ASIAN HOTELS AND PROPERTIES PLC ANNUAL REPORT 2020 | 2021
The period under review was a year of transcending the challenges faced by the hospitality industry at large. We managed to remain undeterred and true to our values, having tenaciously navigated turbulent tides, with the help of our loyal and resilient team, and the support of our valued clientele.
Come what may, we are primed and prepped to take on the road ahead. Our focus will remain fixated on the silver lining-being the best we can be, in any eventuality. Contents
Overview About Us 03 Performance Highlights 04
Stewardship
Chairman’s Message 06 Profiles of Directors 09 Risk and Opportunities 11 Corporate Governance 15
Management Reports
Operating Environment 41 Financial Review 43
Financial Reports
Annual Report of the Board of Directors 46 Report of the Audit Committee 53 Statement of Directors’ Responsibility 55 Independent Auditors’ Report 56 Income Statement 60 Statement of Other Comprehensive Income 61 Statement of Financial Position 62 Statement of Changes in Equity 63 Statement of Cash Flows 65 Notes to the Financial Statements 67
Supplementary Information
Consolidated Value Added Statement 113 Information to Shareholders & Investors 114 5 Year Financial Review of the Group 116 5 Year Financial Summary of the Property Development Division 116 5 Year Financial Summary of the Cinnamon Grand Colombo Hotel 117 Glossary of Financial Terms 118 Corporate Information Inner Back Cover Annual Report 2020 | 2021 03
About Us
Asian Hotels and Properties PLC (the Group) are the leaders in the hospitality industry in the city of Colombo with its five-star properties Cinnamon Grand Colombo and Cinnamon Lakeside Colombo and its investment property Crescat Boulevard. We provide livelihoods to 1,330 direct employees and a number of large and SME suppliers.
BRAND ¾ Cinnamon Grand Colombo ¾ Cinnamon Lakeside Colombo ¾ Crescat Boulevard
BUSINESS ¾ 847 Rooms ¾ 20 Restaurants and 4 Main Ballrooms ASIAN HOTELS ¾ 200,744 Sq. ft. of Rental Property AND PROPERTIES PLC CAPITAL ¾ Total Assets Rs. 40,869 Mn ¾ Employees 1,330 ¾ New Investments Rs. 250 Mn
RECOGNITION ¾ World Travel Awards: Sri Lanka’s Leading Business Hotel of the Year ¾ Trip Advisors’ Traveller Award 2020 ¾ Energy Solutions Company ECO33 achieving 1Mn Kwh in Energy Savings ¾ Agoda Customer Review Award 2020 04 Asian Hotels and Properties PLC
Performance Highlights
Operational Performance 2021 2020 2019 2018
Group revenue Rs. Mn 1,790 5,559 7,658 8,628 Results from operating activities Rs. Mn (1,913) (28) 1,083 1,774 Profit/(Loss) before tax Rs. Mn (2,370) 199 1,270 2,469 Profit/(Loss) after tax Rs. Mn (2,244) 106 1,078 2,186 Dividend Rs. Mn - 442 885 1,328 Return on equity (ROE) % (5.54) (0.15) 2.51 5.20 Pre-tax return on capital employed (ROCE) % (6.43) 0.61 3.66 6.85
Balance Sheet Strength
Total assets Rs. Mn 40,869 42,582 42,524 41,148 Total liabilities Rs. Mn 6,256 5,889 6,092 5,911 Net debt (cash) Rs. Mn 691 (587) (846) (463) Total shareholders’ funds Rs. Mn 31,306 32,941 32,785 31,738 No. of shares in ‘000 442,775 442,775 442,775 442,775 Net assets per share Rs. 70.70 74.40 74.04 71.68 Debt/equity Times 0.03 0.01 0.01 0.01 Debt/total assets % 2.54 0.89 0.87 1.44
Social Performance
Market price of share as at 31st March Rs. 37.40 29.00 41.90 50.20 Market capitalisation Rs. Mn 16,560 12,840 18,552 22,227 Dividend payout Times - (9.09) 1.09 0.79 Dividend per share Rs. - 1.00 2.00 3.00 Dividend yield % - 3.45 4.77 5.98 Economic value added Rs. Mn (7) 3,014 4,884 5,899 Employee benefit liability Rs. Mn 378 345 365 345
Environment
Recycle of wastage % 2.43 5.38 7.53 8.12 Waste reused % 82.15 87.26 87.23 86.73
Environmental friendly initiatives during the year ¾ Use of re-cycled packing material for our online deliveries and eco-friendly cutlery. ¾ Joined the Central Environmental Authority and Ministry of Environments’ Pen and Toothbrush recycling programme titled “Not a rule but a discipline”, to reduce the impact of plastic on the environment. ¾ An awareness programme on Managing Domestic Waste was conducted for employees, focusing on reducing single use plastic and the effects of plastic on the environment. Our focus was and still is on the silver lining-being the best we can possibly be to our valued clientele, team, community and industry-come what may. 06 Asian Hotels and Properties PLC
Chairman’s Message
“Cinnamon Care”- the Cinnamon Standard for Care and Cleanliness was implemented across all our resorts and hotel properties with stringent health and safety protocols in line with the guidelines issued by the World Health Organisation and the Government of Sri Lanka. Cinnamon Grand, Cinnamon Lakeside, along with other properties in the Cinnamon Hotels & Resorts chain were among the first to receive the ‘Safe & Secure’ certification awarded by SLTDA.
Dear Stakeholder, for international travel. The sharp increase in COVID-19 positive I am pleased to present to you, on behalf of the Board, the cases from late April 2021 due to the emergence of a third wave highlights of the Annual Report and Financial Statements of in the country and resultant border and mobility restrictions Asian Hotels and Properties PLC for the year ended 31st March imposed by the Government in May 2021 has further slowed 2021. The Group remains resilient despite a year that was down short-term recovery prospects for the industry. Given the extremely challenging for the entire tourism industry. As we were strategic importance of the tourism sector to the Sri Lankan compelled to suspend the hotel’s operations for several weeks economy, the Government has extended several relief measures during the year, FY 2020/21 has been defined by our ability to including concessionary funding and loan moratoriums, remain agile while maintaining excellence in service delivery and moratoriums on Sri Lanka Tourism Development Authority ensuring strict adherence to health and safety protocols for the (SLTDA) registered land leases, and concessions on payment of benefit of our employees, guests and all other stakeholders. levies to support the recovery of the industry. Sri Lanka Tourism was one of the first in the Asian region to prepare and issue a OPERATING CONTEXT detailed COVID-19 Health Protocol for the industry which also received the Safe Travel Stamp from World Travel & Tourism Following the outbreak of the COVID-19 pandemic in March Council. Moreover, ongoing efforts to launch an integrated 2020, the global tourism industry witnessed its sharpest decline five-year Global Communication Campaign (GCC) is expected on record with international arrivals plummeting by almost 74% to positively contribute to the recovery of the industry in the compared to 2019. Widespread travel restrictions and health and medium to long term. safety protocols impacted tourism in almost every region, with the Asia Pacific region recording the highest decrease of 84%. The GROUP PERFORMANCE Middle East and African regions recorded a 75% drop in arrivals while Europe and the Americas recorded declines of 70% and 69% Performance of the Group was significantly impacted by the respectively. While the world-wide rollout of a COVID-19 vaccine COVID-19 pandemic with activity levels at Cinnamon Grand, is expected to help restore consumer confidence to some extent, Cinnamon Lakeside, and Crescat Boulevard declining sharply re-emerging outbreaks across many countries is likely to defer due to lockdowns, business disruptions and health and safety plans to ease travel restrictions, further prolonging a recovery for protocols in place to contain the spread. Occupancy rates which the industry. It is however encouraging to note a significant ‘pent recorded an encouraging recovery post-Easter Sunday Attack up’ demand for leisure travel, which is evident when looking at declined sharply with the closure of airports on 18th March 2020. travel destinations such as the Maldives, which augurs well for a Global corporate travel remained much subdued even after the “V” shaped recovery once travel restrictions ease out. opening of the airports in Sri Lanka on 21st January 2021 due to border restrictions on source markets compelling the city hotels to In Sri Lanka, the Government imposed travel restrictions with rely primarily on domestic business. Innovative packages targeting a full closure of the airport and termination of all passenger the local market supported average occupancy of around 10% flights from mid-March 2020. As a result, total tourist arrivals for city hotels during the fourth quarter. Food & Beverage and during the period January to December 2020 amounted to Banquet activity picked up gradually with the opening of the 507,704, a decline of 73% compared to the total tourist arrivals country albeit at lower levels due to safety guidelines which in 2019. While Sri Lanka reopened its borders to international limited capacity. Taking into consideration the lockdowns and tourists on 21st January 2021, arrivals during the first quarter of subsequent dampened economic activity, concessions on rentals 2021 remained subdued reflecting the lower demand globally were given to our tenants at Crescat Boulevard. At the end of Annual Report 2020 | 2021 07
December 2020, the mall was temporarily closed for renovations. ALIGNING WITH THE CINNAMON BRAND These constraints resulted in a decline in the Group revenue for In furtherance of the Group’s vision of expanding the the year by 67.8% to Rs. 1.79 Bn and Group EBITDA declined by “Cinnamon” footprint by creating a holistic value proposition 332% to a negative figure of Rs. 1.82 Bn. The pressure was on that leverages the round trip offering in key tourist destinations cashflows, hence a key area of focus throughout the year. Group in Sri Lanka and the Maldives, the hotel operations were loss after tax amounted to Rs. 2.24 Bn reflecting the impact of the re-aligned, bringing Cinnamon Colombo hotels and resorts COVID-19 pandemic on these two iconic Colombo hotels. under a single operating structure. The unified organisational structure will result in greater operational synergies and financial FOCUS ON HEALTH & SAFETY efficiencies across all our hotels. Ensuring the safety of our employees and guests remains a key priority. We continue to take proactive action to mitigate Staff development activities continued despite the challenges the risk of a spread of the COVID-19 virus, in compliance posed by the pandemic as we focused on providing employees with the guidelines and regulations stipulated by the health the skills and competencies required to be agile in the new authorities, whilst continuing to rollout additional voluntary normal. The Group tied up with the Ecole Hotelier De Lausanne, and precautionary measures. “Cinnamon Care”- the Cinnamon a leading hotel management school aimed at developing a Standard for Care and Cleanliness was implemented across all strong talent pipeline. our resorts and hotel properties with stringent health and safety protocols in line with the guidelines issued by the World Health In alignment with the Group’s diversity and inclusion program Organisation and the Government of Sri Lanka. Cinnamon and gender policy, the Group is committed to increasing the Grand, Cinnamon Lakeside, along with other properties in number of women in our workforce by promoting greater the Cinnamon Hotels & Resorts chain were among the first to female participation in a traditionally male dominated tourism receive the ‘Safe & Secure’ certification awarded by SLTDA. industry. During the year we implemented several initiatives such as the introduction of gender targets, employer supported In furtherance of our commitment to our people, the Group childcare solutions and agile work arrangements to promote ensured continued employment to all our permanent staff, and greater female representation across our businesses. no salary reductions were implemented for non-executive staff despite the financial constraints faced by the Group due to the With technology and digitalisation playing an increasingly impact of the pandemic. Additionally, certain other cash benefits important role in the tourism eco-system, we continue to were paid as part of our efforts to support our employees explore and implement digitisation initiatives particularly through such challenging times. targeting branding and distribution channels. Data analytics is also being leveraged for decision making, focusing on STRENGTHENING OUR BRAND improving customer value proposition and revenue model. Understanding our customer requirements was key to strengthening our brand during the year. Cinnamon Grand CORPORATE GOVERNANCE remains the preferred venue for corporate events, weddings I am pleased to state that there were no departures from any and celebrations with a reputation for excellence in service and of the provisions of the Code of Business Conduct and Ethics cuisine. Leveraging on this, we offered innovative packages of the Code of Best Practice of Corporate Governance, jointly targeting our local clientele such as the Party Lovers, Wine advocated by the Securities and Exchange Commission of & Unwind and The Resident’s Key. The opening of ‘Plates’, Sri Lanka and the Institute of Chartered Accountants of Cinnamon Grand’s 24-hour international cuisine restaurant in Sri Lanka. I also wish to affirm our commitment to upholding January 2021 increased the dining capacity while expanding the Group policies, where emphasis is placed on ethical and legal offering for our guests. Cinnamon Grand and Cinnamon Lakeside dealings, zero tolerance for corruption, bribery and any form of partnered together to launch ‘Flavours’ - an online home delivery harassment or discrimination in our workplace and any work- solution which offers a carefully curated menu from our favourite related situations. restaurants to the homes of our discerning clientele, adding a new dimension to home-bound consumers’ dining experiences. 08 Asian Hotels and Properties PLC
Chairman’s Message
SUSTAINABILITY navigate the ongoing and potential constraints. The lockdowns and various measures imposed have offered insights to business This was a year for further enhancing the sustainability of resilience and also highlighted the need to manage our our internal business processes as community engagement businesses and people in an agile work environment. Careful opportunities were limited. We have implemented policies to planning and oversight to enable Group businesses to adapt as eliminate single use plastics, initiatives to remove plastic from the situation evolves, whilst managing liquidity and financing rooms and sorting contributed to reduced those related to landfills. will continue to be a key area of focus. Responsible consumption initiatives, including related to energy usage, resulted in cost savings which was a key focus area given MEDIUM TO LONG-TERM (BEYOND COVID-19) the leaner cashflows. Supply chains were reviewed to find local substitutes for imported items resulting in an expansion of our Whilst significant short-term challenges are expected given the local supplier base. Where required, support was provided to these current situation and the anticipated addition to the city hotel suppliers on how to further improve the quality of their products. room inventory with the entry of several international players These initiatives added value to the relevant SME’s supported over the next few years and the resultant price pressure, the livelihoods and provided opportunities for growth to local Group remains confident of its medium to long-term prospects. businesses. Pent up demand for leisure travel particularly within the region is expected to fuel demand in the medium term. Meanwhile, with COMMUNITY ACTION tourist arrivals to Sri Lanka significantly below regional peers the potential for tourism still remains largely untapped presenting In recognition of the untiring efforts during the course of the significant growth potential for the cluster in the long term. COVID-19 pandemic, Cinnamon Grand and Cinnamon Lakeside participated in the “Cinnamon Travel Pledge”, offering 2,000 The renovation of Crescat Boulevard is also expected to be complimentary holiday packages to the frontline health care completed in 2021 with a new value proposition for consumers professionals as a way of showing our appreciation for their and potential tenants which will add to the cashflows of the Group. dedicated work. ACKNOWLEDGEMENTS OUTLOOK I wish to thank my colleagues on the Board for their guidance Immediate to Short-Term and support during what was a difficult year. The Board, and Despite rapid vaccination drives in countries such as the United I, wish to express our appreciation to Mr. J. R. Gunaratne who States and the United Kingdom, the relatively slower pace of retired from the Board in December 2020, for his invaluable the vaccination roll-out in many other countries has hindered contribution and wish him the very best in all his future the resumption of international travel. Meanwhile, recurring endeavors. We also warmly welcome Mr. C. L. P. Gunawardane outbreaks of the pandemic across countries and the resultant who joined the Board during the year under review. tightening of travel restrictions continue to impact short term prospects of the global tourism industry. I also take this opportunity to recognise the management and their teams for their continued commitment during this Sri Lanka commenced 2021 on an optimistic note with the re- challenging year. In conclusion, I extend my sincere appreciation opening of airports on 21st January 2021. The resurgence of the to our stakeholders including our tour operator partners, guests third wave of the outbreak in April 2021 however has compelled and shareholders for their continued support and trust. the Government to re-impose stringent health and safety measures to control the transmission of the COVID-19 virus, including isolation of select areas deemed as ‘high-risk’, travel restrictions during select periods, limitations on foreign arrivals and certain restrictions on travel within the country. Krishan Balendra Chairman Despite the uncertain conditions, the outbreaks in CY2020 24th May 2021 and the subsequent recovery post easing of restrictions, have imparted learnings for the Group which will help us better Annual Report 2020 | 2021 09
Profiles of Directors
Krishan Balendra Suresh Rajendra as a finance professional in varying Chairman Director industries including Pharmaceutical, Manufacturing, Management Services, Krishan Balendra is the Chairman of John Suresh Rajendra has over 30 years of Electrical Engineering and Construction. Keells Holdings PLC (JKH). He is a Director experience in the fields of finance, Changa is also a Fellow member of the of the Ceylon Chamber of Commerce and travel & tourism, hotel management, Chartered Institute of Management the Hon. Consul General of the Republic property development and real estate Accountants UK and holds a Masters of Poland in Sri Lanka. He is a former management and business development in Business Administration, from the Chairman of Nations Trust Bank PLC and acquired both in Sri Lanka and overseas. Postgraduate Institute of Management, the Colombo Stock Exchange. Krishan Prior to joining the John Keells Group, University of Sri Jayewardenepura. started his career at UBS Warburg, Hong he was the Head of Commercial and Kong, in investment banking, focusing Business Development for NRMA primarily on equity capital markets. Motoring and Services in Sydney, Mikael Svensson He joined JKH in 2002. Krishan holds a Australia and Director/General Manager Director law degree (LLB) from the University of of Aitken Spence Hotel Management London and an MBA from INSEAD. (Pvt) Ltd, Sri Lanka. He is a Fellow Mikael Svensson is presently the CEO member of the Chartered Institute of Cinnamon Hotels & Resorts, Mikael of Management Accountants, UK. He overlooks Cinnamon’s entire portfolio of Gihan Cooray is a member of the Group Executive hotels and resorts in Sri Lanka and the Director Committee of the John Keells Group. He Maldives including the development of is also the President of the Leisure Group the much-anticipated integrated resort Gihan Cooray is the Deputy Chairman/ and responsible for Union Assurance project Cinnamon Life Colombo. Mikael Group Finance Director and has overall PLC. John Keells Information Technology brings with him extensive international responsibility for the Group’s Finance and Pvt. Ltd., and John Keells Stockbrokers senior leadership experience in managing Accounting, Taxation, Corporate Finance (Pvt) Ltd. He serves as a Director of and operating large scale luxury hotels and Strategy, Treasury, Information Union Assurance PLC, Trans Asia Hotels across Asia, the Middle East and Australia, Technology function and John Keells PLC, John Keells Hotels PLC and also of which over 20 years was with the Hyatt Research. He is the Chairman of Nations in many of the unlisted companies of Group. He was the opening General Trust Bank PLC. Gihan holds an MBA from the John Keells Group. He is currently Manager of the landmark luxury hotel the Jesse H. Jones Graduate School of the Chairman of the Condominium on the trunk of the Palm Jumeirah, the Management at Rice University, Houston, Developers Association of Sri Lanka. Viceroy Palm Jumeirah, Dubai and the Texas. He is a Fellow member of the Grand Hyatt Mumbai, India. He was also Chartered Institute of Management the General Manager of the Park Hyatt Accountants, UK, a certified management Changa Gunawardane Canberra, Australia and Hyatt Regency Hua accountant of the Institute of Certified Director Hin, Thailand. Prior to joining John Keells Management Accountants, Australia and Holdings PLC (JKH), he was the Senior Vice has a Diploma in Marketing from the Changa Gunawardane is presently the President of Louis T Collection, a Singapore Chartered Institute of Marketing, UK. He Chief Financial Officer (CFO) of the based hospitality management and serves as a committee member of The Leisure group, Changa has been with building solutions company which owns a Ceylon Chamber of Commerce. John Keells Holdings PLC (JKH) for over 15 portfolio of hotels across Asia and Australia. years. He previously held the position of Chief Financial Officer of the Information Technology sector, as well as the Sector Financial Controller of the Airlines and Logistics SBU within the Transportation sector. With over 26 years of experience 10 Asian Hotels and Properties PLC
Profiles of Directors
Ashan De Zoysa Bureau Limited, Sri Lanka Banks’ Association Director* (Guarantee) Limited and The Financial Ombudsman Sri Lanka (Guarantee) Limited. Ashan De Zoysa counts more than He currently serves as an Independent 26 years of experience in the field Non-Executive Director in the company of Information & Communication boards of Assetline Leasing Co Ltd, Ceylinco Technology including several years of Life Ltd and as the Non-Executive Chairman overseas exposure, in the fields of IT of DFCC Bank PLC. and Derivative/Commodity Trading in Australia. Ashan holds a Bachelor of Commerce Degree from the University Cholmondeley Pinto of New South Wales. He is the Managing Director* Director of A. E. C. Properties Private Ltd and serves on the Board of Associated Cholmondeley Pinto was appointed as Electrical Corporation Ltd. He has a Non-Executive Director and as the previously served on the Boards of AMW Chairman of the Board Audit Committee Group as a working Director and as an of Asian Hotels and Properties PLC in July Independent Non-Executive Director of 2011. He is a Fellow member of the Union Assurance PLC. Institute of Chartered Accountants of Sri Lanka with 48 years of post-qualified experience, in the profession and in Jegatheesan Durairatnam industry. He returned to Sri Lanka in 2006 Director* after a spell of 32 years abroad. He last worked for 23 years for SABMiller PLC, Jegatheesan Durairatnam joined the the world’s second largest multinational Commercial Bank of Ceylon PLC in 1982 and breweries group, holding CFO positions in he is the retired Managing Director/Chief its listed subsidiaries in several countries. Executive Officer. His banking experience He is currently retired. He is also a Non- covers all aspects of International Trade, Executive Director of Trans Asia Hotels PLC. Off Shore Banking, Credit, Operations and IT. He has been in the Bank’s Corporate Management Team for 14 years. He holds a bachelor’s degree from the University of Peradeniya. He has held positions in Senior Management, including the position of Chief Operating Officer, Deputy General Manager International Division, Assistant General Manager - International Division and Head of Imports. He also serves on the Boards of Commercial Development Company PLC, Lanka Financial Services
*Independent Director Annual Report 2020 | 2021 11
Risk and Opportunities
Risk management is an ongoing process which is deemed to be the utmost priority of the Board. The current domestic and global social economic conditions have made this process much more complicated and have compelled us to constantly re-assess and monitor the risks and look for opportunities more vigilantly than we have ever been.
BUILDING A CULTURE OF RISK AWARENESS
RISK GOVERNING STRUCTURE, RISK MANAGEMENT PROCESS ROLES AND RESPONSIBILITIES
Strategic Business Unit RISK IDENTIFICATION BY ¾ Responsible for identifying, measuring, monitoring and STRATEGIC BUSINESS UNITS managing risk. ¾ Preparation of Risk & Control Self Assessment (RCSA)
RISK ASSESSMENT, RATING AND PRIORITISATION
JOHN KEELLS GROUP ENTERPRISE RISK MANAGEMENT DEVELOPMENT OF RISK FUNCTION MITIGATION STRATEGY ¾ Review and constructive challenge of RCSA
IMPLEMENTATION OF RISK RESPONSE STRATEGY
BOARD ¾ Review by respective Audit Committee RISK MONITORING ¾ Review by respective Boards AND REPORTING 12 Asian Hotels and Properties PLC
Risk and Opportunities
Significant Risk Identified and Management of the Risk Through our structured risk assessment and management process, the following risks have been identified as high importance and respective procedures have been set out to manage and mitigate the identified risk.
RISK RISK MANAGEMENT CURRENT ASSESSMENT
Global Pandemic Outbreak Preventive: compliance with guidance issued by the SLTDA, MOH, Impact: High Loss of business due to the Government and other regulatory bodies Likelihood of global travel restrictions and Detective: regular routine health checks for guests and staff - occurrence: High social distancing practices conducting PCR tests for staff, staff trainings on COVID-19 virus a hindrance to business Risk rating: Ultra High detections, collection of data on recent health conditions of guests, continuity, health and safety of staff and association decarations relating to Trend: guests and staff COVID-19 measurements Corrective: expenditure control measures, stress- tests, weekly dashboard monitoring of financial and non-financial KPIs. BCP in place to continue operations adhering to pandemic restrictions, COVID-19 SOP’s in place for guest and staff self-isolations on positive cases
Business Risk Preventive: refurbishments, product upgrades, enhancing service Impact: High Increase in competitiveness in standards and guest value propositions in our hotel, retention of key Likelihood of the industry due to the rapid talent and training and development of staff occurrence: High growth in room inventory, Detective: gathering business intelligence on market developments continuous increase in the Risk rating: High product quality standards Corrective: monitoring of guest reviews and rankings, increased Trend: to keep in line with the marketing efforts including social media strategies and review of competition resulting in cost pricing strategies escalations, and increasing price competition
Country Risk Preventive: additional security arrangements including continuous Impact: High Vulnerability to acts of terrorism lobbying with the Government agencies and industry personnel Likelihood of leading to travel warnings to Detective: installation of baggage scanning machines, walk through occurrence: Low tourists which results in lower metal and explosive detectors, vehicle checks occupancy, possible damage Risk rating: Moderate to property and equipment Corrective: Business Continuity Plans, signage and evacuation plans, Trend: and high risk of safety of guests adequate insurance covers, backup plans for data protection and staff
Brand and Reputation Risk Preventive: maintaining brand standards, health and safety standards Impact: High Our reputation will directly and ensuring high levels of customer and associate satisfaction Likelihood of impact our ability to Detective: continuous monitoring of social media platforms occurrence: Low attract customers Corrective: responding immediately to guest concerns and Risk rating: Low addressing any areas of weakness Trend: Annual Report 2020 | 2021 13
RISK RISK MANAGEMENT CURRENT ASSESSMENT
Food Safety Preventive: ISO 22000 food safety management certification Impact: High Direct and immediate impact on supported by associate training on basic food hygiene and Likelihood of the health and safety of guests, establishing systematic waste disposal methods occurrence: Low staff and our brand reputation Detective: regular audits and third-party microbiological testing, Risk rating: Low regular medical checks for food handlers, cleaning, regular sanitisation and pest control schedules Trend: Corrective: public relations handle by Duty Managers and immediate action for damage control
Customer Privacy & Preventive: compliance with the John Keells Group IT policy which Impact: High Data Protection set out the expected behavior of employees in handling data and Likelihood of Safeguarding the privacy of IT systems, back up servers, updating of firewalls, service contracts, occurrence: Low customer data and other data storage in alternate locations collected to facilitate smooth Risk rating: Low Detective: monitoring of potential threats through regular internal operations and importance audits and implementation of cybersecurity framework Trend: of complying with regulatory requirements Corrective: review of reports, investigation of unusual activity and initiating appropriate action and disaster recovery plans
Equipment/Machinery Preventive: maintenance is carried out on a regular basis according Impact: High Breakdowns to a predetermined schedule Likelihood of Breakdowns in equipment Detective: regular inspections, supervision and monthly occurrence: Low and machinery potentially maintenance disrupting our operations, Risk rating: Low adversely impacting our Corrective: maintenance is done on a need’s basis upon identification Trend: services, guest experiences and of issues from detective measures or breakdown incidents resulting in reputation loss and increased cost
Health and Safety Preventive: regular up-to-date training programs for employees at Impact: High The nature of operations is all levels. Notices and guidelines passed on to all stakeholders in an Likelihood of such that it necessitates for the organised way occurrence: Low business to associate with its Detective: on-going monitoring, supervision stakeholders constantly and Risk rating: Low and inspection controls and random PCR testings of employees for especially under the current COVID-19 virus detection. Trend: Global Pandemic situation the Health and Safety of these Corrective: Investigation and review of process, training stakeholders are considered to and insurance be of high importance 14 Asian Hotels and Properties PLC
Risk and Opportunities
RISK RISK MANAGEMENT CURRENT ASSESSMENT
Information Technology and Preventive: Upgraded technology to support a virtual operating Impact: High Cyber Risk environment and increased cyber security controls Likelihood of Given the restricted and Detective: Continuous monitoring and reporting systems in place occurrence: Low unpredictable operating environment due to the Corrective: Immediate measures taken to correct on identified Risk rating: High COVID-19 Global Pandemic, deficiencies Trend: the dependence on virtual operations is high and the associated risks are considered to be of high importance
Supply Chain Preventive: continuously reviewing supplier standards, maintenance Impact: Low Inability of our suppliers to of agreements, supplier forums and continuous monitoring and Likelihood of deliver our requirements in engagement of suppliers occurrence: Low terms of quality, and price Detective: supplier audit through checklist, regular third-party can lead to negative impacts Risk rating: Low assessment of top 20 suppliers, temperature loggers, establishing on service quality damage traceability mechanism for perishables Trend: to reputation and pressure on margins. Short supplies of Corrective: robust supplier engagement, capacity building on food raw materials could result in safety and insurance, identification of alternative suppliers and disruptions to operations modifying the menus and ordering process accordingly
Financial Risk: Credit and Preventive: stringent credit policy and controls to mitigate the Impact: Low Liquidity Risk impact of default, regular review of credit limits, capital investments Likelihood of Exposure and losses due to are planned in a manner which would not adversely impact on the occurrence: Low the default of settlements cashflows and gearing status by debtors, inability to meet Risk rating: Low Detective: ongoing monitoring against collection targets with financial commitments on progressive action, regular review mechanisms to monitor the Trend: due dates Company’s performance against budgets Corrective: regular internal audits
Risk rating unchanged Risk rating increased Risk rating decreased Annual Report 2020 | 2021 15
Corporate Governance
Governance and Leadership CORPORATE GOVERNANCE Asian Hotels and Properties PLC (“Company”) has a well-established corporate governance framework HIGHLIGHTS 2020/21 comprising of policies, organisation structure, processes ¾ Board priorities were and a comprehensive system of internal controls realigned as the country supporting the conduct of day to day operations in line went into lockdown with expectations of the Board. resulting in the sudden closure of the two hotels A strong set of corporate values and a formal Code of and investment property Conduct that applies across the entire organisation of the Company including the Board of Directors, ¾ Health and safety of support a common understanding of the standards of guests, and employees conduct expected to be observed by all associates at all were a key concern and levels, management and the Board of Directors in the stringent protocols were performance of their official duties. adhered at all three locations As a subsidiary of John Keells Holdings PLC (“the ¾ Cashflow and liquidity Parent Company”), the Company and its subsidiary management was a is aligned to the Parent Company’s policies, strategic priority throughout the planning, resource allocation, accountability, values year due to the continuing and assurance processes. Accordingly, the Company mobility restrictions complies with the following statutes, rules and which constrained the regulations and where necessary, any deviations generation of cash inflows permitted, have been duly explained. ¾ Providing job security to staff despite pandemic challenges 16 Asian Hotels and Properties PLC
Corporate Governance
CORPORATE GOVERNANCE SYSTEM WITHIN A SUSTAINABILITY DEVELOPMENT FRAMEWORK
INTERNAL GOVERNANCE STRUCTURE
Principles of Corporate Governance ¾ Allegiance to the Holding Company, JKH and Chairman and the Board of Directors upholding its values. ¾ Compliance with the laws and Company Rules and Audit Committee Regulations applying to the territories that the Group operates in. ¾ Conduct of business in an ethical manner at all times, Nominations Committee in line with acceptable business practices. ¾ Exercise of professionalism and integrity in all business Human Resources and Compensation Committee and ‘public’ personal transactions. ¾ Ensuring that no one person has unfettered powers of decision making. Related Party Transactions Review Committee ¾ Opting for the early adoption of accounting standards and best practices in governance regulation Project Risk Assessment Committee when practical. ¾ Encouraging proactive discussions with the relevant regulatory bodies to facilitate the implementation of matters of governance and other business reforms in Sri Lanka. President/CEO/Sector Head ¾ Making business decisions and resource allocations, in an efficient and timely manner, within a framework that ensures transparent and ethical dealings which adhere to the laws of the country and the standards of Leadership Team governance that stakeholders expect from the Company.
Management Team
Employee Empowerment Annual Report 2020 | 2021 17
INTEGRATED GOVERNANCE ASSURANCE MECHANISMS REGULATORY BENCHMARKS
Companies Act No.7 of 2007 and Strategy Formulation and Decision JKH Code of Conduct regulations Making Process Mandatory Compliance
Listing Rules of the Colombo Stock Exchange (CSE) Human Resource Governance Senior Independent Director Mandatory Compliance
Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987, Integrated Risk Management Board Committee including directives and circulars Mandatory Compliance
Code of Best Practices on Related Party Transactions (2013) advocated IT Governance Employee Participation by the Securities and Exchange Commission of Sri Lanka (SEC) Mandatory Compliance
Tax Governance Internal Controls Code of Best Practice on Corporate Governance (2013) jointly advocated by the SEC and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) Voluntary Compliance Stakeholder Management and Ombudsperson Effective Communication Code of Best Practice on Corporate Governance (2017) issued by CA Sri Lanka Voluntary compliance with almost the Sustainability Governance External Assurance full 2017 Code, to the extent of business exigency and as required by the John Keells Group 18 Asian Hotels and Properties PLC
Corporate Governance
INTERNAL GOVERNANCE STRUCTURE The Board is of the view that the Chairman’s other commitments do not interfere with the discharge of his responsibilities to The components of the internal governance structure are the Company. The Board is satisfied that the Chairman makes designed in such a way that the executive authority is well sufficient time available to serve the Company effectively. devolved and delegated through a committee structure ensuring that the President of the leisure sector of the Parent The role of the Chairman is separate from the CEO ensuring that Company and the senior management team are accountable for no Director has unfettered power and authority. the overall Company functions and sub-functions respectively.
Chairman’s Appraisal: Human Resources and Compensation Clear definitions of the limitations on authority, responsibility Committee of the ultimate Parent Company, JKH appraises and accountability are set and agreed upon in advance to the performance of the Chairman on an organisational and achieve greater operating efficiency, expediency, healthy debate individual basis as approved by the Board. and freedom of decision making. THE CHAIRMAN’S RESPONSIBILITIES The Internal Governance Structure comprises of ¾ Ensuring that the principles and processes of the Board are ¾ The Board of Directors maintained, including the provision of accurate, timely and clear information ¾ Board Sub-committees ¾ Encouraging debate and constructive criticism ¾ Senior Management Committees ¾ Setting agendas for meetings of the Board in conjunction with the Senior Managers of the John Keells Group, Strengthened and complemented by internal policies, Company Secretary, that focus on the strategic direction and processes and procedures: performance of our business ¾ Strategy formulation and decision making ¾ Leading the Board and individual Director performance ¾ Human resource governance assessments ¾ Integrated risk management ¾ Speaking and acting for the Board and representing the ¾ IT governance Board to shareholders ¾ Tax governance ¾ Presenting shareholders’ views to the Board ¾ Stakeholder management and effective communication ¾ Facilitating the relationship between the Board and the ¾ Sustainability governance Management
BOARD OF DIRECTORS ASSURANCE MECHANISMS The Board of Directors is the ultimate governing body of the This comprises ‘bodies and mechanisms’ which are employed to Group and is responsible for the supervision of the Group. In all enable regular review of progress against objectives with a view actions taken by the Board, they owe a fiduciary duty to exercise to identifying deviations, ensuring quick redress and provide their business judgement in what they reasonably believe to assurance that actual outcomes are in-line with expectations. be in the best interests of the Company. In discharging that obligation, Directors may rely on the honesty and integrity of THE ROLE OF THE CHAIRMAN the Company’s Senior Executives, its Advisors and Auditors. The Chairman presides over Board Meetings with a view to establishing a constructive working relationship with all the The Board promotes a culture of openness, constructive dissent Directors so as to ensure the participation and contribution of and productive dialogue, ensuring an environment which Non-Executive Directors (NED) with their views on matters under facilitates employee empowerment, engagement and creates consideration being openly expressed and considered. The value to all stakeholders. Chairman maintains contact with all the Directors and has informal discussions with the NEDs as necessary. Annual Report 2020 | 2021 19
Board Induction and Training Key Changes to the Board Composition 2020/21 The John Keells Group (“JKH Group”) has a formal induction ¾ Mr. J. R. Gunaratne resigned from the Board of Directors with process for its Directors. This process is designed to provide effect from 31.12.2020 an overview of the JKH Group values and culture, JKH Group ¾ Mr. C. L. P. Gunawardane was appointed to the Board of governance framework, policies and processes, Code of Directors with effect from 01.01.2021 Conduct, the business model of the Holding Company, ¾ Mr. C. J. L. Pinto shall resign from the Board with effect from strategy and the Directors’ responsibilities in accordance with the AGM date current legislation. The induction process includes visits to key operational locations to facilitate an appreciation of the ¾ Independence of the Directors has been determined in operations of the Holding Company. The Chairman ensures that accordance with the Continuing Listing Rules of the CSE and new Directors are introduced to other Board members and key all three NED/ID Board members have submitted signed management personnel and that they are briefed on matters confirmations of their independence. taken up at prior meetings. Directors are encouraged to update ¾ The Board members have a wide range of expertise as well their skills and knowledge on a continuous basis. as significant experience in diverse fields enabling them to discharge their governance duties in an effective manner. Composition of the Board of Directors as at 31st March 2021
Non-Executive Non-Independent Director Non-Executive Independent Director
COMPOSITION OF THE BOARD OF DIRECTORS The composition of the Board of Directors of the Company during the year under review is illustrated as follows:
Name of Director/ Shareholding Material Employee of Family Member Continuous Capacity Business the Company a Director or service for nine Relationship CEO years Non-Executive, Non-Independent Directors (NED/NID)
Mr. K. N. J. Balendra No No No No N/A
Mr. S. Rajendra* No No No No N/A
Mr. J. G. A. Cooray Yes No No No N/A
Mr. J. R. Gunaratne** No No No No N/A
Mr. C. L. P. Gunawardane*** No No No No N/A
Mr. M. R. Svensson No No No No N/A
Non-Executive, Independent Directors (NED/ID)
Mr. C. J. L. Pinto Yes No No No No
Mr. J. Durairatnam No No No No No
Mr. A. S. De Zoysa No No No No No
* Became a NED with effect from 1st January 2021 ** Resigned from the Board with effect from 31st December 2020 *** Appointed to the Board with effect from 1st January 2021 20 Asian Hotels and Properties PLC
Corporate Governance
ABOUT THE BOARD Without limiting the Board’s function, its specific responsibilities include: ¾ The Board is of the view that its present composition ensures a right balance between executive expediency and ¾ Approving objectives, strategies and financial plans and independent judgement. monitoring the Company’s performance against these plans. ¾ The Board of Directors participate in defining goals, vision, ¾ Monitoring compliance with the regulatory requirements strategies and business targets. All Directors are able to and ensuring all of its employees act with integrity and and willingly add value and independent opinion on the diligence in the interests of the Company and stakeholders decision-making process, which is of immense benefit to the ¾ Reviewing and approving all significant policies and procedures. effective functioning of the Board. The details of the current Board of Directors along with a brief resume of each Director ¾ Exercising objective judgement on all corporate matters is found on page 9 and 10 of this Report. independent from the Executive Management ¾ Transactions or events that have a material bearing on the ¾ Formulating short and long-term strategies as a basis for the Company are disclosed by way of circulars to shareholders, operational plans of the Company announcements to the CSE and media/press releases. The ¾ Determining and recommending interim and final dividends Board maintains an appropriate dialogue with shareholders for the approval of shareholders. of the Company and is ready to answer questions raised by ¾ Identifying the principal risks of the business and periodically shareholders at Annual General Meetings. reviewing the risk management systems in place ¾ Individual Directors will update the Board with any new ¾ Preparation and presentation of financial statements, information in relation to interests or relationships relevant to together with a statement by the Auditors pertaining to their independence. reporting responsibilities ¾ The Board has developed a policy that it uses to determine the independence of its Directors. This determination is carried Delegation of Authority out annually or at any other time where the circumstances of a The Board delegates some of its functions to the Audit Director change warrants reconsideration. Individual Directors Committee and Nominations Committee while retaining will update the Board with any new information in relation to the final right to accept the recommendations made by interests or relationships relevant to independence. the Committees. Board appoints Independent Directors as ¾ The Board has been made aware of the other commitments chairpersons to both committees. held by its Directors and is satisfied that these do not affect their duties as Directors of the Company. Conflict of Interest and Independence ¾ All NEDs are required to notify the Chairman of changes in Each Director holds continuous responsibility to determine their outside Board appointments and the Chairman carries whether he or she has a potential or actual conflict of interest out a review of all such appointments in consultation with arising from external associations, interests or personal the other Directors where necessary to ascertain any possible relationships in material matters which are considered by the conflicts of interest. Board from time to time.
Board Responsibilities and Decision Rights The independence of the Group’s NEDs is reviewed on the The business of the Company is conducted by its senior following basis: management, employees, managers and officers, under the ¾ Shareholding carrying not less than 10 per cent of the voting direction of the Executive Directors and the oversight of the rights in the Group Board, to enhance the long-term value of the Company for its shareholders. The Board aims to fulfil its responsibilities ¾ Is employed or Director of another company or business* by creating value for all stakeholders that is sustainable and ¾ Income/Non-cash benefit equivalent to 20 per cent of the beneficial. Stakeholders include shareholders, employees, Director’s income customers, the community and the environment. ¾ Employment in the Group two years immediately preceding appointment as Director Annual Report 2020 | 2021 21
¾ Close family member is a Director, CEO or a Key ¾ Material Business Relationship or a significant shareholding in Management Personnel another company or business* ¾ Has served on the Board continuously for a period exceeding * Other companies in which a majority of the other Directors nine years from the date of first appointment of the listed company are employed, or are Directors, ¾ Material Business Relationship with the Group whether or have a significant shareholding, or have a material directly or indirectly in the two years immediately preceding business relationship. appointment as Director Details of other companies in which Board members hold Board or Board Sub-Committee membership is available with the Company's secretaries for inspection by shareholders on request.
Processes in place to mitigate any potential or actual conflict of interest or independence of Directors throughout the term of their membership on the Board
PRIOR TO APPOINTMENT ONCE APPOINTED DURING MEETINGS
Nominee Directors are requested to Directors who are appointed are Directors who have disclosed disclose their various interests that expected to inform the Board and an interest in a matter under could potentially conflict with the obtain Board clearance prior to discussion, have excused interests of the Company accepting any position or engaging themselves from deliberations on in any transaction that could create the subject matter and refrained a potential conflict of interest. from voting on the subject matter (such abstentions from Board All NEDs are required to notify the decisions are duly recorded) Chairman of changes in their current Board representations
BOARD MEETINGS, AGENDAS AND ATTENDANCE ¾ Ratification of the use of the Group seal and share certificates issued Four (04) Board meetings were held during the financial year under review. ¾ Ratification of Circular resolutions ¾ New resolutions The typical Board agenda of the Group keep to the ¾ Any other business following format;
¾ Confirmation of previous minutes All Directors have access to Keells Consultants (Private) Limited, ¾ Matters arising from the previous minutes who act as Company Secretaries, for advice on relevant ¾ Board Sub-Committee reports and other matters exclusive matters. The Chairman ensured that all Board proceedings were to the Board conducted in a proper manner, approving the agenda for each meeting prepared by the Board Secretary. ¾ Review of performance - in summary and in detail, including high level commentary on actuals and outlook ¾ Approval of quarterly and annual financial statements ¾ Ratification of capital expenditure and donations 22 Asian Hotels and Properties PLC
Corporate Governance
Directors’ Attendance ¾ Leave, flexi-hours, tele-working and work from home policies including health and safety enhancements and protocols in Name of Director No. of Board Meetings Attended light of the COVID-19 pandemic Mr. K. N. J. Balendra 4/4 Mr. J. G. A. Cooray 4/4 ¾ Code of Conduct which also includes policies on gifts, Mr. J. R. Gunaratne 3/3 * entertainment, facilitation payments, proprietary and Mr. J. Durairatnam 4/4 confidential information Mr. C. J. L. Pinto 4/4 ¾ Policy against sexual harassment Mr. A. S. De Zoysa 4/4 ¾ Policies on forced, compulsory and child labour and child Mr. S. Rajendra 4/4 protection adopted by the Group Mr. M. R. Svensson 4/4 ¾ Disciplinary procedure Mr. C. L. P. Gunawardane 1/1 ** ¾ Policy on grievance handling * Resigned w.e.f. 31.12.2020 ¾ Policies on anti-fraud, anti-corruption and anti- money ** Appointed w.e.f. 01.01.2021 laundering and countering the financing of terrorism ¾ Policy on communications and ethical advertising REGULATORY BENCHMARKS ¾ Ombudsperson policy The Company is fully compliant with all the mandatory rules ¾ Group accounting procedures and policies and regulations stipulated by the Corporate Governance Listing Rules published by the CSE, SEC and also by the Companies Act. ¾ Policies on enterprise risk management ¾ Policies on fund management and Foreign Exchange risk The Company has also given due consideration to the Best mitigation Practice on Corporate Governance Reporting guidelines (2017) ¾ IT policies and procedures, including data protection, jointly set out by SEC and CA Sri Lanka and has voluntarily classification and security adopted the relevant provisions as far as is practicable and the ¾ Group environmental and economic policies benchmarks we have set for ourselves in working towards local and global best practices. ¾ Policies on energy, emissions, water and waste management ¾ Policies on products and services What follows is a more detailed account, including where relevant, the applicable components of the Company’s TRANSPARENCY AND ACCOUNTABILITY Corporate Governance System. Financial Guidence
The Board of Directors (“Board”) has taken all reasonable steps to The Board of Directors consists of four (4) senior qualified ensure that all Financial Statements are prepared in accordance accountants with significant experience in the corporate sector, with the Sri Lanka Accounting Standards (SLFRS/LKAS) issued who possess the necessary knowledge to offer the Board by CA Sri Lanka and the requirements of the CSE and other guidance on matters of finance. These Directors add substantial applicable authorities. value and independent judgement on the decision making of the Board on matters concerning finance and investments. Key Internal Benchmarks Timely Supply of Infomation ¾ Articles of Association of the Company The Directors are provided with necessary the information in ¾ Recruitment and selection policies advance including important developments pertaining to the ¾ Learning and development policies Group, by way of Board papers and proposals in order to ensure ¾ Policies on equal opportunities, non-discrimination, robust discussion, informed deliberation and effective decision career management and promotions making. Members of the senior management team prepare ¾ Rewards and recognition policy Annual Report 2020 | 2021 23
presentations to Directors on important issues relating to strategy, Directors can serve up to a maximum of three successive risk management and system procedures, where necessary. The terms unless an extended Board tenure is necessitated by the Directors have access to: requirements of the Company. ¾ External and Internal Auditors The proposal for the re-election of Directors is set out in the ¾ The Company Secretary Annual Report of the Board of Directors. ¾ Experts and other external professional advisory services ¾ Senior managers under a structured arrangement BOARD SUB-COMMITTEES ¾ Information as is necessary to carry out their duties and The Board has delegated certain functions to Board sub- responsibilities effectively and efficiently committees, while retaining final decision-making rights. ¾ Periodic performance reports and updates by management Members of these sub-committees are able to focus on their on topical matters, new regulations and best practices as designated areas of responsibility and impart knowledge and relevant to the Company’s businesses oversight in areas where they have greater expertise. These are; 1. The Audit Committee BOARD EVALUATION 2. The Nominations Committee The Board conducts its Board performance appraisal for every 3. The Human Resources and Compensation Committee financial year. This formalised process of individual appraisal 4. The Related Party Transactions Review Committee enabled each member to self-appraise on an anonymous basis, the performance of the Board under the areas of, 5. Project Risk Assessment Committee ¾ Role clarity and effective discharge of responsibilities, As permitted by the listing rules of the CSE, the Human ¾ People mix and structures, Resources and Compensation Committee and the Related ¾ Systems and procedures, Party Transactions Review Committee of the ultimate Parent ¾ Quality of participation and Company, JKH, functions as the Human Resources and Compensation Committee and Related Party Transactions ¾ Board image Review Committee of the Group. Additionally, the Project Risk Assessment Committee of JKH also functions as the Project Risk The scoring and open comments are collated by an Assessment Committee of the Group. Independent Director, and results are analysed to give the Board an indication of its effectiveness as-well-as areas that required The Board sub-committees comprise predominantly of Non- addressing and/or strengthening. Executive Independent Directors. TENURE, RETIREMENT AND RE-ELECTION OF DIRECTORS AUDIT COMMITTEE As prescribed by the Articles of Association of the Company, Role at each Annual General Meeting, one-third of the Directors of the Company except the Chairman retire by rotation. A Director Assist the Board in fulfilling its oversight responsibilities for retiring by rotation is eligible for re-election. The Directors who the integrity of the Financial Statements of the Group, the retire are those who have been longest in office since their internal control and risk management systems of the Company appointment/re-appointment. In addition, any new Director and its compliance with legal and regulatory requirements, who was appointed to the Board during the year is required the External Auditors’ performance, qualifications and to stand for re-election at the next Annual General Meeting in independence, and the adequacy and performance of the terms of the Articles of Association of the Company. Internal Audit function, which at the Holding Company - JKH level is referred to as the Group Business Process Review All Non-Executive Independent Directors are appointed for a Division (Group BPR). This is detailed in the terms of reference period of three (3) years and are eligible for re-election by the of the Committee which has been approved by the Board and shareholders subject to the age limit as per statutory provisions at is reviewed annually. The effectiveness of the Committee is the time of re-appointment. Further, Non-Executive Independent evaluated annually by each member of the Committee and the results are communicated to the Board. 24 Asian Hotels and Properties PLC
Corporate Governance
Composition of Committee NOMINATIONS COMMITTEE The Audit Committee comprises of three (3) NED/IDs. As prescribed Role in the Listing Rules of CSE, the Chairman of the Audit Committee is a The Nominations Committee is accountable to the Board of Fellow member of the Institute of Chartered Accountants of Sri Lanka Directors. The Committee undertakes an annual self-review with several years of experience in financial auditing and accounting. of its objectives and responsibilities. Such objectives and responsibilities are also reviewed by the Board of Directors and Review Process any other person the Board considers appropriate. ¾ Review the quarterly and annual financial statements, including the quality, transparency, integrity, accuracy and Composition of Committee, Meetings held and Attendance compliance with accounting standards, laws and regulations The Nominations Committee of the Company comprised of ¾ Procedures for identifying business risks and controlling two (2) Independent Directors and one (1) Non-Independent their financial impact on the Company and the operational Director, namely: effectiveness of the policies and procedures related to risk and control Mr. J. Durairatnam - Chairman Mr. K. N. J. Balendra - (Non-Independent) ¾ The appointment, remuneration, qualifications, Mr. A. S. De Zoysa independence and performance of the External Auditor and the integrity of the audit process as a whole All committee members attended the meetings which were ¾ Budgeting and forecasting systems, financial reporting held on 21st April 2020 and 31st December 2020. systems and controls ¾ Procedures for ensuring compliance with relevant regulatory Review Process and legal requirements ¾ Regularly review the skills, composition of the Board against ¾ Arrangements for protecting intellectual property and other the current and emerging needs of the business make non-physical assets recommendations to the JKH Nominations Committee ¾ Overseeing the adequacy of the internal controls and allocation regarding any changes to the status quo of responsibilities for monitoring internal financial controls ¾ To ratify the appointments made by the JKH Nominations ¾ Policies, information systems and procedures for preparation Committee to the Company Board and dissemination of information to shareholders, stock exchanges and the financial community. ¾ To define and establish a nomination process of NEDs to the Boards of its subsidiaries Meetings held during the year ¾ To make recommendations to the Board in respect of all new Four (4) meetings were held during the year under review. The Board appointments (and re-election of those retiring in terms Senior Management of Cinnamon Grand Colombo and Crescat of the Articles of Association of the Company) to its subsidiaries Property Division attend the Audit Committee meetings by ¾ Regularly review the structure, size, composition and invitation. Further, the representatives of the Internal Auditors, competencies, including the skills, knowledge and Messrs. PricewaterhouseCoopers (Pvt) Ltd, Group BPR Division and experience, of the Board and make recommendations to the the External Auditors Messrs. KPMG, Chartered Accountants, also Board with regard to any changes attend the Audit Committee meetings by invitation. The Audit ¾ Ensure that on appointment to the Board, Directors receive a Committee performs an important monitoring function in the formal letter of appointment overall governance of the Group. Director Finance of Cinnamon Grand is the Secretary of the Committee. ¾ Ensure that every appointee undergoes an induction to the organisation. Attendance ¾ Appointment of the chairperson and Executive Directors Name No. of meetings shall be the collective decision of the Board. attended ¾ Assess the skills required for the Company’s subsidiary’s Mr. C. J. L. Pinto - Chairman 4/4 Board, given the current and emerging needs of the business Mr. J. Durairatnam 4/4 ¾ Consider making any appointments or re-appointment to the Mr. A. S. De Zoysa 4/4 Boards of the Company’s subsidiary Annual Report 2020 | 2021 25
¾ Provide advice and recommendations to the Board and/or the Chairman (as the case may be) on any such appointment Report of the Nominations Committee The following members served for the Committee during The Committee is authorised by the Board to seek appropriate the financial year: professional advice from within and outside the Company as Mr. J. Durairatnam - Chairman and when it considers necessary. Mr. K. N. J. Balendra Mr. A. S. De Zoysa Operational Practices ¾ The majority of the members of the Committee are NEDs During the reporting period, the Committee together with the Chairman. The Chairman of the Committee recommended; is an NED/ID. Any two (2) NEDs of whom one shall be 1) Mr. C. J. L. Pinto’s contract to be renewed and that he independent, shall constitute a quorum and be competent to be re-appointed as a Non-Executive Independent transact the affairs of the Committee. Director of AHP and TAH with effect from 1st June 2020 ¾ The Committee may adopt such rules and regulations as it for a further term of one (01) year until the respective deems appropriate for the conduct of its affairs, provided Annual General Meetings of AHP and TAH for the that they are not inconsistent with this Charter as approved financial year 2020/2021. by the Board. 2) the following appointments to the respective Board of ¾ Meetings shall be summoned under the name of the Directors. Chairman, or if he is incapacitated or unavailable, by any Asian Hotels and Mr. Changa Gunawardane other Committee member. Properties PLC ¾ The Committee shall meet when there is a perceived need to Trans Asia Hotels PLC Mr. Suresh Rajendra transact business in terms of its mandate. Notwithstanding Mr. Changa Gunawardane the same, the Committee should meet at least twice a year. Presence via telephone and presence facilitated by other The Committee continues to work with the Board on technological means, at a Committee meeting is considered reviewing its skills mix, based on the immediate and equivalent to physical presence. emerging needs. Further, the Committee discussed with ¾ The Committee shall keep minutes of its proceedings and the Board the outputs of the Annual Board Evaluation. those minutes shall be tabled at the next Board meeting. ¾ The Chairman of the Committee shall report to the Board, every quarter, the discussions had, and decisions taken. The tabling of the minutes of the Committee Meeting, J. Durairatnam where appropriate, will be sufficient compliance with this Chairman of the Nominations Committee requirement. 24th May 2021 ¾ The Chairman of the Committee will present an annual report to the Board of Directors summarising the Committee’s activities during the year and any related results and findings. ¾ A member of the Nominations Committee should not participate in decisions relating to his/her own appointment. 26 Asian Hotels and Properties PLC
Corporate Governance
HUMAN RESOURCES AND COMPENSATION COMMITTEE Report of the Human Resources and Role Compensation Committee As permitted by the Listing Rules of the CSE, the Human The following members served for the Committee during Resources and Compensation Committee of JKH (the parent the financial year: company), functions as the Human Resources and Compensation Mr. D. A. Cabraal - Chairman Committee of the Company and its Subsidiary. The Chairman- Mr. M. A. Omar CEO of JKH and Group Finance Director of JKH are present at Dr. S. S. H. Wijayasuriya all Committee meetings unless the Chairman-CEO or Executive Directors’ remuneration is under discussion respectively. The Committee determined the remuneration of the Executive Directors including the Chairman-CEO in terms of Composition of Committee, Meetings held and Attendance the methodology set out by the Board, upon an evaluation The Human Resources and Compensation Committee of of their performance by the Non-Executive Directors. JKH comprises of three (3) NED/IDs. Committee to comprise The evaluation of the members of the Group Executive Committee (GEC) was considered by the Committee and exclusively of NEDs, a majority of whom are independent. The remuneration was determined based on performance, Chairman of the Committee is a NED. market comparators for similar positions and in accordance with the Company’s Compensation and Benefits policy. Mr. D. A. Cabraal - Chairman Mr. M. A. Omar A report from the Chairman of the Human Resources and Dr. S. S. H. Wijayasuriya Compensation Committee continues to be a standing agenda item at the quarterly Board meetings. The Chairman The Committee met on 30th June 2020 and all members attended of the Committee reports on the developments which have the meeting. taken place since the last Board meeting, if any, and updates Scope the Board on various matters, as relevant and requested.
¾ Review and recommend overall remuneration philosophy, In light of the COVID-19 impact on the businesses and strategy, policies and practice and, performance-based pay its people, the Group developed and implemented plans for the John Keells Group a Working Arrangement Protocol which set out the ¾ Determine and agree with the Board a framework for working practices to be followed by Group employees in remuneration of Chairman and Executive Directors based terms of maintaining their health and safety. The Group on performance targets, benchmark principles, performance also implemented a new Agile Working Policy, with the identification of agile roles across all sectors. To mitigate related pay schemes, industry trends and past remuneration the financial impact of the pandemic on the Group, the ¾ Succession planning of Key Management Personnel employees and the members of the GEC were subject to ¾ Determining compensation of NEDs will not be under the salary reductions for a limited period of time. scope of this Committee. The Committee wishes to report that the Company The remuneration policy adopted by the Company as has complied with the Companies Act in relation to recommended by the Human Resources and Compensation remuneration of Directors. The annual performance appraisal scheme, the calculation of short-term incentives, Committee of JKH is formulated to attract and retain high caliber and the award of ESOPs were executed in accordance with executives and motivate them to develop and implement the the approvals given by the Board, based on discussions business strategy in order to optimise long-term shareholder conducted between the Committee and the Management. value creation. The customised “pay for performance scheme” continues to apply for all Company employees based on the pillars of individual performance and organisational performance. The remuneration package for all employees at D. A. Cabraal Assistant Manager level and above is based on organisational Chairman of the Human Resources and performance and individual performance. However, in respect of Compensation Committee the Executive level and below, the employees scheme operates 20th May 2021 purely on the basis of individual performance. Annual Report 2020 | 2021 27
RELATED PARTY TRANSACTIONS REVIEW COMMITTEE Report of the Related Party Transactions Review Committee The following members served for the Committee during the financial year: Role Ms. M. P. Perera - Chairperson As required by the SEC under its Code of Best Practice for Mr. N. Fonseka Listed Companies, the Related Party Transactions Review Mr. A. Cabraal Committee was formed at the Parent Company (JKH) level with effect from the 01st April 2014. The Committee of the The Chairman, Deputy Chairman/Group Finance Director, and Group Financial Controller attended meetings by invitation. The Head of Group Business Process parent company on behalf of the Company, as permitted by Review served as the Secretary to the Committee. the Listing Rules of the CSE, with the intention of ensuring, on behalf of the Board, that all related party transactions of The objective of the Committee is to exercise oversight on behalf of the Board JKH and its listed subsidiaries are consistent with the Code of of John Keells Holdings PLC and its listed Subsidiaries, to ensure compliance Best Practices on Related Party Transactions advocated with the Code on Related Party Transactions, as issued by the Securities and Exchange Commission of Sri Lanka (“The Code”) and with the Listing Rules of the by the SEC. Colombo Stock Exchange (CSE). The Committee has also adopted best practices as recommended by the Institute of Chartered Accountants of Sri Lanka. Composition of Committee, Meetings held and Attendance This committee of JKH comprises three (3) NED/IDs. The The Committee in discharging its functions primarily relied on processes that were Chairperson of the Committee is a NED. The Head of validated from time to time and periodic reporting by the relevant entities and Key Management Personnel (KMP) with a view to ensuring that: Group Business Process Review operates as the secretary ¾ there is compliance with “the Code“ and Listing Rules of the CSE to this committee. ¾ shareholder interests are protected; and ¾ fairness and transparency are maintained. Name of Committee Member No. of meetings attended The Committee reviewed and pre-approved all proposed non-recurrent Related Party Ms. M. P. Perera - Chairperson 4/4 Transactions (RPTs) of the parent, John Keells Holdings PLC, and all its listed subsidiaries, Mr. N. Fonseka 4/4 namely: John Keells PLC, Tea Smallholder Factories PLC, Asian Hotels and Properties PLC, Mr. A. Cabraal 4/4 Trans Asia Hotels PLC, John Keells Hotels PLC, Ceylon Cold Stores PLC, Keells Food Products PLC, and Union Assurance PLC. Recurrent RPTs were reviewed annually by the Committee. All committee members attended all four meetings Furthermore, guidelines were introduced to facilitate requisite disclosures & assurances by which were held on 15th May 2020, 28th July 2020, 03rd senior management of the aforementioned listed companies, in relation to Recurrent RPTs November 2020 and 26th January 2021. so as validate compliance with sec 9.5(a) of the listing rules and thus exclusion from review and pre-approval by the Committee. Scope In very broad terms, the scope of this sub-committee is: Other significant transactions of non-listed subsidiaries were also presented to the Committee for information. ¾ Developing, and recommending for adoption by the Board of Directors of JKH and its listed subsidiaries In addition to the Directors, all Presidents, Executive Vice Presidents, Chief Executive including the Company, a Related Party Transactions Officers, Chief Financial Officers and Financial Controllers of respective companies/ Policy which is consistent with the requirements of sectors have been designated as KMPs in order to increase transparency and the SEC and is synchronised with the operating model enhance good governance. Annual disclosures from all KMPs setting out any RPTs they were associated with, if any, were obtained and reviewed by the Committee. and the delegated decision rights of the Group. ¾ Updating the Board of Directors on the related party The Committee held four meetings during the financial year. Information on the Transactions of each of the listed companies of the attendance at these meetings by the members of the Committee is given alongside. Group on a quarterly basis. The activities and views of the Committee have been communicated to the Board ¾ Define and establish the threshold values for each of of Directors, quarterly, through verbal briefings, and by tabling the minutes of the the subject listed companies in setting a benchmark Committee’s meetings. for related party transactions, related party transactions which have to be pre-approved by the Board of Directors, related party transactions which Ms. M. P. Perera Chairperson of the Related Party Transactions Review Committee require to be reviewed annually and similar issues 20th May 2021 relating to listed subsidiary companies. 28 Asian Hotels and Properties PLC
Corporate Governance
PROJECT RISK ASSESSMENT REVIEW COMMITTEE Report of the Project Risk Assessment Review Committee Role, Composition of Committee, Meetings held and Attendance The following members served for the Committee during the financial year: The Project Risk Assessment Committee of JKH functions as the Project Risk Assessment Committee of the Company and Dr. S. S. H. Wijayasuriya – Chairman its Subsidiary. The Project Risk Assessment Committee of JKH Mr. K. N. J. Balendra comprises of two (2)EDs and two (2) NED/IDs. The Chairman of Mr. J. G. A. Cooray the committee is a NED/ID. The following served as members of Ms. M. P. Perera the committee during the financial year. The Project Risk Assessment Committee was established Dr. S. S. H. Wijayasuriya – Chairman with the purpose of further augmenting the Group’s Mr. K. N. J. Balendra Investment Evaluation Framework. The committee provides Mr. J. G. A. Cooray the Board with enhanced illumination of risk perspectives Ms. M. P. Perera with respect to large-scale new investments, and also assists the Board in assessing the potential impact of risks Note that the Committee shall convene only when there is a associated with such investments. Investments which need to transact in business as per the terms of its mandate. are referred to the committee are those which exceed a During the year no committee meetings were held. board-agreed threshold in terms of quantum of investment and/or potential impact to the Group. The committee Scope accordingly provides early-stage recommendations to the ¾ Review and assess risks associated with large-scale Board with respect to the extent of risk and adequacy of investments and the mitigation plans thereto, if mitigation is mitigation strategies. possible, and identify risks that cannot be mitigated. During the year under review, given the unprecedented ¾ Ensure stakeholder interests are aligned, as applicable, in impact of the COVID-19 pandemic on Group businesses, making this investment decision the Board met more frequently than usual. The increased ¾ Where appropriate, obtain specialised expertise from external frequency of Board Meetings provided the opportunity sources to evaluate risks, in consultation with the Group Finance Director for discussions related to investments and risk assessments to be conducted within Board Meeting agendas. As such, ¾ Recommend to the Board, necessary action required, to the Committee did not have a requirement to convene mitigate risks that are identified in the course of evaluating a separately, during the year under review. project in order to ensure that those risks are captured by the John Keells Group Risk Matrix for monitoring and mitigation
S. S. H. Wijayasuriya Chairman of the Project Risk Assessment Committee 20th May 2021 Annual Report 2020 | 2021 29
REMUNERATION ACCOUNTABILITY AND ASSURANCE Remuneration for Non- Executive, Non-Independent Directors System of Internal Controls Compensation for NEDs, and NED/NIDs is determined by The Board has overall responsibility for the system of internal reference to fees paid to other NED/NIDs of comparable control. A sound system of internal control is designed to companies. manage rather than eliminate the risk of failure to achieve business objectives. The Company continues to stress on Director fees applicable to NEDs nominated by JKH are paid the importance of strong internal control throughout the directly to JKH and not to individual Directors. organisation. Written responsibilities, authority delegation and management controls have been adopted to create Remuneration for Non- Executive, Independent Directors: transparency for utilisation of the Company’s resources and to Compensation for NED/IDs is determined by reference to fees distinguish the duties of staff and controllers in order to ensure paid to other NED/IDs of comparable companies. NED/IDs that proper verification and monitoring processes are in place. receive a fee for devoting time and expertise for the benefit of the Company. Nevertheless, NED/IDs fees are not time-bound or The Company further maintains a system of internal controls, defined by a maximum/minimum number of hours committed which is designed to safeguard its assets from identified risks, to the Group per annum and hence are not subject to while ensuring that all transactions are duly authorised, recorded additional/ lower fees for additional/lower time devoted. NED/ and reported. Key systems and rules relating to delegation of IDs do not receive any performance/incentive payments. authority are formalised and documented.
The aggregate remuneration paid for the NEDs of the Company, As a member of the John Keells Group, the Company is now for the year was Rs. 2,400,000. part of a comprehensive planning and monitoring process. The Annual Plans and Budgets are developed by the Company along Remuneration for Executive Directors: with a reforcast after six months. Strategic priorities and key The remuneration of the Executive Directors is determined drivers are pre-identified and tracked on a monthly basis. as per the remuneration principles of the John Keells Group. The Human Resources and Compensation Committee of JKH During the financial year under review following tasks were conducted a market survey of Executive Director remuneration performed by the John Keells Group Business Process Review with a view to assessing the appropriateness of compensation Division and outsourced Internal Auditors to ensuring the with market benchmarks. Having taken into account the existence of effective internal controls; complexities associated with the John Keells Group, it was ¾ John Keells Group-wide initiative to strengthen the existing established that the compensation is in-line with the market. Business Continuity Plans (BCP) and Disaster Recovery Plans (DRP). All Heads of Department were encouraged to re-visit The Executive Directors, like other eligible employees, have their BCPs in confirming that such plans were up-to-date and received employee shares option based on role responsibility relevant to the current working environment and actual performance. Accordingly, the number of options ¾ New methods of data analytics were carried out using so awarded was recommended to the Board by the Human sophisticated tools where the entire data population was Resources and Compensation Committee of JKH. analysed (as opposed to analysing a sample) in identifying exceptions and irregularities The Company does not have an employee share option scheme ¾ Implemented process improvements stemming from the (ESOP), however eligible employees are entitled to receive ESOPs findings of internal audits of the parent company (JKH) based on actual performance. ¾ Total aggregate remuneration paid to Executive Directors The existing SAP SOX processes were reviewed and updated to for the year was Rs. 34,531,852. ensure compliance with Sarbanes Oxley Act of 2002 - Section 404 ¾ Strengthened the management reporting on internal controls to facilitate better decision making. ¾ Carried out frequent surprise cash counts across the Group. 30 Asian Hotels and Properties PLC
Corporate Governance
Risk Review INVESTMENT APPRAISAL PROCESS AND The Board is responsible for the formulation of the appropriate INVESTMENT DECISIONS systems of internal controls for the AHP Group and ensuring its Over the years, the Group has refined the process of investment effectiveness. The Board is fully conscious that any internal control appraisal which ensures the involvement of the relevant persons system contains inherent limitations and no system of internal when capital investment decisions are made. In this manner, control could provide absolute assurance against the occurrence several views, opinions and advice are obtained prior to the of material errors, poor judgement in decision making, human investment decision being made. Experience has proven that errors, losses, fraud or other irregularities. The Board has therefore a holistic and well-debated view of the commercial viability taken appropriate action to minimise such situations. and potential of proposed projects including operational, financial, funding, risk and tax implications has most of the time There is a continuous process for identifying, evaluating and culminatedin a good result. All investment decisions are routed managing the significant risks faced by the Company which through a committee structure that safeguards against one has been in place during the financial year and up to the date individual having unfettered decision-making powers in of approval of the Annual Report and Accounts. The Board such decisions. regularly reviews this process. Operations, Planning, Monitoring and Decision Rights Certain aspects of its business operation may expose the The responsibility for monitoring plans have been entrusted Company to both internal and external risks. The Company to the Managing Agents. The achievement of annual plans as recognises the importance of controlling these risks and well as ensuring compliance with the Company policies and minimising the possibility of any negative impact to the guidelines rests with the President, CEO, General Manager and Company. The Company is using the Business Risk Management functional department heads of the respective business units to (BRM) process which is established by JKH to identify both whom appropriate decision rights have been granted in order to financial and operational risks. execute operational and financial decisions within their purview.
It endeavours to ensure the control systems designed to safeguard the Company’s assets and maintain proper accounting records that facilitate the production and availability of reliable information are in place and are functioning as planned. Annual Report 2020 | 2021 31
INTEGRITY Human Resource Governance and Performance Management Monitoring of Financial and Operational Data The Performance Management System (PMS) continued to Financial results and key operational performance indicators are evolve positively in catering to, and fashioning, employee evaluated against the Annual Plan and subsequent reforecast on empowerment in meeting current and emerging needs. a monthly basis at all levels of management. The Board reviews Following linkages of PMS were further strengthened: the financial results on a quarterly basis. The IT systems in place ¾ Learning and development Career development, facilitate the online display of information relevant to the needs ¾ Succession planning of hotel managers and functional heads pertinent to their areas ¾ Talent management of responsibility. ¾ Reward and recognition Information Technology and Governance ¾ Compensation and benefits The Company Information Technology (IT) Governance Policy has evolved in line with the John Keells Group’s IT Governance Policy Management Committee in the last year to deliver and embrace new technologies which The Hotel and Property divisions of the Company have two have aligned with the overall business objective of the John separate Management Committees consisting of the General Keells Group. This evolution occurred as the Company discerned Manager of Cinnamon Grand and Sector Head of the Property the competitive advantage gained and the enhancement of Division and other key managers of divisions in order to discuss business value which came about through the skilful alignment matters pertaining to strategy and operations. of IT with its business objectives and the prudent management of its IT resources. The Company has always been a step ahead Strategic risks and opportunities arising from changes in our in embracing emerging technologies and systems, consistently business environment are regularly reviewed by the Group investing in developing its IT infrastructure. Continuous focus Management Committee (GMC) of the Hotel and Property on cutting-edge technology has ensured greater reliability of IT divisions at the meetings held monthly. The role of the GMC is to systems and has shortened information delivery times to both provide the necessary guidance and direction to the Company internal and external stakeholders. on matters that are strategic and long-term in nature or have the potential to significantly impact the division’s performance and The IT governance system, in particular, was closely reviewed reputation and to make decisions on key business-wide policies, during the year towards ensuring the following: including operational policies, internal controls, the Human ¾ Leverage IT as a strategic asset Resources Strategy and the Risk Management Policy. ¾ Ensure agility, in view of the fast-changing technology Internal Auditors ¾ Establish the right balance between business needs and IT Quarterly Audits are conducted by the Company’s Internal enablement Auditors, Messrs. PricewaterhouseCoopers (Pvt) Ltd, Chartered ¾ Ensure that all IT investments have a quantifiable (or visible) Accountants. The role of the internal audit team is to determine business return whether risk management, control and governance processes ¾ Ensure a strong IT governance and regulatory framework are adequate and functioning. The Internal Audit function is through a coherent set of policies, processes and adoption independent of the External Auditor. The reports arising out of of best practices in line with world-class organisations, but such audits are, in the first instance, considered and discussed always keeping in mind business returns at the business/functional unit levels and after review by the ¾ Ensure that e-enabled platforms are regularly reviewed for respective President/CEO of the Company and the Subsidiary are ‘internal control effectiveness’ through SOX methodology of forwarded to the Audit Committee on a regular basis. Further, the process flow analysis Audit Committee also assesses the effectiveness of the risk review process and systems of internal control on a regular basis. Follow- ups on internal audits are done on a structured basis. Relevant risks and vulnerabilities of the Company are identified and promptly brought to the attention of the Management, facilitating corrective and preventive measures to be taken in a timely manner. 32 Asian Hotels and Properties PLC
Corporate Governance
Additionally, a technically strong Management Audit function Sri Lanka Financial Reporting Standards (SLFRS) aligned with the Company’s strategies adds value in a variety of Living by the Company’s philosophy of good governance and ways, including; reporting, the Financial Statements for the year 2020/21 have been ¾ Providing an independent opinion on the integrity, reliability prepared and presented in accordance with Sri Lanka Accounting and relevance of management information Standards (SLFRS/LKAS) which have materially converged with the ¾ Assessing the adequacy of controls over the protection of International Financial Reporting Standards (IFRS) as issued by the assets and management of liabilities International Accounting Standards Board (IASB). ¾ Reviewing compliance with corporate policies and external regulations Compliance with Legal Requirements ¾ Reducing the risk of fraud Compliance with legal requirements and Company, Parent Company-internal rules are significant elements of Corporate Governance for the management of the Company. The Board of Going Concern and Financial Risk Directors to the best of their knowledge and belief are satisfied The Directors are satisfied that the Company continues to be that the Company has not engaged in any activity which a going concern and has sufficient resources to continue in contravenes laws and regulations and all financial obligations operation for the foreseeable future. In the unlikely event that due to the Government and to the employees have been either the net assets of the Company fall below a half of shareholders’ duly paid or adequately provided for in the Financial Statements. funds, shareholders would be notified, and an extraordinary resolution passed on the proposed way forward. Security Training Policy JKH’s securities trading policy prohibits all employees and The going concern principle has been adopted in preparing agents engaged by the Company who are aware of unpublished the Financial Statements. All statutory and material declarations price sensitive information from trading in the Company’s are highlighted in the Annual Report of the Board of Directors. shares or the shares of other companies in which the Company Financial Statements are prepared in accordance with the presently has business interests. Sri Lanka Accounting Standards (SLAS), including all the new standards introduced during the financial year and comply with External Audit the requirements of the Companies Act. Messrs. KPMG, Chartered Accountants serves as the External Auditors of the Group. The audit fees paid by the Company and Information in the Financial Statements of the Annual Report Group to Messrs. KPMG are separately classified on page 76 in are supplemented by operating environment and financial the Notes to the Financial Statements of the Annual Report. The review from page 41 to 44 explains to shareholders the strategic, Auditors’ Report on the Financial Statements of the Group for the operational, investment and risk related aspects of the Company year is found on page 56 to 59 of this Annual Report. that have translated into the reported financial performance and are likely to influence future results. The Company has attempted always to separate the internal Auditors from the external Auditors in order to maintain external The Statement of Directors’ Responsibilities in relation to Auditor independence. The appointment/re-appointment of the financial reporting is given on page 55 of the Annual Report. The External Auditors were recommended by the Audit Committees Directors’ interests in contracts of the Company are addressed on to the Board of Directors. page 49 of the Annual Report of the Board of Directors. Employee Participation in Assurance The Directors have taken all reasonable steps in ensuring the accuracy and timeliness of published information and in The following meetings, interviews, evaluations and surveys presenting an honest and balanced assessment of results in were conducted during the year: the quarterly and annual financial statements. Price sensitive ¾ Skip Level meetings information has been disclosed to the CSE, shareholders and the ¾ Exit interviews press in a timely manner and in keeping with the regulations. ¾ 360 degree evaluation Annual Report 2020 | 2021 33
BUILDING TRUST CODE OF CONDUCT Whistle Blower Policy JKH CODE OF CONDUCT Through a communication link named ‘Chairman Direct’, concerns about unethical behaviour and any violation of Group values could be reported by any employee of the Company to the Chairman of JKH. Employees reporting such incidents are Allegiance to the company guaranteed complete confidentiality and such complaints are and the group investigated and addressed via a select committee under the direction of the Chairman.
Ombudsperson Compliance with rules and regulations applying in the territories In order to deal with a situation in which an employee or that the Group operates in 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, Conduct all business in an ethical being the ultimate Parent Company, to entertain such concerns. manner at all times in keeping with The findings and the recommendations of the Ombudsperson acceptable business practices arising subsequent to an independent inquiry is confidentially communicated to the Chairman-CEO of JKH or to the Senior Independent Director of JKH upon which the involvement duty Exercise of professionalism and integrity of the Ombudsperson ceases. On matters referred to him by the in all businesses and “public” personal Ombudsperson, the Chairman-CEO or the Senior Independent transactions Director of JKH, as the case may be, will place before the Board: The written Code of Conduct of JKH to which all employees at all i. the decision and the recommendations levels and the Board of Directors are bound by, engraves the desired ii. action taken based on the recommendations behaviour of JKH staff at executive level and above. This is being iii. where the Chairman-CEO or the Senior Independent constantly and rigorously monitored. The objectives of the JKH Director of JKH disagrees with any or all of the findings and Code of Conduct were further affirmed by a strong set of corporate or the recommendations thereon, the areas of disagreement values which were well institutionalised at all levels within the and the reasons, therefore. Group and thus the Company through structured communication. The degree of employee conformance with corporate values and their degree of adherence to the JKH Code of Conduct were the key In situation (iii - above) where the Board is required to consider elements of reward and recognition schemes. the areas of disagreement and decide on the way forward, the Chairman-CEO or the Senior Independent Director of JKH is The Chairman of the Board affirms that there have not been expected to take such steps as are necessary to ensure that the any material violations of any of the provisions of the JKH Code complainant is not victimised, in any manner, for having invoked of Conduct. In the instances where violations did take place, or this process. These open-door policies facilitate constant were alleged to have taken place, they were investigated and dialogue, communication, transparency and ultimately boost handled through the Company’s established procedures. employee confidence, which would help retain existing talent whilst attracting new. SHAREHOLDER RELATIONS The Shareholders of the Company re-elect Directors, receive annual reports and appoint Auditors on a regular basis in accordance with the Companies Act. The shareholders of the Company exercise their rights at the General Meetings held for shareholders, as the case may be, including the Annual General Meeting (AGM). Each resolution brought before the shareholders 34 Asian Hotels and Properties PLC
Corporate Governance
at the AGM is voted on separately by the shareholders. The OUR STAKEHOLDERS notice of the AGM and the relevant documents required are to be published and will be sent to the shareholders within the statutory periods. The Company circulates the agenda for the SHAREHOLDERS We are committed to creating long-term growth meeting and shareholders vote on each issue separately. and returns to the shareholders and to conduct the business in a transparent manner. All shareholders are invited and encouraged to be present, actively participate and vote at the AGM. The AGM provides an opportunity for Shareholders to seek and obtain clarifications and information on the performance of the Company and to informally meet the CUSTOMERS Directors after the AGM. The External Auditors and the Company’s We are committed to continuously develop a better lawyers are invited too and are present at the AGM to render any quality of goods and services for the benefit and satisfaction of our customers. professional assistance that may be requested. Shareholders who are not in a position to attend the AGM in person are entitled to have their voting rights exercised by a proxy of their own choice.
Roles of Stakeholders PARTNERS We treat all partners fairly in order to achieve The Company realises the importance of ensuring that all mutual benefits. stakeholders’ rights are properly observed. Pertinent procedures are carried out in line with the rules and regulations of the CSE, as well as the related laws. EMPLOYEES Major Transactions We consider ouremployees as valuable assets and treat them fairly in regards to work opportunities, The Directors ensure that any corporate transaction that remuneration and quality of the working environment. would materially affect the net asset base of the Company The Company also provides all its employees professional and career development training. is communicated to shareholders. There were no major transactions, as defined under Section 185 of the Companies Act during the year under review. COMPETITORS Going Forward We abide by the framework of fair competition and will not destroy the reputation of competitors The Board is committed to the highest standards of Corporate through false accusations. Governance in order that the Company shall achieve its long-term sustainable growth objectives. The Board is accountable to the Company’s shareholders for good governance in its management of the affairs of the Company. The Board confirms that the Company was fully compliant throughout the year ended 31st CREDITORS March 2021 with all the principles and provisions of the good We observe all of our obligations to creditors. Corporate Governance and the Code of Business Conduct and Ethics. The Company’s approach to Corporate Governance enables it to understand the expectations of stakeholders, forecast trends in social, environmental and ethical requirements and to manage SOCIETY AND ENVIRONMENT the Company’s performance in an appropriate manner. We are committed to conducting business that benefits the economy, society and quality of the environment. The parent company of the Company While the Board is satisfied with its level of compliance with has established the Corporate Social Responsibility the governance requirements, it recognises that practices (CSR) Department to promote to the Company’s staff the importance of the CSR objectives to and procedures can always be improved, and there is merit achieve balanced benefits relating to society, the in continuously reviewing its own standards. The Board’s environment and all stakeholders in harmony with programme of review will continue throughout the year ahead. the Company’s sustainable growth objectives. Annual Report 2020 | 2021 35
STATEMENT OF COMPLIANCE UNDER SECTION 7.6 OF THE LISTING OF THE COLOMBO STOCK EXCHANGE (CSE) ON ANNUAL REPORT DISCLOSURES Mandatory Provisions - Fully Compliant
Compliant Non Compliant
Rule Compliance Reference (within the Report) Status
(i) Names of persons who were Directors of the Entity Profiles of Directors - Page 9 and 10
(ii) Principal activities of the entity and its subsidiaries during the Annual Report of the Board of Directors - year, and any changes therein Page 46 to 52
(iii) The names and the number of shares held by the 20 largest Information to Shareholders and Investors - holders of voting and non-voting shares and the percentage Page 114 and 115 of such shares held
(iv) The float adjusted market capitalisation, public holding Information to Shareholders and Investors - percentage (%), number of public shareholders and under Page 114 and 115 which option the Listed Entity complies with the Minimum Public Holding requirement
(v) A statement of each Director’s holding and Chief Executive Annual Report of the Board of Directors - Officer’s holding in shares of the Entity at the beginning and Page 46 to 52 end of each financial year
(vi) Information pertaining to material foreseeable risk factors Risk and Opportunities Report - Page 11 to 14 of the Entity
(vii) Details of material issues pertaining to employees and During the year 2020/2021, there were no industrial relations of the Entity material issues pertaining to employees and industrial relations of the Company
(viii) Extents, locations, valuations and the number of buildings of Notes to the Financial Statements - the Entity’s land holdings and investment properties Page 67 to 112
(ix) Number of shares representing the Entity’s stated capital Notes to the Financial Statements - Page 67 to 112
(x) A distribution schedule of the number of holders in each class Information to Shareholders and Investors - of equity securities, and the percentage of their total holdings Page 114 and 115
(xi) Financial ratios and market price information Performance Highlights - Page 4
(xii) Significant changes in the Company’s or its subsidiaries’ Notes to the Financial Statements - fixed assets, and the market value of land, if the value differs Page 67 to 112 substantially from the book value as at the end of the year 36 Asian Hotels and Properties PLC
Corporate Governance
Rule Compliance Reference (within the Report) Status
(xiii) Details of funds raised through a public issue, rights issue and Information to Shareholders and Investors - a private placement during the year Page 114 and 115
(xiv) Information in respect of Employee Share Ownership or Stock Notes to the Financial Statements - Page 67 Option Schemes to 112
(xv) Disclosures pertaining to Corporate Governance practices in Corporate Governance - Page 15 to 39 terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c. of Section 7 of the Listing Rules
(xvi) Related Party transactions exceeding 10 per cent of the Notes to the Financial Statements - Page 67 equity or 5 per cent of the total assets of the Entity as per to 112 audited financial statements, whichever is lower
STATEMENT OF COMPLIANCE UNDER SECTION 7.10 OF THE RULES OF THE COLOMBO STOCK EXCHANGE (CSE) ON CORPORATE GOVERNANCE Mandatory Provisions – fully compliant
CSE Rule No. Subject Compliance Requirement Compliance Applicable Section in Status the Annual Report
7.10 (a-c) Compliance The Company is in compliance with the Corporate Governance Corporate Governance Rules and any deviations are explained where applicable
7.10.1 (a-c) Non-Executive Two or at least one-third of the total number of Corporate Governance Directors Directors should be NEDs, whichever is higher
7.10.2(a) Independent Directors Two or one-third of NEDs, whichever is higher, Corporate Governance should be independent
7.10.2(b) Independent Directors Each Non-Executive Director should submit Available with the a declaration of independence/Non- Secretaries for review Independence in the prescribed format
7.10.3(a) Disclosure relating to » The Board shall annually determine the Corporate Governance Directors independence or otherwise of the NEDs » Names of the Independent Directors should be disclosed in the Annual Report
7.10.3(b) Disclosure relating to The basis for the Board’s determination of Corporate Governance Directors Independent Director, if criteria specified for Independence is not met Annual Report 2020 | 2021 37
CSE Rule No. Subject Compliance Requirement Compliance Applicable Section in Status the Annual Report
7.10.3(c) Disclosure relating to A brief resumé of each Director should be Profiles of Directors Directors included in the Annual Report and should include the Directors areas of expertise
7.10.3(d) Disclosure relating to Provide a brief resumé of new Directors Corporate Governance Directors appointed to the Board with details specified in 7.10.3(a), (b) and (c) to the CSE
7.10.4 (a-h) Criteria for defining Requirements for meeting criteria Corporate Governance Independence to be Independent
7.10.5 The Human Resources A listed Company shall have a Remuneration Corporate Governance and Compensation Committee. The Human Resource and Committee of JKH Compensation Committee (equivalent of the RC with a wider scope) of the listed Parent Company may function as the Remuneration Committee.
7.10.5(a) Composition of The » Shall comprise of NEDs, a majority of Corporate Governance Human Resources whom will be Independent and Compensation » One NED shall be appointed as Chairman Committee of the Committee by the Board of Directors
7.10.5.(b) Functions of Human The Human Resources and Compensation Corporate Governance Resources and Committee shall recommend the Compensation remuneration of the Executive Directors Committee
7.10.5.(c) Disclosure in the Annual » Names of Directors comprising the Human Human Resources Report relating to The Resources and Compensation Committee and Compensation Human Resources » Statement of Remuneration Policy Aggregated Committee Report and Compensation remuneration paid to EDs and NEDs Committee
7.10.6 Audit Committee The Company shall have an Audit Committee Corporate Governance
7.10.6(a) Composition of Audit » Audit Committee shall comprise of NEDs a Audit Committee Committee majority of whom should be Independent Report » A NED shall be appointed as the Chairman of the Committee » The CEO should attend Audit Committee Meetings » The Chairman of the Audit Committee or one member should be a member of a professional accounting body 38 Asian Hotels and Properties PLC
Corporate Governance
CSE Rule No. Subject Compliance Requirement Compliance Applicable Section in Status the Annual Report
7.10.6(b) Audit Committee Overseeing of the; Audit Committee Functions » Preparation, presentation and adequacy Report of disclosures in the Financial Statements in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS) » Overseeing the compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements » Overseeing the processes to ensure that the internal controls and risk management are adequate to meet the requirements of the Sri Lanka Auditing Standards » 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
7.10.6(c) Disclosure in Annual » Names of Directors comprising the Corporate Governance Report relating to Audit Audit Committee and the Audit Committee » The Audit Committee shall make a Committee Report determination of the independence of the Auditors and disclose the basis for such determination » The Annual Report shall contain a Report of the Audit Committee setting out the manner of compliance with their functions
STATEMENT OF COMPLIANCE UNDER SECTION 9.3.2 OF THE LISTING RULES OF THE CSE ON CORPORATE GOVERNANCE Mandatory Provisions - Fully Compliant
Rule Compliance Reference (within the Report) Status
(a) Details pertaining to Non-Recurrent Related Party Notes to the Financial Statements - Page 67 Transactions (RPT) to 112
(b) Details pertaining to RPT Notes to the Financial Statements - Page 67 to 112 Annual Report 2020 | 2021 39
Rule Compliance Reference (within the Report) Status
(c) Report of the Related Party Transactions Review Committee Corporate Governance - Page 15 to 39
(d) Declaration by the Board of Directors as an affirmative Annual Report of the Board of Directors - statement of compliance with the rules pertaining to RPT, Page 46 to 62 or a negative statement otherwise
STATEMENT OF COMPLIANCE WITH THE COMPANIES ACT NO. 7 OF 2007 Mandatory Provisions - Fully Compliant
Rule Compliance Reference (within the Report) Status
168 (1) (a) The nature of the business together with any ü Annual Report of the Board of Directors - Page 46 change thereof to 52
168 (1) (b) Signed financial statements of the AHP Group ü Statement of Directors' Responsibilities - Page 55 and the Company
168 (1) (c) Auditors’ Report on financial statements of the ü Independent Auditors' Report - Page 56 to 59 Company and AHP Group
168 (1) (d) Accounting policies and any changes therein ü Notes to the Financial Statements - Page 67 to 112
168 (1) (e) Particulars of the entries made in the Interests ü Annual Report of the Board of Directors - Page 46 Register to 52
168 (1) (f) Remuneration and other benefits paid to ü Notes to the Financial Statements - Page 67 to 112 Directors of the Company
168 (1) (g) Corporate donations made by the Company ü Notes to the Financial Statements - Page 67 to 112
168 (1) (h) Information on the Directorate of the ü Annual Report of the Board of Directors - Page 46 Company and its subsidiaries during and at to 52 the end of the accounting period
168 (1) (i) Amounts paid/payable to the External Auditor as ü Notes to the Financial Statements - Page 67 to 112 audit fees and fees for other services rendered
168 (1) (j) Auditors’ relationship or any interest with the ü Independent Auditors' Report - Page 56 to 59 Company and its Subsidiaries
168 (1) (k) Acknowledgement of the contents of this ü Statement of Financial Position - Page 62 Report and signatures on behalf of the Board We tenaciously sought to circumvent the obstacles in our course by collectively adopting a solution-oriented mindset. Annual Report 2020 | 2021 41
Operating Environment
DOMESTIC ECONOMY The tourism industry was a significant contributor to the national economy contributing over 5% to GDP growth in 2017 and 2018. The industry was impacted in 2019 by the Easter Sunday TOP 5 MARKETS terror attacks and in 2020 by the COVID-19 pandemic. The government acted swiftly in mid-March 2020 to prevent the GDP spread of the virus by closing borders for international tourists 2021 and imposing an island-wide lock-down which was eased ¾ 2019: 2.3% ¾ Kazakhstan in May 2020. While overall economic activities resumed and ¾ 2020: - 3.6% ¾ Ukrain recovered in the 3rd and 4th quarters of 2020, economic output ¾ 2021: + 3.4% (prediction) ¾ Germany in 2020 contracted by 3.6% due to the impact of the pandemic compared to a positive growth of 2.3% in 2019. Tourist arrivals ¾ United Kingdom plunged from 1.914 million in 2019 to 0.508 million in 2020 a ¾ China reduction of 74%. Hotels in Sri Lanka re-opened for the domestic market in July 2020 albeit at discounted prices. At Colombo 2020 hotels, the restaurant and banquet activities recommenced ¾ India with diminished capacity in compliance with the health and safety measures implemented. Sri Lanka opened the borders INFLATION ¾ United Kingdom to international tourists on 21st January 2021 with defined ¾ Russia ¾ Current NCPI (Y-Y) 4.2% restrictions, attracting tourists from non-traditional source ¾ Germany markets and later from traditional source markets as well. ¾ Predicted: 4-6% ¾ China
Accommodative monetary policy resulted in a significant decrease in policy interest rates by over 200 bps during the 2019 year. Moratoria initially extended to the tourism industry in the ¾ India aftermath of the terror attacks in 2019 April, were extended ¾ United Kingdom till 30th September 2021. Central Bank of Sri Lanka also ¾ Russia introduced Saubhagya loan COVID-19 reconnaissance working TOURIST ARRIVALS capital facility for several industries including the tourism ¾ China sector. Meanwhile, several other measures such as the waiver ¾ 2019: 1,913,702 ¾ Australia of SLTDA’s annual registration fee to all tourist establishments ¾ 2020: 507,704 and moratoriums on utility bill payments have also been ¾ 2021: 9,629 in Q1 implemented to support the tourism sector.
Source: CBSL Annual Report,World Economic Outlook-April 2021 and UNWTO 42 Asian Hotels and Properties PLC
Operating Environment
GLOBAL ECONOMY The global economy has a significant impact on the tourism industry as countries with strong economies are both key source markets and alternate destinations for international tourists. Sri Lanka’s top source markets have changed over the past three years as depicted in the following graph; GROWTH PROJECTIONS
10 Global Economy Advanced Economies Emerging markets and Developing Economies 8 5.9
6 5.4 4.8
4 3.7 2.9 1.7 2 2019 0 2020 -2 2021
-4 -3
-6 -4.9
-8 -8 -10 Source: UNWTO
The COVID-19 pandemic impacted the global growth to decline INTERNATIONAL TOURIST ARRIVALS (IN MILLIONS) by 3.3% compared to a positive growth of 2.9% in 2019. The closure of the border by 76% of the countries led to the collapse 1600 0% of the global tourism industry with international tourist arrivals 1400 -10%
declining sharply by 86%. According to UNWTO 27% of all 1500 -20% destinations worldwide kept their borders completely closed 1200 -30% for international tourism due to the COVID-19 Global Pandemic 1000 and world tourist arrivals dropped by 74% from 1.5 Billion in 2019 -40% 800 to 381 Million in 2020. Asia and the Pacific region were most -50%
impacted with a decline of 84% in tourist arrivals compared to a 600 746 -60%
growth of 4% in 2019. The fall in international travel has estimated 381 400 -69% -70% a loss of USD 1.3 trillion in export revenues - more than 11 times -75% -75% -70% -74% 200 360 -80% 65 the loss recorded during the 2009 global economic crisis. 70 69 57 221 16 18 -84% 219 0 -90% OUTLOOK East Africa World World Middle Sri Lankan economic growth is expected to recover to 3.4% in Europe Asia and Asia Americas 2021 with the anticipated inflow of foreign investments, the the Pacific stabilisation of the COVID-19 spread, opening the border for 2019 2021 Percentage change international tourism, and resumption of other economic activities. Source: UNWTO
The International Monitory Fund (IMF) World Economic Outlook According to UNTWO, the majority of tourism experts do not has projected a stronger than expected recovery in 2021 and expect international tourism to return to pre-COVID levels 2022 for the global economies. The economies are expected before 2023. The uncertainties of the outlook and resulting to grow by 6% in 2021 and 4.4% in 2022 indicating a brighter volatility of predictions require the tourism industry to act outlook overall. cautiously and vigilantly. Annual Report 2020 | 2021 43
Financial Review
Stepping out of the aftermath effects of the Easter Sunday bombings in April 2019, we were faced with the most challenging financial year with the onset of the COVID-19 Global Pandemic. Two months of island wide lockdown and, closure of the international airports in Sri Lanka and worldwide border restrictions brought down our occupancy to single digits. As Colombo hotels, the patronage we had from the domestic market also dwindled due to health and safety concerns despite the implementation of strict health and safety protocols as concerns regarding the pandemic were present throughout the year. The Group’s unswerving commitment to high standards supported a revival in food & beverage and banquet activities together with innovative packages to attract guests to extend their experience supported cashflow during the year as well as the top slots in reviews among city hotels.
INCOME STATEMENT HIGHLIGHTS COST OF SALES AND GROSS PROFIT MARGINS 2021 2020 2019 2018 The lifting of the minimum room rates and the reduction of Revenue (Rs. Mn) 1,790 5,559 7,658 8,628 rates to cater to the local clientele in the absence of international tourists resulted in a significant drop in gross profit margins to Revenue Growth (%) (67.8) (27.4) (11.2) (4.8) an average of 1.3% compared to 47% in 2020. Management did Gross Profit (Rs. Mn) 23 2,594 4,197 4,897 not look to cut down direct costs which would compromise Gross Profit Margin (%) 1.3 46.7 54.8 56.7 the product quality and took on the loss for the year. Further, Operating Profit (Rs. Mn) (1,913) (28) 1,083 1,774 the increased protocols followed for the health and safety of Net finance Income (Rs. Mn) 2 74 59 117 customers contributed to the escalation of cost of sales. Profit before tax (Rs. Mn) (2,370) 199 1,270 2,468 Profit after tax (Rs. Mn) (2,244) 106 1,078 2,185 NET OPERATING PROFIT/LOSS EPS (Rs.) (4.02) (0.11) 1.83 3.81 The Group recorded an operating loss of Rs. 1,913 million Brackets indicate losses compared to Rs. 28 million in 2020. Even though the Group curtailed its Administration, Distribution and Other operating costs REVENUE by a commendable 21% compared to previous year, the significant decline in gross profit resulted in the Net operating loss. With occupancies at zero percent for nearly 1/4th of the financial year the Revenue of the Group declined sharply by NET FINANCE INCOME 68% to Rs.1,790 million for 2020/21. Competition within the city hotels intensified with the removal of minimum room rates 2021 2020 Change leading to steeply discounted prices which impacted both the Rs. 000’s Rs. 000’s % top line and margins. The lockdown and subsequent restricted Finance Cost (31,707) (25,555) (24) operating environment curtailed Revenue from banquets and Finance Income 33,509 99,772 (66) in-house dining. 1,802 74,217 (98)
The closure of Crescat Boulevard rental property from April to Group finance income reduced by Rs. 66.3 million compared May 2020 due to lockdown, necessitated reductions in rental to the previous year due to the reduction in short-term rates until December 2020 due to restricted operations and investments and market interest rates. The decline in Group the Group undertaking a complete closure of the property finance cost reflects the reduced interest rates and net exchange for refurbishments from January 2021 also contributed to the loss counterweighing the increased overdraft and loan facilities decline in Group Revenue. taken during the year. Overall, net finance income reduced by 72.4 million. 44 Asian Hotels and Properties PLC
Financial Review
NET LOSS BEFORE TAX Investment in Property Plant and Equipment during the year was mainly the investment in the All-day Dining Restaurant - Net Loss after Tax for the year amounted to Rs. 2,370 million Plates which amounted to Rs. 207 million. During the year our compared to a profit of Rs.199 million in 2020. The Net Loss was due Investment Property - Crescat Boulevard and Commercial Centre to the combined impact of Net Operating Loss of Rs. 1,911 million de-valued to reflect the current market rental values. and the loss in fair value of investment properties of Rs. 459 million. The investment properties were re-valued during the financial year OUTLOOK to reflect the current market rental values. With the opening up of the tourist industry by lifting border BALANCE SHEET HIGHLIGHTS restrictions and the curtailment of COVID-19 spread through the global vaccination process, the Group is confident of the 2021 2020 2019 2018 revival of the tourism industry. The Group will continue to grow Total Assets (Rs. Mn) 40,869 42,582 42,524 41,148 alternative business of online deliveries and outdoor catering Property Plant and 34,198 34,298 33,950 32,879 whilst maintaining banquet and restaurant business. The Equipment (Rs. Mn) refurbishment of investment property at a cost of Equity (Rs. Mn) 34,613 36,692 36,432 35,237 Rs. 435 million is expected to be completed by the end of Non-Current 4,175 4,272 4,185 4,106 the second quarter of 2021 opening up a niche market of Liabilities (Rs. Mn) convenience retail shopping, upscale F&B and entertainment Current Liabilities (Rs. Mn) 2,081 1,617 1,907 1,805 center contributing towards a positive outlook for the Group. Debt to Equity Ratio 0.03 0.01 0.01 0.02 Current Ratio 0.38 1.26 1.29 1.27 Quick Asset Ratio 0.33 1.18 1.22 1.17
The Group continued to maintain a healthy Balance Sheet even with significant decline in revenue and losses through regular scrutiny of finances and sound cashflow management. Its current ratio and quick asset ratio averaged at 0.38 and 0.33 respectively, a decline from the previous year mainly due to the overdraft and Saubagya loans, taken at low interest rates to manage the cashflows under curtailed operations. Even with the increased overdraft facilities and loans, the Group maintained a healthy debt to equity ratio of 0.03, well over the industry recommended average. Financial Reports
Annual Report of the Board of Directors 46 Report of the Audit Committee 53 Statement of Directors’ Responsibility 55 Independent Auditors’ Report 56 Income Statement 60 Statement of Other Comprehensive Income 61 Statement of Financial Position 62 Statement of Changes in Equity 63 Statement of Cash Flows 65 Notes to the Financial Statements 67
FINANCIAL CALENDAR
Interim Reports 1st Quarter 22nd July 2020 2nd Quarter 27th October 2020 3rd Quarter 19th January 2021 4th Quarter 24th May 2021
Annual Reports 2019/20 21st May 2020 2020/21 24th May 2021
Meetings 26th Annual General Meeting 24th June 2020 27th Annual General Meeting 25th June 2021 46 Asian Hotels and Properties PLC
ANNUAL REPORT OF THE BOARD OF DIRECTORS
The Directors have the pleasure of presenting the 27th Annual REVENUE Report of Asian Hotels and Properties PLC (‘Company’) together Revenue generated by the Company amounted to with the Audited Financial Statements for the year ended 31st Rs. 979 million (Rs. 3,231 million in 2020) whilst the AHP Group March 2021. revenue amounted to Rs. 1,790 million (Rs. 5,559 million in 2020) Contribution to AHP Group revenue, from the different business This Report considers the requirements of the Companies segments are provided in Note 5 to the Financial Statements. Act, the relevant listing rules of the Colombo Stock Exchange (CSE), recommended reporting and corporate governance best RESULTS AND APPROPRIATIONS practices, including the Code of Best Practice on Corporate Governance (2013) jointly advocated by the Securities and The loss after tax of the Company was Rs. 1,425 million (Rs. Exchange Commission of Sri Lanka (SEC) and the Institute 126 million in 2020) whilst the AHP Group loss attributable to of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Owners of the Company, John Keells Holdings PLC (JKH) recommended accounting practices. for the year was Rs. 1,781 million (Rs. 50 million in 2020). A detailed description of the Group results and appropriations PRINCIPAL ACTIVITIES are given below. The Company is engaged in the business of Hoteliering, 2020/21 2019/20 Property Development and Management. Trans Asia Hotels PLC Rs. ‘000 Rs. ‘000 (the owner of Cinnamon Lakeside Colombo) is a subsidiary of Net Profit/(Loss) for the year after (2,369,708) 199,311 the Company, and its principal activity is Hoteliering. There has providing for expenses including been no material change in the activities of the Company and depreciation on property, plant its subsidiary (collectively the ‘AHP Group’) during the period and equipment was: under review. From which income tax has been 125,706 (93,392) REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS reversed/(deducted): The financial and operational performance, during the year Leaving thereafter a Net Profit/ (2,244,002) 105,919 ended 31st March 2021 and future business development of the (Loss) after tax of: Company and AHP Group, is provided in the Chairman’s message The amount attributable to 463,328 (155,747) and reports on Operating Environment and Financial Review. Minority Interest which has been These reports, which form an integral part of the Annual Report deducted is: of the Board of Directors, together with the Audited Financial Statements, reflect the situation of the Company and AHP Group. Leaving a Profit/(Loss) available to (1,780,674) (49,828) the Group of: FINANCIAL STATEMENTS AND AUDITORS’ REPORT The brought forward Profit is: 7,4 45,171 7,907,652 The Financial Statements, duly signed by the Directors, are 10,911 provided on page 62 to 112 and Auditors’ Report on the Financial Transferred to Revenue Reserve of: 10,911 Statements is provided on page 56 to 59 of this Annual Report. Other Comprehensive Income: (1,869) 19,211 - SEGMENT REPORTING Interim Dividend paid: (442,775) 5,673,539 A financial and operational review of the AHP Group and its Leaving an un-appropriated 7,4 45,171 business units are described in the management report section balance to be carried forward of: of the Annual Report. These reports, together with the audited financial statements, reflect the state of affairs of the Company ACCOUNTING POLICIES and the AHP Group. Segment-wise contribution to Group All the significant accounting policies adopted by the Company revenue, results, assets and liabilities are provided in and Group are mentioned in the Notes to the Financial Note 36 to the Financial Statements. Statements. The Financial Statements, which comprise the Annual Report 2020 | 2021 47
Income Statement, Other Comprehensive Income Statement, MARKET VALUE OF PROPERTIES Statement of Financial Position, Statement of Changes in Equity All buildings owned by the Company were last revalued and the Statement of Cash Flows, together with the accounting as at 31st December 2020. Valuation was carried out by policies and notes (‘The Financial Statements’) have been M/s P. B. Kalugalagedara and Associates, Chartered prepared in accordance with Sri Lanka Accounting Standards Valuation Surveyor. (SLFRS/LKAS) as issued by CA Sri Lanka and the requirement of the Companies Act. The changes to accounting policies have All properties classified as investment property were also been applied consistently to all financial periods presented in revalued as at 31st December 2020 in accordance with the these Financial Statements, unless otherwise indicated. The requirements of LKAS 40. This valuation too was carried out by accounting policies adopted in preparation of the Financial M/s P. B. Kalugalagedara and Associates. Statements are given from page 67 to 112 of this Report. Details of property valuations, including the valuation methods DIVIDENDS are provided in Note 14.3 to the Financial Statement on page 85 An Interim Dividend of Rs. 1/- per share for the financial year of this report. ended 31st March 2020, was paid on 30th March 2020. There was no dividend declared for the financial year ended 31st March 2021. INVESTMENT PROPERTIES In accordance with LKAS 40-Investment Property, the net book However, if a dividend is declared, it is preceded by a value of properties held to earn rental income, and properties confirmation from the Board of Directors that the Company held for capital appreciation have been classified as Investment will satisfy the requirements of Section 56 (2) of the Companies Properties. The details of Investment Properties are explained in Act No. 7 of 2007, and that it will also satisfy the solvency test in Note 16.1 to the Financial Statements on page 87. accordance with Section 57 of the Companies Act No. 7 of 2007. The Board will also obtain a certificate from the Auditors, prior to INVESTMENT IN SUBSIDIARY recommending the dividend. Company No. of Shares % Holding PROPERTY, PLANT AND EQUIPMENT Trans Asia Hotels PLC (Quoted) 86,823,028 43.41 The book value of Property, Plant and Equipment as at the balance sheet date amounted to Rs. 30,773 million (2020 - STATED CAPITAL Rs. 30,750 million) and Rs. 34,198 million (2020 - Rs. 34,298 million) for the Company and AHP Group respectively. The Stated Capital of the Company as of 31st March 2021 Rs. 3,345 million (2020 - Rs. 3,345 million) comprising of Capital expenditure for the Company and AHP Group amounted 442,775,300 ordinary shares. to Rs. 234 million (2020 - Rs. 102 million) and Rs. 250 million (2020 - Rs. 255 million) respectively. SHARE INFORMATION The market value of an ordinary share of the Company as of Total Freehold Land available - Asian Hotels and Properties PLC - 31st March 2021 was Rs. 37.40 (31st March 2020 - Rs. 29.00). Eight Acres and Five Decimal Naught Eight Perches (A8. R00 P05.08) The distribution and composition of shareholders and the information relating to earnings, dividend, net assets, and market Total Leasehold Land available - Trans Asia Hotels PLC - Seven value per share is given in the Information to Shareholders Acres, One Rood and Twenty Four Decimal Two Eight Perches and Investors and Five (5) Year Financial Review section of this (A07. R01. P24.28). Annual Report.
Details of Land and Buildings with net book values including The Company has made every endeavour to ensure equitable details of Property, Plant and Equipment of the Company and treatment of all shareholders and has adopted adequate the AHP Group and their movements are given in Note 14 to the measures to prevent information asymmetry. Financial Statements on page 80. 48 Asian Hotels and Properties PLC
Annual Report of the Board of Directors
MAJOR SHAREHOLDERS The Directors of Trans Asia Hotels PLC [Subsidiary] who held Details of the twenty (20) largest shareholders of the Company office during the year under review are set out below: and the percentage shareholding held by the public are Mr. K. N. J. Balendra - Chairman disclosed in the Information to Shareholders and Investors Mr. J. G. A. Cooray section of this Annual Report from page 115. Mr. J. R. Gunaratne (Resigned w.e.f. 31/12/2020) Mr. N. L. Gooneratne RESERVES Mr. C. J .L. Pinto Mr. E. H. Wijenaike Total reserves as at 31st March 2021 for the Company and AHP Ms. J. C. Ponniah Group amounted to Rs. 26,084 million (2020 - Rs. 27,379 million) Mr. M. R. Svensson and Rs. 27,960 million (2020 - Rs. 29,596 million) respectively. Mr. C.L.P. Gunawardane (Appointed w.e.f. 01/01/2021) Mr. S. Rajendra (Appointed w.e.f. 01/01/2021) The movements and composition of the Capital Reserves and Revenue Reserves during the year are disclosed in the Statement RESPONSIBILITY OF THE BOARD of Changes in Equity. Details of responsibilities of the Board and the manner in which DIRECTORS those responsibilities were discharged during the year are disclosed in the Corporate Governance section of this Annual Report. The Board of Directors of the Company as at 31st March 2021 and brief profiles of each Director are given in the Board of RETIREMENT AND RE-ELECTION OF DIRECTORS Directors section of this Annual Report. In accordance with Article 84 of the Articles of Association of the The Directors of the Company who held office during the year Company, Mr. S. Rajendra and Mr A S De Zoysa, retire by rotation under review are set out below. and being eligible to offer themselves for re-election. Brief Mr. K. N. J. Balendra - Chairman profiles of Mr. S. Rajendra and Mr A S De Zoysa are contained on Mr. J. G. A. Cooray Page 9 and 10 of this Annual Report. Mr. J. R. Gunaratne (Resigned w.e.f. 31/12/2020) Mr. S. Rajendra Mr. C L P Gunawardane retires in terms of Article 91 of the Mr. C. J. L. Pinto Articles of Association of the Company and being eligible offers Mr. A. S. De Zoysa himself for re-election. Brief profile of Mr. C L P Gunawardane is Mr. J. Durairatnam contained on Page 9 of this Annual Report. Mr. M. R. Svensson Mr. C.L.P. Gunawardane (Appointed w.e.f. 01/01/2021) BOARD SUB - COMMITTEES Board Audit Committee Therefore, the Board now consists of eight (8) Directors The following NED/IDs of the Board served as members of the comprising of five (5) Non- Executive Non- Independent Board Audit Committee. Directors (NED/NID) and three (3) Non-Executive Independent Mr. C.J. L. Pinto - Chairman Directors (NED/ID). Mr. A. S. De Zoysa Mr. J. Durairatnam In accordance with the criteria for ‘Independence’ specified by section 7.10.4 of the listing rules of the CSE and as identified by The Report of the Audit Committee is given on page 53 and 54 the Code of Best Practice on Corporate Governance (2013) jointly of this Report. advocated by the SEC and CA Sri Lanka, the Board affirms that the aforesaid NED/IDs satisfy the criteria for independence and Nominations Committee have satisfied the requirements under clause 7.10.2 (b). The Nominations Committee of the Company was formed with effect from 01st December 2015. Annual Report 2020 | 2021 49
The Nominations Committee comprises of following 02 NED/IDs Dr. S. S. H. Wijayasuriya - Chairman and 01 NED/NID as at 31st March 2021. Ms. M. P. Perera Mr. J. Durairatnam - Chairman Mr. K. N. J. Balendra Mr. A. S. De Zoysa Mr. J. G. A. Cooray Mr. K. N. J. Balendra The Project Risk Assessment Committee policy is detailed in the The Report of the Nominations Committee is given in the Corporate Governance section of this Annual Report. Corporate Governance section of this Annual Report. INTERESTS REGISTER Human Resources and Compensation Committee The Company has maintained an Interests Register as As permitted by the listing rules of the CSE, the Human contemplated by the Companies Act. In compliance with the Resources and Compensation Committee of the Parent requirements of the Companies Act, this Annual Report also Company, JKH, functions as the Human Resources and contains particulars of entries made in the Interests Register Compensation Committee of the Company. as well as the particulars of the entries made in the Interests Register of the Subsidiary which is a Public Limited Company. The following members of the JKH Board serve on the JKH Human Resources and Compensation Committee as of DIRECTORS’ INTERESTS IN CONTRACTS 31st March 2021: The Directors of the Company have made general declarations Mr. D. A. Cabraal - Chairman as required by Section 192 (2) of the Companies Act and no Mr. M. A. Omar additional interests have been disclosed by any Director. Dr. S. S. H. Wijayasuriya Indemnities and remuneration The report of the Human Resources and Compensation The Board approved the payment to Mr. S Rajendra, Executive Committee and the remuneration policy is given in the Director of Asian Hotels and Properties PLC, a remuneration Corporate Governance section of this Annual Report. comprising of: ¾ A short term variable incentive based on individual Related Party Transactions Review Committee performance, organisation performance and role As permitted by the listing rules of the CSE, the Related Party responsibility based on the results of the financial year Transactions Review Committee of the Parent Company, JKH, 2019/2020; and functions as the Related Party Transactions Review Committee of ¾ A Long Term variable incentive plan in the form of an the Company. This committee was formed with effect from Employee Share Options in John Keells Holdings PLC; 01st April 2014. Mr. S Rajendra became a Non-Executive Director with The Related Party Transactions Review Committee comprises 03 effect from 1st January 2021 at the standard Non-Executive NED/IDs as at 31st March 2021: fees approved by the Board for Non-Executive Directors (if Ms. M. P. Perera – Chairperson applicable) which fees are commensurate with the market Mr. D A. Cabraal complexities associated with the John Keells Group. Mr. A. N. Fonseka Mr. C L P Gunawardane was appointed as a Non-Executive The report of the Related Party Transactions Review Committee is Director of the Company with effect from 1st January 2021 at the given in the Corporate Governance section of this Annual Report. standard Non-Executive fees approved by the Board for Non-Executive Directors (if applicable) which fees are Project Risk Assessment Committee commensurate with the market complexities of the Company. Project Risk Assessment Committee of JKH, the parent company, functions as the Project Risk Assessment Committee of the Details of the remuneration and other benefits received by the Company and its subsidiary. The Project Risk Assessment Directors of the Company and its subsidiaries are set out in Note Committee members of JKH are as follows. 8 to the Financial Statements. While any Executive Directors’ remuneration is determined by the Human Resources and 50 Asian Hotels and Properties PLC
Annual Report of the Board of Directors
Compensation Committee of JKH, the parent company, the EMPLOYEE SHARE OPTION PLAN (ESOP) remuneration of the Non-Executive Directors is determined Employees of the Company receive remuneration in the form according to scales of payment decided upon by the Board. of share-based payment under the John Keells Group’s ESOP The Directors are of the opinion that the framework assures Scheme. Share options of the parent Company JKH are granted appropriateness of remuneration and fairness for the Company. to senior executives of the Company, whereby employees render services as consideration for equity instruments (equity- Director fees applicable to NEDs nominated by JKH are paid settled transactions). The cost of the employee services received directly to JKH and not to individual Directors. in respect of the shares or share options granted is recognised in the Income Statement over the period that employees provide PARTICULARS OF ENTRIES IN THE INTERESTS REGISTER services, from the time when the award is granted up to the OF THE SUBSIDIARY vesting date of the options. The overall cost of the award is Trans Asia Hotels PLC calculated using the number of share options expected to vest a) Interests in contracts and the fair value of the options at the date of grant. The Directors of Trans Asia Hotels PLC have all made a general The employee remuneration expense resulting from the John disclosure to the Board of Directors as permitted by Section Keells Group’s ESOP scheme to the employees of the Company 192 (2) of the Companies Act No. 7 of 2007 and no additional is recognised in the Income Statement of the Company. This interests have been disclosed by any Director. transaction does not result in a cash outflow to the Company and expense recognised is met with a corresponding equity reserve b) Indemnities and remuneration increase, thus having no impact on the Statement of Financial Mr. S Rajendra and Mr. C L P Gunawardane were appointed Position (SOFP). The fair value of the share options is estimated at as Non-Executive Directors of Trans Asia Hotels PLC with the grant date using a binomial option pricing model, taking into effect from 1st January 2021 at the standard Non-Executive account the terms and conditions upon which the share options fees approved by the Board of Trans Asia Hotels PLC for Non- were granted. The valuation takes into account factors such as stock Executive Directors (if applicable) which fees are commensurate price, expected time to maturity, exercise price, expected volatility with the market complexities of the Trans Asia Hotels PLC. of share price, expected dividend yield and risk-free interest rate.
Director fees applicable to NEDs nominated by JKH are paid CORPORATE GOVERNANCE DIRECTORS’ DECLARATIONS directly to JKH and not to individual Directors. The Directors declare that. DIRECTORS’ SHAREHOLDINGS OF THE COMPANY a) The Company has complied with all applicable laws and regulations in conducting its business. The shares held by Directors and their spouses in the Company as of 31st March 2021 are as follows. b) The Directors have declared all material interests in contracts involving the Company and refrained from voting on Director Shareholding matters in which they were materially interested. as at 31st March c) The Company has made all endeavours to ensure the 2021 2020 equitable treatment of shareholders. Mr. K. N. J. Balendra - Chairman Nil Nil d) The business is a going concern with supporting Mr. J. G. A. Cooray 10,600 10,600 assumptions or qualification as necessary. Mr. J. R. Gunaratne N/A Nil (Resigned w.e.f. 31/12/2020) e) They have conducted a review of internal controls covering Mr. S. Rajendra Nil Nil financial, operational and compliance controls and risk management and obtained a reasonable assurance of their Mr. C. J. L. Pinto 7,800 7,800 effectiveness and successful adherence herewith. (Joint account with Mrs. M. R. C. Pinto) Mr. A. S. De Zoysa Nil Nil f) The Company being listed on the CSE is compliant with the Mr. J. Durairatnam Nil Nil rules on Corporate Governance under the Listing Rules of the CSE with regard to the composition of the Board and its Mr. M. R. Svensson Nil Nil Sub-Committees. Mr. C. L. P. Gunawardane Nil N/A (Appointed w.e.f. 01/01/2021) Annual Report 2020 | 2021 51
g) The Company is in compliance with the Code of Best ENVIRONMENTAL PROTECTION Practice on Corporate Governance (2013) jointly advocated The Company is in compliance with the relevant environmental by the SEC and CA Sri Lanka. The Company is also compliant laws, regulations and endeavours to comply with best practices with almost the full 2017 Code of Best Practice on Corporate applicable in the Country. The Company has not engaged in any Governance issued by CA Sri Lanka to the extent of business activity that is harmful to the environment. exigency and as required by the AHP Group. STATUTORY PAYMENTS A comprehensive report on Corporate Governance practices and principles with respect to the management and operations of the The Directors confirm that to the best of their knowledge, Company are set out from page 15 to 39 of this Report. all taxes, duties and levies payable by the Company and its Subsidiary, All contributions, levies and taxes payable on behalf SUSTAINABILITY of, and in respect of the employees of the Company and its Subsidiary, and all other known statutory dues that were due The Company is conscious of the need to preserve the and payable by the Company and its Subsidiary as at the environment and its natural resources and has taken specific Balance Sheet date have been paid or, where relevant provided steps, particularly in ensuring the conservation of its natural for, except as specified in Note 37 to the Financial Statements, resources and environment as well as addressing material issues covering Contingent Liabilities. highlighted by its stakeholders. Every endeavour has been made to minimise adverse effects on the environment to ensure ENTERPRISE RISK MANAGEMENT sustainable continuity of natural resources. The Board confirms that there is an ongoing process of identifying, EMPLOYMENT evaluating and managing any significant risks faced by the Company, where annual risk reviews are carried out by the The Company has an equal opportunity policy in respect of Enterprise Risk Management Division and the risks are further employment and these principles are enshrined in specific reviewed each quarter by the Company. The headline risks are selection, training, development and promotion policies, presented to the Board Audit Committee for review by the ensuring that all decisions are based on merit. The Company, in respective business units. The details of the Risks Report and Risk line with the Group (JKH) policy, practices equality of opportunity Management Process are set out from page 11 to 14 of this Report. for all employees irrespective of ethnic origin, religion, political opinion, gender, marital status or physical disability. INTERNAL CONTROL
The number of persons employed by the Company and the The Board, through the involvement of the Group Business Group as at 31st March 2021 was 806 (943 in 2020) and 1,330 Process Review (Group BPR) Division, takes steps to gain (1,555 in 2020), respectively. assurance on the effectiveness of control systems in place. The Audit Committee receives regular reports on the adequacy and There have been no material issues pertaining to employees and effectiveness of internal controls in the Company. These include industrial relations of the Company and the AHP Group during compliance with laws, regulations and established policies and the financial year 2020/21. procedures of the Company.
SUPPLIER POLICY The Head of Group BPR Division has direct access to the Chairman of the Audit Committee. Reports of the outsourced Internal The Company, in line with the Group’s (JKH) policies, applies an Auditors are also reviewed by the Audit Committee on matters overall policy of agreeing and clearly communicating terms of pertaining to the Company. payment as part of the commercial agreements negotiated with suppliers and endeavours to pay for all items properly charged The Directors acknowledge their responsibility for the Company’s in accordance with these agreed terms. As at 31st March 2021, systems of internal controls. The statements of Corporate the trade and other payables of the Company and AHP Group Governance from page 15 to 39 sets out in detail the Company’s amounted to Rs. 416 million (2020 - Rs. 447 million) and Rs. 726 system of internal controls. million (2020 - Rs. 742 million), respectively. 52 Asian Hotels and Properties PLC
Annual Report of the Board of Directors
RELATED PARTY TRANSACTIONS The Independent Auditors’ Report to the shareholders on the The Company’s transactions with Related Parties, given in Note Financial Statements is given on page 56 to 59. 33 to the Financial Statements, have complied with the Listing Rule 9.3.2 of the Colombo Stock Exchange and the Code of Best The Audit Committee reviews the appointment of the Auditor, Practices on Related Party Transactions under the Securities and its effectiveness, independence and its relationship with the Exchange Commission Directive issued under Section 13(c) of Company, including the level of audit and non– audit fees paid the Securities and Exchange Commission Act. to the Auditor. Based on the declaration of Messrs. KPMG and as far as the Directors are aware, the Auditors do not have any DONATIONS relationship [except in so far as an Auditor] or interest in the Company or its Subsidiary. Total donations made by the AHP Group during the year amounted to Rs. 0.019 million (31st March 2020 - Rs. 2.2 million). ANNUAL REPORT
EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE The Board of Directors approved the Consolidated Financial Statements on 24th May 2021. The appropriate number of copies Except for the matters disclosed in Note 39 to the Financial of this report will be submitted to the Colombo Stock Exchange Statements on page 112, there were no material events that and to the Sri Lanka Accounting and Auditing Standards require adjustments or disclosure in the Financial Statements. Monitoring Board as required.
GOING CONCERN ANNUAL GENERAL MEETING The Board of Directors, after considering the financial position, The Board of Directors is closely monitoring the ongoing operating conditions, regulatory and other factors, and such developments in the Country due to the COVID -19 pandemic matters required to be addressed in the Code of Best Practice and the resultant directives issued by the regulatory authorities. on Corporate Governance (2013) jointly advocated by the Given the unprecedented nature of these events and the fact SEC and CA Sri Lanka, based on available information, the that the health and wellbeing of all Meeting attendees is of management has assessed the existing and anticipated effects paramount importance, the Annual General Meeting shall be a of COVID-19 on the Group Companies and the appropriateness virtual meeting and it will be held on 25th June 2021 at 3.00pm. of the use of the going concern basis. In March 2021, Group evaluated the resilience of its businesses considering a wide This Annual Report is signed for and on behalf of the Board of range of factors such as current and expected profitability, Directors by; the ability to defer non-essential capital expenditure, debt repayment schedules, if any, cash reserves and potential sources of financing facilities, if required, and the ability to continue providing goods and services. Chairman Director Having presented the outlook for group and subsidiary to the By Order of the Board AHP Board, the Directors are satisfied that the Company and its subsidiary have adequate resources to continue in operational existence for the foreseeable future, to justify adopting the going concern basis in preparing these financial statements. Keells Consultants (Private) Limited AUDITORS Secretaries The retiring Auditors Messrs. KPMG, Chartered Accountants, 24th May 2021 have expressed their willingness to continue in office. The Audit Committee at a meeting held on 27th April 2021 recommended that they be re-appointed as Auditors for the year 2021/2022. A Resolution to re-appoint them as auditors and authorising the Directors to determine their remuneration will be proposed at the Annual General Meeting. Annual Report 2020 | 2021 53
REPORT OF THE AUDIT COMMITTEE
INTRODUCTION experience and independence of members are brought to bear The Board Audit Committee of Asian Hotels and Properties PLC on all matters, which fall within the committee’s purview. The is formally established as a Sub-Committee of the Main Board, to Director Finance of the Cinnamon Grand serves as the Secretary which it is accountable. Charter of the Committee clearly defines to the Audit Committee. the terms of reference of the Audit Committee. It demonstrates that activities of the Audit Committee are in-line with the The Sector Head - Property Group of John Keells Holdings, Chief Code of Best Practice on Corporate Governance issued jointly Financial Officer - Leisure Industry Group ,General Manager by the Institute of Chartered Accountants of Sri Lanka and the of Cinnamon Grand and Cinnamon Lakeside, Sector Financial Securities and Exchange Commission of Sri Lanka. Controllers of Property and Hotels Sectors together with the Head of Group Business Process Review division of John Keells The effectiveness of the Committee is evaluated annually Holdings PLC, attend Audit Committee meetings by invitation. by each member of the Committee and the results are Other officials are invited to attend on a need basis. Outsourced communicated to the Board. Internal Auditors, PricewaterhouseCoopers (Pvt) Ltd., and Independent External Auditors KPMG, are required to attend This report focuses on the activities of the Audit Committee meetings on a regular basis. for the year under review. A more general description of the Committee’s functions is also given under Corporate The Audit Committee held four meetings during the financial Governance Commentary on page 15 to 39. year. Information on the attendance at these meetings are given under Corporate Governance on page 24. In addition, ROLE OF THE COMMITTEE the Chairman of the Committee met the Internal and External Auditors and in-house personnel, as necessary, to strengthen The role of the Audit Committee is to assist the Board in fulfilling guidance and oversight related to Audit Committee matters. its oversight responsibilities in relation to the integrity of the Financial Statements of the Company and of the subsidiary The activities and views of the Committee have been (AHP Group), the internal control and risk management communicated to the Board of Directors, quarterly, through verbal systems of the Group, compliance with legal and regulatory briefings and by tabling the minutes of the Committee’s meetings. requirements, the External Auditors’ performance, qualifications and independence, and, the adequacy and performance of the FINANCIAL REPORTING Internal Audit function undertaken by the Group (JKH) Business Process Review Division (Group BPR). The scope of functions and The Audit Committee has reviewed and discussed the Group’s responsibilities are adequately set out in the terms of reference quarterly and annual Financial Statements prior to publication of the Committee which has been approved by the Board and is with management and the external auditors. The scope of the reviewed annually. review included ascertaining compliance of the statements and disclosures with Sri Lanka Accounting Standards, the COMPOSITION OF THE COMMITTEE AND MEETINGS appropriateness and changes in accounting policies and material judgemental matters. The Committee also discussed The Audit Committee comprised of three Non-Executive with the External Auditors and Management the matters Independent Directors. Mr. C.J.L. Pinto serves as the Chairman of communicated to the Committee by the External Auditors in the Audit Committee since 2011. He is a Fellow of the Institute their reports on the audit for the year. The Committee has also of Chartered Accountants of Sri Lanka and has 48 years of regularly discussed the operations of the Company and its future post-qualifying experience in the profession. He also serves as prospects with the Management and is satisfied that all relevant the Chairman of the Audit Committee of Trans Asia Hotels PLC. matters have been taken into account in the preparation of the Other members of the committee have a specialist banking and Financial Statements. IT background. All Non-Executive Directors satisfy the criteria for independence as specified in the Standards on Corporate The committee obtained independent input from External Governance for listed Companies issued by the Securities and Auditors on the effects of any new Sri Lanka Accounting Standards Exchange Commission of Sri Lanka. The Audit Committee that came into effect for the year under review and satisfied reports directly to the Board. The individual and collective themselves that any necessary preparatory work was carried out, financial and hotel industry specific knowledge, business to enable the Company to comply with these new standards. 54 Asian Hotels and Properties PLC
Report of the Audit Committee
INTERNAL AUDIT, RISK AND CONTROLS The External Auditors kept the Committee advised on an on- PricewaterhouseCoopers (Pvt) Ltd continued to serve as the going basis regarding any unresolved matters of significance. Outsourced Internal Auditors of the Company, and the audit Before the conclusion of the audit, the Committee met with plans and scope of work were formulated in consultation with the External Auditors to discuss all audit issues and agree on Group BPR division and approved by the Committee. their treatment. This included the discussion of formal reports from the External Auditors to the Committee. The Committee The main focus of the Internal Audit was to provide independent also met the External Auditors, without the Management being assurance on the overall system of internal controls, risk present, prior to the finalisation of the Financial Statements. management and governance; by evaluating the adequacy and effectiveness of internal controls, and compliance with laws The External Auditors’ final management reports on the audit and regulations and established policies and procedures of the of the Company and Group Financial Statements for the company. Reports from the Outsourced Internal Auditors on the year 2020/21, together with management’s responses, were operations of the Company were also reviewed by the Committee. discussed with management and the auditors.
During the year, reports were received by the Committee from The Audit Committee is satisfied that the independence of the the Outsourced Internal Auditors, which were reviewed and External Auditors has not been impaired by any event or service discussed with Management, the Outsourced Internal Auditors that has given rise to a conflict of interest. Due consideration has and the Group BPR division. been given to the level of audit and non-audit fees received by the External Auditors from the are Group and confirmation has been The recommendations of the Internal Auditors are implemented received from the External Auditors of their compliance with the as required, and confirmed by the auditors, in subsequent independence criteria given in the Code of Ethics of the Institute follow-up audits. of Chartered Accountants of Sri Lanka.
In the context of enhanced health and safety measures that The performance of the External Auditors has been evaluated became necessary during the year under review due to and discussed with the senior management of the Company, and COVID-19 pandemic, the committee paid special attention to risk the Committee has recommended to the Board that KPMG be re- mitigation measurements introduced by the management and appointed as the External Auditors of Asian Hotels and Properties obtained management assurance in this regard. PLC for the financial year ending 31st March 2022, subject to approval by the shareholders at the Annual General Meeting. The Audit Committee has also reviewed the processes for the identification, evaluation and management of all significant CONCLUSION operational risks faced by the Company. The most significant Based on the reports submitted by the External Auditors and the operational risks and the remedial measures taken to mitigate Outsourced Internal Auditors of the Company, the assurances them have been reviewed with the Management and the John and certifications provided by the senior management, and Keells Group Sustainability and Group BPR division. the discussions with the Management and the auditors both at formal meetings and informally, the Committee is of the view that Formal confirmations and assurances have been received from the control environment within the Company is satisfactory and senior management on a quarterly basis regarding the efficacy provides reasonable assurance that the financial position of the and status of the internal control systems and risk management Company is adequately monitored and its assets are safeguarded. systems, and compliance with applicable laws and regulations.
The Committee reviewed the whistle blowing arrangements for the Company which is in-line with the Group (JKH) arrangements C. J. L. Pinto and had direct access to the Ombudsperson for the Group. Chairman of the Audit Committee 24th May 2021 EXTERNAL AUDIT The External Auditors’ letter of engagement, including the scope Members: of the audit, was reviewed and discussed by the Committee Mr. C. J. L. Pinto - Chairman with the external auditors and Management prior to the Mr. J. Durairatnam commencement of the audit. Mr. A. S. De Zoysa Annual Report 2020 | 2021 55
STATEMENT OF DIRECTORS’ RESPONSIBILITY
The responsibility of the Directors, in relation to the Financial standards have been followed and the Financial Statements Statements and the Consolidated Financial Statements of have been prepared on a going concern basis. The Board the Company and its Subsidiary (AHP Group) is set out in this of Directors are of the view that adequate funds and other Statement. This Statement of Directors’ Responsibility is to be resources are available within the Company to continue in read in conjunction with the Report of the Auditors and is made operation for the foreseeable future. to distinguish the respective responsibilities of the Directors and of the Auditors in relation to the Financial Statements contained The Board of Directors have taken all reasonable steps expected in this Annual Report. of them to safeguard the assets of the Company and of the AHP Group to establish appropriate systems of internal controls The financial statements are comprised of: to prevent, deter and detect any fraud, misappropriation or » Income statement and Statement of comprehensive income other irregularities. The Board of Directors have also taken all of the Company and AHP Group, which present a true and reasonable steps to ensure that the Company and AHP Group fair view of the profit and loss of the Company and AHP maintain adequate and accurate accounting books of record Group for the financial year. which reflect the transparency of transactions and provide an accurate disclosure of the financial position of the Company and » Statement of financial position, which represents a true and of the AHP Group. fair view of the state of affairs of the Company and AHP Group as at the end of the financial year: The Board of Directors is required to provide the Auditors with every opportunity to take whatever steps and undertake The Board of Directors approved the Annual Report on 24 whatever inspection they consider appropriate for the purpose May 2021. The appropriate number of copies of this report will of enabling them to give an independent Audit Report. The be submitted to the Colombo Stock Exchange and to the Sri Board of Directors is of the view that they have discharged their Lanka Accounting and Auditing Standards Monitoring Board as responsibilities as set out in this Statement. required. COMPLIANCE REPORT The Board of Directors of the Company are required by the provisions of the Companies Act to prepare Financial Statements The Directors confirm that, to the best of their knowledge, which give a true and fair view of the state of affairs of the all taxes and levies payable by the Company and AHP Group, Company and of the AHP Group as at the end of the financial and all contributions, levies and taxes payable on behalf of year, Profit or Loss, Cash flows of the Company and of the AHP the employees of the Company and AHP Group, and all other Group for the financial year. known statutory obligations as at the reporting date, have been paid or provided for, except as specified in Note 37 to the The Board of Directors confirm that the Financial Statements Financial Statements covering Contingent Liabilities. of the Company and of the AHP Group for the year ended 31 March 2021 presented in the report have been prepared The Board of Directors confirms that the Company and AHP in accordance with the Sri Lanka Accounting and Auditing Group have complied with the Para 23 of the LKAS 24, and all Standards Act No. 15 of 1995, the Companies Act and has related party transactions are carried out at “arm’s length” basis. provided the information required by and otherwise complied with the listing rules of the Colombo Stock Exchange (CSE) and By Order of the Board the code of best practice on Corporate Governance (2013) jointly advocated by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission of Sri Lanka (SEC). Keells Consultants (Private) Limited In preparing the Financial Statements, the Board of Directors Secretaries has selected appropriate accounting policies and have applied 24th May 2021 them consistently. Reasonable and prudent judgements and estimates have been made and applicable accounting 56 Asian Hotels and Properties PLC
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF ASIAN HOTELS AND PROPERTIES PLC REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion We have audited the financial statements of Asian Hotels and Properties PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiary (“the Group”), which comprise the statement of financial position as at 31 March 2021, and the income statement, statement of profit and loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory notes to the financial statements set out in pages 60 to 112.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company and the Group as at 31 March 2021, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
Basis for Opinion We conducted our audit in accordance with Sri Lanka Accounting Standards. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the company financial statements and consolidated financial statements of the current period. These matters were addressed in the context of our audit of the company financial statements and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Annual Report 2020 | 2021 57
Independent Auditors’ Report
01. Management assessment of the Group’s impacts of the COVID-19 related events. Company and Group Risk Description Our Response The Company and the Group incurred net loss of Rs. 1.4 Bn and Rs. 2.2 Bn respectively for Our audit procedures included: the year ended 31st March 2021. Further, the Company’s and the Group’s current liabilities » Obtaining the cash flow projections exceeded its current assets by Rs 633 Mn and 1,293 Mn respectively as at the reporting date. and discussing with management However, these financial statements have been prepared on a going concern basis. the possible impact on the key When adopting the going concern basis in preparation of the financial statements, the assumptions used in preparing directors have reviewed the Company’s and Group’s cash flow projections, prepared by the the projections due to management. The cash flow projections were based on management’s assumptions and COVID-19 pandemic. estimation of future cash inflows and outflows, also taking into consideration the impact of » Inspecting the facility agreements COVID-19 related events. for the Company’s and Group’s long-term loans to identify any Notes to the financial statements, describes the impact of COVID-19 outbreak to the financial covenants or similar terms current year financial statements and possible effects to the Company’s and Group’s future and assessing the implication prospects, performance and cash flows. Further, the management has described how they of these on the Company’s and plan to deal with these events and circumstances as the outbreak is still prevailing as at the Group’s liquidity; date of this report. » Assessing adequacy of disclosures We identified management assessment of the Company’s and Group’s ability to continue in the financial statements, in as going concern and COVID-19 related disclosures as a key audit matter because the cash relation to the impact of prevailing flow projections referred to above involves consideration of future events and circumstances pandemic situation to sustain its which are inherently uncertain, and effect of those uncertainties may significantly impact operations in the foreseeable future the resulting accounting estimates. Therefore, the assessment requires the exercise of with reference to the requirements significant management judgement in assessing future cash inflows and outflows which of the prevailing standards. could be subject to potential management bias.
02. Valuation of the land and buildings (Property, Plant and Equipment and Investment Property) – the Group and the Company Refer to note 14 and 16 to the financial statements Risk Description Our Response As at 31st March 2021, the Group’s Land and Buildings carries at fair Our audit procedures included: value, classified as Property, Plant and Equipment and Investment » Discussions with management and the external Properties amounting to Rs. 31.6 Bn and Rs. 5 Bn respectively (the valuer and comparison of the key assumptions used Company: Rs. 29 Bn and Rs. 2.2 Bn respectively). against externally published market comparable or The Group has engaged an independent professional Valuer with industry data where available and challenging the appropriate expertise to determine the fair value of these properties in reasonableness of key assumptions based on our accordance with recognised industry standards. knowledge of the industry and the possible impact on the key assumptions and the resulting valuation due Estimating the fair value is a complex process which involves a to COVID-19 pandemic. significant degree of judgment and estimates in respect of price per » Assessing the key inputs used in the valuation by the perch of the land, capitalisation rates, value per square feet, fair market independent external valuer against our expectations rental and diversity of locations and nature of the land and buildings and based on our experience, externally published market investment properties. comparable and our knowledge of property market, Further, the Group have incorporated a COVID-19 risk adjustment consultation with internal valuation specialist. for property valuation to reflect the associated risks in the valuation » Assessing the objectivity, independence, competence model based on reasonable and supportable information available to and qualifications of the external valuer. management at the reporting date. » Assessing the adequacy of the disclosures in the We identified this as a key audit matter because of the significance of financial statements, including the description and the value of these properties to the Financial Statements and significant appropriateness of the inherent degree of subjectivity judgement/estimation involves in the valuation. and key assumptions in the estimates. 58 Asian Hotels and Properties PLC
Independent Auditors’ Report
Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the annual report if we conclude that there is a material misstatement there in, we are required to communicate the matter to those charged with governance. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: » Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. » Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and Group’s internal control. » Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. » Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern. Annual Report 2020 | 2021 59
Independent Auditors’ Report
» Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. » Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements As required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.
CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditors' report is 2599.
CHARTERED ACCOUNTANTS Colombo, Sri Lanka 24th May 2021 60 Asian Hotels and Properties PLC
INCOME STATEMENT
GROUP COMPANY For the year ended 31st March Page No. Note 2021 2020 2021 2020 In Rs. ’ 000s
Continuing operations Revenue from contracts with customers 74 5 1,790,116 5,559,550 979,148 3,230,953 Cost of sales (1,766,760) (2,965,470) (1,101,882) (1,819,312) Gross Profit/(Loss) 23,356 2,594,080 (122,734) 1,411,641
Dividend income 75 6 - - - 43,412 Other operating income 75 7 204,344 101,738 200,627 94,159 Distribution expenses (124,719) (271,917) (79,289) (151,265) Administration expenses (1,703,462) (1,897,874) (919,358) (1,230,287) Other operating expenses (312,274) (553,948) (175,982) (314,673)
Results from operating activities 75 8 (1,912,755) (27,921) (1,096,736) (147,013)
Finance cost 76 9 (31,707) (25,555) (7,497) - Finance income 77 10 33,509 99,772 29,780 95,114 Net Finance Income 1,802 74,217 22,283 95,114 Change in fair value of investment property 87 16 (458,755) 153,015 (349,236) (9,410)
Profit/(Loss) before tax (2,369,708) 199,311 (1,423,689) (61,309)
Income tax expense/(reversal) 77 11 125,706 (93,392) (1,567) (64,580)
Profit/(Loss) for the year (2,244,002) 105,919 (1,425,256) (125,889)
Attributable to: Owners of the company (1,780,674) (49,828) (1,425,256) (125,889) Non-controlling interest (463,328) 155,747 - - (2,244,002) 105,919 (1,425,256) (125,889)
Rs. Rs. Rs. Rs. Loss per share - Basic/Diluted 79 12 (4.02) (0.11) (3.22) (0.28) Dividend per share 79 13 - 1.00 - 1.00
Figures in brackets indicate deductions The accounting policies and notes as set out in pages 67 to 112 form an integral part of these Financial Statements. Annual Report 2020 | 2021 61
STATEMENT OF OTHER COMPREHENSIVE INCOME
GROUP COMPANY For the year ended 31st March Note 2021 2020 2021 2020 In Rs. ’ 000s
Profit/(Loss) for the Year (2,244,002) 105,919 (1,425,256) (125,889)
Other comprehensive income Items that will not to be reclassified to Income Statement in subsequent periods Revaluation of land and buildings 14 181,186 705,637 141,357 707,585 Re-measurement gain/(loss) on defined benefit plans 29.1 (1,809) 24,951 (1,905) 15,602 179,377 730,588 139,452 723,187
Deferred tax effect on actuarial valuation (14) (1,036) - - Deferred tax effect on land & building revaluation (25,366) (99,062) (19,790) (99,062) Tax on other comprehensive income 28 (25,380) (100,098) (19,790) (99,062)
Other comprehensive income not to be reclassified to Income Statement in subsequent periods, net of tax 153,997 630,490 119,662 624,125 Total comprehensive income for the year, net of tax (2,090,005) 736,409 (1,305,594) 498,236
Attributable to: Owners of the company (1,646,107) 577,060 (1,305,594) 498,236 Non-controlling interests (443,898) 159,349 - - (2,090,005) 736,409 (1,305,594) 498,236
Figures in brackets indicate deductions The accounting policies and notes as set out in pages 67 to 112 form an integral part of these Financial Statements. 62 Asian Hotels and Properties PLC
STATEMENT OF FINANCIAL POSITION
GROUP COMPANY As at 31st March Page No. Note 2021 2020 2021 2020 In Rs. ’ 000s
ASSETS Non current assets Property, plant and equipment 80 14 34,198,342 34,297,919 30,773,023 30,750,426 Right-of-use asset 86 15 731,836 744,240 - - Investment property 87 16 5,005,270 5,464,025 2,239,764 2,589,000 Investment property - Work in Progress 88 16.2 113,015 - 113,015 - Intangible assets 89 17 1,680 2,352 991 1,346 Investment in subsidiary 90 18 - - 660,045 660,045 Non current financial assets 91 19 27,722 31,457 15,174 22,232 Other non current assets 92 20 3,009 8,660 985 6,279 Total non current assets 40,080,874 40,548,653 33,802,997 34,029,328
Current assets Inventories 92 21 107,085 131,314 70,550 91,456 Trade and other receivables 92 22 162,606 690,970 98,979 239,721 Amounts due from related parties 101 33.2 33,490 93,657 20,463 49,413 Other current assets 93 23 135,957 149,981 87,436 89,361 Short term investments 93 24 198,535 524,814 198,535 524,814 Total current assets 788,058 2,033,169 555,545 1,326,455 Total assets 40,868,932 42,581,822 34,358,542 35,355,783
EQUITY & LIABILITIES Equity Stated capital 93 25 3,345,117 3,345,117 3,345,117 3,345,117 Revenue reserves 5,673,539 7,445,171 4,235,994 5,663,155 Other components of equity 94 26 22,287,036 22,151,217 21,847,751 21,716,102 Equity attributable to owners of the company 31,305,692 32,941,505 29,428,862 30,724,374
Non-controlling interest 3,307,203 3,750,825 - - Total equity 34,612,895 36,692,330 29,428,862 30,724,374
Non current liabilities Interest bearing borrowings 96 27 59,436 39,954 19,420 - Deferred tax liabilities 97 28 3,736,792 3,887,264 3,489,290 3,504,424 Employee benefit liabilities 98 29 378,361 345,139 232,324 207,458 Total non current liabilities 4,174,589 4,272,357 3,741,034 3,711,882
Current liabilities Trade and other payables 100 30 726,277 742,172 415,749 447,414 Amounts due to related parties 101 33.3 69,364 77,351 56,372 65,799 Income tax liabilities 100 31 37,192 95,171 6,507 45,890 Interest bearing borrowings 96 27 208,797 146,619 31,286 - Other current liabilities 100 32 267,982 362,148 169,020 243,006 Bank overdrafts 771,836 193,674 509,712 117,418 Total current liabilities 2,081,448 1,617,135 1,188,646 919,527 Total liabilities 6,256,037 5,889,492 4,929,680 4,631,409 Total equity and liabilities 40,868,932 42,581,822 34,358,542 35,355,783
I certify that the financial statements comply with the requirements of The Board of Directors is responsible for the preparation and the Companies Act No. 7 of 2007. presentation of these financial statements.
C L P Gunawardane K N J Balendra J G A Cooray Director/ Chief Financial Officer Chairman Director
The accounting policies and notes as set out in pages 67 to 112 form an integral part of these financial statements.
24th May 2021 Colombo Annual Report 2020 | 2021 63
STATEMENT OF CHANGES IN EQUITY
GROUP Attributable to Owners of the Company Note Stated Revaluation Other Capital Revenue Total Non Total Capital Reserve Reserve Reserve controlling Equity In Rs. ’ 000s interest
As at 1st April 2019 3,345,117 21,386,255 146,154 7,907,652 32,785,178 3,646,757 36,431,935
Total comprehensive income (Loss)/profit for the year - - - (49,828) (49,828) 155,747 105,919 Other comprehensive income - 607,677 - 19,211 626,888 3,602 630,490 Total comprehensive income - 607,677 - (30,617) 577,060 159,349 736,409
Transactions with owners of the company Transferred to revenue reserve (Note a) - (10,911) - 10,911 - - - Share based payments 26.2 - - 22,042 - 22,042 1,309 23,351 Interim dividend paid - 2019/2020 13 - - - (442,775) (442,775) - (442,775) Subsidiary dividend to Non-controlling Interest - 2019/2020 - - - - - (56,590) (56,590) As at 31st March 2020 3,345,117 21,983,021 168,196 7,445,171 32,941,505 3,750,825 36,692,330 As at 1st April 2020 3,345,117 21,983,021 168,196 7,445,171 32,941,505 3,750,825 36,692,330
Total comprehensive income Loss for the year - - - (1,780,674) (1,780,674) (463,328) (2,244,002) Other comprehensive income - 136,436 - (1,869) 134,567 19,430 153,997 Total comprehensive income - 136,436 - (1,782,543) (1,646,107) (443,898) (2,090,005)
Transactions with owners of the company Transferred to revenue reserve (Note a) - (10,911) - 10,911 - - - Share based payments 26.2 - - 10,294 - 10,294 276 10,570
As at 31st March 2021 3,345,117 22,108,546 178,490 5,673,539 31,305,692 3,307,203 34,612,895
Note (a): According to the Sri Lanka Accounting Standard - 16 “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 amounting Rs. 10.91Mn. (Rs. 10.91 Mn in 2020).
Figures in brackets indicate deductions. The Notes to the Financial Statements from Pages 67 to 112 form an integral part of these Financial Statements. 64 Asian Hotels and Properties PLC
Statement of Changes in Equity
COMPANY Note Stated Revaluation Other Capital Revenue Total Capital Reserve Reserve Reserve Equity In Rs. ’ 000s
As at 1st April 2019 3,345,117 20,948,604 137,938 6,216,217 30,647,876
Total comprehensive income Loss for the year - - - (125,889) (125,889) Other comprehensive income - 608,523 - 15,602 624,125 Total comprehensive income - 608,523 - (110,287) 498,236
Transactions with owners of the company Share based payments 26.2 - - 21,037 - 21,037 Interim dividend paid - 2019/2020 13 - - - (442,775) (442,775)
As at 31st March 2020 3,345,117 21,557,127 158,975 5,663,155 30,724,374 As at 1st April 2020 3,345,117 21,557,127 158,975 5,663,155 30,724,374
Total comprehensive income Loss for the year - - - (1,425,256) (1,425,256) Other comprehensive income - 121,567 - (1,905) 119,662 Total comprehensive income - 121,567 - (1,427,161) (1,305,594)
Transactions with owners of the company Share based payments 26.2 - - 10,082 - 10,082
As at 31st March 2021 3,345,117 21,678,694 169,057 4,235,994 29,428,862
Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 67 to 112 form an integral part of these Financial Statements. Annual Report 2020 | 2021 65
STATEMENT OF CASH FLOWS
GROUP COMPANY For the year ended 31st March Note 2021 2020 2021 2020 In Rs. ’ 000s
Operating Profit/ (Loss) Before Working Capital Changes Profit/(Loss) before Tax (2,369,708) 199,311 (1,423,689) (61,309) Adjustments for: Finance Income 10 (33,509) (99,772) (29,780) (95,114) Dividend Income 6 - - - (43,412) Finance Cost 9 21,699 12,270 7,497 - Change in Fair Value of Investment Property 16 458,755 (153,015) 349,236 9,410 Depreciation of property, plant and equipment 14 526,458 574,885 351,993 386,891 (Profit)/loss on disposal of property, plant & equipment 7 (3,277) 20,640 (801) 24,579 Amortisation of right-of-use assets 15 12,404 12,404 - - Amortisation of intangible assets 17 672 817 355 376 Provision for doubtful debts 22 278,354 12,838 2,040 9,714 Employee benefit provision and related costs 29 76,072 75,688 50,091 51,356 Share based payment expenses 26 10,570 23,352 10,082 21,037 Provision/(reversal) made on slow moving Inventory (8,054) 231 - - Unrealised loss on foreign exchange 9 10,008 13,285 - - (1,019,556) 692,934 (682,976) 303,528
Cash Flows From/(Used in) Operating Activities Operating Profit/(Loss) Before Working Capital Changes (1,019,556) 692,934 (682,976) 303,528
Decrease in Inventories 32,283 2,357 20,906 6,194 Decrease in Trade and Other Receivables 250,010 120,592 138,702 79,390 (Increase)/Decrease in amounts due from Related Parties 60,167 23,168 28,950 (23,745) Decrease in Other Current Assets 14,024 16,257 1,925 11,660 Decrease in Trade and Other Payables (15,895) (8,697) (31,665) (7,568) Increase/(Decrease) in amounts due to Related Parties (7,987) (37,635) (9,427) 10,107 Decrease in Other Current Liabilities (94,166) (203,810) (73,986) (162,731) Cash Generated (used in)/from Operations (781,120) 605,166 (607,571) 216,835
Finance Income Received 10 33,509 99,772 29,780 95,114 Finance Cost Paid 9 (12,546) (3,536) (6,790) - Dividend Received 6 - - - 43,412 Tax Paid (108,125) (136,272) (75,874) (101,951) Gratuity Paid 29.1 (44,659) (71,103) (27,130) (51,947) Net Cash flows (used in)/from Operating Activities (912,941) 494,027 (687,585) 201,463 66 Asian Hotels and Properties PLC
Statement of Cash Flows
GROUP COMPANY For the year ended 31st March Note 2021 2020 2021 2020 In Rs. ’ 000s
Cash Flows From/(Used in) Investing Activities Purchase/Transfers and Construction of Property, Plant and Equipment 14 (250,251) (254,738) (233,729) (101,681) Addition /Transfers to Investment Property 16 - (1,010) - (1,010) Addition to Investment Property - Work in Progress 16.2 (113,015) - (113,015) - Addition to Intangible Assets 17 - (186) - - Proceeds from Sale of Property, Plant & Equipment 7,832 16,976 1,296 8,408 Proceeds from Other Assets (Net) 9,386 6,801 12,352 9,498 Net Cash flows used in Investing Activities (346,048) (232,157) (333,096) (84,785)
Cash Flows From/(Used in) Financing Activities Dividend Paid to Equity Holders of Parent 13 - (442,775) - (442,775) Dividend Paid to shareholders with non-controlling interest - (56,590) - - Repayment Long Term Borrowings 27 (12,500) (990) - - Proceeds from Long Term Borrowings 27 75,000 - 50,000 - Net Cash flows from/(used in) Financing Activities 62,500 (500,355) 50,000 (442,775)
Net decrease in Cash and Cash Equivalents (1,196,489) (238,485) (970,681) (326,097)
Cash and Cash Equivalents at the Beginning of the Year 773,573 1,012,058 739,086 1,065,183
Cash and Cash Equivalents at the end of the Year (422,916) 773,573 (231,595) 739,086
Analysis of Cash and Cash Equivalents Favourable Balances Cash and Bank 150,385 442,433 79,582 331,690 Short Term Investments 198,535 524,814 198,535 524,814 Unfavourable Balances Bank Overdrafts (771,836) (193,674) (509,712) (117,418) Total Cash and Cash Equivalents (422,916) 773,573 (231,595) 739,086
Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 67 to 112 form an integral part of these Financial Statements. Annual Report 2020 | 2021 67
NOTES TO THE FINANCIAL STATEMENTS
1 REPORTING ENTITY (b) Basis of Measurement Asian Hotels and Properties PLC is a public limited liability The financial statements have been prepared on the historical Company incorporated and domiciled in Sri Lanka and listed cost basis except for followings items, which are measured on an on the Colombo Stock Exchange. The registered office and alternative basis on each reporting date. principal place of business of the Company is located at No.77, » Freehold land and buildings which are measured at cost, Galle Road, Colombo 03. at the time of acquisition are subsequently recognised at revalued amounts which are the fair values at the date of Consolidated financial statements revaluation less accumulated depreciation and impairment The consolidated financial statements of the Company as at cost if any. and for the year ended 31st March 2021 comprise the financial » Investment properties which are stated at fair values. information of the Company and its subsidiary; Trans Asia Hotels » Defined benefit obligations are measured at its present value, PLC (together referred to as the ‘Group’ and individually as based on an actuarial valuation as explained in Note 29. ‘Group entities’).
(c) Presentation and Functional Currency Approval of financial statements The Financial Statements are presented in Sri Lankan Rupees, The financial statements for the year ended 31st March 2021 were the Group’s functional and presentation currency, which is the authorised for issue by the Board of Directors on 24th May 2021. currency of the primary economic environment in which the Group operates. Each entity in the Group uses the currency of Principal activities and nature of operations the primary economic environment in which they operate as The Principal activities of the Company and the Group during their functional currency. All values are rounded to the nearest the year were hoteliering and property development. There Sri Lankan Rupees thousand (Rs.’000) unless otherwise indicated. were no significant changes in the nature of the Principal activities of the Company and the Group during the financial (d) Use of estimates and judgements year under review. The preparation of the Financial Statements, management has made judgements, Estimates and assumptions that affect the The Group had 1,330 (2020 – 1,555) employees and the Company application of accounting policies and the reported amounts of had 806 (2020 - 943) employees as at the reporting date. assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions Responsibility for financial statements are reviewed on an ongoing basis. Revisions to accounting The responsibility of the Board of Directors in relation to the estimates are recognised prospectively. financial statements is set out in the Statement of Directors’ Responsibility report in the Annual report. i) Judgements Information about judgements made in applying accounting policies that have the most significant effects on the amounts 2 BASIS OF PREPARATION recognised in the financial statements is included in the (a) Statement of compliance following notes: The financial statements which comprise the income statement, » Consolidation: whether the Group has de facto control over statement of other comprehensive income, statement of an investee - Note 18 financial position, statement of changes in equity and the statement of cash flows, together with the accounting policies ii) Assumptions and estimation uncertainties and notes (the “financial statements”) have been prepared in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS) Information about assumptions and estimation uncertainties as issued by the Institute of Chartered Accountants of Sri Lanka that have a significant risk of resulting in a material adjustment in (CA Sri Lanka) and in compliance with the Companies the year ended 31 March 2021 is included in the following notes: Act No. 7 of 2007. » Measurement of Freehold land & buildings - Note 14 68 Asian Hotels and Properties PLC
Notes to the Financial Statements
» Measurement of Investment Properties - Note 16 The significant accounting estimates impacted by these » Measurement of Defined Benefit Plans - key actuarial forecasts and associated uncertainties are predominantly assumptions - Note 29 related to expected credit losses, fair value measurement, and recoverable amount assessments of non-financial assets. » Impairment test: key assumptions underlying recoverable amounts - Note 22 The impact of the COVID-19 pandemic on each of these » Recognition and measurement of provisions and accounting estimates is discussed further below and/or in the contingencies: key assumptions about the likelihood and relevant note to these Financial Statements. magnitude of an outflow of resources - Note 37 » Recognition of deferred tax assets; Availability of future taxable (e) Measurement of Fair Values: profits against which deductible temporary differences and A number of the Group’s accounting policies and disclosures tax loses carried forward can be utilised - Note 28 require the measurement of fair values for both financial and non-financial assets and liabilities. The Group regularly reviews iii) COVID-19 pandemic significant unobservable inputs and valuation adjustments. If third The ongoing COVID-19 pandemic has increased the estimation party information is used to measure fair values, Group assesses the uncertainty in the preparation of these Consolidated Financial evidence obtained from the third parties to support the conclusion Statements. that such valuations meet the requirements of SLFRS, including the level in the fair value hierarchy in which such valuations should be The estimation uncertainty is associated with: classified. Significant valuation issues are reported to the Group’s » the extent and duration of the disruption to business arising Audit Committee. When measuring the fair value of an asset or a from the actions by government, businesses and consumers liability, the Group uses observable market data as far as possible. Fair to contain the spread of the virus; values are categorised into different levels in a fair value hierarchy » the extent and duration of the expected economic based on the inputs used in the valuation techniques as follows: downturn (and forecasts for key economic factors including I. Level 1: Quoted prices (unadjusted) in active markets for GDP, employment and house prices). This includes the identical assets or liabilities. disruption to capital markets, deteriorating credit, liquidity II. Level 2: Inputs other than quoted prices included in Level concerns, increasing unemployment, declines in consumer 1 that are observable for the asset or liability, either directly discretionary spending, reductions in production because of (i.e. as prices) or indirectly (i.e. derived from prices). decreased demand, and other restructuring activities; and III. Level 3: Inputs for the asset or liability that are not based on » the effectiveness of Government and Central Bank measures observable market data (unobservable inputs). that have and will be put in place to support businesses and consumers through this disruption and economic downturn. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then The Group and Company has developed various accounting the fair value measurement is categorised in its entirety in the estimates in these Financial Statements based on forecasts same level of the fair value hierarchy as the lowest level input of economic conditions which reflect expectations and that is significant to the entire measurement. assumptions as at 31st March 2021 about future events that the Directors believe are reasonable in the circumstances. There The Group recognises transfers between levels of the fair value is a considerable degree of judgement involved in preparing hierarchy at the end of the reporting period during which the forecasts. The underlying assumptions are also subject to change has occurred. uncertainties which are often outside the control of the Group. Accordingly, actual economic conditions are likely to be different (f) Going Concern from those forecast since anticipated events frequently do not In determining the basis of preparing the financial statements occur as expected, and the effect of those differences may for the year ended 31 March 2021, based on available significantly impact accounting estimates included in these information, the management has assessed the prevailing and financial statements. anticipated effects of COVID-19 on the Group Companies and the appropriateness of the use of the going concern basis. Annual Report 2020 | 2021 69
It is the view of the management there are no material 3.1 Basis of Consolidation uncertainties that may cast significant doubt on the Groups’ (i) Business combinations ability to continue to operate as going concern due to the Business combinations are accounted for using the acquisition improved operating environment despite the ongoing effects method as at the acquisition date - i.e. when control is transferred of the pandemic and the operationalisation of risk mitigation to the Group. Control is the power to govern the financial and initiatives and continuous monitoring of business continuity operating policies of an entity so as to obtain benefits from its and response plans at each business unit level along with activities. In assessing control, the Group takes into consideration the financial strength of the Group. The management have potential voting rights that are currently exercisable. formed judgement that the Group and the Company have adequate resources to continue in operational existence for the (ii) Non-controlling interests foreseeable future and continue to adopt the going concern basis in preparing and presenting these financial statements. NCI are measured at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value at the The Government of Sri Lanka offered certain relief measures date of acquisition. including a moratorium on repayment of loans and concessionary working capital facilities for eligible industries. Changes in the Group’s interest in a subsidiary that do not result The Group qualified for such relief measures and it helped ease in a loss of control are accounted for as equity transactions. the financial position further during the financial year. On 19th March 2021, the Government issued a circular extending the (iii) Subsidiaries debt moratorium granted for tourism sector for another six Subsidiaries are those enterprises controlled by the Group. The months commencing 1st April 2021, which was availed by the Group controls an entity when it is exposed to, or has rights to, Company and its subsidiary. variable returns from its involvement with the entity and has the ability to affect those returns through its power over the In determining the above significant management judgements, entity. The financial statements of subsidiaries are included in estimates and assumptions the impact of the COVID-19 the consolidated financial statements from the date on which pandemic has been considered as of reporting date and specific control commences until the date on which control ceases. considerations have been disclosed under the relevant notes. (iv) Loss of control (g) Comparative Information When the Group loses control over a subsidiary, it derecognises The presentation and classification of the Financial Statements of the assets and liabilities of the subsidiary, and any related NCI the previous years have been amended, where relevant for better and other components of equity. Any resulting gain or loss is presentation and to be comparable with those of the current year. recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (v) Transactions eliminated on consolidation Summary of significant accounting policies have been disclosed Intra-group balances and transactions, and any unrealised along with the relevant individual notes in the subsequent income and expenses arising from intra-group transactions, are pages and those accounting policies presented with each note, eliminated in preparing the Consolidated Financial Statements. have been applied consistently by the Group and the Company. 3.2 Foreign Currency Transactions Other significant accounting policies not covered with Transactions in foreign currencies are translated to the individual notes respective functional currencies of Group entities at exchange The following accounting policies, which have been applied rates at the dates of the transactions. Monetary assets and consistently by the Company and the Group, are considered to liabilities denominated in foreign currencies at the reporting be significant but not covered in any other sections. date are retranslated to the functional currency at the exchange rate at that date. 70 Asian Hotels and Properties PLC
Notes to the Financial Statements
The foreign currency gain or loss on monetary items is the amount that would have been determined, net of depreciation difference between amortised cost in the functional currency or amortisation, if no impairment loss had been recognised. at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign 3.4 Financial instruments currency translated at the exchange rate at the end of the year. (i) Recognition and initial measurement Non-monetary assets and liabilities that are measured at fair value Trade receivables and debt securities issued are initially in a foreign currency are retranslated to the functional currency at recognised when they are originated. All other financial assets the exchange rate at the date that the fair value was determined. and financial liabilities are initially recognised when the Group Non-monetary items that are measured based on historical cost becomes a party to the contractual provisions of the instrument. in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on A financial asset (unless it is a trade receivable without a retranslation are recognised in income statement. significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value 3.3 Non Financial Assets impairment through profit or loss (FVTPL), transaction costs that are directly The carrying amounts of the Group/Company’s non-financial attributable to its acquisition or issue. A trade receivable without assets, other than inventories and deferred tax assets, are a significant financing component is initially measured at the reviewed at each reporting date to determine whether there is transaction price. any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment Financial Assets loss is recognised if the carrying amount of an asset exceeds its Classification and subsequent measurement of financial assets recoverable amount. On initial recognition, a financial asset is classified as measured at: For impairment testing, assets are grouped together into the amortised cost; fair value through other comprehensive smallest group of assets that generates cash inflows from income (FVOCI) continuing use that are largely independent of the cash inflows » debt investment; fair value through other comprehensive of other assets or CGUs. Goodwill arising from a business income (FVOCI) combination is allocated to CGUs or groups of CGUs that are » equity investment; or fair value through profit or loss (FVTPL). expected to benefit from the synergies of the combination.
The recoverable amount of an asset or Cash Generating Unit Financial assets are not reclassified subsequent to their initial (CGU) is the greater of its value in use and its fair value less costs recognition unless the Group changes its business model for to sell. In assessing value in use, the estimated future cash flows managing financial assets, in which case all affected financial are discounted to their present value using a pre-tax discount assets are reclassified on the first day of the first reporting period rate that reflects current market assessments of the time value of following the change in the business model. A financial asset money and the risks specific to the asset or CGU. For impairment is measured at amortized cost if it meets both of the following testing, assets are grouped together into the smallest group of conditions and is not designated as at FVTPL: assets that generates cash inflows from continuing use that are » it is held within a business model whose objective is to hold largely independent of the cash inflows of other assets or CGUs. assets to collect contractual cash flows; and » its contractual terms give rise on specified dates to cash flows Impairment losses are recognised in profit or loss. Impairment that are solely payments of principal and interest on the losses recognised in respect of CGUs are allocated to reduce the principal amount outstanding. carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. Groups’ consolidated financial assets classified and measured at amortised cost are limited to its trade debtors, related For other assets, an impairment loss is reversed only to the extent party receivables, short term investments and cash and that the asset’s carrying amount does not exceed the carrying cash equivalents. Annual Report 2020 | 2021 71
A debt investment is measured at FVOCI if it meets both of the » the frequency, volume and timing of sales of financial assets following conditions and is not designated as at FVTPL: in prior periods, the reasons for such sales and expectations » it is held within a business model whose objective is about future sales activity. achieved by both collecting contractual cash flows and selling financial assets; and, Transfers of financial assets to third parties in transactions that do not qualify for de-recognition are not considered sales for » its contractual terms give rise on specified dates to cash flows this purpose, consistent with the Group’s continuing recognition that are solely payments of principal and interest on the of the assets. principal amount outstanding.
Financial assets that are held for trading or are managed and On initial recognition of an equity investment that is not held for whose performance is evaluated on a fair value basis are trading, the Group may irrevocably elect to present subsequent measured at FVTPL. changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis. Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest All financial assets not classified as measured at amortised For the purposes of this assessment, ‘principal’ is defined as the cost or FVOCI as described above are measured at FVTPL. This fair value of the financial asset on initial recognition. ‘Interest’ is includes all derivative financial assets. On initial recognition, the defined as consideration for the time value of money and for Group may irrevocably designate a financial asset that otherwise the credit risk associated with the principal amount outstanding meets the requirements to be measured at amortised cost or at during a particular period of time and for other basic lending FVOCI as at FVTPL if doing so eliminates or significantly reduces risks and costs (e.g. liquidity risk and administrative costs), as well an accounting mismatch that would otherwise arise. Group’s as a profit margin. investment in equity investments are classified as Fair Value through OCI (FVOCI). In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the Financial assets - Business model assessment contractual terms of the instrument. This includes assessing The Group makes an assessment of the objective of the business whether the financial asset contains a contractual term that model in which a financial asset is held at a portfolio level could change the timing or amount of contractual cash flows because this best reflects the way the business is managed such that it would not meet this condition. In making this and information is provided to management. The information assessment, the Group considers: considered includes: » contingent events that would change the amount or timing » the stated policies and objectives for the portfolio and of cash flows; the operation of those policies in practice. These include » terms that may adjust the contractual coupon rate, including whether management’s strategy focuses on earning variable-rate features; contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets » prepayment and extension features; and to the duration of any related liabilities or expected cash » terms that limit the Group’s claim to cash flows from outflows or realising cash flows through the sale of the assets; specified assets (e.g. non-recourse features). » how the performance of the portfolio is evaluated and reported to the Group’s management; A prepayment feature is consistent with the solely payments » the risks that affect the performance of the business model of principal and interest criterion if the prepayment amount (and the financial assets held within that business model) and substantially represents unpaid amounts of principal and interest how those risks are managed; on the principal amount outstanding, which may include reasonable additional compensation for early termination » how managers of the business are compensated - e.g. of the contract. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and 72 Asian Hotels and Properties PLC
Notes to the Financial Statements
Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.
Financial assets - Subsequent measurement and gains and losses
Financial assets at amortized cost These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss. Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss. Financial assets at FVTPL These include Financial assets that the entity either holds for trading purposes or upon initial recognition it designates as at fair value through profit or loss. Debt instrument through FVOCI A Debt instrument that meets the cash flow characteristics test and is not designated at FVTPL under the Fair Value option must be measured at FVTOCI if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and sell financial assets.
Financial Liabilities The Group enters into transactions whereby it transfers assets Classification, subsequent measurement and gain and losses recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the Financial liabilities are classified as measured at amortised cost or transferred assets. In these cases, the transferred assets are not FVTPL. A financial liability is classified as at FVTPL if it is classified derecognised. as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at Financial liabilities fair value and gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are The Group derecognises a financial liability when its contractual subsequently measured at amortised cost using the effective obligations are discharged or cancelled, or expire. The Group interest method. Interest expense and foreign exchange gains also derecognises a financial liability when its terms are modified and losses are recognised in profit or loss. Any gain or loss on and the cash flows of the modified liability are substantially de-recognition is also recognised in profit or loss. different, in which case a new financial liability based on the modified terms is recognised at fair value. (i) De-recognition On de-recognition of a financial liability, the difference between Financial assets the carrying amount extinguished and the consideration paid The Group derecognises a financial asset when the contractual (including any non-cash assets transferred or liabilities assumed) rights to the cash flows from the financial asset expire, or it is recognised in profit or loss. transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of (ii) Offsetting ownership of the financial asset are transferred or in which the Financial assets and financial liabilities are offset and the net Group neither transfers nor retains substantially all of the risks amount presented in the statement of financial position when, and rewards of ownership and it does not retain control of the and only when, the Group currently has a legally enforceable right financial asset. to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Annual Report 2020 | 2021 73
(iii) Impairment The maximum period considered when estimating ECLs is the Financial instruments and contract assets maximum contractual period over which the Group is exposed to credit risk. The Group recognises loss allowances for Expected Credit Losses (ECLs) on: Measurement of ECL for trade debtors » financial assets measured at amortised cost; Given the nature of the trade debtors of the group, management » debt investments measured at FVOCI; and can identify key drivers behind the changes in credit risk for each » contract assets. debtor on individual basis. Accordingly the life time ECL will be assessed on an individual basis for trade debtors. The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at Presentation of allowance for ECL in the statement of 12-month ECLs: financial position » debt securities that are determined to have low credit risk at Loss allowances for financial assets measured at amortised cost the reporting date; and are deducted from the gross carrying amount of the assets. » other debt securities and bank balances for which credit risk For debt securities at FVOCI, the loss allowance is charged to (i.e. the risk of default occurring over the expected life of the profit or loss and is recognised in OCI. financial instrument) has not increased significantly since initial recognition. (iv) Write-off The gross carrying amount of a financial asset is written off Loss allowances for trade receivables is always measured at an when the Group has no reasonable expectations of recovering amount equal to lifetime ECLs. a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the gross When determining whether the credit risk of a financial carrying amount when the financial asset is 360 days past due asset has increased significantly since initial recognition and based on historical experience of recoveries of similar assets. when estimating ECLs, the Group considers reasonable and For corporate customers, the Group individually makes an supportable information that is relevant and available without assessment with respect to the timing and amount of write-off undue cost or effort. This includes both quantitative and based on whether there is a reasonable expectation of recovery. qualitative information and analysis, based on the Group’s The Group expects no significant recovery from the amount historical experience and informed credit assessment and written off. However, financial assets that are written off could including forward-looking information. still be subject to enforcement activities in order to comply with the Group’s procedures to recovery of amounts due. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. 4 STANDARDS ISSUED BUT NOT YET EFFECTIVE AND The Group considers a financial asset to be in default when: CHANGES IN ACCOUNTING STANDARDS » the borrower is unlikely to pay its credit obligations to the 4.1 Standards issued but not yet effective Group in full, without recourse by the Group to actions such The following amendments and improvements are not as realising security (if any is held); or expected to have a significant impact on the Group’s financial » the financial asset is more than 90 days past due. statements. » Amendments to SLFRS 7, SLFRS 9 and LKAS 39: Interest Rate Lifetime ECLs are the ECLs that result from all possible default Benchmark Reform - Phrase 1. events over the expected life of a financial instrument. » Amendments to SLFRS 9, LKAS 39, SLFRS 7, SLFRS 4 and SLFRS 16 : Interest Rate Benchmark Reform - Phrase 2. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting » Amendments to LKAS 1: Classification of liabilities as Current date (or a shorter period if the expected life of the instrument is or Non-current. less than 12 months). 74 Asian Hotels and Properties PLC
Notes to the Financial Statements
» Amendments to SLFRS 3: Reference to the Conceptual Framework. » Amendments to LKAS 16: Property, Plant & Equipment - Proceeds before Intended Use. » Amendments to LKAS 37: Onerous Contracts - Cost of Fulfilling a Contract.
4.2 Changes in accounting standards The following amendments and improvements do not expect to have a significant impact on the Group's financial statements. » Amendments to SLFRS 3: Definition of a Business. » Amendments to LKAS 1 and LKAS 8: Definition of Material. » Conceptual Framework for Financial Reporting.
5 REVENUE Accounting policy Contracts with customers Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.
Performance obligations and significant judgements The Group’s performance obligations and significant judgements are summarised below: The revenue for providing the services are usually recognised at or after the guests’ departure, over the period of stay or at the point of arrival of guests. The entity identifies the services under each contract as one performance obligation. The revenue is accounted based on the output method. Since revenue will be based on the final good or service provided, the output method will provide a faithful depiction in recognising revenue. Accordingly revenue is recognised on the rooms occupied on daily basis and food and beverages and hotel related sales are accounted for at the time of sale and rental income is recognised on an accrual basis.
When obtaining destination management service (travel agents), the entity acts as the principal. Customer receives and consumes the benefits of the entity’s performance, as and when the service is performed. Therefore, revenue is recognised at gross over the period, based on the output method. The timing and the amount of cashflow will vary according to the agreements. Transaction price shall comprise of supplier fee and company mark-up, summing up to be the gross service fee. The advance payments are recognised as a liability. Upon provision of the services, the liability is set off and revenue is recognised over the period.
GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
REVENUE Rooms 76,976 1,900,686 38,918 1,077,115 Food & Beverage 1,441,573 2,983,612 797,453 1,717,022 Rental Income from Investment Property 148,527 320,079 83,479 255,031 Other Revenue 123,040 355,173 59,298 181,785 Total Revenue 1,790,116 5,559,550 979,148 3,230,953 Annual Report 2020 | 2021 75
6 DIVIDEND INCOME Accounting policy Dividend income is recognised when right to receive the payment is established. GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Dividend from Subsidiary (Trans Asia Hotels PLC) - - - 43,412 - - - 43,412
7 OTHER OPERATING INCOME Accounting policy Other income is recognised on an accrual basis. Net 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 income statement, after deducting the proceeds from disposal, the carrying amount of such assets and the related selling expenses. 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.
GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Exchange gain/(loss) (880) 5,266 (1,185) 3,832 Profit/(Loss) on disposal of property, plant & equipment 3,277 (20,640) 801 (24,579) Car park income 6,684 14,605 6,684 14,605 Promotional income 3,605 9,362 3,605 9,362 Taxi line commission 29 4,123 29 4,123 Insurance claim 149,382 74,313 149,382 74,313 Sundry income 42,247 14,709 41,311 12,503 204,344 101,738 200,627 94,159
8 PROFIT FROM OPERATIONS Accounting policy Expenditure recognition Expenses are recognised in the income statement 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 income statement.
For the purpose of presentation of the income statement, the “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the Company’s and Group’s performance. 76 Asian Hotels and Properties PLC
Notes to the Financial Statements
Profit/(Loss) Before Tax is stated after charging all expenses including the following; GROUP COMPANY For the year ended 31st March Note 2021 2020 2021 2020 In Rs. ’ 000s
Remuneration to executive directors 34,532 44,387 34,532 44,387 Remuneration to non executive directors 7,320 11,100 2,400 5,100
Remuneration to Auditors Audit 1,850 1,850 1,150 1,150 Audit related service - fee - 157 - 75
Cost of defined employee benefits Defined benefit plan cost 29 64,866 64,809 38,885 40,477 Defined contribution plan cost - EPF and ETF 137,326 161,387 90,061 107,233 Other long term employee benefit cost 11,206 10,879 11,206 10,879 Staff Expenses 1,204,379 1,604,942 703,312 979,147 Depreciation of property, plant and equipment 14 526,458 574,885 351,993 386,891 Amortisation of leasehold property 15 12,404 12,404 - - Donations/CSR 19 2,238 - 1,720 Amortisation of intangible assets 17 672 817 355 376 Provision for impairment losses on trade and other receivables 22 278,354 12,838 2,040 9,714
9 FINANCE COST Accounting policy Finance costs comprise interest expense on borrowings, overdraft and exchange loss on borrowings. Interest expenses are recognised using the effective interest method.
Borrowing cost Borrowing 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 capitalised as part of that asset.
GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Interest expense on long term borrowings 9,153 10,647 707 - Exchange loss on long term borrowings 10,008 13,285 - - Interest expense on Bank overdraft 12,546 1,623 6,790 - 31,707 25,555 7,497 - Annual Report 2020 | 2021 77
10 FINANCE INCOME Accounting policy Finance income Finance income comprises interest income derived on funds invested as Fixed Deposits and Savings. Interest income is recorded as it accrues using the effective interest rate (EIR).
GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Interest income on loans to employees 3,788 5,778 2,342 4,562 Income from short term investments 29,721 93,994 27,438 90,552 33,509 99,772 29,780 95,114
11 INCOME TAX EXPENSE Accounting policy Income tax expenses comprise of current and deferred tax. It is recognised in profit or loss except items recognised directly in equity or in Other Comprehensive Income.
Current Tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. Current tax assets and liabilities are offset only if certain criteria are met.
The subsidiary company is liable for taxation at the rate of 14% as per the first schedule of the Inland Revenue Act, No. 24 of 2017, on its profits derived from “promotion of tourism” Income tax for any other income is computed at 24%. In accordance with BOI agreement dated 11th March 1994 the profits and income of the company were exempt from taxation until 2014 and at the expiry of said period the following options were available for the Company. (a) Income tax payable for the year of assessment shall be computed at 2% of the turnover of the Company or (b) To adapt the provisions of the Inland Revenue Laws for the time being imposed.
The Board of the Company resolved to compute the income tax payable at 2% of the turnover of the Company with effective from 01st April 2014. The Group is liable for Income Tax on any other income at 24%.
The Group has complied with the arms’ length principles relating to transfer pricing as prescribed in the Inland Revenue Act. GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Income tax expense Current tax charge (Note 11.1) 50,146 93,242 36,491 65,520 (Reversal)/Charge for deferred tax (Note 11.2) (175,852) 150 (34,924) (940) (125,706) 93,392 1,567 64,580 78 Asian Hotels and Properties PLC
Notes to the Financial Statements
11.1 Reconciliation between Income Tax Expense and the Product of Accounting Profit For the year ended 31st March 2021 2020 In Rs. ‘000s
COMPANY Taxable Revenue 1,169,675 3,424,064 Income Tax charged at Standard rate of 24% 6,910 6,313 Concessionary rate of 14% - 9,650 Concessionary rate of 2% 22,818 66,479 Under/(Over) provision on income tax for previous years 6,763 (16,922) Current income tax charge 36,491 65,520
SUBSIDIARY (Loss)/Profit Before Tax (946,019) 304,032 Income not liable for income tax (1,695) - Accounting profit chargeable to income taxes (947,714) 304,032 Disallowable expenses 495,706 234,941 Allowable expenses (187,410) (384,822) Tax losses not utilised 696,278 - Taxable Income 56,860 154,151
Income Tax charged at Standard rate of 24% 13,646 4,061 Concessionary rate of 14% - 19,212 Current income tax charge 13,646 23,273 Under provision on income tax for previous years 9 4,449 Total income tax expense 13,655 27,722
GROUP Company 36,491 65,520 Subsidiary 13,655 27,722 Group current income tax charge 50,146 93,242
11.2 Provision for Deferred Tax GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Deferred Tax arising from Change in fair value of investment property (35,341) (2,032) (34,924) (940) Benefit arising from tax losses and other credits (97,479) - - - Accelerated depreciation for tax purposes (1,338) 2,907 - - Others (ROU assets/liabilities, trade receivables etc) (40,511) - - - Employee benefits (1,183) (725) - - Total deferred tax (reversal)/charge (175,852) 150 (34,924) (940) Annual Report 2020 | 2021 79
Deferred tax liability has been computed taking into consideration the tax rate of 14% applicable for the tourism industry and 10% applicable on the investment property as per the Inland Revenue Act No. 24 of 2017.
The Inland Revenue (Amendment) Bill, to amend the Inland Revenue Act, No. 24 of 2017, incorporating announcements implemented by the Inland Revenue Circular Nos. PN/IT/2020-03 (Revised) and PN/IT/2021-01 was Gazetted on 18th March 2021.
As the Bill has been Gazetted and also printed by order of Parliament as of the reporting date, the Group’s management, having applied significant judgement have concluded the provisions of the Inland Revenue (Amendment) Bill to be substantially enacted, and have relied upon the income tax rates specified therein to calculate the income tax liability and deferred tax provision for the 2020/21 financial year of the Group.
11.3 Tax Losses Carried Forward GROUP For the year ended 31st March 2021 2020 In Rs. ’ 000s
Tax losses arising during the year 696,278 - 696,278 -
12 LOSS PER SHARE Accounting policy Basic EPS is calculated by dividing the profit/(loss) for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. The basic earnings/(loss) per share is based on the profit attributable to Asian Hotels & Properties PLC. Diluted EPS is calculated by dividing the profit/(loss) attributable to ordinary equity holders of the parent (after adjusting outstanding share option scheme and warrants) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Net Loss for the year (Rs.) (1,780,674) (49,828) (1,425,256) (125,889) Number of ordinary shares 442,775 442,775 442,775 442,775 Basic/Diluted* loss per share (Rs.) (4.02) (0.11) (3.22) (0.28)
*Diluted loss per share
There was no dilution of ordinary shares outstanding at any time during the year. Therefore, diluted loss per share is the basic loss per share.
13 DIVIDEND PER SHARE GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Interim dividend paid-2019/2020 - 442,775 - 442,775 Total Dividends - 442,775 - 442,775 Dividend Per Share (Rs.) - 1.00 - 1.00 80 Asian Hotels and Properties PLC
Notes to the Financial Statements
14 PROPERTY, PLANT AND EQUIPMENT Accounting policy Basis of recognition Property, plant and equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the company and the cost of the asset can be reliably measured.
Basis of measurement All items of property, plant and equipment are initially recorded at cost. Where items of property, plant and equipment are subsequently revalued, the entire class of such assets is revalued at fair value. The Group applies cost model to property, plant and equipment except for land and buildings and records at cost of purchase or construction together with any incidental expenses thereon less accumulated depreciation and any accumulated impairment losses. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
Revaluation of land and buildings The Group applies the re-valuation model to land and buildings. The Group has adopted a policy of revaluing assets at least every five years.
When an asset’s carrying amount is increased as a result of a revaluation, the increase shall be recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.
When an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus.
The revaluation surplus included in equity in respect of an item of property, plant and equipment may be transferred directly to retained earnings when the asset is derecognised.
The Group uses the revaluation model of measurement of land and buildings. The Group engaged independent expert valuers to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence of transaction prices for similar properties. Valuations are based on open market prices, adjusted for any difference in the nature, location, or condition of the specific property. These valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The date of the most recent revaluation was carried out on 31st December 2020.
Consequently, as at the reporting date, the value reflected represents the best estimate based on the market conditions that prevailed, which in their considered opinion, meets the requirements in SLFRS-13 Fair Value Measurement. Annual Report 2020 | 2021 81
De-recognition An item of property, plant and equipment is de-recognised 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 income statement in the year the asset is de-recognised.
Impairment The Group has not determined impairment as at the reporting date due to the COVID-19 pandemic. The Group and the Company implemented its business continuity plans which were operationalised during the early days of the pandemic. Businesses also developed and instituted COVID-19 specific response plans and teams to enable smooth and uninterrupted functioning of businesses and operations to the extent possible, whilst maintaining strict adherence to Government directives and health and safety considerations in situations where normal operations are disrupted.
Depreciation Depreciation is calculated by using 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. The estimated useful life of assets is as follows: Assets Years Buildings 75 Plant and Machinery 10-20 Motor Vehicles 4-10 Vessel of Floating Restaurant 18 Furniture, Furnishings Equipment 5-15 Computers 5 Base Stock/Circulating Assets 3-10 Outdoor Carpark Development 10
The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end.
Buildings of the subsidiary are depreciated using straight line method in order to depreciate over the balance lease period of 59 years. Depreciation of an assets ceases at the earlier of the date that the asset is classified as held for sale and the date that asset is de- recognised.
Capital work-in-progress Capital work-in-progress is stated at cost. These are expenses of a capital nature directly incurred on property, plant and equipment, awaiting capitalisation. 82 Asian Hotels and Properties PLC
Notes to the Financial Statements
14.1 GROUP As at 31st March Freehold Buildings Outdoor Plant & Base Furniture, Motor Capital Total Total Land Carpark Machinery Stock & Fittings & Vehicles Work In 2021 2020 In Rs. ‘000s Development Circulating Equipment Progress Assets
Cost or Valuation At the beginning of the year 23,501,000 8,104,057 11,783 1,597,144 1,836,973 2,897,678 87,521 49,619 38,085,775 37,433,599 Additions - 3,296 - 9,357 4,351 13,209 - 220,038 250,251 254,738 Disposals - - - (13,043) (47,660) (20,681) - - (81,384) (191,358) Revaluations gain - 181,186 ------181,186 705,637 Depreciation adjustment on revaluation - (137,344) ------(137,344) (116,841) Transfers from work in progress - 172,640 - 4,438 12,942 79,527 - (269,547) - - At the end of the year 23,501,000 8,323,835 11,783 1,597,896 1,806,606 2,969,733 87,521 110 38,298,484 38,085,775
Accumulated Depreciation At the beginning of the year - 93,377 11,390 845,306 1,338,678 1,446,899 52,206 - 3,787,856 3,483,619 Charge for the year - 176,647 393 65,125 114,094 166,622 3,577 - 526,458 574,885 Disposals - - - (11,425) (46,384) (19,019) - - (76,828) (153,807) Depreciation adjustment on revaluation - (137,344) ------(137,344) (116,841) At the end of the year - 132,680 11,783 899,006 1,406,388 1,594,502 55,783 - 4,100,142 3,787,856
Carrying Value As at 31st March 2021 23,501,000 8,191,155 - 698,890 400,218 1,375,231 31,738 110 34,198,342 - As at 31st March 2020 23,501,000 8,010,680 393 751,838 498,295 1,450,779 35,315 49,619 - 34,297,919
Note-14.1. a Freehold Land and Buildings of the Group were valued by M/s. P.B. Kalugalagedara & Associates, an independent Chartered Valuer as at 31st December 2020, and the book values were written up to correspond with the valuation. Further there is no significant value change as at 31st March 2021.
Had the revalued buildings of the Group been included at cost, the carrying value of the said asset would amount to Rs.5,057 Mn. (Rs.5,048 Mn in 2020) had the revalued Land of Group been included at cost, the carrying value of the said asset would amount to Rs. 470 Mn (Rs.470 Mn in 2020). (Details of the fair value hierarchy is given in note 14.3) Annual Report 2020 | 2021 83
Note-14.1. b Details of Groups’ Land and Building stated at valuation are indicated below; Fair Value as at 31.12.2020 Property Land/Building Extent Location In Rs. ‘000s
Freehold Land and Building Company Land (I) A06 - R2- P22.21 No. 77, Galle Road, Colombo 03 23,501,000 Land (II) A01 - R1- P22.87 No. 77, Galle Road, Colombo 03 Building - Stage(I) 348,818 Sq Ft No. 77, Galle Road, Colombo 03 Building - Stage (II) & (III) 299,975 Sq Ft No. 77, Galle Road, Colombo 03 5,551,000 Life style Building 49,280 Sq.Ft No. 77, Galle Road, Colombo 03 New Associate Life Style Building 36,859 Sq. Ft No. 77, Galle Road, Colombo 03
Investment Properties Company Building 145,196 Sq Ft No. 89, Galle Road, Colombo 03 No. 117, Sir Chittampalam A. Gardiner Subsidiary Building 55,548 Sq Ft Mawatha, Colombo 02. Note 16 No. 117, Sir Chittampalam A. Gardiner Land A01 - R02- P30.0 Mawatha, Colombo 02.
Leasehold Properties Subsidiary Building 316,063 Sq Ft No. 115, Sir Chittampalam A. Gardiner 2,659,927 Mawatha, Colombo 02. No. 115, Sir Chittampalam A. Gardiner Land A05 - R02- P34.28 Mawatha, Colombo 02. Note 15
Note-14.1.c The Vessel of floating restaurant of the Subsidiary has been classified under Motor Vehicles.
Note-14.1.d The cost of the fully depreciated assets in the Group which are still in use of the Group amounting Rs. 2,162 Mn (Rs. 1,563 Mn in 2020).
Note-14.1.e There are no assets pledged as at the reporting date that require disclosure in the Group. 84 Asian Hotels and Properties PLC
Notes to the Financial Statements
14.2 COMPANY Freehold Buildings Outdoor Plant & Base Stock & Furniture, Motor Capital Total Total Land Carpark Machinery Circulating Fittings & Vehicles Work In 2021 2020 As at 31st March Development Assets Equipment Progress In Rs. ‘000s
Cost or Valuation At the beginning of the year 23,501,000 5,407,198 11,783 934,004 920,539 1,988,194 13,495 19,445 32,795,658 32,236,723 Additions - 108 - 889 2,650 10,044 - 220,038 233,729 101,681 Disposals - - - - (37,201) (704) - - (37,905) (133,490) Revaluations gain - 141,357 ------141,357 707,585 Depreciation adjustment on revaluation - (137,344) ------(137,344) (116,841) Transfers from work in progress - 151,009 - - 12,856 75,618 - (239,483) - - At the end of the year 23,501,000 5,562,328 11,783 934,893 898,844 2,073,152 13,495 - 32,995,495 32,795,658
Accumulated Depreciation At the beginning of the year - 31,975 11,390 511,466 581,511 895,395 13,495 - 2,045,232 1,875,685 Charge for the year - 127,907 393 38,034 68,799 116,860 - - 351,993 386,891 Disposals - - - - (36,976) (433) - - (37,409) (100,503) Depreciation adjustment on revaluation - (137,344) ------(137,344) (116,841) At the end of the year - 22,538 11,783 549,500 613,334 1,011,822 13,495 - 2,222,472 2,045,232
Carrying Value As at 31st March 2021 23,501,000 5,539,790 - 385,393 285,510 1,061,330 - - 30,773,023 - As at 31st March 2020 23,501,000 5,375,223 393 422,538 339,028 1,092,799 - 19,445 - 30,750,426
Note-14.2.a Freehold Land and Buildings of Asian Hotels and Properties PLC were valued by M/s. P.B. Kalugalagedara & Associates, an independent Chartered Valuer as at 31st December 2020, and the book values were written up to correspond with the valuation. Valuation Method used is direct capital comparison approach. Further there is no significant value change as at 31st March 2021.
Note-14.2.b Had the revalued Buildings of the company been included at cost, the carrying value of the said asset would amount to Rs. 3,530 Mn. (Rs. 3,497 Mn in 2020) Had the revalued Land been included at cost, the carrying value of the said asset would amount to Rs. 470 Mn (Rs. 470 Mn in 2020).
Note-14.2.c The cost of the fully depreciated assets which are still in use of the Company amounting Rs. 1,030 Mn (Rs. 546 Mn in 2020).
Note-14.2.d There are no assets pledged as at the reporting date that require disclosure in the Company. Annual Report 2020 | 2021 85
14.3 Details of Group’s land, building and other properties stated at valuation are indicated below; Method of valuation Effective date of valuation Property valuer Buildings on leasehold land of Direct Capital Comparison P B Kalugalagedara, Chartered Trans Asia Hotels PLC. Method 31-Dec-20 Valuation Surveyor Land and building of Asian Direct Capital Comparison P B Kalugalagedara, Chartered Hotels and Properties PLC. Method 31-Dec-20 Valuation Surveyor
(i) Fair value hierarchy The fair value of property was determined by external independent property values having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued.
The fair value measurement for all of properties has been categorised as level 03 fair value based on the input to the valuation technique used.
(ii) Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of property, as well as the significant unobservable inputs used.
Valuation Technique Significant Estimates for Interrelationship between Unobservable Inputs Unobservable Inputs Key Unobservable Inputs and Fair Value Measurements GROUP Direct Capital Comparison Estimated price per square Rs. 7,500/- per sq. ft. Positive correlated sensitivity Method feet of building Rs. 5,975/- per sq. ft. Rs. 3,350/- per sq. ft. Rs. 500/- per sq. ft Rs. 400/- per sq.ft. Capitalisation rate 6.25% & 3% for 59 years Negative correlated sensitivity COMPANY Direct Capital Comparison Estimated price per Rs. 13,000/- per sq. ft. Positive correlated sensitivity Method square feet of building Rs. 9,000/- per sq. ft. Rs. 8,750/- per sq. ft. Rs. 8,000/- per sq. ft. Rs. 5,000/- per sq. ft. Rs. 3,500/- per sq. ft. Rs. 3,000/- per sq. ft. Rs. 2,000/- per sq. ft. Estimated cost per Rs. 19 Mn per perch Positive correlated sensitivity perch of land Rs. 16.5 Mn per perch
(iii) Summary description of valuation methodologies Direct capital comparison method This method may be adopted when the rental value is not available from the property concerned, but there are evidences of sale price of properties as a whole. In such cases, the capitalised value of the property is fixed by direct comparison with capitalised value of similar property in the locality. 86 Asian Hotels and Properties PLC
Notes to the Financial Statements
Investment/ income method This method involves capitalisation of the expected rental income at an appropriate rate of years purchase currently characterised by the real estate market.
15 RIGHT OF USE ASSET Accounting policy The Group recognises right of use assets when the underlying asset is available for use. Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life or the lease term. Right of use assets are subject to impairment.
As at 31st March GROUP In Rs. ‘000s 2021 2020
Cost 945,160 945,160
Accumulated amortisation At the beginning of the year 200,920 188,516 Charge for the year 12,404 12,404 Balance at the end of the year 213,324 200,920 Carrying amount 731,836 744,240
Leasehold property is the land which the hotel (Cinnamon Lakeside Hotel) is located. The leasehold land is on a 99 years long term lease agreement entered with the Urban Development Authority, Sri Lanka, which commenced from 7th August 1981 and is being amortised on a straight line basis over a period of 94 years which commenced from 1st April 1986.
15.1 Details of Leasehold Property Property Land extent (in acres) Lease period GROUP In Rs. ‘000s 2021 2020
Trans Asia Hotels PLC A07 - R01 - P24.28 99 years from 7th August 1981 731,836 744,240 731,836 744,240
The Group has not determined Impairment as at the reporting date due to the COVID-19 pandemic. The Group implemented its business continuity plans which were operationalised during the early days of the pandemic. Businesses also developed and instituted COVID-19 specific response plans and teams to enable smooth and uninterrupted functioning of businesses and operations to the extent possible, whilst maintaining strict adherence to Government directives and health and safety considerations in situations where normal operations are disrupted. Annual Report 2020 | 2021 87
16 INVESTMENT PROPERTY Accounting policy Basis of recognition and measurement Investment property is 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 Income Statement.
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 gains or losses on retirement or disposal are recognised in Income Statement in the year of retirement or disposal. Transfers are made to and from investment property only when there is a change in use in accordance with the criteria listed in Sri Lanka Accounting Standard 40 “Investment Property”.
GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 5,464,025 5,310,000 2,589,000 2,597,400 Additions - 1,010 - 1,010 Change in fair value during the year (458,755) 153,015 (349,236) (9,410) At the end of the year 5,005,270 5,464,025 2,239,764 2,589,000
16.1 Valuation details of investment property Investment properties of the Group were valued by a qualified professional valuer as at 31st December 2020, details of which are as follows;
In order to adopt the Fair Value model on Investment Property, as per Sri Lanka Accounting Standard 40 “Investment Property” the Land & Building classified as Investment Property of Asian Hotels and Properties PLC which includes Crescat Boulevard was valued by Mr. P.B. Kalugalagedera, a Chartered Valuation Surveyor using Investment/Income method of valuation on 31st December 2020.
The Commercial Centre of Trans Asia Hotels PLC was valued by Mr. P.B. Kalugalagedera, a Chartered Valuation Surveyor using the direct capital comparison method on 31st December 2020.
Changes in the values are recognised as gains/losses in Income Statement. All gain are unrealised. Further there is no significant value change as at 31st March 2021 as per Valuer’s statement.
Consequently, as at the reporting date, the value reflected represents the best estimate based on the market conditions that prevailed, which in considered opinion, meets the requirements in SLFRS-13 Fair Value Measurement.
Rental Income earned from Investment Property by the Company and Group amounted to Rs. 83 Mn (2020 Rs. 255 Mn) and Rs. 149 Mn (2020 Rs. 320 Mn) respectively. Direct Operating Expenses incurred by the Company and Group amounted to Rs. 73 Mn (2020 Rs. 102 Mn) and Rs. 81 Mn (2020 Rs. 110 Mn) respectively. 88 Asian Hotels and Properties PLC
Notes to the Financial Statements
The methods used by the valuer are as follows; Property Method of Valuation Fair Value as at 31.12.2020 In Rs. ‘000s Asian Hotels and Properties PLC. Investment Income Method 2,239,764 Crescat Boulevard, Colombo 3 Trans Asia Hotels PLC. Direct Capital Comparison Method 2,765,506 Commercial Centre, Colombo 2
(i) Fair Value Hierarchy The fair value of property was determined by external independent property valuer having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The fair value measurement for all of properties has been categorised as level 03 fair value based on the input to the valuation technique used.
(ii) Valuation Technique and Significant Unobservable Inputs The following table shows the valuation technique used in measuring the fair value of investment property, as well as the significant unobservable inputs used:
Valuation Technique Significant Estimates for Interrelationship between Key Unobservable Inputs Unobservable Inputs Unobservable Inputs and Fair Value Measurements Direct Capital Comparison Capitalisation rate 6.25% & 3% for 59 years Negatively correlated sensitivity Method Estimated price per square feet Rs. 3,725/- per sq. ft Positively correlated sensitivity Estimated price per perch Rs. 14.5 Mn per perch Positively correlated sensitivity Investment/Income method Annual rent income Rs. 196.5 Mn Positively correlated sensitivity Capitalisation rate 6.25% Negatively correlated sensitivity
Refer Note 14.3 for summary description of valuation methodologies
16.2 Investment Property - work in progress Crescat mall was closed for refurbishment on 31.12.2020 due to the construction work which commenced on 05.03.2021. The total cost incurred as at 31st March 2021 is Rs. 113 Mn. Annual Report 2020 | 2021 89
17 INTANGIBLE ASSETS Accounting policy Basis of Recognition An intangible asset is an identifiable non monetary asset without physical substance held for use in the production or supply goods or other services, rental to others or for administrative purposes. An intangible asset is initially recognised at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
(i) Computer software All 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 is 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) Amortisation Intangible 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. Intangible assets are amortised on a straight line basis in the Income Statement 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 5 years. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year- end.
Amortisation shall cease at the earlier of the date that the asset is classified as held for sale or the date that asset is de-recognised.
(iii) De-recognition An intangible asset is de-recognised on disposal or when no future economic benefits are expected from its use and subsequent disposal.
GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Computer Software Cost At the beginning of the year 34,459 34,767 7,595 8,089 Additions - 186 - - Disposals - (494) - (494) At the end of the year 34,459 34,459 7,595 7,595
Accumulated Amortisation At the beginning of the year 32,107 31,784 6,249 6,367 Amortisation 672 817 355 376 Disposals - (494) - (494) At the end of the year 32,779 32,107 6,604 6,249
Carrying value As at 31st March 1,680 2,352 991 1,346 90 Asian Hotels and Properties PLC
Notes to the Financial Statements
18 INVESTMENT IN SUBSIDIARY Accounting policy Investment in subsidiaries is initially recognised at cost in the financial statements of the Company. Any transaction cost relating to acquisition of investment in subsidiaries is immediately recognised in the income statement. After the initial recognition, Investments in subsidiaries are carried at cost less any accumulated impairment losses.
The Company has not determined impairment as at the reporting date due to the COVID-19 pandemic. COMPANY As at 31st March 2021 2020 In Rs. ‘000s
Carrying value Investments in subsidiary at cost 660,045 660,045 660,045 660,045
Number of Effective Cost of Market shares holding % Investment Value
2021 Trans Asia Hotels PLC. (Quoted) 86,823,028 43.41% 660,045 4,853,407 2020 Trans Asia Hotels PLC. (Quoted) 86,823,028 43.41% 660,045 4,888,136
Power and exposure, or rights, to variable returns Asian Hotels & Properties PLC (AHP) consider Trans Asia Hotels PLC (TAH) as a subsidiary since the AHP has power and exposure, right to variable return and ability to use its powers over TAH, based on the factors mentioned below even though it has only 43.41% ownership.
It is AHP that strategises the marketing, positioning and sales of TAH, thereby, affecting the operating return, in addition to the dividend. This duly approved operating model established for AHP and TAH is driven by AHP as the lead.
AHP is exposed to variable returns from its involvement with TAH as a result of its performance. In addition AHP has quantitative, and qualitative, returns that are not available to other interest holders, due to its ability to use TAH’s assets in combination with its own to achieve economies of scale, cost savings and other synergies in their mutual interest.
In addition to having the lead of the operating model, AHP also has the right to nominate directors to the TAH board. JKH had assigned the power to AHP in order to nominate Directors to TAH. Annual Report 2020 | 2021 91
Non Controlling Interest in subsidiary The following table summarises the information relating to the Group’s subsidiary that has NCI. As at 31st March 2021 2020 In Rs. ‘000s
NCI percentage 56.59% 56.59%
Non current assets 6,937,922 7,179,368 Current assets 234,368 707,565 Non current liabilities (433,556) (560,474) Current liabilities (894,587) (698,389) Net assets 5,844,147 6,628,070 Net assets attributable to NCI 3,307,203 3,750,825
Revenue 810,968 2,328,597 (Loss)/ Profit for the year (818,746) 275,220 Other comprehensive income 34,335 6,365 Total Comprehensive income (784,411) 281,585 (Loss)/Profit allocated to NCI (463,328) 155,747 OCI allocated to NCI 19,430 3,602
Cash flow from operating activities (102,647) 209,388 Cash flow from investing activities (5,652) (81,872) Cash flow from financing activities 7,074 (57,150) Net increase in cash and cash equivalents (101,225) 70,365
19 NON CURRENT FINANCIAL ASSETS Loans to executives Refer Note 35.1.3 GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 39,816 46,098 28,144 36,424 Loans granted/(transfers) 14,000 27,446 3,000 17,540 Recoveries (16,859) (33,728) (9,916) (25,820) At the end of the year 36,957 39,816 21,228 28,144
Receivable within one year (Note 22) 9,235 8,359 6,054 5,912 Receivable between one and five years 27,722 31,457 15,174 22,232 36,957 39,816 21,228 28,144 92 Asian Hotels and Properties PLC
Notes to the Financial Statements
20 OTHER NON CURRENT ASSETS GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Prepaid cost of staff motor vehicle loan 3,009 8,660 985 6,279
21 INVENTORIES Accounting policy Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price less estimated costs of completion and the estimated costs necessary to make the sale. GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Food & Beverage 69,677 95,914 47,832 64,288 General 4,785 6,218 2,573 3,927 Diesel/Furnace/Gas Stock 13,521 16,486 8,665 10,748 Engineering Stock 19,820 21,468 11,480 12,493 Provision for slow moving inventory (718) (8,772) - - 107,085 131,314 70,550 91,456
22 TRADE AND OTHER RECEIVABLES Accounting policy Refer note 3.4 for accounting policy of financial instruments GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Trade receivables 364,696 608,127 49,307 179,880 Other receivables 91,991 99,446 57,568 65,839 Loans to executives (Note 19) 9,235 8,359 6,054 5,912 Less: Impairment (Note 22.1) (303,316) (24,962) (13,950) (11,910) 162,606 690,970 98,979 239,721
22.1 Impairment At the beginning of the year 24,962 14,987 11,910 5,059 Provision for the year 278,354 12,838 2,040 9,714 Written off during the year - (2,863) - (2,863) At the end of the year 303,316 24,962 13,950 11,910 Annual Report 2020 | 2021 93
The Group’s exposure to credit risk is influenced by the individual characteristics of each customer. The individual receivable balances were re-assessed, specific provisions were made wherever necessary, existing practice on the provisioning of trade receivables were re-visited and adjusted to reflect the rearrangement of homogeneous groups which the COVID-19 outbreak has affected different types of customers. Receivable balances are monitored on an ongoing basis to minimise bad debt risk and to ensure default rates are kept very low whilst the improved operating environment itself during the financial year has resulted in improved collections.
23 OTHER CURRENT ASSETS GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Prepayments and non cash receivables 69,222 64,304 21,012 31,811 WHT Recoverable - 43,904 - 29,845 ESC Recoverable - 22,125 - 12,705 VAT Refund 62,013 - 62,013 - Advance to Creditors 4,722 19,648 4,411 15,000 135,957 149,981 87,436 89,361
24 SHORT TERM INVESTMENTS Refer note 3.4 for accounting policy of financial instruments GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Fixed deposits 198,535 524,814 198,535 524,814 198,535 524,814 198,535 524,814
25 STATED CAPITAL Accounting policy The ordinary shares of Asian Hotels and Properties PLC are quoted in the Colombo Stock Exchange. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are eligible for one vote per share at Annual General Meetings of the Company. 2021 2020 As at 31st March Number of Value of Number of Value of shares shares shares shares In ‘000s Rs. Rs.
Issued and fully paid ordinary shares 442,775 3,345,117 442,775 3,345,117 94 Asian Hotels and Properties PLC
Notes to the Financial Statements
26 OTHER COMPONENTS OF EQUITY GROUP COMPANY As at 31st March Note 2021 2020 2021 2020 In Rs. ’ 000s
Revaluation reserve 26.1 22,108,546 21,983,021 21,678,694 21,557,127 Share based payments 26.2 178,490 168,196 169,057 158,975 22,287,036 22,151,217 21,847,751 21,716,102
26.1 REVALUATION RESERVE GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 21,983,021 21,386,255 21,557,127 20,948,604 Revaluation gain on freehold land & buildings 158,647 706,739 141,357 707,585 Transferred to revenue reserve (10,911) (10,911) - - Deferred tax on land & building (22,211) (99,062) (19,790) (99,062) At the end of the year 22,108,546 21,983,021 21,678,694 21,557,127 Revaluation reserve relates to revaluation of Property, Plant & Equipment.
26.2 Share-based payment plans -Group Accounting policy In accounting for employee remuneration in the form of shares, SLFRS 2 – Share based payments, is effective for the Company’s parents entity John Keells 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 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 statements 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 John Keells Holdings PLC’s share option scheme to the employees of Asian Hotels and Properties PLC is recognised in the income statement of the company. This transaction does not result in a cash outflow to the company and expense recognised 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 John Keells Holdings PLC using and option model and the relevant details are communicated by the John Keells Holdings PLC to all applicable subsidiary companies.
Employee Share Option Scheme Under the John Keells Group’s Employees Share Option scheme (ESOP), share options of the parent are granted to senior 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 contractual term for each option granted is five years. There are no cash settlement alternatives. The Group does not have a past practice of cash settlement for these share options. Annual Report 2020 | 2021 95
The expense recognised for employee services received during the year is shown in the following table: GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 180,216 156,864 158,975 137,938 Expense arising from equity-settled share-based payment transactions 10,570 23,352 10,082 21,037 At the End of the year with non- controlling interest 190,786 180,216 - - Non-controlling interest at the end of the year (12,296) (12,020) - - At the end of the year 178,490 168,196 169,057 158,975
Movements during the year - Group The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during the year: 2021 2020 No. WAEP No. WAEP
Outstanding as at 1st April 2,488,728 154.66 3,039,478 161.70 Granted during the year 407,900 132.86 453,000 136.97 Lapses/Forfeited during the year (565,120) 149.82 (1,147,900) 164.85 Adjusted - sub division during the year - - (44,433) 176.04 Transfers (1,575,000) 147.13 188,583 150.79 Outstanding as at 31st March 756,508 154.53 2,488,728 154.66 Exercisable as at 31st March 558,419 155.79 1,739,206 155.06
Movements during the year - Company The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during the year: 2021 2020 No. WAEP No. WAEP
Outstanding as at 1st April 2,228,561 151.75 2,716,732 159.76 Granted during the year 407,900 132.86 403,000 136.97 Lapses/Forfeited during the year (499,346) 149.61 (1,079,754) 166.24 Transfers (1,575,000) 147.13 188,583 150.79 Outstanding as at 31st March 562,115 152.86 2,228,561 151.75 Exercisable as at 31st March 380,793 155.88 1,561,580 155.00
Fair value of the share option and assumptions 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 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. 96 Asian Hotels and Properties PLC
Notes to the Financial Statements
27 INTEREST BEARING LOANS AND BORROWINGS Accounting policy Borrowings are initially recognised at fair value less any directly attributable transaction costs. Subsequently, they are stated at amortised cost, any difference between the proceeds (net of transaction cost) and the repayable amount (including interest) is recognised in Income Statement over the period of the loan using effective interest method.
Refer note 3.4 for accounting policy of financial liabilities GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 186,573 165,479 - - Loans obtained 75,000 - 50,000 - Repayments (12,500) (990) - - Accrued interest 9,152 8,799 706 - Exchange difference 10,008 13,285 - - At the end of the year 268,233 186,573 50,706 -
Repayable within one year 208,797 146,619 31,286 - Repayable after one year 59,436 39,954 19,420 - 268,233 186,573 50,706 -
Security and repayment terms In Rs. ’ 000s 2021 2020 Nature of facility Interest rate Repayment terms Security Face carrying Face carrying value value value value Company Saubagya COVID-19 4% 17 Equal installments of Rs. 1.39Mn None 25,353 25,353 - - Renaissance Facility Loan and final installment of Rs. 1.37Mn commencing from May 2021 Credit Guarantee and 4% 17 Equal installments of Rs. 1.39Mn None 25,353 25,353 - - Interest subsidy loan and final installment of Rs. 1.37Mn scheme commencing from May 2021 Subsidiary Term Loan (USD) Current Rate (LIBOR Capital Repayment in 5 equal None 187,782 187,782 186,573 186,573 plus margin) quarterly installments of USD 187,500 commencing on 01.04.2021. Interest to be serviced monthly. Interest accrued on term Lower of LIBOR + Repayment in 5 equal monthly None 17,245 17,245 - - loan USD during COVID-19 Margin or one year installments of USD 18,455 commencing moratorium phase 1 and 2 Fixed Deposit rate +1% from 01.04.2021 Saubagya COVID-19 4% 6 Equal installments commencing from None 12,500 12,500 - - Renaissance Facility Loan January 2021 Annual Report 2020 | 2021 97
The Group and The Company continued to place emphasis on ensuring that cash and undrawn committed facilities are sufficient to meet the short, medium and long-term funding requirements, unforeseen obligations as well as unanticipated opportunities. Constant dialogue between Companies and banks regarding financing requirements, ensures that availability within each single borrower limit is optimised by efficiently reallocating under-utilised facilities within the Company. The daily cash management processes at the business units include active cash flow forecasts and matching the duration and profiles of assets and liabilities, thereby ensuring a prudent balance between liquidity and earnings.
28 DEFERRED TAXATION Accounting policy Deferred 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 realisation 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.
GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 3,887,264 3,787,016 3,504,424 3,406,302 Recognised in income statement (175,852) 150 (34,924) (940) Recognised in other comprehensive income 25,380 100,098 19,790 99,062 At the end of the year 3,736,792 3,887,264 3,489,290 3,504,424
The closing deferred tax liability is made up as follows; Revaluation of land 3,224,340 3,224,340 3,224,340 3,224,340 Revaluation of buildings 364,115 338,748 304,749 284,959 Accelerated depreciation for tax purposes 348,079 349,418 - - Employee Benefit Liability (20,445) (19,275) - - Losses and other credits available for offset against future taxable income (97,479) - - - Revaluation of investment property (41,307) (5,967) (39,799) (4,875) Others (40,511) - - - 3,736,792 3,887,264 3,489,290 3,504,424
As per the Inland Revenue Act No. 24 of 2017, business income includes gains from realisation of land owned by the company. Accordingly, the gains from the realisation of land shall be the amount by which the sum of the consideration received for the land which exceeds the acquiring cost of the asset or liability at the time of realisation. The Company has recognised a revaluation reserve on freehold land (capital assets of the Company) amounting to Rs. 23,031 Mn as at 31st March 2021 which is the amount by which the sum of the carrying value of the freehold land exceeds the acquiring and improvement cost of the land based on the revaluation carried out and accounted for as at the reporting date. Accordingly, the Company has recognised a deferred tax liability of Rs. 3,224 Mn pertaining to revaluation reserve of freehold lands which is computed at the corporate tax rate of 14%. Revaluation gain on building also was considered in computing deferred tax after considering the amendments in the newly enacted Inland Revenue Act. 98 Asian Hotels and Properties PLC
Notes to the Financial Statements
The Group has recognised deferred tax on revaluation of it’s buildings classified as investment property (Investment assets) at the rate of 10% as per the Inland Revenue Act No. 24 of 2017. Accordingly the Company and the Group have recognised deferred tax asset of Rs. 39.8 Mn and Rs. 41.3 Mn respectively as at 31st March 2021 on the revaluation loss reported during the year.
29 EMPLOYEE BENEFIT LIABILITIES Accounting policy (i) Defined Contribution Plans - EPF/ETF Employees’ Provident Fund and Employees’ Trust Fund (EPF & ETF) are recognised as incurred.
Employees are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund contributions in line with respective statutes and regulations.
The Company and the Group contribute 3% of gross emoluments of employees to the Employees’ Trust Fund. Company contributes 15% and subsidiary contributes 12% of gross emoluments of employees to Employees’ Provident Fund.
(ii) Defined benefit plans - Gratuity A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Company and the Group are liable to pay retirement benefits under the Payment of Gratuity Act, No. 12 of 1983. The liability recognised in the statement of financial position is the present value of the defined benefit obligation as at 31st March 2021.
The defined benefit obligation is calculated by a qualified actuary as at 31st March 2021 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 immediately in the other comprehensive income. Under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five-years of continued service.
(iii) Other long term employee benefit A new Long-Term Incentive Plan (LTI) has been launched for senior employees of the Group. The overall incentive will be paid in cash as a lump sum payment upon achievement of key performance indicators linked to the five year strategic plan in place. The Liability recognised in respect other long term employee benefits are measured as the present value of the estimated future cash outflows expected to be made by the Group in relation to the performance and the services of the relevant employees, up to the reporting date. GROUP COMPANY As at 31st March Note 2021 2020 2021 2020 In Rs. ’ 000s
Employee defined benefit plan - gratuity 29.1 350,837 328,821 204,800 191,140 Other long term employee benefits 29.2 27,524 16,318 27,524 16,318 378,361 345,139 232,324 207,458 Annual Report 2020 | 2021 99
29.1 Employee defined benefit plan - gratuity GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 328,821 360,066 191,140 218,212 Current service cost 28,696 27,835 17,860 17,688 Interest cost 36,170 36,974 21,025 22,789 Payments (44,870) (76,578) (28,450) (61,283) (Gain)/Loss arising from changes in assumptions 1,809 (24,951) 1,905 (15,602) Transfers 211 5,475 1,320 9,336 At the end of the year 350,837 328,821 204,800 191,140
The employee benefit liability of the Company and Group is based on the actuarial valuations carried out as at 31st March 2021 by Mr. P. Gunasekera, AIAA, Messrs. Smiles Global (Pvt) Ltd and Mr. M. Poopalanathan, AIA, Messrs. Actuarial & Management Consultant (Pvt) Ltd; a firms of professional actuaries respectively.
The principal assumptions used in determining the cost of employee benefits were: GROUP COMPANY 2021 2020 2021 2020
Discount rate 8.00% 11.00% 8.00% 11.00% Future salary increases 8.00% 8.00% 8.00% 8.00%
29.1.1 Sensitivity of assumptions used If one percentage point change in the assumed discount rate would have the following effects: 2021 2021 In Rs. ’ 000s Discount rate Salary increment GROUP COMPANY GROUP COMPANY
Increase by one percentage point (14,575) (8,650) 16,469 9,796 Decrease by one percentage point 15,873 9,438 (15,392) (9,139)
29.1.2 Maturity analysis of the payments The following payments are expected on employee benefit liabilities in future years 2021 2020 GROUP COMPANY GROUP COMPANY
Within the next 12 months 36,182 12,732 42,442 15,848 Between 1-2years 42,309 8,716 42,313 13,625 Between 2-5years 133,351 78,073 137,100 91,609 Between 5-10 years 128,721 105,279 96,845 70,058 Beyond 10 years 10,274 - 10,121 - Total 350,837 204,800 328,821 191,140 100 Asian Hotels and Properties PLC
Notes to the Financial Statements
29.2 Other long term employee benefits GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 16,318 5,439 16,318 5,439 Current service cost 11,206 10,879 11,206 10,879 At the end of the year 27,524 16,318 27,524 16,318
30 TRADE AND OTHER PAYABLES Accounting policy Trade payables are the aggregate amount of obligations to pay for goods or services, that have been acquired in the ordinary course of business. Trade payable are classified as current liabilities if payment is due within one year and initially recognised at Fair Value and subsequently measured at amotised cost using the effective interest method. GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Trade Payables 230,966 178,999 151,505 81,125 Retention on Construction 17,131 23,959 17,131 23,959 Accrued Expenses 183,286 212,157 33,467 64,139 Other Creditors 294,894 327,057 213,646 278,191 726,277 742,172 415,749 447,414
31 INCOME TAX LIABILITIES GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
At the beginning of the year 95,171 138,201 45,890 82,321 Charge for the year 50,146 93,242 36,491 65,520 Payments and set-off against refunds and credits (108,125) (136,272) (75,874) (101,951) At the end of the year 37,192 95,171 6,507 45,890
32 OTHER CURRENT LIABILITIES GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Contract liabilities 182,915 219,764 97,909 136,184 Other Advances 66,030 89,267 57,691 84,070 Other tax payables 19,037 53,117 13,420 22,752 267,982 362,148 169,020 243,006 Annual Report 2020 | 2021 101
33 RELATED PARTY DISCLOSURES Terms and conditions of transactions with related parties Transactions with related parties are carried out in the ordinary course of business. Outstanding current account balances at year end are unsecured, interest free and settlement occurs in cash.
Non-recurrent related party transactions There were no non-recurrent related party transactions which in aggregate value exceeds 10% of the equity or 5% of the total assets whichever is lower of the Company as per 31 March 2020 audited financial statements, which required additional disclosures in the 2020/21 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities and Exchange Commission Directive issued under Section 13(c) of the Securities and Exchange Commission Act.
Recurrent related party transactions There were no recurrent related party transactions which in aggregate value exceeds 10% of the consolidated revenue of the Group as per 31 March 2020 audited financial Statements, which required additional disclosures in the 2020/21 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities and Exchange Commission Directive issued under Section 13(c) of the Securities and Exchange Commission Act.
Group carried out transactions in the ordinary course of its business on an arm’s length basis with parties who are defined as related parties as per LKAS 24 “Related Party Disclosure”.
33.1 Parent and Ultimate Controlling Party The Company’s Ultimate Parent undertaking and controlling party is John Keells Holdings PLC (JKH PLC).
The amounts receivable from and payable to related parties as at 31st March 2021, are presented below, GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
33.2 Amounts due from related parties Parent-John Keells Holdings PLC 7,861 16,723 2,229 6,736 Subsidiary-Trans Asia Hotels PLC - - 1,856 332 Companies under common control of JKH PLC 25,629 76,934 16,378 42,345 33,490 93,657 20,463 49,413
33.3 Amounts due to related parties Parent-John Keells Holdings PLC 14,436 16,904 10,436 12,745 Subsidiary-Trans Asia Hotels PLC - - 592 519 Companies under common control of JKH PLC 54,928 60,447 45,344 52,535 69,364 77,351 56,372 65,799 102 Asian Hotels and Properties PLC
Notes to the Financial Statements
33.4 Transactions with Related Parties The Group and Company carried out transactions with the following related entities. GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
(a) Transactions with Parent Company The company’s parent is John Keells Holdings PLC Rendering of services 433 8,176 177 4,901 Receiving of Services 94,401 100,838 55,529 58,930 Rent Received 27,767 29,369 - -
(b) Transactions with Subsidiary - Trans Asia Hotels PLC Rendering of services - - 660 2,821 Receiving of services - - 4 538
(c) Transaction with companies Under common control of JKH PLC Purchase of Goods 335 6,185 295 2,737 Rendering of services 21,774 135,723 14,846 73,562 Receiving of services 218,465 398,000 144,084 234,276 Rent Received 66,742 93,538 24,258 48,603
(d) Transactions with Equity Accounted Investees of JKH PLC Rendering of services 1,706 3,444 1,073 593 Receiving of services 17,234 15,332 11,951 15,332 Interest Received 13,274 36,334 13,274 36,334
33.5 Compensation of key management personnel GROUP COMPANY For the year ended 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Short-term employee benefits 41,852 49,487 36,932 49,487 Other long-term benefits 628 950 628 950 Share base payments 11,813 13,360 11,813 13,360
In addition to their salaries the Company provides non-cash benefits to the Key Management Personnel and contributes to a post- employment defined benefit plan on their behalf. Directors’ emoluments are disclosed in Note 8 to the Financial Statements. Annual Report 2020 | 2021 103
34 FINANCIAL INSTRUMENTS - ACCOUNTING CLASSIFICATION AND FAIR VALUES OF THE GROUP 34.1 Financial Assets and Liabilities by Categories - Group Financial assets and liabilities in the tables below are split into categories in accordance with SLFRS 9. Financial assets at Financial liabilities measured amortised cost at amortised cost As at 31st March Note 2021 2020 2021 2020 In Rs. ‘000s
Financial instruments in non-current assets/non-current liabilities Other non-current financial assets 19 27,722 31,457 - - Other non-current assets 20 3,009 8,660 - - Interest bearing borrowings 27 - - 59,436 39,954
Financial instruments in current assets/current liabilities Trade and other receivables/payables 22-30 162,606 690,970 542,991 530,015 Amounts due from/due to related parties 33.2-33.3 33,490 93,657 69,364 77,351 Interest bearing borrowings 27 - - 208,797 146,619 Short term investments 24 198,535 524,814 - - Cash in hand and at bank 150,385 442,433 - - Bank overdrafts - - 771,836 193,674 Total 575,747 1,791,991 1,652,424 987,613
The management assessed that the fair value of cash at bank, short term deposits, trade receivables, other payables, bank overdrafts and other current financial liabilities approximate their carrying amounts largely due to the short term maturities of these instruments. Accordingly the fair value hierarchy does not apply.
34.2 Financial Assets and Liabilities by Categories - Company Financial assets and liabilities in the tables below are split into categories in accordance with SLFRS 9. Financial assets at Financial liabilities measured amortised cost at amortised cost As at 31st March Note 2021 2020 2021 2020 In Rs. ‘000s
Financial instruments in non-current assets /non-current liabilities Other non-current financial assets 19 15,174 22,232 - - Other non-current assets 20 985 6,279 - - Interest bearing borrowings 27 - - 19,420 -
Financial instruments in current assets /current liabilities Trade and other receivables/payables 22-30 98,979 239,721 382,282 383,275 Amounts due from/due to related parties 33.2-33.3 20,463 49,413 56,372 65,799 Interest bearing borrowings 27 - - 31,286 - Short term investments 24 198,535 524,814 - - Cash in hand and at bank 79,582 331,690 - - Bank overdrafts - - 509,712 117,418 Total 413,718 1,174,149 999,072 566,492 104 Asian Hotels and Properties PLC
Notes to the Financial Statements
The management assessed that the fair value of cash at bank, short term deposits, trade receivables, other payables, bank overdrafts and other current financial liabilities approximate their carrying amounts largely due to the short term maturities of these instruments. Accordingly the fair value hierarchy does not apply.
35 FINANCIAL RISK MANAGEMENT Objectives and Policies Financial instruments held by the Group, principally comprise of cash at bank, short-term deposits, other non current assets,amounts due from/due to related parties, trade receivables, trade payables, bank overdrafts, borrowings and other current financial liabilities. The main purpose of these financial instruments is to manage the operating, investing and financing activities of the Group.
Financial risk management of the Group 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 Group’s operating units. 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.
The Group 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 Group’s risk management processes are based are designed to identify and analyse these risks throughout the Group, to set appropriate risk limits and 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 Group manages and monitors these risks primarily through its operating and financing activities.
The Audit Committee of John Keells Holdings PLC, the parent Company, oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The 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.
35.1 Credit risk Credit 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 Group 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 Group trades only with recognised, credit worthy third parties. It is the Group’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 Group’s exposure to bad debts is not significant.
With respect to credit risk arising from the other financial assets of the Group, such as cash and cash equivalents, Trade receivables, Related party receivables and investments in fixed deposits, the Group’s exposure to credit risk arises from default of the counterparty. The Group manages its operations to avoid any excessive concentration of counterparty risk and the Group takes all reasonable steps to ensure the counterparties fulfill their obligations. Annual Report 2020 | 2021 105 5% 4% 2% 2% 25% 28% 39% 21% 29% 45% % of % of 100% 100% allocation allocation Total Total 93,657 49,413 31,457 22,232 442,433 331,690 690,970 239,721 524,814 524,814 1,783,331 1,167,870 ------93,657 49,413 93,657 49,413 parties parties related related related Amounts Amounts Amounts due from due from due from ------524,814 2020 2020 524,814 524,814 524,814 Short term Short term investments investments ------Trade Trade Trade 690,970 239,721 690,970 239,721 and other and other receivables receivables ------Cash in Cash in Cash at bank at bank at 442,433 331,690 442,433 331,690 hand and hand and ------assets assets 31,457 22,232 31,457 22,232 current current current financial financial Other non Other non 6% 5% 5% 4% 26% 19% 28% 24% 35% 48% % of % of 100% 100% allocation allocation Total Total 79,582 33,490 20,463 98,979 27,722 15,174 150,385 162,606 198,535 198,535 572,738 412,733 ------33,490 20,463 33,490 20,463 parties parties related related related Amounts Amounts Amounts due from due from due from ------198,535 2021 2021 198,535 198,535 198,535 Short term Short term investments investments ------Trade Trade Trade 98,979 98,979 162,606 162,606 and other and other receivables receivables ------79,582 79,582 Cash in Cash in Cash at bank at bank at 150,385 150,385 hand and hand and ------assets assets 27,722 15,174 27,722 15,174 current current current financial financial Other non Other non Risk exposure
Total credit risk exposure credit Total Cash in hand and at bank in hand and at Cash risk exposure credit Total Cash in hand and at bank in hand and at Cash Amounts due from related parties related due from Amounts Trade and other receivables Trade parties related due from Amounts Trade and other receivables Trade Loans to executives to Loans Deposits with bank Deposits with bank executives to Loans Credit risk is the risk of financial loss to the Group, if a customer or counter partycounter customerif a to theor instrumentGroup, to loss of the financial financial risk to a is meet Credit risk fails contractual its and arises obligations, receivablesprincipally from from customers the Group’s and placements deposits in with banking institutions. The maximum positionsassets risk of financial generallyare subjectwhich to their carryingare creditto equal risk (withoutcollateral, considerationamounts of Following table the shows maximum positions. risk if available). 35.1.1 Group Risk exposure Company Risk exposure In Rs. ’000s In Rs. ’000s In Rs. 106 Asian Hotels and Properties PLC
Notes to the Financial Statements
35.1.2 Deposits with bank Deposits with bank mainly consist of Fixed Deposits. As at 31 March 2021, Fixed deposits of the group and company were rated “A” or better. GROUP COMPANY As at 31st March 2021 2020 2021 2020 Fitch ratings In Rs. ’000s Rating % In Rs. ’000s Rating % In Rs. ’000s Rating % In Rs. ’000s Rating % of total of total of total of total
A+ 127,567 64% - - 127,567 64% - - A 70,968 36% 301,735 57% 70,968 36% 301,735 57% B - - 223,079 43% - - 223,079 43% Total 198,535 100% 524,814 100% 198,535 100% 524,814 100%
35.1.3 Loans to executives Loans to executive portfolio is largely made up of vehicle loans which are given to staff at assistant manager level and above. The respective business units have obtained the necessary Power of Attorney as collateral for the loans granted.
35.1.4 Trade and other receivables GROUP COMPANY As at 31st March 2021 2020 2021 2020 In Rs. ’ 000s
Neither past due nor impaired 94,581 108,934 59,007 71,927
Past due but not impaired 0 - 30 days 40,066 105,452 18,203 41,588 31- 60 days 16,951 277,073 4,541 64,605 61- 90 days 3,133 104,309 4,757 44,796 91- 120 days 654 64,245 7,287 10,459 121- 180 days 2,095 32,207 4,317 7,139 > 181 days 308,442 23,712 14,817 11,117 Gross carrying value 465,922 715,932 112,929 251,631
Less: impairment provision Individually assessed impairment provision (303,316) (24,962) (13,950) (11,910) Total 162,606 690,970 98,979 239,721
The Group has obtained deposits from major customers by reviewing their past performance and credit worthiness.
The requirement for an impairment is analysed at each reporting date on an individual basis for major customers.
35.1.5 Amounts due from related parties The Group’s amounts due from related party mainly consists from Parent, Subsidiary and other related entities. Annual Report 2020 | 2021 107
35.1.6 Credit risk relating to cash and cash equivalents In order to mitigate settlement and operational risks related to cash and cash equivalents, the Company uses several banks with acceptable rating for its deposits.
35.2 Liquidity Risk Liquidity 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.
This excludes the potential impact of extreme circumstances that cannot reasonably be predicted such as natural disasters.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of multiple sources of funding including bank loans, overdrafts and over a broad spread of maturities.
35.2.1 Net debt/(cash) As at 31st March GROUP COMPANY In Rs. ’ 000s 2021 2020 2021 2020
Short term investments 198,535 524,814 198,535 524,814 Cash in hand and at bank 150,385 442,433 79,582 331,690 Total liquid assets 348,920 967,247 278,117 856,504
Non current portion of borrowings 59,436 39,954 19,420 - Current portion of borrowings 208,797 146,619 31,286 - Bank overdrafts 771,836 193,674 509,712 117,418 Total liabilities 1,040,069 380,247 560,418 117,418 Net debt/(cash) 691,149 (587,000) 282,301 (739,086)
35.2.2 Liquidity risk management The Group’s approach to managing liquidity is to 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 top’s reputation.
Group maintains a portion of its assets in highly liquid form in order to meet its contractual obligations during the normal course of its operations.
Group monitors the level of expected cash flows on trade and other receivables together with expected cash outflow on trade and other payables and it 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.
Group has implemented a mixed approach that combines elements of the cash flow matching approach and the liquid assets approach. The business units attempt to match cash outflows in each time bucket against the combination of contractual cash inflows plus other inflows that can be generated through the sale of assets and other secured borrowings.
The Group continued to place emphasis on ensuring that cash and undrawn committed facilities are sufficient to meet the short, medium and long-term funding requirements, unforeseen obligations as well as unanticipated opportunities. Constant dialogue 108 Asian Hotels and Properties PLC
Notes to the Financial Statements
between Group companies and banks regarding financing requirements, ensures that availability within each single borrower limit is optimised by efficiently reallocating under-utilised facilities within the Group.
The daily cash management processes at the business units include active cash flow forecasts and matching the duration and profiles of assets and liabilities, thereby ensuring a prudent balance between liquidity and earnings.
The Government of Sri Lanka offered certain relief measures including a moratorium on repayment of loans and concessionary working capital facilities for eligible industries. Company qualified for such relief measures and it helped ease the financial position further during the financial year. On 19th March 2021, the Government issued a circular extending the debt moratorium granted for tourism sector for another six months commencing 1st April 2021, which was availed by the Group.
Maturity analysis - Group The table below summarises the maturity profile of the Group’s financial liabilities at 31st March 2021 based on contractual undiscounted payments. Within 1 Between Between Between Between More than 5 Total year 1-2 years 2-3 years 3-4 years 4-5 years years 2021
Interest bearing borrowings 208,797 59,436 - - - - 268,233 Trade and other payables 726,277 - - - - - 726,277 Amounts due to related parties 69,364 - - - - - 69,364 Bank overdrafts 771,836 - - - - - 771,836 1,776,274 59,436 - - - - 1,835,710
The table below summarises the maturity profile of the Group’s financial liabilities at 31st March 2020 based on contractual undiscounted payments. Within 1 Between Between Between Between More than 5 Total year 1-2 years 2-3 years 3-4 years 4-5 years years 2020
Interest bearing borrowings 146,619 39,954 - - - - 186,573 Trade and other payables 742,172 - - - - - 742,172 Amounts due to related parties 77,351 - - - - - 77,351 Bank overdrafts 193,674 - - - - - 193,674 1,159,816 39,954 - - - - 1,199,770
Maturity analysis - Company The table below summarises the maturity profile of the Company financial liabilities at 31st March 2021 based on contractual undiscounted payments. Within 1 Between Between Between Between More than 5 Total year 1-2 years 2-3 years 3-4 years 4-5 years years 2021
Interest bearing borrowings 31,286 19,420 - - - - 50,706 Trade and other payables 415,749 - - - - - 415,749 Amounts due to related parties 56,372 - - - - - 56,372 Bank overdrafts 509,712 - - - - - 509,712 1,013,119 19,420 - - - - 1,032,539 Annual Report 2020 | 2021 109
The table below summarises the maturity profile of the Company financial liabilities at 31st March 2020 based on contractual undiscounted payments. Within 1 Between Between Between Between More than 5 Total year 1-2 years 2-3 years 3-4 years 4-5 years years 2020
Interest bearing borrowings ------Trade and other payables 447,414 - - - - - 447,414 Amounts due to related parties 65,799 - - - - - 65,799 Bank overdrafts 117,418 - - - - - 117,418 630,631 - - - - - 630,631
35.3 Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market prices comprise two types of risk: » Interest rate risk » Currency risk
The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
35.3.1 Currency risk Foreign currency risk that the fair value or future cash flows of a financial instrument will fluctuate, due to changes in foreign exchange rates.
Company as at the reporting date, do 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.
The bank loan obtained in US Dollar terms are matched with US Dollar receipts from customers. The annual average US Dollar receipts of the Company is USD 10,235 approximately.
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 attempt to mitigate the exposure to currency risk arising from its transactions.
The Sri Lankan Rupee witnessed significant volatility during 2020/21 on the back of the COVID-19 pandemic and macro-economic pressures. The Group adopted prudent measures, as and when required, to manage the financial impacts arising from currency fluctuations by matching liabilities with corresponding inflows and entering into forward exchange rate agreements, where applicable. At a Group level, the translation risk on foreign currency debt is largely hedged “naturally” as a result of the conscious strategy of maintaining US Dollar cash balances while also ensuring obligations can be managed through US Dollar denominated revenue streams. 110 Asian Hotels and Properties PLC
Notes to the Financial Statements
35.3.2 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.
The Group is exposed to interest rate risk for USD loan obtained from HNB. However, management monitors the sensitivities on regular basis and ensure risks are managed on a timely manner.
The global outbreak of the COVID-19 pandemic has resulted in reductions in policy rates and monetary easing policies by Central Bank of Sri Lanka which has resulted in a sharp reduction in lending rates. The Group has managed the risk of increased interest rates by having a balanced portfolio of borrowings at fixed and variable rates while interest rate swap agreements are in place for a significant portion of the Group’s foreign currency borrowing portfolio.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s and the Company’s profit before tax.
Increase/(decrease) in basis points Effect on profit before tax Rs. 000’s Rupee borrowings Other currency GROUP COMPANY borrowings + 375 + 87 (26,462) (9,615) 2021 - 375 - 87 26,462 9,615 + 274 +156 (2,773) (2,773) 2020 -274 -156 2,773 2,773
The assumed spread of basis points for the interest rate sensitivity analysis is based on the currently observable market environment changes to base rates such as AWPLR and LIBOR.
35.4 Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong financial position and healthy capital ratios in order to support its business and maximise shareholder value.
The Group manages its capital structure, and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may issue new shares, have a rights issue or buy back of shares.
As at 31 March GROUP COMPANY In Rs. ’ 000s 2021 2020 2021 2020
Total liabilities 6,256,037 5,889,492 4,929,680 4,631,409 Less: cash and fixed deposits 348,920 967,247 278,117 856,504 Adjusted net debt 5,907,117 4,922,245 4,651,563 3,774,905 Total equity 34,612,895 36,692,330 29,428,862 30,724,374 Adjusted net debt to adjusted equity ratio 17.07% 13.41% 15.81% 12.29% Annual Report 2020 | 2021 111
36 OPERATING SEGMENT INFORMATION Accounting policy A 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 Group has the following two strategic divisions, which are its reportable segments.
The following summary describes the operations of each reportable segment. Reportable Segments Operations Hotel Provide hoteliering services to local and foreign tourists Property Property development and renting out premises
HOTELS PROPERTY Group Total For the year ended 31st March 2021 2020 2021 2020 2021 2020 In Rs. ’000s
External revenue 1,706,637 5,304,519 83,479 255,031 1,790,116 5,559,550 Inter segment revenue (65,047) (65,047) 65,047 65,047 - - Total Segment Revenue 1,641,590 5,239,472 148,526 320,078 1,790,116 5,559,550
Segment Operating Profits Before Finance Expenses (1,893,201) (33,514) 13,955 148,777 (1,879,246) 115,263 Inter Company Dividends - (43,412) - - - (43,412) Finance Expenses (31,707) (25,555) - - (31,707) (25,555)
Change in fair value of investment properties Company - - (349,236) (9,410) (349,236) (9,410) Commercial Centre of Subsidiary - - (109,519) 162,425 (109,519) 162,425 (Loss)/Profit Before Taxation (1,924,908) (102,481) (444,800) 301,792 (2,369,708) 199,311 Income Tax Expense 96,944 (87,412) 28,762 (5,980) 125,706 (93,392) (Loss)/Profit After Taxation (1,827,964) (189,893) (416,038) 295,812 (2,244,002) 105,919 Non-Controlling Interest 433,527 (31,569) 29,801 (124,178) 463,328 (155,747) (Loss)/Profit attributable to equity owners (1,394,437) (221,462) (386,237) 171,634 (1,780,674) (49,828)
As at 31st March Assets Segment Assets 31,661,209 32,710,839 9,869,623 10,531,215 41,530,832 43,242,054 Elimination - - - - (661,900) (660,232) Total Assets 31,661,209 32,710,839 9,869,623 10,531,215 40,868,932 42,581,822
Liabilities Segment Liabilities 6,184,409 5,724,510 73,483 165,169 6,257,892 5,889,679 Elimination - - - - (1,855) (187) Total Liabilities 6,184,409 5,724,510 73,483 165,169 6,256,037 5,889,492 112 Asian Hotels and Properties PLC
Notes to the Financial Statements
37 CONTINGENT LIABILITIES Accounting policy Provisions 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.
Contingent liabilities are disclosed if there is a possible future obligation as a result of a past event, or if there is a present obligation as a result of a past event but either a payment is not probable or the amount cannot be reasonably estimated.
The contingent liability of the subsidiary as at 31st March 2021, relates to the following: Income tax assessments relating to years of assessments 2012/13 to 2017/18. The subsidiary has lodged appeals against the assessments and is contesting these under appellate procedure. Having discussed with independent legal and tax experts and based on the information available, the contingent liability as at 31st March 2021 is estimated at 168 Mn.
In the year 2009, Colombo Municipal Council (CMC) imposed a trade tax on the hotel revenue for all the hotels within the city limits with subsequent gasetted amendments. However, the hoteliers together with Tourist Hotels Association of Sri Lanka (THASL) are in the process of negotiations with CMC through court, for which the resolution is still pending. Accordingly, the Company and the Group have made a provision in the financial statements amounting to Rs. 3 million per year based on the guidelines issued by THASL.
The management is confident that the ultimate resolution of the above contingencies are unlikely to have a material adverse effect on the financial position of the company.
38 CAPITAL COMMITMENTS The Company had capital expenditure contracted for Rs. 435 Mn as at 31st March 2021, which were not provided for in the consolidated financial statements.
39 EVENTS SUBSEQUENT TO THE REPORTING DATE AND OTHER MATTERS Other than the contingent liabilities and capital commitments referred to in Note 37 & 38 to the Financial Statements, there have been no events subsequent to the reporting date which would have any material effect on the Company and the Group.
40 DIRECTORS’ RESPONSIBILITY STATEMENT The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Please refer to the page 55 for the Statement of Directors Responsibility for Financial Reporting. Annual Report 2020 | 2021 113
CONSOLIDATED VALUE ADDED STATEMENT
In Rs. '000s 2021 2020
Revenue 1,790,116 5,559,550
Adjustment for Change in Fair Value of Investment Property (458,755) 153,015 Adjustment for Finance Income 33,509 99,772 Adjustment for other Income 204,344 101,738 1,569,214 5,914,075
Less : Cost of Materials & Services purchased from external sources 1,576,647 2,900,201 Value Added (7,433) 3,013,874
In Rs. '000s 2021 % 2020 %
Distributed as follows: To Employees as Remuneration 1,417,777 -19074.1% 1,842,017 61.1% To the Government as Taxes 271,832 -3657.1% 458,755 15.2%
To the Providers of Capital as Interest on Loans 21,699 -291.9% 12,270 0.4% as Minority Interest (463,328) 6233.4% 155,747 5.2% To Shareholders as Dividends - - 442,775 14.7%
Retained within the business as Depreciation 527,130 -7091.8% 575,702 19.1% as Reserves (1,782,543) 23981.5% (473,392) -15.7% (7,433) 100 3,013,874 100 114 Asian Hotels and Properties PLC
INFORMATION TO SHAREHOLDERS & INVESTORS
STOCK EXCHANGE LISTING The Issued Ordinary Shares of Asian Hotels and Properties PLC are listed with the Colombo Stock Exchange of Sri Lanka. The Audited Financial Statements of the Company and the Consolidated Financial Statements for the year ended 31st March 2021 have been submitted to the Colombo Stock Exchange.
DISTRIBUTION OF SHAREHOLDINGS 31.03.2021 31.03.2020 From - To Number of Total Percentage of Number of Total Percentage of Shareholders Shareholdings Shareholdings Shareholders Shareholdings Shareholdings
1 - 1,000 2,262 573,875 0.1 2,249 576,783 0.1 1,001 - 10,000 711 2,495,231 0.6 730 2,580,772 0.6 10,001 - 100,000 168 4,838,527 1.1 179 5,408,913 1.2 100,001 - 1,000,000 29 8,919,576 2.0 28 7,536,763 1.7 1,000,001 and above 11 425,948,091 96.2 11 426,672,069 96.4 3,181 442,775,300 100.0 3,197 442,775,300 100.0
ANALYSIS OF SHAREHOLDERS Categories of Shareholders 31.03.2021 31.03.2020 Holdings Holdings Number % Number %
Individuals 15,178,508 3.43 15,525,787 3.51 Institutions 427,596,792 96.57 427,249,513 96.49 442,775,300 100.00 442,775,300 100.00
Resident 439,124,333 99.18 438,955,408 99.14 Non Resident 3,650,967 0.82 3,819,892 0.86 442,775,300 100.00 442,775,300 100.00
Public 94,932,708 21.44 94,932,708 21.44 Non Public* 347,842,592 78.56 347,842,592 78.56 442,775,300 100.00 442,775,300 100.00 *Includes shareholdings of Parent Company, Directors & Spouses. Annual Report 2020 | 2021 115
Public share holding 2021 2020
The Public Share Holding (%) 21.44 21.44 Number of Public Shareholders 3,178 3,194 Compliant under option 4 - Float adjusted market capitalisation (LKR Bn) 3.55 2.75
For the Year Ended 31st March 2021 2020
Market Value Highest Market Price per share Rs. 51.90 46.00 Lowest Market Price per share Rs. 20.00 27.10 Last Traded Market Price per share as at Rs. 37.40 29.00
Dividend Payments Interim Dividend per Share Rs. - 1.00
TOP TWENTY SHAREHOLDERS As at 31.03.2021 As at 31.03.2020 Name Shareholdings Shareholdings Shareholdings Shareholdings Percentage Percentage
John Keells Holdings PLC 347,824,192 78.56 347,824,192 78.56 Employees Provident Fund 45,249,798 10.22 45,249,798 10.22 Sri Lanka Insurance Corporation Ltd-Life Fund 10,055,900 2.27 10,055,900 2.27 Bank of Ceylon A/C Ceybank Unit Trust 8,978,984 2.03 8,968,103 2.03 Dr. S. Yaddehige 3,415,200 0.77 3,415,200 0.77 Bank of Ceylon-No. 2 A/C (BOC PTF) 2,583,400 0.58 2,583,400 0.58 Bank of Ceylon-No. 1 Account 2,367,741 0.53 2,367,741 0.53 Sampath Bank PLC/Dr. T. Senthilverl 1,570,454 0.35 1,570,454 0.35 National Savings Bank 1,366,132 0.31 1,366,132 0.31 Mr. A. M. Weerasinghe 1,276,238 0.29 NIL NIL Bank of Ceylon A/C - Ceybank Century Growth Fund 1,260,052 0.28 1,253,149 0.28 East West Properties PLC 977,379 0.22 20,000 0.00 Mr. S. E. Captain 825,900 0.19 825,900 0.19 Employee Trust Fund Board 767,478 0.17 767,478 0.17 Mr. M. Mannawarajan 650,124 0.15 650,124 0.15 Richard Pieris & Co Ltd - Account No. 01 639,400 0.14 639,400 0.14 Mr. R. S. Captain 550,351 0.12 226,203 0.05 Commercial Bank of Ceylon PLC/Andaradeniya Estate 442,852 0.10 279,444 0.06 Acuity Partners (PVT) Limited/Mr. Anthony Romesh Grero 381,380 0.09 380,000 0.09 Dr. A.K.A. Jayawardene 377,438 0.09 72,800 0.02 Hatton National Bank PLC/Nishantha Priyanjith Sooriyaarachchi 289,307 0.07 NIL NIL 431,849,700 97.53 428,515,418 96.78 116 Asian Hotels and Properties PLC
5 YEAR FINANCIAL REVIEW OF THE GROUP
2020/21 2019/20 2018/19 2017/18 2016/17 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000
Revenue 1,790,116 5,559,550 7,658,470 8,628,053 9,066,959 (Loss)/Profit After Taxation (2,244,002) 105,919 1,077,935 2,185,746 2,779,116 (Loss)/Profit attributable to Equity owners (1,780,674) (49,828) 811,157 1,685,950 2,265,412
Share Capital & Reserves Stated Capital 3,345,117 3,345,117 3,345,117 3,345,117 3,345,117 Other Components of Equity 22,287,036 22,151,217 21,532,409 20,415,314 22,139,389 Revenue reserves 5,673,539 7,445,171 7,907,652 7,977,471 7,624,291 Shareholders’ Funds 31,305,692 32,941,505 32,785,178 31,737,902 33,108,797
Minority Interest 3,307,203 3,750,825 3,646,757 3,499,028 3,399,725 34,612,895 36,692,330 36,431,935 35,236,930 36,508,522
Assets & (Liabilities) Current Assets 788,058 2,033,169 2,457,373 2,284,129 3,405,078 Current Liabilities (2,081,448) (1,617,135) (1,906,545) (1,805,411) (1,774,608) Net Current Assets (1,293,390) 416,034 550,828 478,718 1,630,470 Non Current Assets 40,080,874 40,548,653 40,066,525 38,863,818 35,786,694 Non Current Liabilities (4,174,589) (4,272,357) (4,185,418) (4,105,606) (908,642) 34,612,895 36,692,330 36,431,935 35,236,930 36,508,523
Ratio Analysis 2021 2020 2019 2018 2017
(Loss)/Earnings per Share (Rs.) (4.02) (0.11) 1.83 3.81 5.12 Net Assets per Share (Rs.) 70.70 74.40 74.04 71.68 74.78 Current Ratio (Times) 0.38 1.26 1.28 1.27 1.92 After Tax Return on Net Assets (%) (5.69) (0.15) 2.47 5.31 6.84 Dividend Per Share - 1.00 2.00 3.00 4.00 P/E Ratio (9.30) (257.70) 22.87 13.18 10.85 Dividend Payout Ratio - (8.89) 1.09 0.79 0.78
5 YEAR FINANCIAL SUMMARY OF THE PROPERTY DEVELOPMENT DIVISION
2020/21 2019/20 2018/19 2017/18 2016/17 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000
Revenue 83,479 255,031 355,038 349,837 349,872 Cost of Sales 73,530 102,006 108,693 99,958 114,056 Gross Profit 9,949 153,025 246,345 249,879 235,816 Administration & Other Overheads (106,193) (136,279) (126,047) (99,644) (110,682) Finance and Other Income 53,341 75,021 80,183 81,621 74,771 Change in Fair Value of Investment Property (349,236) (9,410) (39,351) 180,138 155,761
Net (Loss)/Profit Before Tax (392,139) 82,357 161,130 411,994 355,666 Annual Report 2020 | 2021 117
5 YEAR FINANCIAL SUMMARY OF THE CINNAMON GRAND COLOMBO HOTEL
2020/21 2019/20 2018/19 2017/18 2016/17 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000
Revenue Rooms 38,918 1,077,116 1,899,741 2,370,490 2,677,204 Food 689,331 1,479,204 1,993,705 2,081,894 2,161,764 Beverage 108,122 237,819 338,664 360,002 357,311 Food & Beverage Others 8,808 3,104 16,861 20,157 21,084 Telephone 3 316 532 1,107 2,023 Rental Income 6,939 22,212 27,983 25,073 22,532 Other Operating Income 43,548 156,153 200,521 220,642 224,127 Total Revenue 895,669 2,975,924 4,478,007 5,079,365 5,466,045
Expenses Rooms 130,879 305,939 399,502 483,530 458,653 Food Cost 284,007 527,123 782,792 803,421 820,476 Beverage Cost 36,542 66,041 105,968 121,068 130,376 Food & Beverage Other 538,305 745,206 810,446 799,777 696,180 Telephone 3,787 4,163 4,330 4,876 4,855 Others 43,730 136,676 174,831 182,654 184,091 Total Expenses 1,037,250 1,785,148 2,277,869 2,395,326 2,294,631
Gross Operating Income (141,581) 1,190,776 2,200,138 2,684,039 3,171,414
Expenses Administration & General 298,636 414,744 443,507 447,787 415,982 Advertising & Sales Promotion 77,771 137,314 142,066 130,026 116,048 Heat, Light & Power 165,041 240,112 287,212 301,367 263,709 Repair & Maintenance 98,921 151,562 170,055 186,049 170,916 Total Deductions 640,369 943,732 1,042,840 1,065,229 966,655
Gross Operating Profit (781,950) 247,044 1,157,298 1,618,810 2,204,759 Interest Income 8,755 49,273 77,213 100,099 174,425 Interest Expense (7,497) - - - - Dividend Income - 43,412 74,668 273,493 234,422 Sundry Income 168,311 64,979 10,481 14,662 15,765 (612,381) 404,708 1,319,660 2,007,064 2,629,371
Insurance 15,090 11,048 9,999 9,641 11,262 Rates 16,784 16,784 16,884 16,784 12,939 Operating/Marketing Fee 35,860 135,237 240,647 288,384 333,126 Depreciation 351,437 385,052 393,262 351,873 323,058 419,171 548,121 660,792 666,682 680,385
Net (Loss)/Profit Before Tax (1,031,552) (143,413) 650,868 1,340,382 1,948,986 118 Asian Hotels and Properties PLC
GLOSSARY OF FINANCIAL TERMS
ACCOUNTING POLICIES DEFERRED TAX The specific principles, bases, conventions, rules and practices Sum set aside in the financial statements for taxation that may adopted by an enterprise in preparing and presenting financial become payable in a financial year other than the current statements. financial year.
ACCRUAL BASIS DIVIDEND YIELD Recognising the effects of transactions and other events when Dividend earned per share as a percentage of its market value. they occur without waiting for receipt or payment of cash or its equivalent. DIVIDEND PER SHARE Dividend per share (DPS) is the total dividends paid out over an AMORTISATION entire year (including interim dividends but not including special The systematic allocation of the depreciable amount of an dividends) divided by the number of outstanding ordinary intangible asset over its useful life. shares issued.
CAPITAL EMPLOYED DIVIDEND PAYOUT RATIO Shareholders’ funds plus debt. The percentage of earnings paid to a shareholder as dividends.
CASH EQUIVALENTS EARNINGS PER SHARE (EPS) Short term highly liquid investments that are readily convertible Profit attributable to equity holders divided by the weighted to known amounts of cash and which are subject to an average number of ordinary shares in issue during the period. insignificant risk of changes in value. EBIT CONTINGENCIES Earnings before interest and tax (includes other operating A condition or situation existing at Balance Sheet date where income). the outcome will be confirmed only by occurrence or non- occurrence of one or more future events. EBITDA Earnings before interest, tax, depreciation and amortisation. CURRENT RATIO Current assets divided by current liabilities. EQUITY ASSETS RATIO Total assets divided by shareholder’s equity. CAPITAL EXPENDITURE The total additions to property, plant and equipment. FAIR VALUE Fair value is the amount for which an asset could be exchanged CORPORATE GOVERNANCE between acknowledgeable willing buyer and a knowledgeable The process by which corporate entities are governed. It is willing seller in an arm’s length transaction. concerned with the way in which power is exercised over the management and direction of an entity, the supervision of GROSS PROFIT MARGIN executive actions and accountability to owners and others. What remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross profit by DEBT/EQUITY RATIO sales. Gross profit margin is expressed as a percentage. Debt as a percentage of shareholders’ funds plus non controlling interest. Annual Report 2020 | 2021 119
IMPAIRMENT PRE-TAX RETURN ON CAPITAL EMPLOYED This occurs when recoverable amount of an asset is less than its Profit before interest and tax as a percentage of average capital carrying amount. employed at year end.
INTANGIBLE ASSET PRICE EARNINGS RATIO An intangible asset is an identifiable non- monetary asset Market price per share over Earnings per Share. without physical substance. PUBLIC HOLDING KEY MANAGEMENT PERSONNEL Percentage of shares held by the public calculated as per the Key management personnel are those persons having authority Colombo Stock Exchange Listing Rules as at the date of the Report. and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any QUICK ASSET RATIO Director (whether Executive or otherwise) of that entity. The quick ratio measures a company’s ability to meet its short term obligations with its most liquid assets and is calculated as MATERIALITY follows; The relative significance of a transaction or an event, the Quick Asset Ratio = (current assets- inventories)/current liabilities omission or misstatement of which could influence the economic decisions of users of financial statements. RELATED PARTIES Parties where one party has the ability to control the other party MARKET VALUE PER SHARE or exercise significant influence over the other party in making The price at which an Ordinary share can be purchased in the financial and operating decisions, directly or indirectly. stock market. RETURN ON CAPITAL EMPLOYED (ROCE) MARKET CAPITALISATION EBIT as a percentage of average capital employed Number of shares in issue at the end of period multiplied by the market price at end of period. RETURN ON EQUITY Profit attributable to shareholders as a percentage of average NET ASSETS shareholders funds. Total assets minus current liabilities minus long term liabilities. SHAREHOLDERS’ FUNDS NET ASSETS PER SHARE Stated capital plus capital and revenue reserves. Shareholders funds divided by the weighted average number of ordinary shares. TOTAL DEBT Long term loans plus short term loans and overdrafts. NET DEBT (CASH)
Total debt minus cash plus short-term deposits TOTAL EQUITY Shareholders’ funds plus non-controlling interest. OPERATIONAL RISK This refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. 120 Asian Hotels and Properties PLC
NOTES CORPORATE INFORMATION
NAME OF COMPANY Asian Hotels and Properties PLC
LEGAL FORM A Public Limited Liability Company incorporated in Sri Lanka in 1993 and registered with the Board of Investment of Sri Lanka under Section 17 of the Board of Investment Law No. 4 of 1978
The Company was re-registered as per the New Companies Act No. 7 of 2007 on 15th June 2007
STOCK EXCHANGE LISTING The issued Ordinary shares of the Company are listed on the Main Board of the Colombo Stock Exchange of Sri Lanka
COMPANY REGISTRATION NO. PQ 2
BOARD OF DIRECTORS Mr. Krishan Niraj Jayasekara Balendra - Chairman/Managing Director Mr. Joseph Gihan Adisha Cooray Mr. Suresh Rajendra Mr. Cholmondeley John Lloyd Pinto Mr. Jegatheesan Durairatnam Mr. Ashan Suresh De Zoysa Mr. Mikael Roland Svensson Mr. Changa Lashantha Poojitha Gunawardane (Appointed w.e.f 01/01/2021)
COMPANY SECRETARIES Keells Consultants (Private) Limited 117, Sir Chittampalam A. Gardiner Mawatha, Colombo 2.
REGISTERED OFFICE Address: No. 77, Galle Road, Colombo 03 Tel.: +94 11 2497205 Fax: +94 11 5547570 E-mail: [email protected]
AUDITORS KPMG Chartered Accountants 32A, Sir Mohamed Macan Markar Mawatha Colombo 03.
BANKERS Deutsche Bank AG - Colombo Seylan Bank Ltd - Colombo Hongkong & Shanghai Banking Corp. Ltd. - Colombo Nations Trust Bank PLC - Colombo DFCC Bank PLC - Colombo CITI Bank N.A. - Colombo Bank of Ceylon - Colombo Commercial Bank of Ceylon PLC - Colombo Hatton National Bank - Colombo ASIAN HOTELS AND PROPERTIES PLC