DESIGNED FOR YOU THE FORTRESS RESORTS PLC RESORTS THE FORTRESS - ANNUAL REPORT 2013/14 ANNUAL REPORT THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 Corporate Information Name of Company Secretaries The Fortress Resorts PLC P W Corporate Secretarial (Pvt) Ltd. No. 3 / 17, Kynsey Road, Company Registration No Colombo 08. PQ 207 Telephone: 011 4640360-3 Fax: 011 4740588 Legal Form Email: [email protected] Public Quoted Company with Limited Liability, Quoted on the External Auditors Secondary Board of the Colombo Stock Exchange. Ernst & Young Registered Office Chartered Accountants 201, De Seram Place, Level 27, East Tower Colombo 10. World Trade Center Echelon Square Internal Auditors Colombo 01. BDO Partners Board of Directors Chartered Accountants “Charter House” Mr. K. D. D. Perera (Chairman) 65/2, Sir Chittampalam A Gardiner Mawatha, Mr. J. A. S. S. Adhihetty (Managing Director) Colombo 02. Mr. C. J. Wickramasinghe Mr. Malik J. Fernando Bankers Mr. Merril J. Fernando Mr. S. Senaratne Bank of Ceylon Mr. L. T. Samarawickrama Hatton National Bank PLC Mr. W. D. N. H. Perera Sampath Bank PLC Mr. L. N. De Silva Wijeyeratne Pan Asia Banking Corporation PLC Mr. D. E. Silva Mr. P. B. Perera Mr. H. Somashantha Mr. Jan P. Van Twest Mr. Chatura V. Cabraal Subsidiary Company La Forteresse (Private) Limited Hotel The Fortress Resorts & Spa Koggala Telephone : 091 4389400 Fax : 091 4389458 Email: [email protected] Produced by Copyline (Pvt) Ltd Printed by Gunaratne Offset Ltd DESIGNED FOR YOU We are in the business of designing luxurious spaces, exotic escapes and moments to remember. And as a resort known for sumptuous decadence and award winning stays, we believe that holidays should be about you and that’s why we go that extra mile to help create your own personal paradise. From star class dining, to breath- taking surroundings and impeccable service; we ensure that you are nothing less than satisfied. The Fortress Resort and Spa.... Designed for You THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 01 World Luxury Hotel Awards 2014 The World Luxury Spa Awards reward service excellence within the Luxury Spa Industry. Raising awareness within a highly competitive industry, maintaining the highest standards and building staff-moral is our main aim. Crowns for Food Hygiene Crowns for Food Hygiene scheme is to continuously enhance food hygiene standards in the food handling establishments in Sri Lanka through the use of a public-private partnership scheme designed, based on international best practices. Wellness & SPA Europe Certificate The Wellness & SPA Europe Certificate is awarded to specially selected and applying wellness hotels which fulfill the criteria and quality standards set by the European Audit Institute Wellness & SPA. The hotels must at least provide a 4**** Superior-Standard as well as an entire Wellness/SPA- conception within the hotel. Best service quality as well as highest internal and external facility standards together with certified and trained staff, are basic requirements as well as being one of the leading hotels in the area! • Trip Advisor – Traveller’s Choice • Trip Advisor – Service Excellence Award • Trip Advisors – Travellers’ Choice Award for Luxury Hotels in Sri Lanka • Trip Advisors – Top Hotels in Sri Lanka • Trip Advisors – Travellers ‘Choice Business Destinations – Best Luxury Hotel Award The Business Destinations Travel Awards are designed to showcase those companies whose products and services represent the pinnacle of the business travel industry. Unique in travel accolade platforms. THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 02 THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 03 A Resort in Koggala, Sri Lanka. A hotel fashioned in the style of a powerful fortress. Rising next to the beach, the resort’s walls enclose verdant gardens and water features, a spa featuring Ayurvedic treatments, a free flow swimming pool, wine cellar, restaurants, boutiques and exquisitely appointed rooms, lofts and residences. The resort’s architecture merges historic Dutch and Portuguese styles into the motifs of Sri Lanka and is Galle’s most innovative resort experience. THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 04 THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 05 Contents Group Financial Highlights 07 | Chairman’s Review 10 | Chief Executive Officer’s Review 14 | Board of Directors 22 | Management Discussion and Analysis 32 | Sustainability Report 50 | Risk Management 66 | Annual Report of the Board of Directors on the Affairs of the Company 70 | Corporate Governance 74 | Statement of Directors’ Responsibilities 86 | Audit Committee Report 87 | Independent Auditor’s Report 91 | Statement of Comprehensive Income 92 | Statements of Financial Position 93 | Statement of Changes in Equity 94 | Cash Flow Statement 95 | Notes to the Financial Statements 96 | Five Year Summary - Group 125 | Group Value Added Statement 126 | Shareholder Information 127 | Notice of Annual General Meeting 129 | Notes 130 | Form of Proxy 131 | Corporate Information IBC THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 06 Group Financial Highlights Year Ended 31st March 2014 2013 2012 2011 Earnings highlights and ratios Revenue Rs.'000 650,526 577,724 464,306 416,345 Earnings before interest and tax (EBIT) Rs.'000 246,240 214,158 136,810 161,059 Group profit before tax (PBT) Rs.'000 206,995 161,735 87,289 86,032 Group profit after tax (PAT) Rs.'000 176,888 153,635 84,406 84,398 Group profit attributable to the shareholders Rs.'000 176,888 153,635 84,406 84,398 Earnings per share (EPS) Rs. 1.6 1.39 0.76 0.76 EPS Growth % 15 82 41 207 Interest cover No of times 6 4 3 2 Return on Equity % 17 14 9 10 Pre - tax ROCE % 15 11 6 5 Financial position highlights and ratios Total assets Rs.'000 1,397,195 1,490,715 1,389,902 1,375,832 Total debt Rs.'000 70,697 374,808 425,163 513,674 Total shareholder's funds Rs.'000 1,214,760 1,038,082 884,447 800,041 No. of shares in issue Number 110,886,684 110,886,684 110,886,684 110,886,684 Net assets per share Rs. 10.95 9.36 7.98 7.21 Debt/Equity % 6 36 48 64 Debt/Total assets % 5 25 31 37 Market / Shareholder information Market price of share as at 31st March Rs. 13.30 15.00 17.20 25.10 Market capitalisation Rs.'000 1,474,793 1,663,300 1,907,251 2,783,256 Price earning ratio No of times 8.35 10.83 22.60 33.03 Operational information Average occupancy % 72 70 66 65 Number of room nights sold Room nights 13,974 13,459 12,681 12,055 Room revenue Rs.'000 409,210 357,826 290,885 243,715 Average room rate (ARR) Rs. 29,284 26,586 22,939 20,217 Revenue per occupied room Rs. 48,525 45,808 38,828 38,512 Net profitper room Rs.'000 3,334 2,899 1,593 1,592 Revenue Group PBT Group EBIT Interest Cover Rs. Mn Rs. Mn Rs. Mn Times 700 250 300 7 600 250 6 200 5 500 200 150 4 400 150 100 3 300 100 2 50 200 50 1 464 578 651 87 162 207 137 214 246 3 4 6 100 0 0 0 11/12 12/13 13/14 11/12 12/13 13/14 11/12 12/13 13/14 11/12 12/13 13/14 THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 07 A unique method of fishing that is practiced in the south, still fisherman possess great strength and skill and is an icon of Sri Lankan ingenuity as well as the resort. Perched on a wooden crossbar in order to brave the high tide, this tradition creates a beautiful sight out amongst the waves and is a view that is not to be missed during your visit. THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 08 THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 09 Chairman’s Review “Our journey was no walk in the park but the concerted effort of all concerned. The course was not without challenge, we forged forward with unrelenting focus and drive in order to ensure that the ambitious targets set were met. The results as you can see are phenomenal, we have actually over shot our expectation and over-excelled.” Dammika Perera Chairman THE FORTRESS RESORTS PLC - ANNUAL REPORT 2013/14 | Page 10 Dear Stakeholder, renewed economic activity from geographic areas that long It gives me great pleasure to present to you the Annual Report remained laggards due to the conflict were among the factors, and Financial Statements of The Fortress Resorts PLC, for the which underpinned this positive result. year ended 31st March 2014. Its content goes to prove that your Hotel has displayed a paradigm that truly exemplifies Despite adverse weather conditions the agricultural sector excellence. Your confidence and trust etched even more as we rebounded. Demand pressure that built up with the upsurge of look back at our short history of just over 8 years. imports led to the Rupee depreciation against the US Dollar boosting our export competitiveness and propping up our export Global recovery sentiment mixed Synopsis of Global earnings. The global financial crisis, which affected the country’s Environment main export markets and oil prices took its toll on energy prices which in turn adversely impacted the BOP. The global economy grew at 2.5% during the first half of 2013, the same pace as the second half of 2012. The World Economic However, in the latter part of the year, global trade rebounded Outlook published in October 2013, by the IMF, states that the strongly to the favourable developments in the global economy, global economy is expected to expand by 2.9%, 0.4 percentage particularly in the fourth quarter of 2013.