John Keells Hotels PLC Annual Report 2018 | 2019 Our focus never faltered and our goal remained consistent; enriching our guest experience remained paramount. Sharpening our focus in the year under review, enabled us to emerge resilient and not flounder in the face of trials and tribulations. Focusing inward, we improved ourselves, enhancing the impeccable service standards we have maintained year in and year out. Focusing outward, we upgraded our infrastructure; investing in elevating with progress in mind. Focusing intensely, gave us the impetus to charge forward with confidence and embrace our standing as THE trendsetter in the hospitality industry. What an amazing place! The staff could not do more for us and the island was so beautiful. Food was amazing and our water bungalow was the perfect accommodation for our special trip. TripAdvisor Review by Emma H Ellaidhoo Maldives by Cinnamon Contents MANAGEMENT DISCUSSION GROUP HIGHLIGHTS GOVERNANCE AND ANALYSIS Our Portfolio 11 Board of Directors 30 Our Strategic Report 64 Group Structure 14 Corporate Governance 34 Cluster Reviews 74 Performance Scorecard 16 Audit Committee Report 57 Value Creation Report 77 About the Group 18 Report of the Independent Human Resources and Assurance Report 140 Year at a Glance 20 Compensation Committee 59 Risk Management 142 Group Financial and Report of the Operational Highlights 22 Nominations Committee 60 Investor Information 151 Chairman’s Review 24 Report of the Related Party Transaction Review Committee 61 SUPPLEMENTARY FINANCIAL STATEMENTS INFORMATION Financial Calendar 156 Quarterly Information 236 Index to the Indicative US Dollar Financial Information 157 Financial Statements 238 ValUE CREATION REPORT Annual Report of the Decade at a Glance 240 Board of Directors 158 Financial Capital 77 Group Real Estate Portfolio 244 Statement of Manufactured Capital 80 Director’s Responsibility 164 Consolidated Value Added Statement 245 Human Capital 104 Independent Auditors’ Report 165 GRI Content Index 246 Social and Relationship Capital 113 Income Statement 169 Glossary of Financial Terms 251 Intellectual Capital 121 Statement of Group Directory 254 Comprehensive Income 170 Natural Capital 127 Notice of Meeting 262 Statement of Financial Position 171 Form of Proxy 263 Statement of Corporate Information IBC Changes in Equity 172 Statement of Cash Flows 173 Notes to the Financial Statements 175 6 JOHN K EELLS H OTELS PLC Annual Report 2018 | 2019 About this Report GRI 102-1 GRI 102-10 GRI 102-12 GRI 102-46 GRI 102-48 GRI 102-50 GRI 102-51 GRI 102-52 GRI 102-53 GRI 102-54 John Keells Hotels PLC presents its 5th Annual Report NAVIGATION ICONS according to an Integrated format of reporting. Reflecting the Group’s Triple Bottom Line approach, the report Financial Capital discusses the quality, availability and the effective management of all six capitals. Manufactured Capital REPORT SCOPE AND BOUNDARY Human Capital The report covers the operations of John Keells Hotels PLC and its subsidiaries referred to as the “Group” in Sri Lanka Social and and Maldives for the period from 1st April 2018 to 31st Relationship Capital March 2019. We adopt an annual reporting cycle, and the most recent previous report for the financial year ending 31st March 2018 is available on our website Intellectual Capital www.cinnamonhotels.com. The complete list of hotels within the Group is provided on page 19. The Management Natural Capital Discussion & Analysis reports on operations which fall directly under the control of the Group and as individual properties. In preparing this report we have drawn on concepts, guidance and methodology given in the International Integrated Reporting Council’s Framework and Sri Lanka Accounting Standards (SLFRS/LKAS) applicable for financial periods beginning on or after 1st January 2012. The accounting policies adopted are described in detail in the Financial Statements. Further, we are in compliance with the laws and regulations of the Companies Act No. 07 of 2007 and subsequent amendments and Listing Rules of the Colombo Stock Exchange (CSE). The Capital reports are based on the universally applicable and comparable framework for Sustainability Reporting developed by the Global Reporting Initiative (GRI) Standard, in accordance to the Core Reporting option. We also report on the Group’s initiatives towards meeting the United Nations’ Sustainable Development Goals as applicable to the Group. During the year under review there were no Feedback significant changes to the organisation and its supply chain. We understand that Integrated There were no material re-statements of information from Reporting is a continuously evolving the previous reporting period. journey and value your comments, feedback and suggestions on our Report. For further information, please contact; Mr. Prasanna Fernando, Sector Financial Controller, 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02. E-mail: [email protected] JKOHN EELLS HOTELS PLC 7 Annual Report 2018 | 2019 What’s Where CORPorate MANAGEMENT FINANCIAL GOVERNANCE REVIEW REPORTS 34 - 56 64 - 153 169 - 235 FINANCIAL MANUFACTURED HUMAN CAPITAL CAPITAL CAPITAL 77 - 79 80 - 103 104 - 112 SOCIAL AND INTELLECTUAL NATURAL RELATIONSHIP CAPITAL CAPITAL CAPITAL 113 - 120 121 - 126 127 - 139 The staff here are very friendly and welcoming. Set in the lovely countryside, so the views are amazing and the weather is very hot. Sunshine all day. Food is excellent so are the large variety of drinks Lovely pool. TripAdvisor Review by Pat D Cinnamon Lodge Habarana 10 JOHN K EELLS H OTELS PLC Annual Report 2018 | 2019 Who We Are We will always be the Hospitality Trendsetter Cinnamon Hotels & Resorts is known as a pioneer in the travel and hospitality industry inspiring you to enjoy life’s best moments. As one of Sri Lanka’s largest hotel operators, we own a portfolio of nine operational resort hotels spread across prime tourist locations in Sri Lanka and Maldives, offering beaches, mountains and cultural splendour. With a passion for style and a penchant for fun, the diversity of the Cinnamon way of doing things means we have unique experiences in each of the hotels from rooms on the beach to rooms in the ocean and views of the city, the jungle and horizons, so take your pick and we’ll deliver. We create holistic, inspiring adventures and light-hearted fun for one-of-a-kind island adventures. JKOHN EELLS HOTELS PLC 11 Annual Report 2018 | 2019 Our Portfolio 05 672 Luxury Lifestyle Hotels Rooms 04 451 Rustic Luxury Hotels Rooms 02 259 Re-development/ Hotels Rooms Re-construction The location of this hotel is fabulous with lots of wild life in the grounds, a great pool and a very relaxing feel. TripAdvisor Review by jilemcam17 Habarana Village by Cinnamon 14 JOHN KEELLS HOTELS PLC Group Highlights Annual Report 2018 | 2019 Group Structure Kandy Walk Inn Limited 98.39% Cinnamon Citadel Kandy Habarana Lodge Limited 98.35% Cinnamon Lodge Habarana Trinco Holiday Resorts (Pvt) Limited 100% Trinco Blu by Cinnamon Nuwara Eliya Holiday Resorts (Pvt) Limited 100% 2.66 acres of land in Nuwara Eliya Wirawila Walk Inn Limited 80.32% 100% 25.15 acres of land in Wirawila Trinco Walk Inn Limited 100% 14.64 acres of land in Trincomalee Indra Hotels & Resorts Kandy (Pvt) Limited 40% Associate Cinnamon Red Kandy (Under construction) Cinnamon Holidays (Pvt) Limited 100% Inbound & Outbound tour operator JOHN KEELLS HOTELS PLC 15 Annual Report 2018 | 2019 Group Highlights GRI 102-5 GRI 102-45 Yala Village (Pvt) Limited 93.78% Cinnamon Wild Yala Habarana Walk Inn Limited 98.77% Habarana Village by Cinnamon Hikkaduwa Holiday Resorts (Pvt) Limited 100% Hikka Tranz by Cinnamon Ceylon Holiday Resorts Limited 99.31% Cinnamon Bentota Beach (Under re-development) Resort Hotels Limited 100% 41.73 acres of land in Nilaveli Rajawella Hotels Co Limited 100% International Tourists & Beruwala Holiday Resorts (Pvt) Limited Hoteliers Limited 100% 99.33% Cinnamon Bey Beruwala Ahungalla Holiday Resorts Travel Club (Pte) Limited (Pvt) Limited 100% 100% 6.51 acres of land in Ahungalla Ellaidhoo Maldives by Cinnamon Fantasea World Investments (Pte) Limited John Keells Maldivian Resorts 100% (Pte) Limited 100% Cinnamon Hakuraa Huraa Maldives (Under re-construction) Sentinel Reality (Pvt) Limited Tranquility (Pte) Limited 50% Joint Venture 100% 33.69 acres of land in Cinnamon Dhonveli Maldives Vaakarai & Kallarawa 16 JOHN KEELLS HOTELS PLC Group Highlights Annual Report 2018 | 2019 Performance Scorecard Change Indicator 2018/19 2017/18 y-o-y Commitment: Sustainable growth in earnings Revenue Rs. Million 11,033 11,614 (5%) TrevPAR Rs. 26,745 25,720 4% Operating profit Rs. Million 1,087 1,324 (18%) Profit for the year Rs. Million 832 1,131 (26%) Earnings per share Rs. 0.56 0.77 (27%) Dividend per share Rs. 0.15 0.40 (63%) Total assets Rs. Million 37,250 33,236 12% Financial Capital Total equity Rs. Million 28,897 26,353 10% Total debt Rs. Million 5,455 4,244 29% Net assets per share Rs. 19.75 18.00 10% Share price Rs. 7.50 9.30 (19%) Market capitalisation Rs. Million 10,921 13,542 (19%) Commitment: Continued investments in our physical infrastructure Property, plant and equipment Rs. Million 17,563 14,084 25% Room capacity No. of Rooms 1,123 1,204 (7%) Capital Capital expenditure Rs. Million 3,917 1,526 157% Manufactured Manufactured Commitment: Strengthening the employee value proposition Total employees No. 2,105 2,286 (8%) Payments to employees Rs. Million 2,083 2,094 (0.6%) No. of promotions No. 97 152 (36%) Attrition rate % 23 28 (18%) Female representation % 8 8.3 (4%) Investment in training Rs. Million 47.1 34.1 38% Human Capital Total training hours Hours 115,200 89,119 29% New recruits No. 571 444 29% Average training hours/employee Hours 68 39 74 % Workplace injuries No. 33 43 (23%) JOHN KEELLS HOTELS PLC 17 Annual Report 2018 | 2019 Group Highlights GRI 102-7 Change Indicator 2018/19 2017/18 y-o-y Commitment: Creating guest experiences Occupancy rate - Sri Lanka % 80 81 (1%) Occupancy rate - Maldives % 84 82 2% TripAdvisor rating Out of 5 4.4 4.4 - Social media presence No.