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.