John Keels Hotel_Annual Report 2009

7/31/2019 John Keels Hotel_Annual Report 2009

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To own or manage 10,000 hotelrooms in South Asia and otherdestinations of potential - a millionsatisfied customers by 2014.

John Keells Hotels PLC l 1 l Annual Report 2008/09

Mission:To strive for perfection when providing guest experiences that exceed expectations and be

recognized as an emerging regional leader in Hospitality, through the discovery of quality service

propositions, supported by superior performance from our people and technology, whilst nurturing

values on responsible tourism and providing a sustainable future for all stakeholders.

Values:Integrity:

In our business dealings and with each other.

Teamwork:Always putting the Company and the Team

before oneself.

Service:

To achieve excellence for all our customers both

internal and external.

Technology:The use of cutting edge technological

developments to maintain leadership in

our business.

Environment:

To consciously safeguard our environment

and ensure sustainable continuity of our

natural resources.

Our People:Responsible for creating dynamism and

commitment whilst recognizing and

rewarding achievements.

Social Responsibility:Contribute to the development of the

community in which we do our business.

Vision:


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in anticipation...


Chairmans Statement 4

Group Financial Highlights 7

Group operating Highlights & Financial Calendar 8

Group structure 9

Board of Directors 10

Corporate Governance 13

Audit Committee Report 23

Management Discussion & Analysis

Investor Information 26

Financial review 28

Management Discussion & Analysis of Operations 31

Risk Management 62

Sustainability Reporting

Sustainability Report 68

Our People 76

Financial Reports

Annual Report of the Board of Directors 82

Statement of Directors Responsibility 86

Report of the Auditors 87Balance Sheet 88

Income Statement 89

Cash flow Statement 90

Statement of Changes in Equity 92

Notes to the Financial Statements 93

Consolidated Value Added Statement 118

Quarterly Income Statement 119

Supplementary Information

Indicative US Dollar Consolidated Balance Sheet 122

Indicative US Dollar Consolidated Income Statement 123Six year summary Group 124

Group Real Estate Portfolio 125

Directors of Subsidiary Companies 126

Glossary of Financial terms 127

Notice of meeting 128

Form of Proxy 131

Corporate Information IBC

Contents


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Chairmans Statement

With the comprehensive victory of the Sri Lankan armed

forces in liberating the North and East of the country,

Sri Lanka is on the brink of a new era of peace and

economic development. The scourge of terrorism and the

violence that accompanied it, had a crippling effect on the

leisure business in Sri Lanka. With this new beginning, I am

confident that the country and your company will see

tremendous, unprecedented opportunities for growth.

The optimism of the industry at thecommencement of the year

waned, as business and

consumer confidence

deteriorated following

the global credit

crunch, which

plunged the global

economy into the

worst recession in

recent times. Travel

demand was initially dampened by the increase in aviation

fuel prices while uncertainty caused by the deepening

global recession and rising unemployment in the developed

countries led to a shrinking number of international visitors

during the second half of the year.

In the face of these challenges, your company, which is a

key player in the regional tourism industry, fine tuned its

operational efficiencies and demonstrated tremendous

resilience in this difficult year.

Having surmounted the challenges of the past year, it is

with pleasure that I, on behalf of your Board, present the

Annual Report and Audited Accounts of John Keells Hotels

PLC for the year ended 31st March 2009.

Industry Contribution to Economy

In Sri Lanka, the 7.5% GDP growth in the Agricultural

sector was the primary contributor to the overall GDP

growth of 6% achieved in 2008 as reported by the Central

Bank of Sri Lanka. Volatility and turbulence in the world

economy along with security concerns negatively impacted

the Hotels and Restaurants sub sector leading to a further

deceleration in GDP growth to -5%. This significant factor

slowed growth in the Services Sector, which has been

the major driver of GDP growth of the Sri Lankan

economy in the past few years.

In the midst of political change, overall GDP

growth in the Maldives slowed to 5.8% from the

7.2% in 2007. The strong growth in the tourism

sector in the Maldives, following the devastation

of the tsunami in 2004, faltered under the

impact of the world economic crisis and resulted

in the 9.4% year on year growth in the tourism

sub sector of GDP achieved in 2007, declining to

3% in 2008.

Preserving, Protecting and Prospecting

Faced with a contracting market and rising

fuel prices, the Group intensified its efforts to

fine tune its internal operating efficiencies,

conserve resources and improve productivity.


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Faced with a contracting market andrising fuel prices, the Group intensified itsefforts to fine tune its internal operating

efficiencies, conserve resources andimprove productivity


Several successful cost saving initiatives were launched

without compromising brand standards.

Brand consolidation initiatives were vigorously pursued andthe accolades received following the successful

participation of our staff in local and global industry

competitions, further enhanced the visibility and

recognition of the brands.

John Keells Resort Hotels swept the boards, winning five of

the nine awards on offer at the Grand Finale of the 17th

National Bartenders Competition organized by the Ceylon

Hotel School Graduates Association (CHSGA) and the

Sri Lanka Institute of Tourism & Hotel Management. This

was followed by success at the Asia Pacific BartendersCompetition held in Singapore, when a young hostess

from Chaaya Village, competing with bartenders from

Japan, Italy, Korea, Thailand and the United Kingdom,

emerged first runner-up with a brilliant performance.

Participating amongst worldwide travel and tourism

organisations, Cinnamon Island Alidhoo received the Grand

Award in the Education and Training category of the Pacific

Asia Travel Association (PATA) 2008 PATA Gold Awards in

recognition of its initiative to uplift the employability of

young Maldivians, which commenced last year.

Clients of First Choice, which is part of the TUI Travel PLC

Group of companies, a leading UK travel company

honoured Chaaya Island Dhonveli with the Gold Choice

2008 award, as the best winter three star accommodation

worldwide.

Several investment opportunities in emerging leisure

destinations in the region were evaluated during the year,

however none crystallised, as they did not meet our return

expectations. The extreme volatility in the global financial

and capital markets as well as its lagged impact on the

tourism industry during the latter part of the year

necessitated greater discipline and prudence in evaluating

projects. However, alert to the emergence of potential

opportunities in the wake of the global industry downturn,

we continue to explore all such prospects in keeping with

our strategy of expanding our presence in the region.

Performance at a Glance

Despite the bleak industry conditions, the Group achieved

revenue of Rs.5.1Bn, which was similar to the previous

year. Revenue growth in the Maldivian segment, helped to

offset the drop in revenue from the Sri Lankan segment.

Due to the construction of a breakwater at Cinnamon

Island Alidhoo, the resort was only partially operational up

to December 2008, negatively impacting revenue.


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Chairmans Statement


Tight control on direct costs enabled the Group to improve

the gross profit margin to 68% from 64% last year.

However, earnings before interest and tax (EBIT) declined

to Rs.70.5Mn from Rs.392.2Mn in the previous year due to

increased expenditure on administration caused by the full

year operation of Cinnamon Island Alidhoo and Chaaya

Reef Ellaidhoo and higher operational expenses arising

from the high cost of fuel during the greater part of the

year.

The overall reduction of 39% in the finance cost was

primarily due to the reduction in debt consequent to the

rights issue last year and lower rates on overseas

borrowings that are structured on variable rates.

The reduction in finance costs mitigated the increase in

expenditure and the Group reported a net loss before tax

of Rs.221.5Mn during the year under review, against the

net loss of Rs.83.3Mn last year. After accounting for a tax

credit of Rs.0.5Mn arising from the reversal of deferred tax,

the consolidated loss after tax for the year amounted to

Rs.221Mn as against the loss after tax of Rs.71.1Mn in the

previous year.

Future Prospects

With peace and stability, we are confident that the tourism

industry in Sri Lanka will witness a resurgence

notwithstanding current global industry concerns. The

country is likely to see a dramatic turnaround in tourist

arrivals, if augmented by a concerted destination

marketing effort.

With the objective of creating a change in the perception

of Sri Lanka as a tourist destination, the new brand of

Sri Lanka Tourism Small Miracle was launched at the

recently concluded ITB in Berlin. This positioning strategy,

formulated upon the diversity, compactness, authenticity

and the island aspects of the destination, seeks to

differentiate it from competition. In addition, Sri Lanka

Tourism advertised and launched the Hikkaduwa Beach

Festival and the Jazz Festival, amongst others, in order to

create interest around these events with the objective of

popularising the destination in niche markets. To

encourage domestic tourism, the Narambamu Sri Lanka

campaign was launched by Sri Lanka Tourism to create an

awareness of locations of interest in the country. These

efforts met with limited success in the larger background

of security concerns. However, it is anticipated that with

the end of the conflict, these initiatives would contribute

to a quick rebound of tourism in Sri Lanka.

The Maldivian Ministry of Finance and Treasury anticipatesa drop in overall country occupancy in 2009 owing to the

impact of the increase in bed capacity and the downturn in

country arrivals. However, the World Tourism Organisation

expects that although average stays may be shorter, the

repeat visitor segment will demonstrate resilience and

destinations offering value for money with favourable

exchange rates would be at an advantage, as price

becomes a deciding factor. In this context, the Chaaya

Maldivian Resorts, are well positioned as they have

cultivated a loyal customer base by providing value for

money.

Conclusion

I extend my sincere appreciation to the Board of Directors

for their invaluable contribution and support during what

has been a demanding year. My thanks also go out to the

Management team, our loyal clientele, our reliable business

partners and our staff at all levels who have worked with

passion to satisfy our guests.

Last but not least, I am deeply appreciative of the patience

and trust of all our shareholders, and look forward to yourcontinued support in the year ahead.

S C Ratnayake

Chairman

25th May 2009


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Group Financial Highlights


Year ended 31st March 2009 2008

Earnings Highlights and Ratios

Group Gross Revenue Rs'000 5,336,697 5,407,828

Group profit before interest and Tax Rs'000 70,534 392,223

Group profit/(Loss) before Tax Rs'000 (221,479) (83,261)

Group profit/(Loss) after Tax Rs'000 (220,976) (71,062)

Group profit attributable to the shareholders Rs'000 (211,498) (61,337)

Earnings/(Loss) per Share (EPS) Rs. (0.19) (0.07)

EPS Growth % (171.43) (117.95)

Interest Cover No. of times 0.24 0.82

Return on Equity (ROE) % (3.0) (1.1)

Pre -Tax ROCE % 0.53 3.48

Balance Sheet Highlights and Ratios

Total Assets Rs'000 14,748,293 14,231,331

Total Debt Rs'000 6,338,755 5,847,034

Total Shareholder's Funds Rs'000 7,176,624 7,070,544

No. of shares in issue Number 000s 1,092,110 1,092,110

Net Assets per share Rs. 6.57 6.47

Debt/Equity % 88 83

Debt/Total Assets % 43 41

Market/Shareholder Information

Market price of share as at 31st March Rs. 6.50 7.00

Market Capitalisation Rs'000 7,098,716 7,644,771

Price Earnings Ratio No. of times (34.21) (100.00)

Others

Total value added Rs'000 1,863,151 1,982,498

To Employees Rs'000 779,082 676,793To Government Rs'000 392,481 422,230

To Others Rs'000 691,588 883,475

Total Employees Number 2,220 2,267


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Group Operating Highlights


Interim Financial Statements

1st Quarter Ended 30th June 2008 12th August 2008

2nd Quarter Ended 30th September 2008 3rd November 2008

3rd Quarter Ended 31st December 2008 3rd February 2009

Annual Report

Annual Report 2008/09 5th June 2009

Meeting

30th Annual General Meeting 29th June 2009

Year ended 31st March 2009 2008

Occupancy - Sri Lanka % 39% 44%

Occupancy - Maldives % 72% 77%

Overall Occupancy % 51% 56%

Guest Nights Number 439,085 452,914

EBITDA Rs. Mn 790 930

Financial Calendar


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Group Structure



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Board of Directors


Susantha Ratnayake Chairman

Mr Ratnayake was appointed as the Chairman and CEO of

John Keells Holdings PLC and Chairman of John Keells

Hotels in January 2006 and has served on the John Keells

Hotels Board since 1999. He has overall responsibility for

Group Strategy and New Business Development.

Mr Ratnayake is a council member of the Employers'

Federation of Ceylon. He also serves as a member of the

Tourism, Sovereign Rating and Investment Promotion

Clusters of the National Council of Economic Development

(NCED). Mr. Ratnayake has over 30 years management

experience, all of which is within the John Keells Group.

Ajit Gunewardene Director

Mr. Gunewardene is the Deputy Chairman of John Keells

Holdings PLC and has been a member of their Board for

over 16 years. He is a Director of many companies in the

John Keells Group and is the Chairman of Nations Trust

Bank PLC and Union Assurance PLC. He is a member of

the board of Nanco (Pvt) Ltd, a company established for

the development of Nanotechnology in Sri Lanka under the

auspices of the Ministry of Science and Technology. He was

also appointed as a member of the National Advisory

Council for Export Development (NACFED) by the Minister

of Export Development and International Trade. He has

also served as the Chairman of the Colombo Stock

Exchange. In addition to being a member of the Board of

the Sri Lanka Tourism Promotion Bureau, he serves on

several committees appointed by the Minister of Tourism

for the development of this industry in Sri Lanka. Mr.

Gunewardene has a degree in Economics and brings over

27 years of experience to your Board.

Sumithra Gunesekera Director

Mr. Gunesekera was appointed to the Board of John Keells

Hotels PLC in 2007/08. He has overall responsibility for the

Plantation Services Sector and the Corporate

Communications function at the Centre and is also the

Head of the Management Committee of the John Keells

Social Responsibility Foundation. He is Chairman of the

Employers' Network on Disability of the Employers

Federation of Ceylon. Furthermore, he serves on the Board

of Directors of Sri Lanka Institute of Tourism and Hotel

Management. Mr. Gunesekera is a Director in many Group

Companies and has over 27 years of management

experience.

Ronnie Peiris Director

Appointed to the board during 2002/03. Mr. Peiris has

overall responsibility for Group Finance, including Treasury,

Taxation, Corporate Finance, Group Initiatives, Shared

Services and the Information Technology functions at the

centre. Previously, Managing Director of Anglo American

Corporation (Central Africa) Limited and EXCO member of

Konkola Copper Mines plc, both in Zambia, Mr. Peiris has

served on many boards overseas. He has over 36 years

finance and general management experience in Sri Lanka

and abroad. He is a Fellow of the Chartered Institute of

Management Accountants, UK, Association of Chartered

Certified Accountants, UK, and the Society of Certified

Management Accountants, Sri Lanka, and holds an MBA

from the University of Cape Town, South Africa. He is a

member of the committee of the Ceylon Chamber of

Commerce, Chairman of its Taxation Sub Committee and

also serves on its Economic, Fiscal and Policy Planning Sub

Committee.


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JayantissaKehelpannala

SumithraGunesekera

SusanthaRatnayake Ajit

Gunewardene

RonniePeiris

AshroffOmar

AmalCabr

aalRa

nelT.Wijesinha


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Board of Directors


Jayantissa Kehelpannala Director

Appointed to the board during 2004/2005, Mr.

Kehelpannala is currently the Executive Vice President /

Sector Head - Resort Hotels. He has over 27 years of

experience in the leisure industry both in hoteliering and

inbound tourism. He is currently The President of The

Sri Lanka Maldives Bilateral Business Council which is

under the aegis of The Ceylon Chamber of Commerce and

Vice Chairman, Hotels and Tourism Employers Group of

the Employers Federation of Ceylon. In addition he his also

a Director of the Rainforest Ecolodge which is an Industry

driven Hotel development project to cater and popularize

Eco Tourism in Sri Lanka.

Ashroff Omar Director*

Ashroff Omar, Chief Executive Officer of Brandix Lanka Ltd

(Brandix) is a leading industrialist and a prominent figure in

the apparel industry. The Brandix Group is the single

largest apparel exporter in Sri Lanka and is positioned as a

leading apparel solutions provider to many of the worlds

super brands.

Mr. Omar was instrumental in the establishment of The

Joint Apparel Association Forum (JAAF) the apex body of

the apparel industry primarily involved in driving strategy

for the industry, which he chaired at its inception. He was

also the former Chairman of The Sri Lanka Apparel

Exporters Association and is a frequent spokesperson for

the apparel industry.

Mr. Omar is a Director of Phoenix Ventures Ltd - the

holding company of Brandix Lanka Ltd. He serves as a non-executive Director for the Colombo Stock Exchange while

also being the Hon. Consul General of the Republic of

Finland.

Ranel T.Wijesinha Director*

Appointed to the Board in July 2005 Ranel T. Wijesinha

functions as Chairman of the Audit Committee. A Fellow

of the Institute of Chartered Accountants of Sri Lanka,

with over 31 years of national and international

professional work experience in accounting, auditing and

consulting, Ranel is a Past President of the Institute ofChartered Accountants of Sri Lanka, and a Past President

of the Confederation of Asian and Pacific Accountants. He

possesses a Masters Degree in Business Administration

from the University of Pittsburgh in Pennsylvania, USA, and

is presently an Independent International Management

Consultant to multilateral and bi-lateral development

banks and institutions providing advisory services to

overseas Governments. The senior managerial positions he

has held in practice have included functioning as Manager

Deloitte, Bahamas and Partner and Head of Consulting and

Financial Advisory Services of PricewaterhouseCoopers,

Sri Lanka. His exposure to industry included, functioning as

Director, Business Development of the John Keells Holdings

Group, Chairman, National Wealth Corporation Ltd,

Chairman, Ayojana Fund Management (Private) Limited

and as founder director of Lanka Ventures Ltd. He has held

several statutory, regulatory and advisory positions for the

Government of Sri Lanka and has a distinctive exposure to

and balance between the private and public sector and is

currently a member of the Accounting and Auditing

Standards Monitoring Board of Sri Lanka.

Amal Cabraal Director*

Mr. Cabraal was appointed to the Board of John Keells

Hotels PLC as an independent Director in October 2005.

He counts over 26 years of local and international business

experience and is presently the Chairman/CEO of Unilever

Sri Lanka. Mr. Cabraal is an alumnus of INSEAD - France

and holds an MBA from the University of Colombo. A

Chartered Marketer by profession, he is currently the

President - Sri Lanka Region of the Chartered Institute of

Marketing - UK. Mr. Cabraal serves on the Sri Lanka

Tourism Advisory Committee and is a member of the

Strategic Review Committee of the Ceylon Chamber of

Commerce and is a Council member of the Employers

Federation of Ceylon.

* Independent Director


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Corporate Governance

John Keells Hotels PLC reaffirms its strong commitment to

maintaining the highest standards of business integrity in

all of its activities and relationships. This commitment will

continue to be the foundation of the strong relationships it

enjoys as it seeks to align the interests of all its

stakeholders for their greater mutual benefit. It is

expressed by transparency, accountability and disclosure of

its business practices and performance.

The Company welcomes the formal publication of theCode of Best Practice on Corporate Governance (Code)

issued jointly by the Securities and Exchange Commission

of Sri Lanka (SEC) and the Institute of Chartered

Accountants of Sri Lanka (ICASL) in June 2008. Having

reviewed its governance structures and practices against

this standard along with section 7 of the listing rules of the

Colombo Stock Exchange, the Company considers that it

has complied with the requirements of the Code

throughout the year ended 31st March 2009.

This report sets out the extent of our adherence to the

principles and provisions of the Code of Best Practice onCorporate Governance issued jointly by the SEC and ICASL

as outlined below.

Composition of Board

Frequency of Board Meetings

As at 31st March 2009, the Board of John Keells Hotels PLC comprised of eight Directors,

five of whom, including the Chairman, hold office in a non independent capacity

Biographical details of the Directors are set out on pages 10 to 12 of this report.

The Board meets on a quarterly basis, however, additional meetings are held if required. The

Board met on four occasions during the year under review, attendance is shown below

THE COMPANYDirectors

The Board - The Company is led by an effective Board, which also directs and controls the activities of the Company

Governance Principle John Keells Hotels Extent of Compliance

Name of Director Capacity Association and InterestShare Management Material

holding BusinessRelationship

S. C. Ratnayake NED/NID Yes Yes No

A. D. Gunewardene NED/NID Yes Yes No

G. S. A. Gunesekera NED/NID Yes Yes No

J. R. F. Peiris NED/NID No Yes No

J. E. P. Kehelpannala NED/NID No Yes No

R. T. Wijesinha NED/ID No No No

A. Omar NED/ID No No No

A. Cabraal NED/ID No No No

NED Non Executive Director, NID Non Independent Director,ID Independent Director

Name of Director MeetingsAttended

S. C. Ratnayake 3

A. D. Gunewardene 4

G. S. A. Gunesekera 3

J. R. F. Peiris 4

Name of Director MeetingsAttended

J. E. P. Kehelpannala 4

R. T. Wijesinha * 4

A. Omar * 2

A. Cabraal * 4

* Independent


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Responsibilities of the Board

Strategy formulation

Strategy implementation

Effective Systems

Integrity of information and

compliance with statutes

Stakeholder interests

The Board of Directors is responsible for

The ultimate supervision of the Group and the eventual direction of the Company, in

particular the conduct, management and supervision of the business of the Company,

and the provision of necessary directions

Proper stewardship of the companys resources and share responsibility for maintaining

the highest standards of ethics and integrity

Determination of the composition and structure of the companys executive

management and the Companys operating model

Determination of accounting principles and the integrity of financial information in the

event of loss of capital

Adherence to the Corporate Governance principles of the Company

Formulation and approval of

the Groups long-term strategy and Annual investment budget;

significant financial, commercial or industrial policy issues within an ethical

framework

Implementation and monitoring of strategy by entrusting the management of the

following companies to Keells Hotel Management Services Limited, the Managing

Agents, with whom formal management contracts have been signed

Habarana Lodge Ltd - owners of Cinnamon Lodge, Habarana,

Habarana Walk Inn Ltd - owners of Chaaya Village, Habarana, Kandy Walk Inn Ltd - owners of Chaaya Citadel, Kandy,

Trinco Walk Inn Ltd - owners of Club Oceanic, Trincomalee,

Yala Village (Pvt) Ltd - owners of Yala Village, Yala,

Ceylon Holiday Resorts Ltd - owners of Bentota Beach Hotel, Bentota and Coral

Gardens Hotel, Hikkaduwa,

Travel Club (Pte) Ltd - owners of Chaaya Reef Ellaidhoo, Maldives,

Fantasea World Investments (Pte) Ltd - owners of Chaaya Lagoon Hakuraa huraa,

Maldives,

John Keells Maldivian Resorts (Pte) Ltd - owners of Chaaya Island Dhonveli, Maldives

and

Tranquility (Pte) Ltd - owners of Cinnamon Island Alidhoo.

The operations of these Hotels are conducted by the Managing Agents within the policy

framework outlined by the Board that also requires adherence to best practices in the

hospitality industry. The Managing Agents continuously update the Board by means of

Management reports in prescribed formats to enable the Board to monitor and assess

performance.

The effectiveness of the Companys systems of internal control and the management of

risk;

Compliance with laws and regulations of the countries in which the Groups

subsidiaries operate as well as the selection of appropriate accounting principles which

underlie the integrity of financial information

Taking into consideration the interests of all stakeholders when making decisions to utilise

the companys resources and maintaining the highest standards of ethics and integrity notification to shareholders in the event of loss of capital



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Appointment and Renewal of

Board Committees

Review of Reports

Shareholder dialogue

Company Secretary

Compliance with Statutory

and Regulatory

Requirements

Procedures for Directors to

obtain independent

professional advice and

Access to Company Secretary

Independent judgement

Dedication of adequate time

and effort to matters of the

Board and Company

Training for Directors

appointment and renewal of the sub committees

the review and determination of all reports submitted to the Board

maintenance of dialogue with shareholders by

the preparation and timely submission of Interim Financial Statements and the

Annual Report

convening Annual and Extra Ordinary General Meetings

Keells Consultants Limited functions as Secretary to the Board. They ensure that

appropriate Board processes are adopted and that a proper record of all proceedings of

Board meetings is maintained

As the Company is domiciled in Sri Lanka, the Board ensures that the Financial Statements of

the Company and the Group are prepared in accordance with the Sri Lanka Accounting

Standards, the requirements of the Colombo Stock Exchange and other applicable authorities.

The Financial Statements for all companies domiciled in Sri Lanka are prepared in accordance

with The Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants.

The Financial Statements of the companies domiciled in the Maldives are prepared based on

International Financial Reporting Standards. The Board is aware of the importance of the

disclosure of critical accounting policies in the corporate governance framework and opines

that there are no instances where the use of international accounting standards would have

an impact on the Company and the Groups financial performance.

There is an agreed procedure whereby Directors may take independent professional advice

in the furtherance of their duties and all of them have access to the advice and services of

the Company Secretary.

The presence of independent non-executive Directors with proven experience and success in

their respective fields, along with the non independent Directors who are engaged in the

operation of the Company, creates an environment in which an uninhibited exchange of views

can take place. This has yielded improvements in both areas of compliance and performance.

The non independent Directors possess considerable skills in their respective fields that

include Finance, Treasury Management, Marketing and the Hospitality industry enabling

them to bring a wealth of experience to bear on decisions made by the Board.

In proportion with their knowledge and experience, the Directors devote sufficient time and

effort to ensure that they discharge their responsibilities to the Company and the Group. This

includes reviewing Board papers, business visits to understand risk exposures and operating

conditions as well as attending Board meetings and discussions with the Managing Agents.

The updating of all Directors skills and knowledge is a progressive exercise. Formal and

basic training is undertaken by and provided to all Directors as and when deemed

necessary, in such fields as may be appropriate.

All Directors have access to External and Internal Auditors, Senior Management of the

Managing Agents, the services of the Company Secretary as well as the Legal, Tax and

Finance Divisions of the John Keells Group of which the Company is a member.

Non Executive Directors have the opportunity of gaining further insight into the Groups

business by visits to hotels across the brand portfolios.



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Division of Responsibilities The Chairman is a non executive non independent Director. The responsibility for the

effectiveness of the Board and its Committees vests in the Chairman.

The executive responsibility for the functioning of the Groups business including

implementation of strategies approved by the Board and developing and recommending

to the Board the business plans and budgets that support the group strategy has been

entrusted to the President/ CEO of the Leisure Industry Group.


Chairman & CEO

Adequacy of Financial

Knowledge

In addition to the presence of two senior Chartered/Management accountants on the

Board, the non-executive Directors collectively bring to the Board a wide array of domestic

and international experience and expertise in corporate and commercial management.

Financial Acumen

Evaluation and Declaration of

Independence of Non

Executive Directors

Independent Directors

In accordance with the criteria for Independence specified by section 7 of the listing

rules of the Colombo Stock Exchange and as identified by the Code, the Board considers

that three non-executive Directors satisfy the criteria for independence as required under

clause 7.2(b) and has received a declaration of their independence.

Operating in a culture of openness and constructive dissent, the Board is of the view that

its current composition, where three Directors hold office in an independent, nonexecutive capacity, effectively facilitates a healthy balance between executive necessity

and independent judgement, enabling the Board to create and enhance value for the

Companys stakeholders

Board Balance

Adequacy of Notice and

Formal Agenda to be

discussed at Board Meetings

The agenda for Board Meetings is circulated at least a week in advance. Directors are

briefed by means of comprehensive papers, which are accurate and relevant to the

business to be considered at the meeting and enhanced by presentations by key executive

staff during meetings.

During the year under review, the following important matters were featured in the Agenda

Review of policy

Board Sub Committee reports

Monitor alignment with long term strategies and goals

Review and approve Annual Plans and Reforecast

Consider and compare actual performance against plan/reforecast and clarify

significant variances to its satisfaction

Discuss and approve significant capital expenditure, portfolio structure, major

investments, acquisitions and disposals.

Review of effectiveness of internal control and risk management processes

Obtain assurance of compliance with regulatory and statutory requirements

Approve publication of all Interim and Annual financial statements

Supply of Information


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Nomination Committee

Formal and transparent

procedure for new

appointments

Shareholder approval

Disclosure of appointment ofDirectors to shareholders

The Nomination Committee of the Parent Company John Keells Holdings PLC functions as

the nomination committee of the Company and its subsidiaries. The Nomination

Committee of John Keells Holdings PLC comprises three independent Directors and one

non independent Director namely:

Mr. Tarun Das Chairman

Mr. S Enderby

Mrs. S ThiruchelvamMr. S C Ratnayake (Non Independent)

The Board identifies eligible candidates having regard to their professional competence,

experience in commercial management and personal qualities. Eligible candidates are

recommended for appointment by the nomination committee of the parent company,

John Keells Holdings PLC, in keeping with its norms. The John Keels Hotels PLC Board

proceeds to appoint new Directors having considered and approved such

recommendations.

Shareholders must formally approve all new appointments at the first opportunity after

their appointment, as provided by Article 91 of the Articles of Association of the

Company.

Shareholders are informed of the appointment of new Directors by formal announcementon the Colombo Stock Exchange


Board Appointments and Re-election

Term of office and re-election

of Directors

One third of the Directors except the Chairman retire by rotation on the basis prescribed in

the Articles. A Director retiring by rotation is eligible for re-election.

The tenure of office for non independent Directors is limited by their prescribed Company

retirement age.

Independent Directors, on the other hand, can be appointed to office for three

consecutive terms of three years, which however, is subject to the age limit set by statute

at the time of re-appointment following the end of a term.

The proposal for the re-appointment of Directors is set out in the Directors Report as well

as the Notice of Meeting on page 128 of this Report.

Re-election of Directors

Effectiveness of Board

performance

The Board is considering the introduction of a formal Board evaluation process from

2009/10

Notwithstanding the lack of a formal evaluation process, Board business has been

conducted in a structured manner, which facilitates constructive dissent and encourages

the flow of communication between management and the Board. The frank and open

relationship which existed has resulted in a form of ongoing evaluation enabling the Board

to perform effectively in the background of the economic uncertainty and industry

challenges which prevailed during the year under review.

Appraisal of Board Performance


20/136



Biographical Profiles

Disclosure of appointment of

Directors to shareholders

Other relevant information

pertaining to Directors

The biographical details of the Directors are set out on pages 10 to 12 of this report.

Shareholders are informed of the appointment of new Directors by announcement on the

Colombo Stock Exchange.

The Directors have declared the extent of their dealings with the Company, and this

information is disclosed in this Annual Report as follows:

Details of Shareholding - Pages 26 to 27

Details of related party transactions - Page 116

The attendance of Directors at Board Committee meetings are provided on Page 13


Disclosure of Information in Respect of Directors

The annual appraisal of the President/CEO is carried out at parent level and is based on

pre-agreed performance criteria

Appraisal of the CEO

Remuneration Committee

Remuneration Policy

Level and composition of

remuneration

As permitted by the listing rules of the Colombo Stock Exchange, the Remuneration

Committee of the Parent Company John Keells Holdings PLC functions as the

remuneration committee of the Company and its subsidiaries. The Remuneration

Committee of John Keells Holdings PLC comprises three independent Directors:

Mr. E F G Amerasinghe ChairmanMr. M V Muhsin (Up to 28 February 2009)

Mr. P D Rodrigo

The remuneration policy adopted by the Group as recommended by the Remuneration

Committee of its parent, John Keells Holdings PLC is formulated to attract and retain high

calibre executives and motivate them to develop and implement the business strategy in

order to optimise long term Shareholder value creation

Having conducted market surveys, spoken to experts and having considered the

management complexities of the Group, on the recommendation of the remuneration

committee, the Group has adopted the following remuneration policy designed to provide

an appropriate balance between fixed remuneration and variable risk reward as follows,

a fixed element;

a variable element in the form of a short term incentive which is based on the

individual performance and an organization performance metric which covers

revenues and PAT; and

long term incentive in the form of employee share options at John Keells Holdings

PLC for applicable senior executives

A customised pay for performance scheme based on individual and organizational

performance ratings was implemented in 2007/08 for all group employees at manager

level and extended to the assistant manager level in the current financial year, while only

individual performance ratings govern remuneration of group executives at lower levels.

The rationale for excluding the organizational performance rating to pay at the lowerlevels being that individuals at this level have little direct influence on the profitability of

Directors Remuneration


21/136



Directors Remuneration

Executive Share Options

Disclosure of Remuneration

the organization. These changes to the performance measures are intended to generate a

more robust alignment between reward and performance.

Compensation for Non-Executive Directors (NEDs) is determined by reference to fees paid

to other NEDs of comparable companies. NEDs receive a fee for devoting time and

expertise for the benefit of the company. Nevertheless, NEDs fees are not time bound or

defined by a maximum/minimum number of hours committed to the group per annum

and hence is not subject to additional/lower fees for additional/lower time devoted. NEDsdo not receive any performance/incentive payments.

Director Fees applicable to non-executive directors nominated by John Keells Holdings PLC

are paid directly to John Keells Holdings PLC and not to individuals.

The Company does not have an employee share option scheme

The aggregate remuneration paid to Directors is disclosed on page 112 of this report.

Relations with Shareholders

Annual General Meeting

Constructive use of Annual

General Meeting

Convening of Annual

General Meeting

The Annual General Meeting provides a useful forum for shareholders to interact with the

Directors of the Company and discuss the progress of the business, its performance and

objectives, while at the same time giving the Directors the opportunity to understand the

issues and concerns of shareholders.

By order of the Board, the Company Secretaries have convened the Annual General

meeting of the Company in accordance with its Articles and relevant statute.

The Notice convening the meeting provides details of the Agenda to be dealt with at the

meeting as separate resolutions. The consideration and adoption of the Reports of the

Directors and the Financial Statements for the year ended 31 March 2009 along with the

Report of the Auditors is presented as a separate resolution.

Accountability and Audit

Financial Reporting

Balanced Assessment of

Groups position and

prospects

The Groups position and future prospects are reported in detail in the following reports

Chairmans Statement on pages 4 to 6

Management Discussion and Analysis of Operations on pages 31 to 39

Major Transactions

Disclosure The Directors ensure that any corporate transaction that would materially affect the net

asset base of the Company are communicated to shareholders as was evidenced when the

Company sought to acquire a controlling interest in the Confifi Group in 2007/08.

Future strategies of the Company are discussed in the

Chairmans Statement on pages 4 to 6

Management Discussion and Analysis of Operations on pages 31 to 39


22/136



Internal Controls

Maintain Reliable System of

Internal Control

Internal Audit Function

The Board has overall responsibility for the Groups system of internal financial control.

The Groups systems are designed to provide the Directors with reasonable assurance that

assets are safeguarded, transactions are authorized and properly recorded and that

material errors and irregularities are either prevented or detected in a timely manner. Key

elements of such procedures are as follows:

Formal policies and procedures are defined which include the documentation of key

systems and rules relating to delegation of financial authority. This restricts the

unauthorized use of the Groups assets and ensures the monitoring of controls.

The annual budgets are approved by the Board after detailed management review.

There is a detailed budgeting process for each hotel property of the Group. Budgets are

prepared in a manner that facilitates management to monitor the key business and

financial activities. Results are regularly reviewed against budget and revised forecasts

for the year are prepared on a quarterly basis

The Enterprise resource planning system (SAP) has ensured that monthly management

accounts are prepared promptly providing relevant, reliable and up-to-date financial and

other information.

Capital Expenditure is subject to formal authorization procedures.

Experienced and suitably qualified staff takes responsibility for important business

functions. Annual appraisal procedures have been established to maintain standards of

performance.

To further strengthen internal control and have independent assurance, the Group has

enlisted the services of Messrs. PricewaterhouseCoopers in Sri Lanka & Messrs Ernst &

Young in the Maldives, both firms of Chartered Accountants to monitor and report on

the adequacy of the financial and operational systems of the properties operated by the

Group.

The scope included:

Assessment of the adequacy of accounting and operational control systems in terms

of economy, efficiency and effectiveness.


Interim Financial Statements,

Price Sensitive information

and Reports to Regulatory

Authorities

Directors Report

Respective Responsibilities of

Directors and Auditors

Going Concern

The Interim and Annual Financial Statements are prepared and forwarded in a timely

manner. The Colombo Stock Exchange is updated with any information that is considered

to be price sensitive while regulatory reports and returns are submitted by the due dates.

The Annual Report of the Directors is provided on pages 82 to 85

The Statement of Directors Responsibility for the preparation of the Financial Statements

is provided on page 86 while the Report of the Auditors is provided on page 87

The Board of Directors, after considering the financial position, operating conditions,

regulatory and other factors, and such matters required to be addressed in the Corporate

Governance Code, have a reasonable expectation that the company and its subsidiaries

possess adequate resources to continue in operation for the foreseeable future. For this

reason, they continue to adopt the Going Concern basis in preparing the financial

statements.


23/136


Board Review of effectiveness

of system of Internal Controls

Examination of compliance with statutory requirements, management policies and

procedures.

Review and monitor operational and financial controls in order to ascertain

adherence to such controls.

The effectiveness of the system of Internal Control is subject to regular review by the

Internal Auditors under the direction of the Board Audit Committee. Internal Audit reports

are structured in a manner that facilitates the resolution of the concerns highlighted and

follow up action is monitored by the Board on an ongoing basis.


Audit Committee

Chairman and Composition

Charter and Terms of

Reference

Attendance

Responsibility

Ensuring objectivity and

independence of External

Auditors

Report

The Audit Committee comprises solely of independent, non-executive Directors. As

prescribed in the Listing Rules of the Colombo Stock Exchange, the Chairman of the Audit

Committee is a member of a professional accounting body - a fellow of the Institute of

Chartered Accountants of Sri Lanka with several years of experience in financial auditing

and accounting.

It is governed by a Charter that encompasses the review and monitoring of internal

control, operational and business risks, adequacy and fairness of disclosures, procedures

relating to statutory, regulatory and related compliances as well as the working of the

committee.

The Audit Committee met on four occasions during the year, attendance was as follows:-

The Chairman/CEO, Executive Directors, the Chief Financial Officer, Sector Financial

Controllers, the Head of Risk Control & Review, the External and Internal Auditors are

regular invitees of the Audit Committee.The Audit Committee focuses principally in assisting the Board to fulfil its duties by

providing an independent and objective view of the financial reporting process, internal

controls, risk review and the audit function.

Working together with the External Auditors, the Audit Committee reviews the accounting

principles, policies and practices adopted in the presentation of published financial

information. The Committee is responsible for the consideration and recommendation of

the External Auditors.

The detailed Report of the Audit Committee is found on page 23 of this report.

Name of Member Meetings Attended

R. Wijesinha * 5

A. Omar ** 1

A. Cabraal 5

S. R. Jayaweera # 0

* Chairman # Appointed on 28.01.2009

** Overseas


24/136




Code of Business Conduct and Ethics

Code of Conduct and Ethics

Corporate Social

Responsibility

The Company and Group embodied the ethics and conduct expected of its Directors and

employees in its statement of values and has adopted a formal code of ethics covering

Directors and Executives of the company.

The Group recognizes the pivotal role it plays in the local and extended communities in

which it transacts business and the interdependence between its customers, employees

and local entrepreneurs. The activities undertaken by the Group to foster these

relationships and safeguard the environment are described more fully in the Sustainability

Report on pages 68 to 75 of this Report.

Corporate Governance Disclosures

Extent of compliance

Risk Review

This report discloses the governance practices of the Company and the extent to which it

has complied with the Code.

The Companys corporate governance practices are in accordance with the Code except

that

A formal appraisal of Board performance has not been conducted.

The Risk management practices of the Group are described on pages 62 to 65

SHAREHOLDERS

Institutional and Other Investors

Shareholder Voting

Evaluation of Governance

Disclosures

Dialogue with shareholders

All shareholders are encouraged to participate at meetings of the company and a form of

proxy accompanies each notice providing shareholders who are unable to attend such

meetings the opportunity to cast their vote.

Maximum possible information is provided to shareholders in a timely manner and full

disclosure is made subject only to any sensitive information, which could directly affect the

business of the Company and the Group.

The Company through its parent Companys Investor Relations Division maintains an

ongoing dialogue with its key individual and institutional shareholders.

The Company places great emphasis on releasing its financial statements in a timely

manner so as to ensure that shareholders have access to information on which they couldmake informed decisions

Conclusion

The Company is of the firm belief that the real value of

Enterprise Governance lies in co-operative governance,

based on a foundation of trust, loyalty, personal integrity,

fairness to all stakeholders and a strong corporate culture,

which produces infinitely superior results. In an investment

environment in which there is a greater investor

expectation of transparency, integrity and sustainable

governance practices, the Company is well positioned to

reduce its cost of equity by lowering the Companys equity

risk premium.


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27/136


28/136


29/136


30/136


31/136


possible largely due to the success of promotional offers

targeting local clientele, albeit at the cost of lower room rates.

Profitability

The incidence of rising fuel and commodity prices during the first

half of the year negatively impacted performance during the off

peak season resulting in lower margins. With the decrease in

volumes and higher cost of direct inputs, several cost and energy

saving initiatives were launched which included menu and staff

rationalisation. These steps contributed to achieving a GP marginof 68% against the 64% achieved last year.

Administrative expenses were higher primarily due to the

inclusion of expenses such as island rent and depreciation

associated with the full year operation of Alidhoo. The increase

in the electricity tariff and fuel costs in Sri Lanka during first

three quarters, the higher fuel prices in the Maldives in the first

eight months along with the full operation of Ellaidhoo and

Alidhoo contributed to the 11% increase in Other Operating

Expenses.

Although at operational level the profit before interest and tax

amounted to Rs.41Mn, the 83% year on year decrease was due

to exceptional profits included under other operating income in

the last financial year.

The higher profit contribution from Dhonveli, Ellaidhoo and

Hakuraa absorbed the loss of profit contribution from the release

of Velidhu but this was eroded by losses at Alidhoo due to

curtailed operations on account of the construction of the

breakwater and the global recession which adversely impacted

the high end market at year end.

Finance Expenses

The adverse operating conditions in Sri Lanka were heightened

by the increase in lending rates. In this context, the infusion of

equity during the last financial year and lower LIBOR rates on US

Dollar borrowings in the Maldives, were the key contributory

factors that enabled the Group to achieve a 39% reduction in

finance costs during the year under review.

After accounting for tax credits of Rs.0.5Mn, the net

consolidated loss after tax amounted to Rs.221Mn against the

loss of Rs.71Mn in previous year.

GP Margins

2007/08

2008/09

Qtr 1 Qtr 2 Qtr 3 Qtr 4

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

EBIT Finance Expenses

Interest Cover

06/07

Rs. Mn Times

07/08 08/09

Interest Cover

0

100

200

300

400

500

600

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8


32/136

Financial Review


Flat revenue growth and higher operational expenditure incurred

during the year due to adverse macro economic factors, led to a

reduction in interest cover, which decreased from 0.82 to 0.24

notwithstanding the reduction in finance costs.

Funding

Net borrowings as at 31 March 2009 stood at Rs.5.8Bn of which

short term debt amounted to Rs.2.6Bn representing 45% against

the Rs.5.4Bn as at 31 March 2008 with short term debt

representing 33% of total debt.

As mentioned last year, the group debt portfolio is structured to

benefit from the lower interest rate regime on USD borrowings

overseas as opposed to the comparatively higher rates prevalent

in Sri Lanka. The fiscal strategies adopted by the United States

and Europe to stimulate investment led to a reduction in interest

rates on USD borrowings, from which the Group benefited by

way of lower finance costs.

Although the utilisation of short term overseas borrowings are

more attractive in terms of cost and repayment which is less

structured and allows the Group to maximise cyclical operational

cash flows, attempts are being made to convert part of these

borrowings to long term facilities in the light of the current

global shortage of funds.

Cash Generation

Working capital was closely monitored in the backdrop of

turbulence in global financial markets and the consequent credit

crunch. This led to improved collections and generated net

operational cash flows of Rs.916Mn during the year against

Rs.192Mn last year enabling the Group to retire Rs.514Mn of

long term debt. However, the balance generated from

operations was insufficient to fund the cost of construction of

the breakwater at Alidhoo, which was structured by utilising

short term instruments and overdrafts.

With the return of normalcy to Sri Lanka following the cessation

of hostilities, we anticipate tourist arrivals to the country would

improve and contribute to healthy operational cash flows,

enabling the Group to reduce its borrowings in Sri Lanka.Composition of Debt

Short Term Debt

Long Term Debt

06/07 07/08 08/09

0

0.2

0.4

0.6

0.8

1

Equity Debt

Gearing

06/07

Rs. Mn %

07/08 08/09

Gearing

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

20

40

60

80

100

120

140


33/136


34/136

Management Discussion & Analysis of Operations


as well as within the region. This was aggravated by the

global economic crisis leading to the weak growth of 1.6%

and lower overall occupancy rate of 65.5%, down from

the 70.6% achieved in 2007.

Tourism in Sri Lanka

As the government pursued its objective of eradicating

terrorism in the country, the intensification of the conflict

in the North and East exposed the vulnerability of the

tourism industry in Sri Lanka to safety and security

concerns, resulting in tourist arrivals to the country

declining by 17% in 2008/09 when compared with

2007/08.

During the year under review, 409,661 tourist arrivals were

recorded against the 494,889 arrivals recorded in 2007/08.

Arrivals during the year evolved along similar lines to the

previous year with the steepest decline of over 30%

recorded in August 2008 and January 2009, both

traditionally peak months for the industry. Year on year

growth was only recorded in May 2008 (18%) but this was

chiefly due to the lower base in May 2007 when arrivals

plummeted due to the restriction on night flights following

the attack on the airport.

In terms of market performance, the year on year

reduction of 28,781 arrivals from India saw it slipping

behind the UK which with 78,086 arrivals during the year

under review, emerged as the market leader. The other key

source markets that registered lower arrivals were

Germany, Holland, Japan and Hong Kong/China.

According to the Central Bank of Sri Lanka, during thecalendar year 2008, the average stay declined marginally

The strong growth that characterised the firsthalf of the year saw international touristarrivals touching 924 million at year end...

Tourist Arrivals to Sri Lanka by Month

2006/07

2007/08

2008/09

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

-40%

-30%

-20%

-10%

00%

10%

20%

30%

40%

Australia

Maldives

Russia

France

Germany

India

UK

Market Share 08/09

Sri Lanka Performance ofMajor Source Markets

Growth


35/136


36/136



The Maldivian Tourism Industry

With first quarter growth at 5.6%, tourism in the Maldives

pointed to another good year, well on the way to

exceeding the annual growth target of 9% set for 2008.

However, higher airfares and Europes slide into deeper

recession saw growth moving into negative territory during

the last three quarters of the financial year. The last

quarter, which traditionally peaks in arrivals, saw arrivals

drop by as much as 11%, leading to an overall year on

year decline of 3% with total country arrivals during the

year under review amounting to 660,983. The 9% increase

in bed night capacity led to lower hotel occupancy and

exerted pressure on room rates as hotels sought to

preserve occupancy levels. Rising commodity prices in the

world economy and higher freight and fuel costs resulted

in inflation, as measured by the National Consumer Price

Index, increasing by 12.3% compared with the 3.5% in

2006 and 7.4% in 2007.

Pointing to the influx of Italian tourists to the Maldives

when prices were low during the infancy of the tourism

industry, the new Maldivian President acknowledged that

one of the underlying factors for the drop in arrivals from

Italy was the comparatively higher prices attributed to the

increase in island lease rents over the years. On an official

visit to Italy in February 2009, he attended the BIT trade

fair and encouraged Italian investment in the development

of the newly created Maldivian provinces.

In a bid to reduce its dependence on Europe, the Maldives

Tourism Promotion Board together with the Maldives

tourism industry, having identified the promising outbound

tourism potential of the South East Asian market, held

road shows in Kuala Lumpur, Bangkok and Singapore in

October 2008.

There were however, causes for celebration as travel

agents worldwide voted the Maldives, as the 2008 World

Travel Award Winner for Indian Ocean at the 15th World

Travel Awards in Shanghai in June 2008. This was followed

by more accolades at Londons World Travel Market in

November 2008 when the Maldives was awarded the Best

Country Brand for Beach and Best Country Brand for Rest

Tourist Arrivals to Maldives by Month

2006/07

2007/08

2008/09

30,000

40,000

50,000

60,000

70,000

80,000

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

-10%

-5%

0%

5%

10%

15%

20%

India

Korea

Japan

China

France

Russia

Germany

ItalyU

K

Market Share 08/09

Maldives Performance ofMajor Source Markets

Market Share 07/08 Growth

Others

Food & Beverage

Room

JK Hotels MaldivesComposition of Revenue - 2008/09

66%

22%

12%


37/136


and Relaxation for the year 2008. It also ranked second in

the Best Country Brand for Natural Beauty and came third

in the Best Country Brand for Resort and Lodging Options.

Arrivals from the major source markets of UK and Italy fell

by 6% and 7% respectively during the year, while the

German market contracted by 5% resulting in a total drop

of 18,699 arrivals from Europe.

The decline in the value of the Korean Won, which

depreciated by 48% against the US Dollar, saw arrivals

from Korea dropping by 9%. This drop was offset to some

extent by the Chinese market that grew by 2%.

The average stay increased slightly to 8.0 days from 7.9

days in 2007 while year round occupancy averaged 78%,

compared with the 83%, in 2007. Total bed nights

increased by 3% compared with the 10% in 2007. During

the year, the Maldivian Monetary Authority revised the

basis of computing tourist expenditure per night by

replacing total arrivals with tourist arrivals in the

denominator. This change was applied to previous periods

as well and indicates that tourist expenditure per night for

2008 was USD118.3 against USD113.8 in 2007.

Performance of our Hotels in Sri Lanka

Cinnamon Lodge

Cinnamon Lodge continued to experience low occupancy

albeit at a higher average room rate. The significant drop

in numbers of clients booking round trips, because of

travel advisories warning against travel to the region, had a

negative impact on the up market clientele to which the

resort caters with its promise of indulgence. With the

conclusion of military operations in the North, the Lodge is

tipped to regain its pre-eminence in the region as it is

ideally located to cater to prospective visitors to the

cultural triangle, investors and aid workers operating in the

North and East of the country.

Chaaya Village

The drop in arrivals and the negative travel advisories also

affected the flagship of the Chaaya brand, Chaaya Village.

Supported by its loyal local clientele base, Village was able

to limit the drop in occupancy to 11% although country

AdministrationManagement FeesDepreciation

Finance ExpensesSales and MarketingMaintenance & Repairs

Power & EnergyPayrollCost of Sales

JK Hotels MaldivesComposition of Expenses - 2008/09

24%

24%

11%5%

4%

8%

12%

3%

9%

JK Hotels VsMaldives Occupancy - 2008/09

Occ. %

0

20

40

60

80

100

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Maldives

JK Hotels

JK Hotels Vs Cultural TriangleOccupancy - 2008/09

Occ. %

0

10

20

30

40

50

60

70

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Cultural Trangls

JK Hotels


38/136



arrivals declined by 17% during the year under review.

Chaaya Citadel

Occupancy declined to 43% at Citadel as the number of

tourists on round trips decreased due to the unsettled

security conditions prevailing during the year. This year too,

loyal local guests continued to patronise the hotel enabling

the hotel to achieve growth in the average room rate

despite the contraction in volume.

Bentota Beach

The star amongst the Sri Lankan Keells resorts, in terms of

both occupancy and profitability, Bentota Beach

consolidated its premier position in the region. Posting

average annual occupancy of 58%, despite the adverse

industry conditions, this property is ear marked for re-

branding with the return to normalcy.

Coral Gardens

Amongst the beach hotels, the contraction in country

arrivals was felt most at Coral Gardens, the largest resort

in the group portfolio. Occupancy dropped to 25% from

the 35% achieved last year.

As part of the several cost saving initiatives introduced

during the year, we limited the number of rooms in

operation to 64, leading to significant savings on overheads,

particularly in energy, payroll and other operational costs.

Yala Village

During the first half of the year, sporadic acts of terrorism

within the Yala National Park once again deterred tourists

from visiting Yala. Effective counter measures sawoccupancy begin to pick up at the end of the third quarter

and we anticipate that once travel advisories are relaxed,

Yala will live up to its true potential.

Club Oceanic

The stringent controls imposed on aid workers operating in

the region and intermittent breaches in security resulted in

Club Oceanic recording annual occupancy of 38%, down

from the 41% achieved last year, although the average

room rate improved by over 40%. We were encouraged by

renewed interest by domestic travellers and aidorganisations towards the end of the last quarter, a trend

JK Hotels VsKandy Occupancy - 2008/09

Occ. %

0

10

20

30

40

50

60

70

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Kandy

JK Hotels

JK Hotels VsSouth Coast Occupancy - 2008/09

Occ. %

0

10

20

30

40

50

60

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

South Coast

JK Hotels

JK Hotels VsEast Coast Occupancy - 2008/09

Occ. %

0

10

20

30

40

50

60

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

East Coast

JK Hotels


39/136


that augurs well for the future.

Performance of our Hotels in the Maldives

Chaaya Reef Ellaidhoo

Leveraging on the investment infused through upgrading

and enhancing product offerings, Ellaidhoo became the

standard bearer amongst the Maldivian resorts during the

year under review. Satisfied guests, whose enthusiastic

online reviews on the resort feature frequently in global

forums, added to its popularity and championed the

Chaaya brand. Against a 13% drop in country arrivals in

February 2009, Ellaidhoo achieved optimum occupancy

during the winter season with an improved yield,

underlining its potential for the future in a climate of

growth.

Chaaya Island Dhonveli

With its complement and array of 148 rooms, Dhonveli,

the Chaaya heavyweight in the Maldives was the chief

contributor to group revenue in the Maldives with a year

round occupancy of 85%, well above the country average

of 78%. Profitability too improved since the resort was in

operation throughout the year, unlike the previous year

when it was partially closed for upgrading.

Chaaya Lagoon Hakuraa

The drop in arrivals from the UK and the fluctuation of

parity rates left its mark on the performance of Hakuraa.

Although both revenue and profitability increased, growth

momentum slowed due to the prevailing industry

conditions. Hakuraa achieved average annual occupancy of

Other

China

Switzerland

Australia

France

Russia

Germany

Italy

British

JK Hotels Maldives - 2008/09Occupancy by Guest Nationality

31%

16%

13%

9%

9%

3%

3%

3%

13%

Satisfied guests, whose enthusiastic onlinereviews on the resort feature frequently inglobal forums, added to its popularity...


40/136



94%, slightly below the 96% last year, mainly due to low

demand during the off peak season.

Cinnamon Island Alidhoo

With the intention of improving the beach and enhancing

the appeal of this new resort, following the

recommendation of experts in the field of oceanography,

we constructed a breakwater around approximately half of

the island during the off season. As a result, Alidhoo

became fully operational only towards the end of the thirdquarter of the year under review. Designed to cater to

upmarket clientele, the resort was prevented from

achieving its potential as it bore the brunt of the industry

downturn during the last quarter, which traditionally peaks

in performance.

Brand Consolidation

Continuing customer reviews point to growing recognition

of our brands, enabling us to preserve and grow our

market share in adverse industry conditions. Winning

performances by our staff at several local and internationalindustry competitions attracted positive media publicity,

further boosting brand visibility. We continue to innovate

service offerings and continuously review and monitor

brand standards to ensure consistent quality across the

brands. As we unwaveringly focus on building a franchise

around our brands, we are confident that this will aid our

competitive advantage and help us to grow our presence

in the region.

Awards

Competing with bartenders from Japan, Italy, Korea,Thailand and the United Kingdom, a young hostess from

Chaaya Village emerged first runner-up at the Asia Pacific

Bartenders Competition held in Singapore. And just prior

to this achievement, the Resorts Team won five of nine

awards at the Grand Finale of the 17th National Bartenders

Competition organized by the Ceylon Hotel School

Graduates Association (CHSGA) and the Sri Lanka Institute

of Tourism & Hotel Management.

Continuing the initiative launched last year to provide

opportunities for young Maldivians to acquire marketableskills, Cinnamon Island Alidhoo was accorded the singular

honour from among worldwide travel and tourism

organisations with the Grand Award in the Education and

Training category of the Pacific Asia Travel Association

(PATA) 2008 PATA Gold Awards.

More accolades were received by the Group when Chaaya

Island Dhonveli bagged the Gold Choice 2008 award, being

selected as the Best Winter Three Star Accommodation

worldwide by clients of First Choice, which is part of the UK

based TUI Travel PLC Group.

Prospects - Maldives

In a recent review, the Maldivian Ministry of Finance and

Treasury projected marginal growth of 0.9% for the

calendar year 2009, with expectations that the global

recession will abate during the last quarter. It is anticipated

that bed capacity will increase by 10% in 2009, which will

result in projected overall occupancy for 2009 declining to

63.4%, from 78% achieved in 2008. As world trade

declines and more travellers cut costs by choosing to

holiday locally, international travel demand will weaken. Itis also estimated that arrivals will grow in tandem with the


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gradual recovery of the global economy, averaging 1% and

2.5% for 2010 and 2011. According to the World Travel

and Tourism Council, real GDP growth for the Travel &

Tourism Economy in Maldives is expected to be -10.1% in

2009 and to average 2.2% per annum over the coming

ten years.

Prospects - Sri Lanka

We are confident that the recent liberation of the North

from the menace of terrorism has set the stage for anenduring peace and created conditions that are of

paramount importance to achieving sustained growth in

the tourism industry in Sri Lanka. Past experience, when

temporary respites produced robust gains, strengthened

our conviction in the ability of the industry to rebound

quickly. However, in the larger setting of an ailing world

economy, the attempt to regain lost market share will

require much greater effort. In this context, the branding

exercise aptly entitled Sri Lanka Small Miracle initiated

by the Tourism Promotion Board and soft launched at the

ITB in Berlin earlier this year, needs to be vigorously

pursued. An intense, focused marketing campaign such as

the Visit Malaysia campaign will give added impetus to

tourism growth.

We will continue to monitor the evolving recovery and will

pursue our objective of bringing other identified hotels

under our branding initiative.

Overseas Expansion

The Pacific Asia Travel Association (PATA) states that arrivals

to the Asian region will increase by an average of 4% over

the next three years led by China. Supported with the

competitive strength of the Cinnamon and Chaaya brands,

we believe that the potential for the future lies in

expanding overseas.

In a turbulent world economy marked by uncertainty, we

have remained resilient and proactive.

Our ability to adapt to change, reinvent, willingness to

critically examine and rationalise our operating processes,

maximise opportunities for revenue generation and curtail

expenditure has enabled us to weather the challenges of a

difficult year.

Looking beyond the present economic crisis, the prospects

for tourism remain strong, led by renewed expansion in

emerging countries both as tourism destinations and as

an increasing source of international and domestic visitors.

We remain extremely confident about the tourism

industrys longer-term future.


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in anticipation...


Chaaya Citadel,KandyA Kandyan experience, derived from the citys

wealth of history, arts and culture, is what

travellers with a passion for culture tourism yearn

for when holidaying at Chaaya Citadel Kandy. Theproperty, camouflaged by towering trees, sits

rooted in an enviable setting up a hill bordering

the meandering Mahaweli River. Tradition and

modernity come together to offer travellers up-to-

the-minute accommodation in the hotels 121

rooms and suites. The Experience Packages are

personalized and guests are invited on a journey

with many paths that bare the beauty, serenity

and majesty of the glorious hill capital.


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in anticipation...


Bentota Beach,BentotaLike many of the symbolic sites of Down South

Sri Lanka, the Bentota Beach Hotel of 1968, set on

11 acres of landscaped gardens bordering a

golden beach fringed with palm trees, is a

colourful celebrated landmark property. Geoffrey

Bawa designed an all-embracing place of bliss by

setting this splendid sprawling structure amid the

lazy Bentota River and azure waters of the Indian

Ocean. Complete with 133 spacious, well

appointed rooms offering spectacular vistas,

tranquility awaits guests in all the unexpected

places while Sun, sea and surf escapades are all-

time attractions at Bentota Beach Hotel.


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Yala Village,YalaIf the Yala Wildlife Sanctuary is the place to have a

communion with the wild, then Yala Village is the

elegant star-class jungle resort ideal for a wildlife

tourism experience in the tropics. The jungle

resorts 61 superbly furnished bungalow-style

chalets are located in the heart of the animal

kingdom bordering the cerulean waters of the

Indian Ocean. While wildlife is the main draw, Yala

Village knows best how to unleash untamed and

adventurous Excursions for its guests in the

exotic outdoors.


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in anticipation...


Coral Gardens,HikkaduwaDiving safaris, scuba diving and snorkeling on the

Western seaboard of Sri Lanka have been all-time

favourite holiday experiences provided by Coral

Garden Hotel Hikkaduwa since the 1960s.

Strategically nestled facing the splendid coral

reefs with a perfect beachfront garden within a

radius of 50 miles, this 155-roomed resort offers

Sun, sea, sand and a show of exotic marine

adventures. With a commanding view of the Indian

Ocean and marine sanctuary on its doorstep, the

range of Excursions offered to guests are

definitely adventurous and refreshing.


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Club Oceanic,TrincomaleeAlong the Sun-drenched Eastern seacoast of

beautiful Sri Lanka in the Trincomalee District,

Club Oceanic Uppuveli lies lazily against a

fantastic palm-fringed show line along a

spectacular stretch of beach. Since the hotel isrenowned for offering some of the best dive spots

in clear waters, guests often seek out the

Experience Packages with the promise of golden

Sunrises; ankle-deep cerulean waters; historical,

cultural and religious sites and hours of basking

around. This 56-roomed seaside resort offers well-

appointed comfortable accommodation in one of

the worlds most breathtaking settings.

in anticipation...



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7/31/2019 J

John Keels Hotel_Annual Report 2009

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Transcript of John Keels Hotel_Annual Report 2009