been deferred.
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For the year ended 31st March 2014 2013
6 RevenueRoom 1,399,408 1,352,432Food 1,073,233 1,034,971Beverage 153,647 163,607Food and beverage - other 38,123 38,618Power drome revenue 26,484 27,839Rental income from investment property 61,075 34,283Others 187,493 188,473Net revenue 2,939,463 2,840,223Tourism development levy 28,022 27,359Value added tax 385,092 366,341Gross revenue 3,352,577 3,233,923
7 Other operating incomeProfit on disposal of property, plant and equipment 2,636 5,055Gain on exchange 6,182 3,140Sundry income 4,352 3,794Unclaimed dividend income written back 115 244 13,285 12,233
8 Other operating expensesRepairs and maintenance expenses 59,418 57,848Heat, light and power expenses 193,695 173,232Bank charges 926 738Nation Building Tax 63,129 60,036 317,168 291,854
9 Profit from operating activitiesProfit from operating activities is stated after charging all expenses including the following:Directors’ fees 3,120 3,000Audit services 540 500Audit related services 130 200Donations 7,104 4,096Depreciation/amortisation of property, plant and equipment 205,731 184,610Provision for impairment-trade receivables 7,605 1,607Impairment - non trade - 3,926Legal fees 1,846 1,625Management fees 163,352 160,689Foreign exchange gain (6,182) (3,140)Staff cost (includes the following) 534,289 500,082 Defined benefit plan costs - employees benefit 18,522 10,019 Defined contribution plan costs - EPF and ETF 42,245 39,146
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
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For the year ended 31st March 2014 2013
10 Net finance incomeFinance incomeInterest income on short term investments 55,259 64,833 55,259 64,833
Finance expensesInterest expenses on bank over draft (38) (96) (38) (96) 55,221 64,737
11 Tax expenseCurrent tax charge 118,568 122,451Under/(over) provision income tax on previous year 1,873 (2,516)Deferred tax expense 8,098 25,560 128,539 145,495
11.1 Reconciliation between income tax expense and the product of accounting profitProfit before tax 871,719 1,211,212Profits not liable for tax (926) (243)Accounting profit chargeable to income taxes 870,793 1,210,969Income tax on accounting profit at applicable rates 121,558 159,322Tax effect on disallowable expenses 5,298 4,434Tax effect on aggregate allowable expenses - (29,628)Qualifying payment relief (170) (172)Under/(over) provision on income tax previous year 1,873 (2,516)Tax effect on adjustment to opening deferred tax liability (20) 14,055Total income tax expense 128,539 145,495
Income tax charged at Standard rate - 28% 29,860 24,511 Concessionary rate of 12% 88,708 97,941 118,568 122,452
For the year ended 31st MarchUnder/(over) provision on income tax previous year 1,873 (2,516)Deferred tax charge 8,098 25,559Total income tax expense 128,539 145,495
Deferred tax expenseDeferred tax expense arising from Accelerated depreciation for tax purposes 9,123 25,425 Employee benefit liability (1,025) 134Total deferred tax charge 8,098 25,559
Deferred tax liability has been computed at the tax rate of 12% applicable for the tourism industry.
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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12 Earnings per shareEarnings per share is calculated on the profit attributable to the shareholders of the Company over the weighted average number of Ordinary shares in issue during the year, as required by Sri Lanka Accounting Standard 33 "Earnings per share".
For the year ended 31st March 2014 2013
Profit attributable to ordinary shareholders of the company (Rs.) 743,180 1,065,717Weighted average number of ordinary shares (No.) 200,000 200,000Earnings per share (Rs.) 3.72 5.33
13 Dividends per shareFinal dividend paid 2011/2012 - 400,000Final dividend per share 2011 / 12 (Rs.) - 2.00Interim dividend paid 2012 / 13 - 200,000Interim dividend per share 2012 / 13 (Rs.) - 1.00Final dividend paid 2012/2013 400,000 -Final dividend per share 2012 / 13 (Rs.) 2.00 -Interim dividend paid 2013 / 14 300,000 -Interim dividend per share 2013 / 14 (Rs.) 1.50 -
Dividend per share has been calculated, for all periods, based on the number of shares in issue at the time of dividend payout.
14 Property, plant and equipment Furniture Kitchen and Soft
Plant and Computer fixtures and laundry Hotel Motor furnishing Circulating Work in Total Total
Buildings machinery equipment fittings equipment equipment vehicles base stock assets progress 31.03.2014 31.03.2013
Cost / valuation
Balance as at 01.04.2013 2,307,747 471,316 92,837 305,997 202,585 38,191 64,939 578,548 142,266 61,254 4,265,680 3,798,824
Additions during the year 153,395 41,485 3,826 91,243 25,973 6,095 - 13,072 33,251 4,046 372,386 205,841
Transferred from work in progress 56,753 - - - - 170 - (170) - (56,753) - -
Depreciation adjustment on revaluation - - - - - - - - - - - (127,382)
Disposals - (15,219) (3,360) (5,567) (3,785) - (79) (687) (5,651) - (34,348) (11,273)
Revaluation - - - - - - - - - - - 399,670
Balance as at 31/03/14 2,517,895 497,582 93,303 391,673 224,773 44,456 64,860 590,763 169,866 8,547 4,603,718 4,265,680
Accumulated depreciation
Balance as at 01.04.2013 - 234,775 77,270 130,645 109,379 4,313 12,012 318,445 98,997 - 985,836 953,826
Charge for the year 42,830 19,228 6,494 16,905 13,270 2,698 4,182 55,408 28,797 - 189,812 167,530
Charge on disposals - (11,725) (3,360) (4,951) (3,564) - (79) (600) (5,438) - (29,717) (8,138)
Transferred to revaluation - - - - - - - - - - - (127,382)
Balance as at 31/03/14 42,830 242,278 80,404 142,599 119,085 7,011 16,115 373,253 122,356 - 1,145,931 985,836
Carrying amount
As at 31/03/2014 2,475,065 255,304 12,899 249,074 105,688 37,445 48,745 217,510 47,510 8,547 3,457,787 3,279,844
As at 31/03/2013 2,307,747 236,541 15,567 175,352 93,206 33,878 52,927 260,103 43,269 61,254 3,279,844 -
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
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14.1 The buildings of the Company were valued at market value by M/s P. B. Kalugalagedara, a chartered Valuation surveyor as at 31.03.2013 based on depreciated current cost approach and the book value was written up to correspond with the valuation. Had the assets been carried at cost less depreciation, the written down value of the building would have been Rs. 1,354 million (2013 - Rs. 1,178 million).
The building is situated on leasehold land A5 - R03 - P34.28 in extent at No. 115, Sri Chittampalam A, Gardiner Mawatha, Colombo 02.
14.2 The cost of the fully depreciated assets which are still in the use of Company amounts to Rs. 354.9 million (2013 - Rs. 322.1 million)
As at 31st March 2014 2013
15 Leasehold propertyCost/valuationBalance at the beginning of the year 945,161 945,161Balance at the end of the year 945,161 945,161
Accumulated amortisationBalance at the beginning of the year 114,093 101,689Charge for the year 12,404 12,404Balance at the end of the year 126,497 114,093Carrying amount 818,664 831,068
The leasehold property is amortised on a straight line basis over 74 years.
16 Investment propertyBalance at the beginning of the year 1,758,250 1,469,540Change in fair value during the year 288,710Balance at the end of the year 1,758,250 1,758,250
In accordance with the Sri Lanka Accounting Standard - 40 "Investment Property" (LKAS 40) the Commercial Centre of the Company was reclassified as Investment Property during the year ended 31st March 2006.
In accordance with application of fair value model for investment property , the Land and Building related to Investment Property situated at No. 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02 on leasehold land in extent A 01 - R02 - P30.0 was revalued by M/s P.B. Kalugalagedara, a Chartered Valuation Surveyor, on 31st March 2014 using the Market Value method.
The valuation obtained confirmed that there has been no significant change in the value of the property as at 31st March 2014.
Rental Income earned from Investment Property by the Company amounted to Rs. 61,074,686/- (2013 - Rs. 34,282,595/-) and direct operating expenses incurred by the Company amounted to Rs. 6,852,913/- (2013 - Rs. 6,064,611/-).
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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As at 31st March 2014 2013
17 Intangible assets Computer softwareCostBalance at the beginning of the year 24,095 22,784Additions 323 1,311Balance at the end of the year 24,418 24,095
Accumulated amortisationBalance at the beginning of the year 16,640 11,966Amortisation for the year 3,515 4,674Balance at the end of the year 20,155 16,640Carrying amount 4,263 7,455
18 InventoriesFood 13,151 11,092Beverage 14,444 14,418Engineering spares 7,955 8,600Guest supplies 2,786 2,275Others 4,720 3,822Inventory obsolete provision (7,182) (7,174) 35,874 33,033
19 Trade and other receivablesTrade receivables 215,125 200,236Provision for impairment (Refer 19.1) (9,118) (1,965) 206,007 198,271Advances and deposits 27,245 33,263Staff loans recovered within one year 1,204 1,734 28,449 34,997 234,456 233,268
19.1 Provision for impairment of trade receivablesBalance at the beginning of the year 1,965 1,554Provision charged during the year 7,605 411Write off during the year (452) -Balance at the end of the year 9,118 1,965
20 Other current assetsAdvances to other creditors 4,530 38,610Prepayments 31,292 32,116WHT Recoverable 4,928 2,988ESC Recoverable - 2,861 40,750 76,575
Figures in brackets indicate deductions.
All values are in Rupees ’000s, unless otherwise stated
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As at 31st March 2014 2013
21 Amounts due from related partiesUltimate parent - John Keells Holdings PLC 462 2,504Parent - Asian Hotels and Properties PLC 263 231Companies under Common Control 13,699 12,087 14,424 14,822
22 Short term investmentFixed and call deposits 486,925 559,873 486,925 559,873
23 Stated capital200,000,000 Ordinary shares 1,112,880 1,112,880
24 Other components of equityBalance at the beginning of the year 1,683,989 1,366,273Transferred to retained earnings (25,134) (33,994)Revaluation on buildings - 399,670Share based payments - (Note 25) 3,496 -Tax effect on revaluation - buildings - (47,960)Balance at the end of the year 1,662,351 1,683,989
25 Share-based payment plansEmployee share option schemeUnder the John Keells Group’s Employees Share Option Scheme (ESOP), share options of the parent are granted to executives of the Company with more than 12 months of service. The exercise price of the share options is equal to the 30 day volume weighted average market price of the underlying shares on the date of grant. The share options vest over a period of four years and is dependent on a performance criteria and a service criteria. The performance criteria being a minimum performance achievement of "Met Expectations" and service criteria being that the employee has to be in employment at the time the share options vest. The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted.
The expense recognised for employee services received during the year is shown in the following table:
2014 2013
Expense arising from equity-settled share-based payment transactions 3,496 -Total expense arising from share-based payment transactions 3,496 -
Movements in the yearThe following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during the year:
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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2014 No. WAEP
Outstanding as at 1 April - -Granted during the year 104,200 253.16Forfeited during the year (17,307) 253.16Adjustment during the year 16,026 253.16Exercised during the year - -Expired during the year - -Outstanding as at 31st March 102,919 253.16Exercisable as at 31st March - -
Fair value of the share option and assumptionsThe fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted.
The valuation takes into account factors such as stock price, expected time to maturity, exercise price, expected volatility of share price, expected dividend yield and risk free interest rate.
As at 31st March 2014 2013
26 Other non current liabilitiesUrban Development AuthorityBalance at the beginning of the year 2,852 4,288Payment during the year (1,436) (1,436)Balance at the end of the year 1,416 2,852
Payable within one year (Note 26.1) 1,416 1,436Payable after one year (Note 26.2) - 1,416Balance at the end of the year 1,416 2,852
26.1 Instalments payable within one yearUrban Development Authority 1,416 1,436 1,416 1,436
26.2 Instalments payable after one yearPayable 1 to 5 yearsUrban Development Authority - 1,416 - 1,416
26.3 Urban Development AuthorityA sum of Rs. 47,400,000/- of the rent due to the Urban Development Authority is to be settled over 33 years from 7th August 1981. The expended cost of Rs. 11,200,000/- on the alternate accommodation constructed by the Company for the Sri Lanka Air Force, was recovered by setting off against the rent instalments due during the first eight years of the agreement signed with the Urban Development Authority dated 31st October 1983. The balance is being paid in 25 instalments until expiration of the obligation and the remaining period as at reporting date is 01 year.
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
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As at 31st March 2014 2013
27 Employee benefitsBalance at the beginning of the year 98,027 99,145Current service cost 10,783 7,089Interest cost 7,740 9,914Payments made during the year (11,072) (11,137)Actuarial again/loss arising from changes in the assumptions in the previous years 1,092 (6,984)Balance at the end of the year 106,570 98,027
The employee benefit liability of the Company is based on the actuarial valuation carried out by Mr. Poopalanathan AIA, Messrs. Actuarial and Management Consultants (Pvt) Ltd., a firm of professional actuaries 31st March 2014.
The principal assumptions used in determining the cost of employee benefits were:
Discount rate 11% 11%Future salary increases 10% 10%
Sensitivity of assumptions usedIf a one percentage point change in the assumptions it would have the following effects:
2014 Discount Salary rate increment
Effect on the defined benefit obligation liabilityIncrease by one percentage point 101,559 112,374Decrease by one percentage point 112,091 101,219
Maturity analysis of the paymentsThe following payments are expected on employee benefit liabilities in future years
Future working life time Defined Benefit Obligation
Within the next 12 months 14,947Between 1 and 5 years 25,401Between 2 and 5 years 29,328Between 5 and 10 years 22,689Beyond 10 years 14,205Total expected payments 106,570
The average duration of the defined benefit plan obligation at the end of the reporting period is 5.47 years.
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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As at 31st March 2014 2013
28 Deferred tax liabilityBalance at the beginning of the year 329,313 255,793Charge for the year 8,098 25,560Deferred tax effect on revaluation of buildings - 47,960Balance at the end of the year 337,411 329,313
The closing deferred tax liability relates to the followingRevaluation of buildings 47,960 47,960Accelerated depreciation for tax purposes 302,239 293,116Employee benefit liability (12,788) (11,763) 337,411 329,313
29 Trade and other payablesTrade payables 65,802 55,239Advances and deposits received 39,340 38,453Accruals and other payables 88,268 64,640Staff payables 29,372 29,798 222,782 188,130
30 Other current liabilitiesBanquet advances 66,823 63,449Other advances 6,838 10,694Other taxes payable 20,758 22,360 94,419 96,503
31 Amounts due to related partiesUltimate parent - John Keells Holdings PLC 2,364 342Parent - Asian Hotels and Properties PLC 15 66Companies under the Common Control of John Keells Holdings PLC 24,336 29,157 26,715 29,565
32 Current tax liabilityBalance at the beginning of the year 65,252 69,397Charge for the year 120,577 120,100Payments, set-off against tax credits and adjustments (127,511) (124,245)Balance at the end of the year 58,318 65,252
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
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33 Related party transactionsThe Company carries out transactions in the ordinary course of business with parties who are defined as Related Parties in " Sri Lanka Accounting Standards (LKAS 24) Related Party Disclosures, the details of which are reported below. The pricing applicable to such transactions is based on the assessment of risk and pricing model of the Company and is comparable with what is applied to transactions between the Company and its unrelated customers.
33.1 Transactions with related companiesThe Company's immediate Parent is Asian Hotels and Properties PLC and Ultimate Parent is John Keells Holdings PLC.
As at 31st March 2014 2013
Ultimate Parent John Keells Holding PLCRendering / (Receiving) of services (20,135) (26,856)Rent received / paid 37,529 33,326
Parent - Asian Hotels and Properties PLCRendering / (Receiving) of services 1,135 (13)Rent received / paid (1,014) (901)
33.2 Transactions with companies under common control of John Keells Holdings PLC.(Purchase) / Sale of goods (12,613) (21,724)Rendering / (Receiving) of services (194,926) (173,221)
33.3 Transactions with related parties-Associates(Purchase) / Sale of goods (494) (864)Interest received / paid to Nations Trust Bank 1,307 9,190
The Company held interest bearing deposits (Rs. 126.9 million) at Nations Trust Bank PLC as at 31.03.2014.
Related party receivable and payable balances are disclosed in Note 21 and 31 respectively.
33.4 Transaction with key management personnel (KMP)According to 'Sri Lanka Accounting Standards (LKAS 24) ' Key Management Personnel are those having authority and responsibility for planning and controlling activities of the entity. Accordingly, the Directors of the Company (including Executive and Non Executive Directors) and their Immediate family members have been classified as KMP of the Company.
Immediate family member is defined as spouse or dependent. Dependent is defined as anyone who depends on respective Director for more than 50% of his/her financial needs.
Compensation of key management personnelShort term employee benefits 3,120 3,000
Key management personnelRendering of services 326 233
Post employment benefit planContributions to the provident fund 454 441
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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34 Financial instruments34.1 Financial assets and liabilities by categoriesFinancial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
Financial assets by categories Financial assets
Loans and at fair value through Available-for-sale Held-to-maturity
receivables profit and loss financial assets investments
As at 31st March 2014 2013 2014 2013 2014 2013 2014 2013
Financial instruments in non-current assets
Other non-current financial assets 1,522 404 - - - - - -
Other Financial assets 5,636 6,876 - - - - - -
Financial instruments in current assets
Trade and other receivables 234,456 233,268 - - - - - -
Amounts due from related parties 14,424 14,822 - - - - - -
Short term investments 486,925 559,873 - - - - - -
Cash in hand and at bank 140,737 99,841 - - - - - -
Total 883,700 915,084 - - - - - -
The fair value of loans and receivables amounts to Rs. 883.7 million (2013 - Rs. 915.1 million).
Financial liabilities by categories Financial liabilities Financial liabilities
through at fair value measured at
profit and loss amortised cost
As at 31st March 2014 2013 2014 2013
Financial instruments in current liabilities
Trade and other payables - - 222,782 188,130
Amounts due to related parties - - 26,715 29,565
Current portion of borrowings
Bank overdrafts - - 53,964 39,578
Total - - 303,461 257,273
The Company has not designated any financial assets or liabilities upon initial recognition, as fair value through profit or loss.
34.2 Financial risk management objectives and policiesFinancial instruments held by the Company, principally comprises of cash, loans and other receivables, trade and other receivables, trades and other payables and loans and borrowing.
The main purpose of these Financial instruments is to manage the operating, investing and financing activities of the Company.
Financial risk management of the Company is carried out based on guidelines established by its Parent Company's central treasury department (Group Treasury) which comes under the purview of the Group Executive Committee (GEC) of the Parent Company. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Hotel's operating unit. The Parent Company provides guidelines for overall risk management, as well, covering specific areas such as credit risk, investment of excess liquidity, interest rate risk and foreign currency risk.
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
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The Company has established guidelines for risk controlling procedures and for the use of financial instruments, including a clear segregation of duties with regard to financial activities, settlement, accounting and related controlling. The guidelines upon which the Company's risk management process are based and designed to identify and analyse these risks throughout the company, to set appropriate risk limits, controls and to monitor the risks by means of reliable and up-to-date administrative and information systems. The guidelines and systems are regularly reviewed and adjusted to changes in markets and products. The Company manages and monitors these risks primarily through its operating and financing activities.
Audit committee of the Company monitors how management compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework relation to the risks faced by the Company. The 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.
34.2.1 Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
The Company trades only with recognised, creditworthy third parties. It is the Company’s policy that all clients who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant.
With respect to credit risk arising from the other financial assets of the Company, such as cash and cash equivalents, the Company's exposure to credit risk arises from default of the counterparty. The Company manages its operations to avoid any excessive concentration of counterparty risks and the Company takes all reasonable steps to ensure that the counterparties fulfil their obligations.
34.2.2 Credit risk exposureThe maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying amounts (without consideration of collateral, if available). Following table shows the maximum risk positions.
Other non Trade and Amounts due
current financial Cash in hand other Other from related % of
Notes assets and at bank receivables investments parties Total allocation
2014
Deposits with bank 33.2.3 - - - 486,925 - 486,925 55%
Loans to executives 33.2.4 7,158 - 1,204 - 8,362 1%
Trade and other receivables 33.2.5 - - 233,252 - - 233,252 26%
Amounts due from related parties 33.2.6 - - - - 14,424 14,424 2%
Cash in hand and at bank 33.2.7 - 140,737 - - - 140,737 16%
Total credit risk exposure 7,158 140,737 234,456 486,925 14,424 883,700 100%
2013
Deposits with bank 33.2.3 - - - 559,873 - 559,873 61%
Loans to executives 33.2.4 7,280 - 1,734 - - 9,014 1%
Trade and other receivables 33.2.5 - - 231,534 - - 231,534 25%
Amounts due from related parties 33.2.6 - - - - 14,822 14,822 2%
Cash in hand and at bank 33.2.7 99,841 - - - 99,841 11%
Total credit risk exposure 7,280 99,841 233,268 559,873 14,822 915,084 100%
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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34.2.3 Deposits with bankFixed and call deposits comprise 100% (2013 - 100%) with banks rated "AA" (Fitch Rating)
34.2.4 Loans to executivesLoans to executive portfolio is made up of vehicle loans which are given to staff at manager level and above. The Company has obtained the necessary Power of Attorney/promissory notes as collateral for the loans granted.
34.2.5 Trade and other receivablesAge analysis of trade and other receivables and other carrying value net of impairment losses is given below:
Company 2014 2013
Neither past due nor impaired 186,488 168,927
Past due but not impaired< 30 days 34,738 47,20531 - 60 days 7,544 6,64861 - 90 days 2,001 5,41891 - 120 days 2,420 3,612121 - 180 days 662 523> 180 days 603 935Impaired 9,118 1,965Gross carrying value 243,574 235,234
Less: Impairment provisionIndividually assessed impairment provision (9,118) (1,965)Total 234,456 233,268
The Company has obtained customer deposit from major customers by reviewing their past performance and credit worthiness, as collateral.
The requirement for an impairment is analysed at each reporting date on an individual basis for major customers.
34.2.6 Amounts due from related partiesThe Company's amounts due from related party mainly consists balances from affiliate companies.
34.2.7 Credit risk relating to cash and cash equivalentsIn order to mitigate settlement and operational risks related to cash and cash equivalents, the Company uses several banks with acceptable rating for its deposits. The Company held cash and cash equivalents of Rs. 573.6 million as at 31st March 2014 (2013 - Rs. 620.1 million).
34.3 Liquidity riskLiquidity risk is the risk that will encounter difficulty in meeting the obligation associated with it's financial liabilities that are settled by delivering cash or another financial asset. The Company'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 unacceptable losses or risking damage to Company's reputation.
Company monitors the level of expected cash inflows on trade and other receivable together with expected cash outflows on trade and other payables.At 31st March 2014, the expected cash inflows from trade and other receivables maturing within two months were Rs. 40.7 million (2013 - 73.6 million).
This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Company has an approved and unused overdraft facility amounting to Rs. 63.5 million as at 31st March 2014.
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
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34.3.1 The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.
Carrying Total 2 Months 2 - 12 1-2 2-3 More than Amount or less Months Year Year 5 years
Contractual cash outflows - 2014Trade Payables 65,802 65,802 65,802 - - - -Other Payables 156,980 156,980 156,980 - - - -Amount due to related parties 26,715 26,715 26,715 - - - -
Contractual cash outflows - 2013Trade Payables 55,239 55,239 55,239 - - - -Other Payables 132,891 132,891 132,891 - - - -Amount due to related parties 29,565 29,565 29,565 - - - -
34.3.2 Management of liquidity riskThe Company'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 unacceptable losses or risking damage to its reputation.
Company maintains a portion of its assets in highly liquid form (short term fixed deposits and government securities) in order to meet its contractual obligations during the normal course of its operations. As at the reporting date “Cash and cash equivalents” amounted to Rs. 573.6 million.
Company monitors the level of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables and it is expected a significant portion of trade receivables as at the reporting date would mature within a shorter period of time, given the historical trends, which enable to meet its contractual obligations.
34.4 Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates will affect its 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.
34.4.1 Currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate, due to the changes in foreign exchange rates. Company as at the reporting date, does not hold significant "Financial instruments" denominated in currencies other than its functional / reporting currency, hence do not get significantly exposed to currency risk from transaction of such balances in to the functional/reporting currency, which is Sri Lankan Rupees.
However, Company engages in transactions associated with foreign currencies in its ordinary course of operations, hence exposed to “Currency risk”
Across the industry, the hotel rates targeting the foreign tourists are quoted in US Dollar terms. However a fluctuation in the exchange rate will not have a significant impact since majority of the quotes are converted to local currency at the point of invoicing. The Company monitors fluctuations in foreign exchange rates and takes precautionary measures to revise its exchange rates on a regular basis, in an attempt to mitigate the exposure to currency risk arising from its transactions.
34.4.2 Interest rate riskInterest rate mainly arises as a result of Company having interest sensitive assets and liabilities which are directly impacted by changes in the interest rates. Management monitors the sensitivities on regular basis and ensure such risks are managed on a timely manner.
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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34.5 Accounting classifications and fair valuesThe Company does not designate any of its financial assets/ liabilities at fair value, hence a classification between fair value hierarchy do not apply.
34.6 Fair values Vs carrying amounts
Other Total Trading Held to Loans and Available financial carrying Fair Maturity receivables for sale liabilities amount Value
31st March 2014Cash and cash equivalents - - 573,698 - - 573,698 573,698Trade and other receivables - - 234,456 - - 234,456 234,456Amounts due from related parties - - 14,424 - - 14,424 14,424 - - 822,578 - - 822,578 822,578
Trade and other payables - - - - 222,781 222,781 222,781Amounts due to related parties - - - - 26,715 26,715 26,715 - - - - 249,496 249,496 249,496
31st March 2013Cash and cash equivalents - - 620,136 - - 620,136 620,136Trade and other receivables - - 233,268 - - 233,268 233,268Amounts due from related parties - - 14,822 - - 14,822 14,822 - - 868,226 - - 868,226 868,226
Trade and other payables - - - - 188,131 188,131 188,131Amounts due to related parties - - - - 29,565 29,565 29,565 - - - - 217,696 217,696 217,696
Carrying value of the above assets and liabilities have been considered as a reasonable approximation to the fair value.
Hotel Investment property TotalFor the year ended 31st March 2014 2013 2014 2013 2014 2013
35 Segmental informationTotal revenue 2,878,388 2,805,940 61,075 34,283 2,939,463 2,840,223Other operating income 13,285 12,233 - - 13,285 12,233Expenses (2,129,397) (1,988,626) (6,853) (6,065) (2,136,250) (1,994,691)Net finance income 55,221 64,737 - - 55,221 64,737
Change in fair value of investment property - - - 288,710 - 288,710Profit before taxation 817,497 894,284 54,222 316,928 871,719 1,211,212Segment assets 5,238,326 5,141,040 1,760,962 1,760,269 6,999,288 6,901,309Segment liabilities 900,179 847,784 - - 900,179 847,784
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
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36 Capital commitments and contingent liabilitiesCapital commitments have decreased by Rs. 332.3 million from that was disclosed as at 31st March 2013 (Rs. 346.5 million). A significant portion of this decrease relates to the capitalization of new human resource building.
37 Events occurring after the reporting dateSubsequent to the date of the Statement of Financial Position, no circumstances have arisen which would require adjustments to or disclosure in the financial statements except for the following:
The Board of Directors of the Company has declared a final dividend of Rs. 2.00 per share for the year ended 31st March 2014. As required by Section 56(2) of the Companies Act No. 7 of 2007, the Board of Directors have confirmed that the Company satisfies the Solvency test in accordance with Section 57 of the Companies Act No. 7 of 2007, and have obtained a certificate from the auditors, prior to recommending the final dividend of Rs. 2.00 per share for this year.
In accordance with Sri Lanka Accounting Standards(LKAS 10) ' Events after the Reporting Period, the proposed final dividend has not been recognised as a liability in the Financial Statements as at 31st March 2014.
38 Directors' responsibility statementThe Board of Directors is responsible for the preparation and presentation of these Financial Statements. Please refer to the page 137 for the statement of Directors' Responsibility for Financial Reporting.
All values are in Rupees ’000s, unless otherwise stated
Figures in brackets indicate deductions.
Notes to the Financial Statements Contd.
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169Quarterly Financial Data for the Financial Year Ended 31st March 2014
Income Statement
For the Quarter ended 30 Jun '13 30 Sep'13 31 Dec '13 31Mar '14 Total for the Year
Turnover 612,873 767,229 811,808 747,553 2,939,463Cost of sales (246,224) (282,930) (291,738) (259,434) (1,080,326)Gross profit 366,649 484,299 520,070 488,119 1,859,137Other operating income 1,564 646 1,661 9,414 13,285Administrative expenses (149,552) (161,773) (167,341) (170,760) (649,426)Sales and marketing expenses (20,322) (23,773) (25,900) (19,335) (89,330)Other operating expenses (72,337) (85,667) (77,560) (81,604) (317,168)Profit from operating activities 126,002 213,732 250,930 225,834 816,498Finance cost (11) (10) (3) (14) (38)Finance income 19,152 12,666 13,441 10,000 55,259Profit before tax 145,143 226,388 264,368 235,820 871,719Income tax expense (23,634) (31,942) (36,950) (36,013) (128,539)Profit after tax 121,509 194,446 227,418 199,807 743,180
Earning per share for the period 0.61 0.97 1.14 1.00 3.72
Balance Sheet
As at 30 Jun '13 30 Sep'13 31 Dec '13 31Mar '14
Net AssetsProperty, plant and equipment 5,883,347 5,907,066 6,030,137 6,038,964Other non current assets 7,096 7,923 9,657 7,158Net current assets 314,943 485,894 296,631 496,968 6,205,386 6,400,883 6,336,425 6,543,090Less : Non current liabilities 430,352 430,237 437,196 443,981Net Assets 5,775,034 5,970,646 5,899,229 6,099,109
Shareholders' FundsStated capital and revenue reserves 2,790,585 4,298,059 4,231,760 4,436,758Other components of equity 2,984,449 1,672,587 1,667,469 1,662,351Total Equity 5,775,034 5,970,646 5,899,229 6,099,109
Net assets per share 28.88 29.85 29.50 30.50
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Five Year Financial Summary & Key Indicators
09/10 10/11 11/12 12/13 13/14 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
RevenueRooms 393,172 800,168 1,043,277 1,352,432 1,399,408Food 408,191 792,411 892,287 1,034,971 1,073,233Beverages 85,898 137,845 149,344 163,607 153,647Food and beverage others 24,534 37,667 38,244 38,618 38,123Telephone 4,364 5,312 3,987 2,764 3,045Investment property income 57,335 57,010 55,755 34,283 61,075Other operating income 93,019 141,443 192,585 213,549 210,932Total revenue 1,066,514 1,971,856 2,375,479 2,840,223 2,939,463
ExpensesRooms 91,187 131,952 151,636 191,799 215,396Food cost 157,048 298,799 330,682 395,510 412,603Beverage cost 29,106 47,084 41,213 46,248 42,438Food and beverage 213,196 267,030 299,127 343,149 369,542Telephone 3,661 4,001 4,042 3,764 3,986Investment property income 275 138 316 179 1,268Others 36,722 49,650 93,675 100,737 98,221Total cost of sales 531,195 798,654 920,690 1,081,384 1,143,454
Gross operating income 535,319 1,173,202 1,454,790 1,758,839 1,796,008
ExpensesAdministration and general 136,487 163,400 188,317 185,208 209,074Advertising and sales 47,119 63,154 60,110 66,185 75,051Heat, light and power 81,226 126,957 141,136 173,232 193,695Repairs and maintenance 70,568 78,048 90,976 98,441 103,477Management fees 56,413 106,687 130,102 160,689 163,352Marketing fee 3,777 8,223 10,630 13,609 14,280Branding expenses 11,996 - - - -Total deductions 407,586 546,469 621,272 697,364 758,928
Gross operating profit 127,733 626,736 833,517 1,061,475 1,037,080Other income 214,700 19,349 25,063 77,067 68,544Assets write-off (23,794) (11,840) (18,151) - -Change in fair value of investment properties - 229,676 99,848 288,710 - 318,639 863,921 940,277 1,427,252 1,105,624Finance expenses 11,034 99 23 96 38Insurance and rates 25,225 26,526 28,998 31,333 28,136Depreciation and amortisation 154,741 151,710 168,272 184,610 205,731 191,000 178,335 197,292 216,039 233,906
Net profit before tax 127,638 685,583 742,984 1,211,212 871,719
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09/10 10/11 11/12 12/13 13/14 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Operating resultsTotal revenue 1,066,514 1,971,856 2,375,479 2,840,223 2,939,463Sales growth (7.35) 84.89 20.47 19.56 3.49Gross operating profit 127,733 626,736 833,517 1,061,475 1,037,080Net profit before taxation 127,638 685,586 742,984 1,211,212 871,719Finance expenses 11,034 99 23 96 38Rates insurance, depreciation and amortisation 179,967 178,236 197,269 215,943 233,868
Shareholder's fundsStated capital 1,112,880 1,112,880 1,112,880 1,112,880 1,112,880Other component of equity 1,434,082 1,407,602 1,366,273 1,683,989 1,662,351Revenue reserves 1,808,534 2,398,139 2,756,945 3,256,656 3,323,879Total Equity 4,355,496 4,918,621 5,236,098 6,053,525 6,099,109
Assets employedProperty, plant and equipment 2,613,003 2,661,580 2,844,998 3,279,844 3,457,787Leasehold property 868,280 855,876 843,472 831,068 818,664Investment property 1,140,016 1,369,692 1,469,540 1,758,250 1,758,250Other non current assets - 56,658 46,619 14,735 11,421Net current assets 117,142 316,756 389,260 598,384 496,968 4,738,441 5,260,562 5,593,889 6,482,281 6,543,090
LessLong term liabilities 5,725 4,288 2,853 1,416 -Employee benefits 74,372 89,299 99,145 98,027 106,570Deferred taxation 302,848 248,354 255,793 329,313 337,411Net Assets 4,355,496 4,918,621 5,236,098 6,053,525 6,099,109
Key indicatorsCurrent ratio times 1.40 2.02 1.88 2.43 2.09Net asset per share (Rs.) 21.78 24.60 26.18 30.27 30.50Market price per share (Rs.) 176 196 67 70 80Earnings per share (Rs.) 0.52 3.30 3.12 5.33 3.72
Statistical summaryOccupancy (%) 41 62 55 60 61No. of rooms occupied 51,226 76,882 69,616 76,199 76,790Average daily rate (Rs.) 7,675 10,408 14,964 17,794 18,224Food cost (%) 38 38 37 38 38Beverage cost (%) 34 34 28 28 28Net profit before tax (%) 12 35 31 43 30
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Glossary of Financial Terms
Glos
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Ter
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Accounting policies The specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting Financial Statements.
Accrual basisRecognising the effects of transactions and other events when they occur without waiting for receipt or payment of cash or its equivalent.
AmortisationThe systematic allocation of the depreciable amount of an intangible asset over its useful life.
Average room rateHotel revenue divided by the number of rooms sold. Booking engineApplication which helps the travel and tourism industry support reservation through the Internet. It helps guests to book hotel services online.
Capital employedShareholders’ funds plus debt.
Cash equivalentsShort term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Contingencies A condition or situation existing at Balance Sheet date where the outcome will be confirmed only by occurrence or non- occurrence of one or more future events.
Current ratioCurrent assets divided by current liabilities.
Capital reservesReserves identified for specific purposes and considered not available for distribution.
Capital expenditureThe total additions to property, plant and equipment.
Corporate governanceThe process by which corporate entities are governed. It is concerned with the way in which power is exercised over the management and direction of an entity, the supervision of executive actions and accountability to owners and others.
Debt/Equity ratioDebt as a percentage of shareholders’ funds.
Deferred taxSum set aside in the financial statements for taxation that may become payable in a financial year other than the current financial year.
Dividend yieldDividend earned per share as a percentage of its market value.
Dividend cover The ratio of company's earnings (net income) over the dividend paid to shareholders, calculated as earnings per share divided by the dividend per share.
Dividend per share Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued.
Dividend payout ratio The percentage of earnings paid to a shareholder as dividends.
Earnings per share (EPS)Profit attributable to equity holders divided by the weighted average number of ordinary shares in issue during the period.
EBITEarnings before interest and tax (includes other operating income).
EBITDA Earnings before interest, tax, depreciation and amortisation
Economic value added (EVA)EVA indicates the wealth that has been created by the business to its shareholders. EVA takes in to account the economic cost of the sums invested as equity in to the business.
Effective tax rate Provision for taxation for the year divided by the profit before tax.
Employee turnoverEmployee Turnover is the Percentage of a company's employees who leave during a specified period. Although it is most often expressed at annual turnover rate
EPS growth Percentage increase in the EPS over the previous year.
Equity assets ratioTotal assets divided by shareholder’s equity.
Fair value Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable willing seller in an arm’s length transaction.
Gross profit marginWhat remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage.
ImpairmentThis occurs when recoverable amount of an asset is less than its carrying amount.
Intangible AssetAn intangible asset is an identifiable non- monetary asset without physical substance.
Interest coverProfit before interest and tax over finance expenses.
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Key management personnelKey management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity.
Market value added (MVA)A calculation that shows the difference between the market value of a company and the capital contributed by investors. In other words, it is the sum of all capital claims held against the company plus the market value of debt and equity.
MaterialityThe relative significance of a transaction or an event, the omission or misstatement of which could influence the economic decisions of users of Financial Statements.
Market value per shareThe price at which an Ordinary share can be purchased in the stock market.
Market capitalizationNumber of shares in issue at the end of period multiplied by the market price at end of period.
Net assetsTotal assets minus current liabilities minus long term liabilities.
Net assets per shareShareholders’ funds divided by the weighted average number of Ordinary shares.
OccupancyThe number of people who are in a particular building or room at one time
Operational RiskThis refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
Pre-Tax return on capital employedProfit before interest and tax as a percentage of average capital employed at year end.
Price earnings ratioMarket price per share over Earnings per Share.
PrudenceInclusion of a degree of caution in the exercise of judgment needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.
Quick asset ratioThe quick ratio measures a company’s ability to meet its short term obligations with its most liquid assets. And is calculated as follows –= (current assets - inventories)/current liabilities
Related partiesParties where one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, directly or indirectly.
Return on assetsProfit after tax as a percentage of average total assets.
Return on equityProfit attributable to shareholders as a percentage of average shareholders’ funds.
Return on average assets (ROA)Profit after tax divided by the average assets.
Room nightOne hotel room occupied for one night; a statistical unit of occupancy.
Room sales per employee per monthAn important ratio that looks at the hotel's room sales in relation to the number of employees they have.
Shareholders’ fundsStated capital plus capital and revenue reserves.
Total carbon foot printThe totals of greenhouse gas emissions caused by the hotel.
Total debtLong term loans plus short term loans and overdrafts.
Total shareholder return(P1 - Po + D)/Po X100P1 = Market price at the end of the yearPo = Market price at the beginning of the financial yearD = Dividend for the year
Total value addedThe wealth created by the operations of the hotel. The value is distributed among the stakeholders and the balance retained within the business.
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NOTICE IS HEREBY GIVEN that the Thirty Third Annual General Meeting of Trans Asia Hotels PLC will be held at the Auditorium of The Ceylon Chamber of Commerce, No. 50, Nawam Mawatha, Colombo 02 on 30th June 2014 at 9.00 a.m.
The business to be brought before the meeting will be:
1. To read the notice convening the meeting.
2. To receive and consider the Annual Report and Audited Financial Statements of the Company for the year ended 31st March 2014 together with the Report of the Auditors thereon.
3. To re-elect as a Director Mr. N L Gooneratne who retires in terms of Section 210 of the Companies Act No. 7 of 2007, for which the passing of the following ordinary resolution is recommended by the Company.
“THAT the age limit stipulated in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. N L Gooneratne, who is seventy one (71) years and that he be re-elected a Director of the Company.
4. To re- elect as a Director Ms. J C Ponniah who retires in terms of Article 90 of the Articles of Association of the Company. A brief profile of Ms. J C Ponniah is contained on Page 17 of the Annual Report.
5. To re-elect as a Director Mr. J R F Peiris who retires by rotation in terms of Article 83 of the Articles of Association of the Company. A brief profile of Mr. J R F Peiris is contained on Page 16 of the Annual Report.
6. To re- elect as a Director Mr. E H Wijenaike who retires by rotation in terms of Article 83 of the Articles of Association of the Company. A brief profile of Mr. E H Wijenaike is contained on Page 17 of the Annual Report.
7. To re-appoint the retiring Auditors, KPMG, Chartered Accountants, and to authorize the Directors to determine their remuneration.
8. To consider any other business of which due notice has been given in terms of the relevant laws and regulations.
By order of the BoardTrans Asia Hotels PLC
Keells Consultants (Private) LimitedSecretaries
Colombo,27th May 2014
Note: i. A member unable to attend is entitled to appoint a Proxy to attend and
vote in his/her place.
ii. A Proxy need not be a member of the Company.
iii. A member wishing to vote by Proxy at the Meeting may use the Proxy Form enclosed.
iv. In order to be valid, the completed Proxy Form must be lodged at the Registered Office of the Company not less than 48 hours before the meeting.
v. If a poll is demanded, a vote can be taken on a show of hand or by a poll. Each share is entitled to one vote. Votes can be cast in person, by proxy or corporate representatives. In the event an individual shareholder and his proxy holder are both present at the meeting, only the shareholder’s vote is counted. If the proxy holder’s appointor has indicated the manner of voting, only the appointors indication of the manner to vote will be used.
Notice of Meeting
Notic
e of
Mee
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I/We ...............................................................................................................................................................................................................................
of ..................................................................................................................................................................................................................................
being a *member/members of Trans Asia Hotels PLC hereby appoint .................................................................................................................................
of ..................................................................................... or failing him/her
Mr. S C Ratnayake of Colombo, failing whomMr. A D Gunewardene of Colombo, failing whomMr. J R F Peiris of Colombo, failing whomMr. N L Gooneratne of Colombo, failing whomMr. C J L Pinto of Colombo, falling whomMr. E H Wijenaike of Colombo, failing whom Ms. J C Ponniah of Colombo
as *my/our proxy to represent *me/us and to vote on *my/our behalf at the Thirty Third Annual General Meeting of the Company, to be held on 30th June 2014 and at any adjournment thereof, and at any poll which may be taken in consequence thereof. *I/We the undersigned hereby authorize *my/our proxy to vote on *my/our behalf in accordance with the preferences indicated below:
FOR AGAINST
1. To re - elect as a Director Mr. N L Gooneratne who retires in terms of Section 210 of the Companies Act No. 7 of 2007.
2. To re-elect as a Director Ms. J C Ponniah who retires in terms of Article 90 of the Articles of Association of the Company.
3. To re-elect as a Director Mr. J R F Peiris who retires in terms of Article 83 of the Articles of Association of the Company.
4. To re-elect as a Director Mr. E H Wijenaike who retires in terms of Article 83 of the Articles of Association of the Company.
5. To re-appoint the retiring Auditors, KPMG, Chartered Accountants, and to Authorise the Directors to determine their remuneration.
Signed this ............................................ day of ............................................ Two Thousand and Fourteen
..........................................Signature of Shareholder
Notes:(a) *Strike out whichever is not desired.(b) Instructions to completion of the Form of Proxy are set out on the reverse hereof. (c) Please indicate an “X” in the cage provided how your Proxy should vote on each Resolution.
Form of Proxy
Form
of P
roxy
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INSTRUCTIONS AS TO COMPLETION OF PROXY
1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the date of signature.
2. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 115 Sir Chittampalam A Gardiner Mawatha, Colombo 2, not later than 48 hours before the time appointed for the holding of the Meeting.
3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.
4. If the appointer is a company or corporation, the Form of Proxy should be executed under its Common Seal or by a duly authorised officer of the company or Corporation in accordance with its Articles of Association or Constitution.
5. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shall exercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting.
Please fill in the following details:
Name : ................................................................................
Address : ................................................................................
................................................................................
................................................................................
Jointly with : ................................................................................
Share Folio No. : ................................................................................
Form of Proxy Contd.
Form
of P
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Corporate Information
Name of the CompanyTrans Asia Hotels PLC
Legal FormA Public Limited Liability Company incorporated in Sri Lanka on 17th July, 1981 and quoted on the Colombo Stock Exchange
Company Registration NumberPQ 5
Registered OfficeNo. 115, Sir Chittampalam A. Gardiner Mawatha,Colombo 2Tel: +94 11 2491000, Fax: +94 11 2449184 E-mail: [email protected]: http://www.cinnamonhotels.com/cinnamonlakeside.htm
Board of DirectorsMr. Susantha Chaminda Ratnayake - Chairman Mr. Ajit Damon GunewardeneMr. James Ronnie Felitus PeirisMr. Navindra Lal GooneratneMr. Cholmondeley John Lloyd PintoMr. Eranjit Harendra Wijenaike Ms. Jhansi Carryl Ponniah Audit CommitteeMr. C. J. L. Pinto (Chairman)Mr. E. H. WijenaikeMs J. C. Ponniah Mr. J. R. F. Peiris (Resigned with effect from 02nd October 2013)
Secretaries and RegistrarKeells Consultants (Private) Limited 117, Sir Chittampalam A Gardiner Mawatha,Colombo 02Tel: +94 11 2306245Fax: +94 11 2439037
AuditorsKPMG Chartered Accountants 32A, Sir Mohamed Macan Markar Mawatha, Colombo 03
BankersCitibank NADeutsche Bank AGSampath Bank PLCThe Hongkong and Shanghai Banking Corporation LtdNations Trust Bank PLC People’s Bank PLC
Design & Concept by: Optima Designs (Pvt) Ltd.Printed by: Aitken Spence Printing & Packaging (Pvt) Ltd.
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