Inspired by life John Keells Hotels PLC | Annual Report 2016-17 Contents Our Vision 03 Independent Auditors’ Report 161 About this Report 04 Income Statement 162 Group Structure 10 Statement of Comprehensive Income 163 Performance Scorecard 12 Statement of Financial Position 164 Year at a Glance 14 Statement of Changes in Equity 166 Key Achievements in 2016/17 15 Statement of Cash Flows 168 Group Financial and Operational Highlights 18 Notes to the Financial Statements 172 Chairman’s Review 22 Quarterly Income Statement - Group 236 Board of Directors 28 Quarterly Statement of Financial Position - Group 237 Management Discussion and Analysis 34 Indicative US dollar Income Statement 238 Consolidated Value Added Statement 118 Indicative US dollar Statement of Financial Position 239 GRI Content Index Tool 120 Ten Years Summary - Group 241 Independent Assurance Report 126 Group Real Estate Portfolio 246 Leadership and Governance 128 Directors of Subsidiary Companies 248 Audit Committee Report 143 Glossary of Financial Terms 252 Risk Management 145 Notice of Meeting 255 Investor Information 150 Form of Proxy 259 Annual Report of the Board of Directors 154 Corporate Information IBC Statement of Directors’ Responsibility 160 You only live once, but if you do it right, once is enough. Step into our world and forget the one you leave behind as the Cinnamon team discovers a myriad ways to demonstrate that for us, leisure is luxurious and always inspired by life. We offer every guest a choice of destination experiences; from laid-back to exhilarating, tranquil to thrilling… and extraordinary is always on the menu. Cinnamon Hotels & Resorts offers a dazzling variety of inspired living experiences at any of our elegant hotels and resorts, sited in several magnificent locations across Sri Lanka and the Maldives…each one vibrant, distinctive and exclusive…. designed for pleasure and inspired by life. JOHN KEELLS HOTELS PLC John Keells Hotels PLC | Annual Report 2016-17 2 Inspired by values | OUR VISION | We will always be the hospitality trendsetter. John Keells Hotels PLC | Annual Report 2016-17 About this Report As our primary publication to stakeholders, this Report demonstrates our integrated approach in formulating strategy and managing our business. 4 John Keells Hotels PLC | Annual Report 2016-17 WELCOME TO OUR INTEGRATED REPORT assessment of our value creation model. There were no significant This year, we present our 3rd Integrated Annual Report prepared changes to the Group’s size, structure, shareholding or supply in accordance with the guidelines of the <IR> Framework issued chain during the period under review. by the International Integrated Reporting Council (IIRC). As our primary publication to stakeholders, this Report demonstrates Reporting Enhancements our integrated approach in formulating strategy and managing We are committed to continuously enhancing the quality of our business, ensuring that business and sustainability objectives our Report and this year we have improved its relevance and are balanced appropriately. Accordingly, the Report aims to meaningfulness through the following; provide a holistic and balanced review of our financial, social and • The United Nations has declared the year 2017 as the Year environmental performance on matters which are material to our of Sustainable Tourism and throughout this Report, we have strategy and ability to create sustainable value. demonstrated our contribution to Sustainable Development Goals wherever possible Scope and Boundary We adopt an annual reporting cycle and this Report covers the • Increased connectivity of information through linking our operations of John Keells Hotels PLC and its subsidiaries (‘referred strategy to our value creation model and material issues to as the Group’) in Sri Lanka and Maldives for the period from 1st • Improved conciseness of the Report April 2016 to 31st March 2017. The Report builds on the Group’s most recent GRI report for the year ending 31st March 2016. Navigating our Report Material aspects included in the Report were selected through This Report has been structured to clearly address three key areas a systematic and comprehensive process which involved robust of interest to our stakeholders as illustrated below. Our response stakeholder engagement at multiple levels, evaluation of emerging to these areas of priority also reflects the key elements of our risks and opportunities in the industry landscape as well as strategic agenda and approach towards stakeholder value creation. Drivers Relevant Capital Strong financial performance Financial capital (page 53) Creating unique guest experiences Social and relationship capital - Customers (page 96) WHAT DRIVES OUR BUSINESS Our brands Intellectual capital (page 102) A strong employee value proposition Human capital (page 82) Physical infrastructure Manufactured capital (page 57) HOW TO STAY IN BUSINESS Creating value across our supply chain Social and relationship capital - Suppliers (page 98) Empowering communities Social and relationship capital - Communities (page 100) WHAT WE CARE Nurturing the planet Natural capital (page 104) ABOUT Lead by example Strong risk management practices THE WAY WE DO BUSINESS Industry thought leadership 5 John Keells Hotels PLC | Annual Report 2016-17 About this Report Reporting Principles and Assurance Integrated Report Annual Financial Statements Corporate Governance and Sustainability Performance Risk Management Report • Integrated Reporting • Sri Lanka Financial • Code of Best Practice • GRI- G4 standards (Core) Framework of the Reporting Standards on Corporate Governance International Integrated issued by the ICASL Reporting Council (IIRC) • Companies Act No. 7 and SEC of 2007 • Listing Requirements PRINCIPLES • Listing Requirements of the Colombo Stock STANDARDS AND STANDARDS of the Colombo Stock Exchange Exchange Messrs. Ernst and Young, Messrs. Ernst and Young, Chartered Accountants Chartered Accountants ASSURANCE Feedback We understand that Integrated Reporting is a continuously evolving journey and value your comments, feedback and suggestions on our Report. For further information, please contact, Mr. Prasanna Fernando Sector Financial Controller, Cinnamon Hotel Management Ltd., 117, Sir Chittampalam A Gardiner Mawatha, Colombo 02. E-mail: [email protected] 6 John Keells Hotels PLC | Annual Report 2016-17 Our Business at a Glance Our flagship lifestyle brand ‘Cinnamon’, embodies the best of Sri Lankan culture, entertainment and hospitality. We are Sri Lanka’s premier hospitality sector operator, owning to comply with numerous international certifications including and managing a portfolio of 1,337 four and five star rooms in Green Globe, ISO 22000:2005, ISO 14001 and OHSAS 18001 11 hotels across Sri Lanka and Maldives. Our flagship lifestyle among others. Headquartered in Colombo, Sri Lanka we are an brand ‘Cinnamon’, embodies the best of Sri Lankan culture, 80.32% owned subsidiary of John Keells Holdings PLC, Sri Lanka’s entertainment and hospitality, delivering its promise of ‘Inspired premier diversified conglomerate, and most valuable listed entity Living’ through iconic, modern and vibrant spaces. A pioneer in terms of market capitalization. John Keells Hotels PLC is listed in sustainable tourism in Sri Lanka, the multi-award winning on the primary board of the Colombo Stock Exchange with a Cinnamon Hotels & Resorts portfolio has obtained and continues market capitalization of Rs.14,561 million at end-March 2017. Beach Front Adventure and Heritage Maldives 564 rooms in 4 resorts (refer page 51) 433 rooms in 4 resorts (refer page 50) 340 rooms in 3 resorts (refer page 52) 7 John Keells Hotels PLC | Annual Report 2016-17 Our Business at a Glance GROUP HIGHLIGHTS (2016/17)OPERATING HIGHLIGHTS (2016/17) OUR STRENGTHS Revenue Occupancy - Sri Lanka Our Team Rs.12,312 Mn 80% 2,590 (+6%) Operating profit Occupancy - Maldives Rs. 2,248 Mn 89% (+8%) REVENUE COMPOSITION EBIT COMPOSITION RETURN ON CAPITAL EMPLOYED (ROCE) % 21% 25% 15 12 9 52% 52% 6 27% 23% 3 0 Beach Resorts Beach Resorts e Adventure and Heritage Adventure and Heritage Beach Maldives Maldives Resorts Maldives Adventur and Heritage Cluster Hotel Room Capacity TripAdvisor Rating Beach Front Cinnamon Bey Beruwala 200 4.2 Hikka Tranz by Cinnamon 150 4.2 Trinco Blu by Cinnamon 81 4.1 Bentota Beach by Cinnamon 133 3.8 Adventure and Heritage Cinnamon Wild Yala 68 4.4 SRI LANKA Cinnamon Lodge Habarana 138 4.4 Habarana Village by Cinnamon 108 4.4 Cinnamon Citadel Kandy 119 4.1 Beach Front Cinnamon Dhonveli Maldives 148 4.5 Ellaidhoo Maldives by Cinnamon 112 4.2 Cinnamon Hakuraa Huraa Maldives MALDIVES 80 4.5 8 John Keells Hotels PLC | Annual Report 2016-17 9 John Keells Hotels PLC | Annual Report 2016-17 Group Structure JOHN KEELLS HOLDINGS PLC (Ultimate Parent Company) JOHN KEELLS HOTELS PLC 80.32% Kandy Walk Yala Village Habarana Habarana Ceylon Trinco Nuwara Inn Limited (Pvt) Limited Lodge Walk Inn Holiday Holiday Eliya Holiday 98.39% 93.78% Limited Limited Resorts Resorts (Pvt) Resorts (Pvt) Limited Limited Limited Cinnamon Cinnamon 98.35% 98.77% 98.65% 100% 100% Citadel Kandy Wild Yala Cinnamon Habarana Lodge Village Bentota Beach Trinco Blu 3.35 acres of Habarana by Cinnamon by Cinnamon by Cinnamon land in Nuwara Eliya Hikkaduwa Resort Hotels Holiday Limited Resorts (Pvt) 100% Limited 41.73 acres of 100% land in Nilaveli Hikka Tranz by Cinnamon 10 John Keells Hotels PLC | Annual Report 2016-17 We are an 80.32% owned subsidiary of John Keells Holdings PLC, Sri Lanka’s premier