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SERENDIB HOTELS PLCAnnuAl RepoRt 2018 | 2019

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We are a brand synonymous with exclusivity, exceptional quality and exemplary service. With an exclusive range of hotels and villas in several breathtaking locales, we offer our discerning clients many options to choose from; all offering the same spirited service and products the company is renowned for.

Keen on providing comprehensive solutions for all aspects of hotel operations and management through Serendib Leisure Management, we are focused on keeping the positive momentum going. Fuelled by our positive momentum, we will continue to bring our brand promise to life.

SERENDIB HOTELS pLc Annual Report 2018 | 20194

Contents

Overviewour Vision, Mission, philosophy 5our Values 6About Serendib leisure 8our portfolio 10Financial Highlights 16non-Financial Highlight 17

LeadershipChairman’s Message 20Board of Directors 24Corporate Management team 28Senior Management team 31Hotel Senior Management 32

Management ReportsManagement Discussion & Analysis 36Sustainability Report 46

GovernanceCorporate Governance 58Risk Management 71Annual Report of the Board of Directors 75Directors’ Interest in Contracts with the Company 81Report of the Audit Committee 83Report of the Related party

transactions Review Committee 85Group Financial Highlights 86

Financial ReportsStatement of Directors’ Responsibility in

Relation to preparing Financial Statements 88Independent Auditor’s Report 89Statement of Financial position 93Statement of profit or loss 94Statement of other Comprehensive Income 95Statement of Changes in equity 96Statement of Cash Flows 98notes to the Financial Statements 99

Supplementary Informationten Year Financial Review 164Investor Information 165notice of Meeting 168Form of proxy 171Corporate Information Inner Back cover

Annual Report 2018 | 2019 oveRview 5

Our PhilosophyTo reflect our engagement with our stakeholders and our passion to elevate the Serendib Leisure hotels to the pinnacle of service excellence. Our decade-long experience in hospitality and pursuit of achieving 100% customer satisfaction drives all our operations.

Our MissionStakeholder Mission

Our Guests To create experiences to write home about by exceeding the expectations of our guests at all times

Our Customers To be the most trusted hotel partner, delivering consistently superior value at all times

Our People To create an environment that will inspire our people to work with pride, happiness and passion which will reflect in service excellence thus delighting our guests

Our Community To develop our community and protect our environment by adopting and implementing sustainable tourism initiatives

Our Shareholders To deliver superior returns to our shareholders through sustained performance excellence

Our Vision“To be one of the top three contributors to the development of the hospitality industry in Sri Lanka and be the benchmark for guest service, F&B standards and management of human capital”


Never content with maintaining the status quo. We always embrace change, relishing the chance to meet the shifting needs of the world around us.

It doesn’t matter where you come from or what your background is - we judge each other on our ability to look at things differently and find novel solutions to complex puzzles.

WE

THIN

K BO

LDLY

WE

LEAD

CHA

NGE

WE

THRI

VE O

N CR

EATI

VITY

We take pride in big ideas. And we believe that each and every one of us should have an input into the future of the company.

Our Values


We foster a dynamic culture that inspires total confidence and evolves based on the changing demands of all our stakeholders.

For our career journeys as well as for our customers, we believe in catering to the individual rather than to the masses.

We constantly strive to be the best we can be. And when we get there, we strive to be even better - never stopping or resting on our laurels.

WE

EVOL

VE W

ITH

OUR

CUST

OMER

S

WE

PERS

ONAL

IZE

EXPE

RIEN

CES

WE

KEEP

LEA

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About Serendib Leisure

One of the leading hotel groups in Sri Lanka, Serendib Leisure has built a sound reputation as a renowned operator of some of the most unique hotel and villa brands in the island, underscored by a sustainable tourism philosophy.

The Serendib Leisure Hotels Group’s hospitality offerings encompass the island’s key attractions: beach, jungle and lagoon. Each property known for its stunning architecture, strategic locations and excellent service.

Avani Bentota Resort, Avani Kalutara Resort, Club Hotel Dolphin and Hotel Sigiriya are popular holiday destinations and patronised by a multi-cultural clientele hailing from different parts of the world.

The boutique hotel and villa portfolio include Lantern Beach Collection and Villa 700; all remarkable spaces providing guests with an intimate and personalised tropical vacation.

Serendib Leisure hotels and villas are nationally and internationally acclaimed for their skilled culinary teams and extremely professional service staff that go the extra mile to make guests feel special and cared for.


Resort Hotels

ManagedOwned ManagedOwned

Boutique Resorts & Villas

Serendib LeiSure HoteLS Group


Our Portfolio

A designer hotel by the renowned

architect Geoffrey Bawa, Avani

Bentota Resort is the ideal beach

escape. Languidly sprawled on

one of the best, golden beach

stretches in the country, this

designer hotel is a launch pad

to begin a series of South coast

expeditions. Staying at Avani

Bentota Resort promises one

blissful solitude in the arms of

luxury and hospitality that the

country is known for.

AvANI BeNtotA ReSoRt

5/5 Excellent

Fantastic hotel

KerenCav

We came back to this wonderful hotel and Sri lanka, first time we have ever gone back to the same hotel in over 30 years. We were so impressed with the hotel and staff and after a second holiday we were over the moon with everything again. the hotel has made Small improvements especially in the pool area but everything has been done to add positively to this colonial style hotel which is over 50 years old and made with massive foresight by the architect Geoffrey Bawa. We stayed in a deluxe room this visit which was massive. the room was cleaned to a high standard, the food was wonderful, loads of variety for breakfast and dinner, we used chatters for lunch which was great, the pool guys are always friendly and find you a sunbed. We cannot praise this hotel enough if you want a laid back friendly hotel right on a lovely beach with the most amazing views and staff then the Avani Bentota is the hotel for you.

18 Mar 2019


Coddled between a stretch

of golden beach on one side,

and the tranquil river on the

other, Avani Kalutara Resort

is acclaimed to be one of the

most romantic properties in the

Southern Coast. The landscape

of this modern beach resort

marries frangipani gardens with a

palm fringed beach whilst deftly

combing Sri Lankan culture with

contemporary design flair. Home

to rooms with scenic views, an

assortment of restaurants and

bars by the waterfront, pool to

lounge in and gorgeous outdoor

weddings venues, the resort is

an ode to beauty, romance and

leisure.

AvANI kAlutARA ReSoRt

5/5 Excellent

Thank you to everyone at Avani Kalutara

Collette Hay

thank you to everyone at Avani Kalutara resort. A wonderful resort with the most friendly, warm and wonderful staff, who made our stay amazing. the rooms were bright, spotlessly clean and well equipped. the buffet food was good and well supplied with a variety of choices. We will return one day.

02 Sep 2018


An ideal beach holiday

destination, Club Hotel Dolphin

is a desirable family hotel, where

memorable experiences await

you just 30 minutes from the

international airport. With a

comprehensive range of modern

facilities, we introduce the unique

‘pause and play’ concept, which

means that you simply get to revel

in the best of both worlds.

cluB hotel dolphIN

5/5 Excellent

Yes,Yes,Yes, Superb!!!!.

Alan P from Great Britain (UK)

What can I say other than, that for us it was our best holiday ever, we were greeted by Daphni, a lovely, lovely lady, a cool drink, cool cloth to wipe our faces after the journey from the airport and a very smooth check into our room. We had a room facing the sea, very clean and with a massive bed, huge fan great first impressions, I must say that our room was always gleaming thanks to Augustus . It was late when we got there so down for a meal, a good choice of food, we were there for two weeks and must have tried most of the meals, small portions of each, many varieties of curry or spicy foods and no upset stomaches at all, well done to the chefs, (apart from the weight gain). used the hotel as a base for travelling, but most days still managed a dip in one of the pools, one morning we done an eco walk on the beach with some of the hotel staff picking up plastic etc, what a brilliant idea strolling along talking to the the hotel manager and we plan to go back next year.

29 Mar 2019

Our Portfolio (Contd.)


At the beating heart of the cultural

triangle of the country, cocooned

within the Sigiriya Natural Reserve

and offering a glorious view of

the world renowned Sigiriya Rock

fortress, lies Hotel Sigiriya, an

eco-hotel taking one back to the

stories of kings and dynasties.

Entwined as one with nature, this

rustic hotel is also the gateway to

bird trails, jungle treks, elephant

watching and safaris through the

nearby National Parks, all with

the assistance of the Resident

Naturalist.

hotel SIgIRIyA

5/5 Excellent

My favourite accommodation in Sri Lanka!

Susanwnz from New Zealand (Aotearoa)

My friend and I arrived from Kandy and we were so pleased when we arrived. the staff were extremely helpful as soon as we arrived. We had a welcome drink and then we were taken to our room. the room was clean, air conditioned and spacious. thank you! We decided to go on an elephant safari which the hotel arranged and we had a great time. We ate all our meals here and I could not eat it all, the food was so delicious. they have theme nights and it is a great atmosphere and very well run. the next day we climbed lion Rock and then came back to soak in the pool admiring what we had just climbed. I would have loved to stay here longer, it is truly a beautiful hotel with everything you need. Great for families, couples and friends. You won’t regret staying at this wonderful hotel.

29 Mar 2019


The Lantern Beach Collection

comprises three boutique villas

located on the coastal town of

Mirissa. The Lantern Boutique

Hotel and the two Ubuntu Beach

Villas by Lantern are exclusive

hideaways for those seeking a

secluded retreat.

Turquoise blue waters, soft

sand, lush vegetation coupled

with its exquisite cuisine at the

Lantern@71 Bistro & Bar provides

our guests an awe-inspiring

holiday experience. Lantern

Collection has redefined the

boutique experience with its

casual atmosphere, impeccable

service and its fine cuisine.

lANteRN BeAch collectIoN

5/5 Excellent

A perfect getaway in Paradise

Crosbytravels

I don’t usually write hotel reviews, but just returned from the most blissful 5 day break at the lantern Boutique Hotel and feel compelled to share. the setting is everything you could possibly wish for...comfortable sun beds, which you can amble your way down to the white sandy beach for a stroll or a dip in the ocean or from bed to the bar for a cold lion beer or bed to the lovely cool pool. the rooms are stylish, spacious, bright and comfortable with everything you could possibly need. However what made the experience special were the staff. Whilst staying at the hotel it we all celebrated my parents 40th wedding anniversary and the staff went above and beyond to make it memorable. What capped off the perfect stay was on the last night whilst eating dinner a member of staff came over to inform us a Green turtle was laying her eggs down on the beach if we wanted to go and take a look. AMAZInG!! I cannot recommend this boutique hotel enough. We will be returning, that’s for sure.

07 Mar 2019

Our Portfolio (Contd.)


An exquisite boutique villa located

amidst stretches of spectacular

beaches in the remote fishing

village of Induruwa, in close

proximity to Bentota.

Villa 700 is an ideal getaway to

relax, unwind or even to opt for

excursions to an array of local

attractions. Its extraordinary

service and cuisine are amongst

some of the unique highlight of

the villa experience.

vIllA 700

5/5 Excellent

tranquillity in style

robin from Amsterdam

this place oozes a serene atmosphere. we loved the design of the villa, spacious, open, minimalist. there are only a few rooms, so it really feels like a villa, not like a hotel. induruwa is a (still) quiet beach. the layout of the grounds is perfect, the garden (with nice pool) adjecent to the beach. we had a deluxe ocean view, huge room, high ceilings, good bed, nice bathroom and an enormous roof terrace. service is good, always friendly, and we loved the breakfast. all in all; perfect if you are looking for relaxation at the beach.

Feb 2019


Financial Highlights

Year ended 31 March 2019 2018

Revenue Rs.000’s 2,038,943 1,842,061earnings before Interest, tax, Depreciation & Amortization (eBItDA) Rs.000’s 405,041 477,880profit before tax Rs.000’s 129,304 270,049profit after tax Rs.000’s 102,351 192,452profit Attributable to equity Holders of the parent Rs.000’s 38,735 118,944earnings per Share Rs. 0.35 1.07Cash earnings per Share Rs. 3.71 0.53Interest Cover times 2 7Return on equity (Roe) % 3.01 5.35Return on Capital employed (RoCe) % 4.91 6.94

Statement of Financial Position Highlights and Ratiostotal Assets Rs.000’s 5,251,576 5,158,857total Debt Rs.000’s 965,618 781,783total Shareholders’ Funds Rs.000’s 3,405,445 3,596,396no. of Shares in Issue nos 111,525,794 111,525,794net Assets per Share Rs. 22.80 22.97Debt / total equity % 28.36 21.74Debt / total Assets % 18.39 15.15

Market/ Shareholder InformationMarket price of Share as at 31st March Rs. 15.90 17.50Market Capitalization Rs.000’s 1,654,424 1,861,674price earnings Ratio times 46 16Dividends per Share Rs. nil nilDividends pay out % nil nil

Earnings Per Share (Rs.)

0.5

1.0

1.5

2.0

02015 2016 2017 2018 2019

1.81

1.82

0.61

1.07

0.35

Market Price per Share (Rs.)

10

20

30

02015 2016 2017 2018 2019

28.0

0

27.5

0

23.1

0

17.5

0

15.9

0

Net Assets Per Share (Rs.)

5

10

20

15

25

02015 2016 2017 2018 2019

22.3

2

22.3

2

21.8

9

22.9

7

22.8

0


Non-Financial Highlight

No of Keys4020 60 80 100 140120 1600

Villa 700

Lantern Beach

Collection

Hotel Sigiriya

Club Hotel Dolphin

Avani Kalutara

Avani Bentota

5

22

154

75

105

79

Occupancy (%)80

0

20

40

60

2018 2019

75% 79

%

4pp

Direct Energy Consumption (kWh)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2018 2019

6,72

8,13

7

7,07

3,92

0

5.1%

30

45

12

51

302

Room Categories

Superior RoomsSuiteStandard

Deluxe RoomsVillas

No of Guests200,000

0

50,000

100,000

150,000

2018 2019

177,

426

192,

894

8.7%

Total Work Force1,000

800

600

400

0

200

2018 2019

862

844

-2.1%

Total Training Hours10,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2018 2019

5,67

8

9,55

8

68.3%

Water withdrawal (m3)

0

50,000

100,000

150,000

200,000

2018 2019

217,

463

188,

960

-13.1%

250,000 11

10

8

9

6

7

1

3

2

4

5

2018 2019

1.73

10.2

7

494.2%

Investment to energy efficient systems (Rs. Mn)

Carbon Emission (Co2) 2018/19

4,907,742 Kg

Avani Bentota | Avani Kalutara | Club Hotel Dolphin | Hotel Sigiriya |

Lantern Beach Collection


#WeThinkBoldly#WeKeepLearning


Quenching our thirst for knowledge, we remain receptive, spirited and courageous as we strive to be exceptional


Chairman’s Message

“the tourism industry demonstrated a marked upsurge in 2018 which was further boosted by Sri lanka being declared the ‘Best country in the world to visit in 2019’ by lonely planet and the launch of the ‘So Sri lanka’ brand at the WtM in london in late 2018.”

A N EsufallyChairman

Annual Report 2018 | 2019 LEADERSHIP 21

At the outset, on behalf of each and every member of this organization, I condemn the horrific attacks of easter Sunday and the events that transpired thereafter. We pray for those who are suffering injury, trauma and heartbreak. We also pray for those departed souls - May they Rest in peace.

the tourism Industry has been directly and seriously impacted as a result of these senseless attacks. Most of the tourism generating countries increased their travel Advisories to the highest level, advising their citizens to avoid ‘non-essential’ travel to Sri lanka. this resulted in a virtual cessation of tourist arrivals. occupancies in hotels dropped dramatically with many establishments recording zero, or near zero, occupancies. At the time of writing, I am pleased to say that the key tourism generating countries have relaxed their travel advisories.

the economic fallout is enormous to the country’s economy. As you are aware, the tourism industry, besides offering employment to those directly employed in tourist establishments, also affords income earning opportunities to many others whose livelihoods depend on the industry - e.g. vegetable producers, fishermen, tuk-tuk drivers, guides, handicraft manufacturers, etc. Due to the ‘multiplier effect’ that the tourism industry generates, the ‘guesstimate’ of the numbers whose livelihoods have been impacted is estimated at between 1.5 to 2.0 million persons.

the industry contributed approximately 5% to the GDp and was the 3rd largest foreign exchange earner. tourism was on course to become the largest foreign

exchange earner, attract significant FDI and offer direct and indirect employment to a much larger number of our countrymen.

the Government, having acknowledged the serious impact to the industry, offered a financial relief package which included a moratorium on loan and interest repayments for 12 months, a subsidised soft-working capital loan scheme to be repaid within 24 months and a reduction of VAt from 15% to 7%. this relief package will assist the formal sector to manage their finances for a while, pending the revival of the industry.

However, many individuals and establishments in the SMe sector had not directly benefit from the relief package offered by the Government, despite the launch of the enterprise Sri lanka “Sancharaka podda” scheme which provides a maximum Rs. 500,000 interest free loan with a one-year moratorium. their survival is critical to the overall industry. I call on the Government to address their needs too.

In addition, the need of the hour is to launch a comprehensive and effective pR and Global Media campaign to woo back travellers to Sri lanka. I am happy to note that the Sri lanka tourism promotion Bureau has undertaken this and has been allocated the necessary funds by the Cabinet.

Global Tourism PerformanceGlobal tourism in 2018 affirms the industry’s potential to be a powerful engine of growth for many global markets. the global tourism industry hit the 1.4 billion mark, two years before the 2020 goal forecasted by the

unWto World tourism Barometer. In 2018 global tourism grew by a strong 6%, led by the Middle east, Africa, Asia pacific and europe. Analysing tourist movements by region, Asia pacific recorded 6% growth with 343 million international tourist arrivals in 2018, while South-east Asia grew at 7%, followed by north-east Asia at 6% and South Asia at 5%.

the year 2018 witnessed some emerging trends in global travel such as Solo travellers, Glamping - luxury camping with creature comforts; and Bleisure travel - where business travellers make an effort to pack in some leisure activities. Widespread social media rise of digital booking platforms and mobile device usage have opened up opportunities for tourists to customise experiential holidays, and these trends will define the global tourism industry going forward.

Sri Lanka Tourism in 2018the tourism industry demonstrated a marked upsurge in 2018 which was further boosted by Sri lanka being declared the ‘Best country in the world to visit in 2019’ by lonely planet and the launch of the ‘So Sri lanka’ brand at the WtM in london in late 2018. overall tourism recorded 10.3% growth as Sri lanka welcomed 2,333,796 tourist arrivals in 2018, the highest-ever for the island, as opposed to 3.2% growth in 2017. tourist arrivals from all major regions, except east Asia and the Middle east, increased in 2018. Western europe continued to be the largest tourist origin for Sri lanka, which grew at 23.5%, with a share of 36% of total tourist arrivals. tourist arrivals from South Asia, the second-largest tourist


origin of Sri lanka, increased by 4.8%. the share of tourist arrivals from east Asia, which had increased steadily since 2011, on the back of an impressive growth of arrivals from China up to 2016, declined to 18.1%, registering a 4.7% decline in arrivals. Better air connectivity does boost tourism and the commencement of direct flights between Sri lanka and Australia witnessed tourist arrivals from Australia recording a significant growth of 35.9%. Further, reflecting the favourable developments in the tourism industry, the earnings from tourism increased to 4.4 billion uS Dollars, recording a substantial growth of 11.6% in 2018, as stated in the Central Bank Annual Report 2018, making it a key foreign exchange-earner for the country.

It is encouraging to note that investments in the tourism sector expanded further in 2018 with approvals granted for 44 hotel projects with 1,302 rooms in 2018, entailing an investment worth uS dollars 201 million. In addition, 35 hotel projects have commenced operations in 2018, adding 1,125 rooms during this period. However, this needs to be complemented with planned development, better air connectivity and greater infrastructure development to offer a seamless experience for tourists to access Sri lanka’s top tourist spots. the potential of the tourism industry to become the highest foreign exchange earner in Sri lanka must be supported by addressing barriers to its further growth. It is very important that the Sri lankan tourism industry pursues a policy of ‘high value’ tourism rather than just chasing numbers.

Cause for Concernthe Government needs to implement strict laws against the desecration of heritage sites and other unlicensed tourist activity that could threaten the long-term sustainability of the industry. the man-animal conflict continues to rage within our country without a viable solution in sight. We need to understand the significance of having the largest sea mammal – the whale and the largest land mammal - the elephant as a tourism offering and to preserve and manage them better. Reports suggest that the leopard population has grown at our national parks. Sri lanka has been on the migratory routes of birds specifically – at Bundala in the south and the Mannar basin in the north. We stand to lose this enviable reputation due to wind farms being set up in the Mannar basin. Meanwhile, environmental degradation reaches new lows every year in the absence of strictly implemented laws to prevent loss of our valuable tourist assets in the island. the need for sustainable tourism policies is dire, and even more so, as competition from other destinations increase.

Our PerformanceI am proud to state that we retained a positive momentum for the year under review. Serendib leisure Hotels Group recorded the highest top-line in its history this year, surpassing the two billion mark for the first time by leveraging on our strong brand positioning and enhanced value proposition. the Group achieved this outstanding financial performance despite partial closure of two of our properties - Avani Bentota and Hotel Sigiriya - for soft refurbishment

Chairman’s Message (Contd.)

Serendib leisure Hotels Group recorded the highest top-line in its history this year, surpassing the two billion mark for the first time by leveraging on our strong brand positioning and enhanced value proposition.

our foray into the boutique hotel space proved timely and astute as lantern Beach Collection performed strongly in its first full year of operations since acquisition.


purposes. our foray into the boutique hotel space proved timely and astute as lantern Beach Collection performed strongly in its first full year of operations since acquisition. Supported by favorable exchange rates, geographical diversity of our properties, and aggressive sales in source markets, Serendib leisure Hotels Group delivered an exceptional performance.

However, the year 2019/20 will be an extremely difficult one for the industry as a whole, and for this Group too. the Group has undertaken significant cost cutting measures without compromising on quality, whilst scaling back discretionary expenditure and postponing non-essential capital expenditure. our goal is to retain all our staff through the lean months we will go through.

Way Aheadthe Industry needs to act with speed and determination to revive tourism, improve security for travellers and market the destination aggressively to attract visitors to return. It is also vital that we manage public perception and create unique experiences in Sri lanka in addition to the sun, sand, wildlife, adventure, surfing, and tea estates, etc. that have been marketed successfully in the past.

Serendib leisure Hotels Group selected ‘positive Momentum’ as the theme for this year’s annual report to embody our outlook for our business and our wish for the sector as a whole. tourism is a global growth industry and the Asia-pacific region, of which Sri lanka is a part, offers huge opportunities for expansion and investment against the backdrop of expansion in global tourism.

AcknowledgementsI take this opportunity to thank all our stakeholders - partners, suppliers, customers and shareholders for their support at all times. Serendib leisure Hotels Group has adopted positive Momentum from its breakout performance in the year under review which will inspire it to keep the faith - with support from all our well-wishers.

Sincerely,



A N EsufallyNon-Executive Chairman

Mr. Abbas esufally was appointed to the Board in 1994 and was elected as Chairman of the Company in 2003. With over 40 years’ experience in the tourism industry, Mr. Abbas esufally has played a pivotal role in expanding the Hemas Group’s leisure interest. He serves as a Group Director of Hemas Holdings plC, Chairman of Serendib Hotels plC, Dolphin Hotels plC, Hotel Sigiriya plC and Diethelm travel Sri lanka (pvt) ltd. He also serves on several other listed and unlisted company boards.

He has played an active part in the growth and development of the country’s tourism industry. Mr. esufally serves as a Member of the Advisory Committee of the tourist Hotels Association of Sri lanka and a Member of the Advisory Council appointed by the Hon. Minister of tourism.

Mr. esufally is a Fellow Member of both the Institute of Chartered Accountants of england & Wales and the Institute of Chartered Accountants of Sri lanka. He is an all Island Justice of peace and serves as the Honorary Consul of Bhutan in Sri lanka.

W M De F ArsakularatneExecutive Director

Mr. Malinga Arsakularatne was appointed as the Managing Director of Hemas’ leisure, travel Aviation Group (ltA), in April 2016. prior to this appointment Mr. Arsakularatne served as the Chief Financial officer of Hemas Holdings plC for over 9 years. Mr. Arsakularatne has 18 years of experience in investment management, corporate finance and business strategy.

He also serves on the Boards of Hemas Holdings plC, Dolphin Hotels plC and Hotel Sigiriya plC. Mr. Arsakularatne also holds directorships in some of the other unlisted subsidiary companies within the Hemas Group. Mr. Arsakularatne is a CFA Charter Holder and a past president of CFA Sri lanka. He is also a Fellow Member of the Chartered Institute of Management Accountants (CIMA), uK and a past Board Member of the CIMA Sri lanka Division. He holds a BSc in Computer Science & engineering from the university of Moratuwa, a MSc in Investment Management from Cass Business School, and an executive MBA from InSeAD.

S M EnderbyNon-Executive Director

Mr. Steven enderby joined Hemas in March 2013 to head the Group’s efforts in Mergers and Acquisitions and was appointed to the Serendib Hotels Board in March 2014. He took up the position of Deputy Ceo and Director of Hemas Holdings plC in november 2013 and was subsequently made the Chief executive officer of the Company in April 2014. Mr. enderby has had a successful track record in private equity with Actis, a leading global emerging markets fund, until his retirement in 2011 as an Actis partner. He has led many of the most successful private equity transactions in Sri lanka including South Asia Gateway terminal, Ceylon oxygen and Millennium Information technologies. Mr. enderby is also non-executive Chairman of Ironwood Capital partners Sri lanka’s leading private equity fund. He has served on the Boards of many leading companies in Sri lanka and India. He is a Fellow of the Chartered Institute of Management Accountants, holds a Degree in economics and Accounting from Queens university Belfast, and a Master’s Degree in Development Studies from the university of Melbourne.

Board of Directors


I A H EsufallyNon-Executive Director

Mr. Imtiaz esufally was appointed to the Board in March 2017. With over 30 years of management experience, Mr. esufally has been at the forefront of the transportation industry in Sri lanka. He presently holds the position of Chairman of the Boards of Hemas Maritime (pvt) ltd and Spectra logistics (pvt) ltd, along with board positions for the Hemas Group’s Aviation and travel companies, and Hemas Holdings plC. Mr. esufally also sits on the Audit Committee of Hemas Holdings plC.

He is a past president of the IAtA Agents Association of Sri lanka and is a member of the Advisory Council of the Ceylon Association of Ships’ Agents.

Mr. Imtiaz esufally earned an Honours degree in Accounting and economics from the university of Kent uK, and is an executive education alumnus of the International Institute for Management Development (IMD) in Switzerland. He is an old boy of St. thomas’ College Mt lavinia, Sri lanka.

E J D RajakarierNon-Executive Director

Mr. Dillipraj Rajakarier was appointed to the Board in 2010. He is the Chief operating officer of Minor International public Company limited and the Chief executive officer of the Minor Hotels Group. He has also served as the Deputy Chief Financial officer of orient-express Hotels, trains & Cruises and as the Group Financial Controller of easi Solutions plC.

Mr. Rajakarier has a Masters’ Degree in Business Administration, from the uK and is also a Member of uK Institute of Management Information Systems. He is also an Associate Member of the British Association of Hotel Accountants, a Member of the Association of Computer professionals, a Member of the Association of Business & Administrative Computing, uK, and a Member of the Institute of Directors.

M A JafferjeeSenior Independent Director

Mr. Murtaza Jafferjee was appointed to the Board in 2010. He is the Chief executive officer of JB Securities limited with over 20 years’ of industry experience in the stock market in Sri lanka. He serves on the Board of nations trust Bank plC as an Independent Director. He has also served on the Board of the Colombo Stock exchange from August 2007 to July 2009.

Mr. Jafferjee holds a Bachelors’ Degree in Mechanical engineering and Computer Science from the university of new South Wales, Australia and a Masters’ Degree in Financial economics from the university of Colombo. He is also a CFA Charter Holder.


Deshamanya Dr. R N A Athukorala Independent Director

Deshamanya Dr. Rohantha Athukorala was appointed to the Board in 2010.

Deshamanya Dr. Rohantha Athukorala is one of Sri lanka’s respected marketing professionals with 23 years of experience in working for British multinationals unilever, Reckitt Benckiser and Diverseylever, winning twice the ‘Best Marketer’ by Chartered Institute of Marketing and ‘Business Achiever’ award by pIM, university of Sri Jayawardenapura.

He was picked to serve the country as the Chairman of Sri lanka export Development Board (eDB) when exports crossed $10 billion, then as the Chairman of Sri lanka tourism promotions Bureau (SltpB). Subsequently the Cabinet appointed Dr Athukorala as the Commissioner General for the World expo 2015 and as the Chairman of the largest retail network lanka Sathosa, where he turned around the organizations’ profitability to Rs. 30 billion.

Deshamanya Dr. Rohantha Athukorala has served 3 presidents of Sri lanka during his tenure in the public sector and then, he went on to serve the united nations (unopS) for 5 years where the ‘Best project’ was secured by Sri lanka.

Currently, Deshamanya Dr. Rohantha Athukorala is the president/ Ceo of Clootrack Sri lanka & Maldives the first Artificial Intelligence (AI) Based real time perception management global company operating in 57 countries. Academically, he has a double degree in Marketing, MBA and a Doctorate in Business Administration. He is an Alumni of Harvard Kennedy and a paul Harris Fellow of Rotary International.

S L SpeldewindeIndependent Director

entrepreneur linda Speldewinde’s name is known for the immense scope of work she has led for South Asia, uniting design led innovation with enterprise & building a unique eco-system. In the most recent award of her honorary doctorate from northumbria university uK, she was acknowledged for her global reputation as one of Sri lanka’s leading entrepreneurs using the power of design to have made an impact on education, the creative sector, rural crafts and communities, as well as social and cultural sustainability.

Ms. Speldewinde is the founding entrepreneur behind ‘Design Corp’ group of companies which is an unusual example of a living ecosystem of businesses, educational institutes, brands and organisations working with design and its power to create commerce, employment and economic growth as their central dynamic. this includes the design academy AoD which many international universities continue to proudly partner for many years, as well as Sri lanka Design Festival, Mercedes-Benz Fashion Week Sri lanka, www.fashionmarket.lk, Design Colombo, Island Craft, Colombo Innovation tower.

Ms. Speldewinde holds a MBA from pIM, and is an alumni of the British Council’s ‘Young Creative entrepreneurship’ from which she hold a special commendation for changing society through education. As much linda is a driver of innovation and entrepreneurship, she is also a passionate advocate of female empowerment and has initiated and driven many initiatives in this areas. Her work resonates through young design talent, business and emerging creative cultures from heritage crafts to digital retail, blazing a trail of inspiration in how design can, in fact, contribute to the world. Ms. Speldewinde was appointed to the board of Serendib Hotels plC in 2017.

Board of Directors (Contd.)


W A T M WijesingheIndependent Director

Mr. thilan Wijesinghe was appointed to the Board in 2016. He has three bachelors’ degrees in engineering, economics and Business Administration from Cornell university, uSA.

Having commenced his career as a Senior Management Consultant at price Waterhouse Coopers, Colombo, Mr. Wijesinghe co-founded Asia Capital plC, which became Sri lanka’s largest investment bank in terms of market capitalisation. In late 1995 Mr. Wijesinghe exited his shareholding in Asia Capital to become the youngest ever Chairman/Director General of the Board of Investment of Sri lanka. During his 5 year tenure, he directed several pioneering privatisation and public-private partnership (ppp) transactions in large scale infrastructure projects. Mr. Wijesinghe is also a co-founder and Board member for life of the Sri lanka Institute of Information technology, which has become Sri lanka’s largest It and engineering university.

Mr. Wijesinghe was the former Managing Director of Forbes & Walker Group and headed Sri lanka’s two largest listed property companies, Asian Hotels properties plC and overseas Realty plC. He continues as a Board member of MJF leisure and is a co-founder and Director of the award winning Ceylon tea trails Resort. He is also a co-founder/Director of Wow.lk.

Mr. Wijesinghe currently is the Chairman of tWCorp that specialises investment structuring with emphasis on real estate focused investments and Chairman of the national Agency for public private partnership Agency of the Ministry of Finance. Mr. Wijesinghe also sits on the boards of several other public and private companies.

S A ChojnackiNon-Executive Director

Mr. Stephen Chojnacki was appointed to the Board in 2017 and is the Chief Commercial officer and General Counsel of Minor International pcl. Mr. Chojnacki holds degrees in economics, foreign affairs and law from the university of Virginia, uSA. Mr. Chojnacki is based in Bangkok and has worked for Minor International for 12 years, across Minor’s hotel, food and distribution businesses. Mr. Chojnacki is a practicing lawyer admitted to the new York Bar. prior to joining Minor International, Mr. Chojnacki worked for linklaters, a large global law firm, in their new York, Hong-Kong and Bangkok offices.


Corporate Management Team

Seated Left to RightShantha Kurumbalapitiya - Managing Director - Serendib leisure Management limited | nimali Welikala - General Manager - Human Resources | Malinga Arsakularatne - executive Director

Standing Left to RightHarith perera - Director - Industry Relations & Business Development | Darshana perera - Director - Finance


Malinga Arsakularatne

Executive Director

Refer to Board of Directors profile on page 24.

Shantha Kurumbalapitiya

Managing Director - Serendib Leisure Management Limited

Mr. Shantha Kurumbalapitiya has over 25 years’ experience in the areas of Accounting & Finance, Business Restructure, production Management, International Marketing, Construction and project Management, Human Resource Management, Business process Re-engineering and General Management, including Ceo responsibilities. prior to joining Serendib leisure, he was the Group CFo of Rockland Distilleries (private) limited. He is a Fellow Member of the Institute of Chartered Accountants Sri lanka and a Fellow Member of the Chartered Institute of Management Accountants uK. He also holds a MBA from the university of West london.

Darshana Perera

Director - Finance

Mr. Darshana perera is the non-executive Director of Dolphin Hotels plC & Hotel Sigiriya plC. He joined Hemas Holdings plC in 2014 in the capacity of Group Financial Controller and prior to joining the Hemas leisure travel Aviation Group (ltA), he served as the Director - Finance and Strategy, Hemas transportation Sector. He is a Fellow Member of the Institute of Chartered Accountants of Sri lanka and also an Associate of the Chartered Institute of Management Accountants

and Institute of professional Managers. He also holds a MBA, specialised in Finance from the university of Colombo. Mr. perera has over 16 years of post-qualifying experience covering wide variety of industries, including Manufacturing, telecommunication, It enabled Services etc. He started his career at ernst & Young and prior to joining Hemas, worked for t&S Buttons lanka (pvt) ltd (a Brandix Company) as the Chief Financial officer and at Dialog Axiata plC.

Harith Perera

Director - Industry Relations & Business Development

Mr. Harith perera is the Director - Industry Relations & Business Development for Hemas leisure, travel Aviation Group (ltA). He joined Hemas FMCG in 1997 and was involved in Sales and Brand Management until 2006. He joined Hemtours in 2006 and subsequently was part of the team launching Diethelm travel in Sri lanka and Maldives. He was the Managing Director of both companies since inception. Harith is currently the president of Sri lanka Association of Inbound tour operators (SlAIto) and a Board member of the Sri lanka tourism promotions Bureau (SltpB). He is a Member of the Chartered Institute of Marketing (CIM), uK and has an MBA from the university of Southern Queensland, Australia.

Nimali Welikala

General Manager - Human Resources

Ms. nimali Welikala is a Senior HR practitioner with experience in a range of sectors. Having worked in the apparel manufacture, banking and It sectors, she is currently the General Manager Human Resources of Hemas leisure, travel Aviation Group (ltA). An alumnus of the university of Delhi, She graduated with a degree in HR & Industrial Relations and completed her post-graduate degree in Business Management at the university of Colombo. nimali found herself at n*able (pvt) ltd as its very first Head of HR prior to her appointment at the Hemas’ leisure, travel and Aviation Group in october 2017. She is the winner of the national Young HR Minds Award in 2009 for her submission in ‘Global Financial Crisis and the role of Human Resources.’ nimali is conferred the award for 100 Most Influential Global HR professionals at the World HRD Congress in 2016.


Senior Management Team

Seated Left to RightRoshan nanayakkara, Head of Information technology | Chaminda Samaranayake, General Manager - Avani Bentota Resorts Suresh Athukorala, General Manager - Hotel Sigiriya | Shantha Kurumbalapitiya, Managing Director - Serendib leisure Management limited | Saman Welapura, Head of projects & technical Services | priyal perera, Head of procurementKusalitha Devruwan, Senior Manager - Human Resources

Standing Left to RightHimaj Jayasinghe, General Manager - Boutique Hotels & Villas | Stephan Sandmann, General Manager - Club Hotel Dolphin Sepala Dahanayake, Head of Administrations & Compliance Management | nimantha neyomal, Assistant Manager - planning & Strategy Implementation | Devika Saelen (Ms.), Head of operational excellence | Kushan pathiraja, Senior Manager - Finance Adrian Jansz, General Manager - Sales & Marketing


Hotel Senior Management

Avani Bentota Resort

Left to RightViraj Kamal Sri - executive Sous ChefDavid de Silva - Senior operations ManagerKrishantha Wanigasekara - executive HousekeeperKavindu Caldera - Food & Beverage ManagerIndika Alwis - Human Resource ManagerKithsiri Fernando - Maintenance engineerChaminda Samaranayake - General ManagerSarath Samarasinghe - Financial Controllerparimalan Kandaraj - Front office Manager

Avani Kalutara

Seated Left to RightChandimal Gunasekara - Manager Human RecourseGihan Chamindra - executive ChefJude Silva - Hotel ManagerJayantha Gunawardena - Front office ManagerSujith Fernando - executive House Keeper

Standing Left to RightSanjeewa lankapura - Assistant Chef engineertuan Faizan - Manager Food & BeverageAnara Rathnayaka - Assistant Finance Controller

Club Hotel Dolphin

Left to Right

Dadison Zoysa - executive Cheftony perera - Resident ManagerSuranga Wewegedara - Senior Human Resource ManagerSugath Wijesinghe - executive HousekeeperStephan Sandmann - General ManagerJagath Rammandala - Chief engineer Mohamed Asfaq - Front office ManagerDhammika Gunasekara - Finance Controller Chandika Jayakody Manager - Health & Safety


Hotel Sigiriya

Left to RightGayan Bandara - Chief engineerthilak Chandimal - F & B Managerthanuje Godage - Finance ControllerSuresh Athukorala - General ManagerBernard Jayasuriya - executive ChefMilinda Meegoda - Front office Manager


Seated Left to RightGayan Sanjeew - Assistant House Keeperuthpala Wickramarathna - Hotel AccountantChathura padmalal - Maintenance executivepreethika De Silva - Human Resource executiveMohamed Jeffran - Senior Finance executive

Standing Left to RightAmila Bandara - Sous ChefSheran Fonseka - Manager operations, Boutique Hotels & VillasIfthikar Amith - Resort ManagerHimaj Jayasinghe - General Manager, Boutique Hotels & VillasChandima Godawatta - Chef De Cuisine


#WeLeadChange#WeThriveOnCreativity


With exceptional talent and inimitable skill, we charter new courses as we envision a vibrant and stimulating future


Management Discussion & Analysis

The Group achieved

its highest-ever top-line

during the year under

review by crossing the

two billion rupee mark

for the first time in its

history

Global Tourism LandscapeDemonstrating its credentials as one of the most potent and fast-growing sectors, global tourism grew by 6% in 2018 as 1.4 billion tourists traversed the globe during the year, as stated in the united nations World tourism organization (unWto) Barometer 2018. the 1.4 billion mark was reached two years ahead of the unWto’s long-term forecast issued in 2010. Compared to the global economic growth of 3.7% in 2018, the performance of the tourism industry in 2018 was a positive development, with the main growth being led by the Middle east with 10% growth, Africa with 7% and Asia pacific and europe both at 6%. Globally, almost 10% of all jobs are linked to the travel and tourism industry, notes World travel & tourism Council, 2018, underscoring the substantial contribution the industry makes to the global economy.

Global Trendsoverall, 2019 is expected to see the consolidation among consumers of emerging trends such as the quest for ‘travel to change and to show’, ‘the

pursuit of healthy options’ such as walking, wellness and sports tourism, ‘multi-generational travel’ as a result of demographic changes and more responsible travel as per unWto research.

Further trends, as revealed in the trekksoft travel trend Report 2019, indicate that travelers, especially millennials, seek once-in-a-lifetime experiences and are more likely to travel to destinations with cultural or historical significance. travellers are also booking bespoke or custom tours and activities in advance. unWto forecasts that by 2030, 58% of international tourists will travel to emerging economies. travellers are also more price sensitive, seeking high quality products at a lower price. Millennials prefer booking on-line using online travel Agencies (otAs) as they can compare options, pricing and reviews in one place.

Growth forecast for 2019unWto forecasts international arrivals to grow 3% to 4% in 2019, more in line with historical trends, compared to

the 6% growth experienced in 2018. trends show strong outbound travel from emerging markets, especially India and Russia, but also from smaller Asian and Arab source markets. At the same time, the global economic slowdown, the uncertainty related to Brexit, as well as geopolitical and trade tensions may prompt a “wait and see” attitude among investors and travellers.

Sri Lanka Tourism Surges by 10.3%the tourism industry demonstrated its potential to become Sri lanka’s top foreign exchange earner by posting a solid 10.3% growth in the year under review to welcome 2,333,796 inbound tourists in 2018, recording the highest annual tourist arrivals in a year. In terms of tourist arrivals by country, India remained at the top with 424,887 arrivals, while China remained the second largest source, despite recording a marginal decline, followed by the uK, Germany and Australia. the top five inbound tourist origins collectively accounted for 52.0% of the total tourist arrivals to Sri lanka in 2018.

Annual Report 2018 | 2019 MANAGEMENT REPORTS 37

Source: Sri Lanka Tourism Development Authority

Tourist Arrivals by Country - 2018 (Top 10)

Australia

India

Maldives

United Kingdom

Russian Federation

France Republic

China

United States Of America

Germany

Netherlands

Others

18.2%

11.4%

10.9%

6.7%4.8%4.6%

3.3%3.2%

2.8%2.4%

31.8%

Earnings from Tourismthe year under review witnessed increased average spending by tourists. earnings from tourism increased by 11.6% to uS dollars 4,381 million in 2018, in comparison to uS dollars 3,925 million in 2017, as stated in the Central Bank’s 2018 Annual Report. In 2018, the average spending per tourist rose to uS dollars 173.8 per day from uS dollars 170.1 per day in 2017, according to the latest annual survey on tourist spending and duration of stay conducted by the Sri lanka tourism Development Authority (SltDA). Further, the average duration of stay by a tourist was estimated at 10.8 days in 2018, in comparison to 10.9 days in 2017.

Regional Wise Arrivals

Western/ Northern Europe

Source: Sri Lanka Tourism Development Authority

Middle East

South Asia

Eastern Europe

East Asia

Other

Tourism Earnings (USD. Bn)

500,000

0.5

1,000,000

1.0

3.01,500,000

1.5

3.5

2,000,000

2.0

4.5

4.0

2,500,000

2.5

5.0

0 02015 2016 2017 2018 2019

Arr

ival

s to

Sri

Lank

a

Tour

ism

Ear

ning

s (U

S$.

Bn)

the year 2018 brought about increased investments in the tourism sector. During 2018, the Sri lanka tourism Development Authority (SltDA) received proposals for

141 hotel projects amounting to uS dollars 919 million, in comparison to 95 projects with a total investment of uS dollars 314 million in 2017. During the year, SltDA granted approvals for 44 hotel projects with 1,302 rooms, of investments worth uS dollars 201 million. In addition, 35 hotel projects have commenced operations in 2018, adding 1,125 rooms during this period.

numerous promotional campaigns were implemented in 2018 to harness the potential of Sri lanka’s tourism industry. the implementation of the new tourism Strategic plan (tSp) 2017-2020, which was introduced in 2017, continued in 2018. In support of these promotional activities, the Sri lanka tourism promotion Bureau (SltpB) launched a new brand identity “So Sri lanka” in november 2018. Many travel related entities including lonely planet and national Geographic endorsed Sri lanka as one of the best destinations to travel to in 2019.

Company Performancethe period under consideration was a watershed year for the Serendib leisure Hotels Group as it recorded the highest-ever revenue in its history, successfully crossing the Rs. 2 Billion mark. top-line surged across its properties, even though Avani Bentota Resort and Hotel Sigiriya underwent partial closure for soft renovations during the period. Further, the Group launched its newly articulated values, which reflect the evolved outlook for the brand as it targets greater innovation and growth after close engagement with internal and external stakeholders through performance evaluation, online reputation management tools and customer and employee engagement surveys.


the product and service offerings were also enhanced to align seamlessly with the new values for a re-energised organization that is future-ready and agile enough to adapt to emerging trends in the tourism industry. Serendib leisure Hotels staff are at the heart of its business and the Group ensures they get optimal opportunities to realise their full potential and remain motivated to deliver a memorable guest experience.

Furthermore, improved systems, processes and technology along with operational improvements have enabled Serendib leisure Hotels Group to improve its efficiency and productivity, blended well to deliver a positive financial performance.

4%

47%

49%

Revenue Mix 2018/19

Room Food & Beverage Others

FINaNCIaL REvIEW

Revenuethe Group achieved its highest-ever revenue during the year under review by crossing the two billion rupee mark to record Rs. 2.04 Bn. notwithstanding the lower occupancies experienced by Avani Bentota and Hotel Sigiriya in Q1 and Q2 due to partial closure for soft renovations, the Group managed to increase its year - round occupancy to 79%, reflecting a 4 percentage-points increase over the preceding year. the trevpar reported an 8% increase over the previous year which was partly aided by rupee devaluation against the major currencies towards the second half of the financial year. the uK was the main source market for the Group, following the trend of increased arrivals to Sri lanka from the united Kingdom (uK). the increase in occupancies further contributed to a 7% increase in the Group’s F&B revenues as well.

600 70%

300

900

1,200 75%

1,500

1,800 80%

2,100

2,400 85%

0 65%2015 2016 2017 2018 2019

Revenue (Rs. Mn)

Profit After Tax (Rs. Mn)

Occupancy (%)

Revenue / Profit / OccupancyMn.

1,5

76

279

301

128

192

102

1,7

68

1,7

69

1,8

42

2,0

39

the Group’s newest addition - lantern Beach Collection (lantern) - completed its first full year of operations under the Serendib leisure Hotels Group, posting a total revenue of Rs. 175 Mn vis a vis Rs. 99 Mn recorded in the previous year which reflected only a six-month performance.

the growth in occupancy and devaluation of the lKR, along with the revenues from lantern Beach Collection, contributed to an overall revenue growth of 11% from the previous year. underlying growth, excluding the contribution from lantern, amounted to 7%.

Management Discussion & Analysis (Contd.)


Costs and Other Incomethe Administration expenses of the Group recorded an increase of 20% from the previous year largely due to soft renovation costs of approximately Rs. 50 Mn at the Avani Bentota and Hotel Sigiriya properties, which comprised of Rs. 36 Mn of refurbishment costs as well as non-current assets retirement costs of Rs. 14 Mn. Furthermore, payroll costs increased by 33% to Rs. 624 Mn as a result of increases in the staff cadre and performance-based incentives. In addition to the above, the annualised effect of lantern’s expenses also contributed to the overall growth in Administration expenses. However, the underlying growth of Administration expenses amounted to only 16%, after excluding the annualised impact of lantern.

Sales and Marketing expenses increased by only Rs. 5 Mn, with 10% growth over the previous year, which was in line with the overall revenue growth of the group.

other Income and Gains, decreased by Rs. 24 Mn during the year under review, which marks a 36% decline from the previous year due to losses incurred from forward contracts resulting from the sharp devaluation of the lKR against the uSD, GBp and euR by 14%, 7% and 5% respectively, compared to gains on forward contracts that were made in the previous year.

Finance costs increased significantly by 106% (Rs. 51 Mn) over the previous year as a result of the annualised impact of the interest on loans taken to finance the acquisition of the lantern Beach Collection, along with a revaluation loss on the uSD loans at Serendib Hotels plC.

Income Tax ExpensesIncome tax expense reduced significantly by 65% against the previous year due to an additional deferred tax liability of Rs. 39.6 Mn recorded in the previous year with the change in tax rate from 12% to 14%.

Profitability & Earningsthe Group managed to achieve a 75% Gross profit margin which was 1 percentage-point higher than the previous year largely due to better negotiations by the Group’s central procurement team coupled with a reduction in the hotels’ All Inclusive guest mix. However, the profit for the Year declined by 47% from the previous year due to the increases in administration expenses and finance costs despite the 11% growth in sales and 65% reduction in Income tax expenses. the loss in revenue arising from the partial closure of the Avani Bentota and Sigiriya Hotels for soft refurbishments, along with the increased maintenance expenses also contributed to the overall decrease in Group’s profitability.

20%1,000

3,000

2,000

40%

1,800 100%

80%

60%

0 0%2015 2016 2017 2018 2019

Equity (Rs. Mn)

Debt (Rs. Mn)

Gearing (%)

Debt / EquityRs. Mn.

2,8

38

3,2

80

3,2

46

3,5

96

3,4

05

566

440

310

782 96

6

the earnings of the equity-holders of the parent recorded a significant drop of 67% due to the parent entity making a loss of Rs. 81 Mn for the year with increased maintenance and finance costs along with additional deferred tax on the new capital expenditure.

Investment in Jada Resorts & Spa (Pvt) LtdSerendib Hotels plC has a shareholding of 5.9% in Jada Resorts & Spa (pvt) ltd, the owning company of Avani Kalutara and Anantara Kalutara Resorts. Jada Resorts & Spa (pvt) ltd is treated as an Available for Sale investment. Hence, the operating results of Avani Kalutara and Anantara Kalutara Resorts are not reflected in the Consolidated Financial Statements of Serendib Hotels plC.



Economic Value Added StatementDuring the year the Group generated Rs. 2,097 Mn (2017/18: Rs. 1,924 Mn) of economic value, a increase of 9% from the previous year, out of which Rs. 1,804 Mn (2017/18: Rs. 1,557 Mn) was the value distributed and Rs. 293 Mn (2017/18: Rs. 367 Mn) was retained for expansion and growth. Further details of the economic distribution is given below:

REVENUE

Rs. 2,038,943(2017/18: Rs. 1,842,061)

FINANCE INCOME

Rs. 15,186(2017/18: Rs. 15,402)

PROFITS ON SALE OF ASSETS & OTHER INCOME

Rs. 42,591(2017/18: Rs. 66,139)

economic value Retained(Rs.000)

Rs. 292,825(2017/18: Rs. 366,653)

OPERATING COSTS

Rs. 730,191(2017/18: Rs. 744,036)

EMPLOYEE WAGES & BENEFITS

Rs. 625,233(2017/18: Rs. 473,429)

PAYMENTS TO PROVIDERS OF FUND

Rs. 92,935(2017/18: Rs. 44,104)

PAYMENTS TO THE GOVERNMENT

Rs. 354,495(2017/18: Rs. 291,552)

COMMUNITY INVESTMENTS

Rs. 1,041(2017/18: Rs. 3,828)

Rs. 1,803,895(2017/18: Rs. 1,556,949)

economic value distributed(Rs.000)

Rs. 2,096,720(2017/18: Rs. 1,923,602)

direct economic value generated(Rs.000)

DEPRECIATION

Rs. 175,955(2017/18: Rs. 158,347)

AMORTISATION

Rs. 14,519 (2017/18: Rs. 15,854)

PROFITS AFTER DIVIDENDS

Rs. 102,351 (2017/18: Rs. 192,452)


Capital Structure of the Groupthere were no major deviations in the overall capital structure of the Group except for a slight increase in surplus cash due to cash generated from operations. the reduction of parent’s equity was due to the Rs. 81 Mn loss made by the parent Company during the year under review. non-Controlling Interest decreased following Serendib Hotel plC’s acquisition of preference shares of Frontier Capital lanka (pvt) ltd which was, previously reported under non-Controlling Interest.

the overall Debt position of the Group increased by 47% compared to the previous year, and the short-term and long-term Debt positions changed mainly due to the new loan of Rs. 592 Mn obtained by Dolphin Hotels plC towards the end of the financial year. the capital structure of the Group remains relatively conservative, with relatively low levels of gearing at 28.4%, with further borrowing capacity available in case of future funding requirements.

Cash Flowthe Group posted consolidated operating cash flows of Rs. 414 Mn, an increase of 602% from the Rs. 59Mn operating cash flow recorded in the previous year. this growth was largely driven by a movement in Working Capital of Rs. 429Mn. the negative impact of slightly increased Inventory levels and trade and other Receivables amounting to Rs. 7Mn was outweighed by improved trade and other payables amounting to Rs. 97Mn. the settlement of large payables owed to the previous owners of Frontier Capital lanka (pvt) ltd in 2017-18 resulted in a comparatively and significantly improved Working Capital movement for the current year. However, the additional

payments for taxes amounting to Rs. 11 Mn and Finance Costs amounting to Rs. 49 Mn caused a slight reduction in the operating cash flow.

A net cash outflow of Rs. 209 Mn from investing activities, a decrease of 52.8% from the previous year’s value of Rs. 443 Mn. this significant deviation was due to the net impact from acquisition of property plant and equipment of Rs. 218 Mn during the current year and investment of Rs. 432 Mn to acquire lantern Beach Collection during the previous year.

the net cash-flows from financing activities decreased by Rs. 440 Mn as a results of new borrowings of Rs. 721 Mn during the year, the repayment of external and related party loans amounting to Rs. 456 Mn and purchase of preference shares of Frontier Capital for a value of Rs. 235 Mn.

Due to the significant improvement in cash flows from operating activities, the net cash inflow for the year stood at Rs. 235Mn against the Rs. 87Mn reported in the previous year.

OPERaTIONaL REvIEW

Avani Bentotaone of the most picturesque resorts along Sri lanka’s golden mile of beach on the West coast, the beach-side property offers the unique appeal of Geoffrey Bawa-designed architecture. the location, with a clean stretch of beach and the large hotel gardens, continues to be a key highlight of the property. However, Avani Bentota was unable to take full advantage of the prevailing demand due to partial closure as it underwent a soft renovation from

May to September 2018. As a result, occupancy rates for the property fell during the year and sales had to be curtailed due to lack of room inventory. notwithstanding this, revenue reduced only marginally by 1% by the end of the year, despite the resort’s occupancy in the first half of the year being 6 percentage-points below the same period last year. the hotel closed the year with an overall occupancy of 73%, sustaining occupancy levels on par with the previous year. Due to a slight shortfall in F&B revenue, with a few restaurants having to be closed during the renovation period, the total revenue earned was marginally lower than the previous year.

In total, Rs. 40 Mn of capital and maintenance expenses were incurred on the soft refurbishment of the hotel during the year, resulting in a rejuvenated product which was well appreciated by guests. the revamping of the main swimming pool and the pool deck was well received by guests. there was a noticeable improvement in guest perceptions and feedback as a result of the enhancement. the refreshed rooms, enhanced service and food offerings, along with the upgraded swimming pool added more vibrance to the resort, improving guest satisfaction, which contributed to accommodation revenue exceeding the previous year, despite the challenges faced during the renovation period. traditional european markets accounted for the majority of volumes of guests that patronised the hotel during the year, while emerging markets such as Russia, Australia and Switzerland showed double digit growth in volumes compared to the previous year, which is a positive sign for the outlook of the hotel.


Club Hotel DolphinA high year-round occupancy of 82%, along with robust F&B revenues and growth in the MICe business segment along with local groups combined to deliver a total revenue of Rs. 953 Mn at Club Hotel Dolphin. the property surpassed the Rs. 900 Mn mark for the first time in its history, breaking the stagnant revenue pattern seen over the past four consecutive years. the 82% occupancy was an increase of about 4 percentage-points over the preceding year. the uK market continued to be the dominant segment for the resort, further boosting its volumes and staying ahead of other markets despite the reduction in volumes from its former key source market - Germany. Apart from the traditional european markets, the other european markets such as poland, France, Switzerland, Sweden and Belgium showed double digit growth in volumes. on the back of increased volumes, supported by a significant increase in room rates, the hotel managed to secure a staggering 20% growth in room revenue.

Hotel Sigiriyathe hotel completed a successful year of operations with 79% year-round occupancy, which is the highest the hotel has seen in its history of over thirty years. the soft upgrade to the rooms helped uplift the overall appearance, quality and standards of the hotel. the note-worthy high volumes coupled with a slight increase in room rates aided by the favourable movement of exchange rates, enabled the hotel to secure an increase of 13% in room revenue. the increase in volumes and introduction of new dining experiences such as the nightly barbeques, also served to achieve an 18% year-on-year increase

in F&B revenue for the hotel and an impressive 15% growth in top-line overall. uK continued to be the top market for the hotel, in line with the trend across the Group, while encouraging growth was seen from emerging markets such as Australia, Japan and Benelux markets.

Serendib Leisure Management Ltd.In response to the growing trend of customers moving away from large properties to more intimate boutique spaces, Serendib leisure Management ltd. (SlMl), the management company of Avani Bentota Resort, Club Hotel Dolphin and Hotel Sigiriya Resorts, made a strategic decision to enter the Boutique hotel and Villa space. In 2017-18 SlMl stepped into the Boutique hotels and villas space through the acquisition of the lantern Beach Collection Mirissa (lantern) and signing of a management agreement with Villa 700 Induruwa. the year 2018-19 proved to be an extremely successful year for SlMl in its quest to be a boutique hotels and villa manager as both lantern and Villa 700 exceeded profit targets set by their respective owners, this being the first full year of operation under the management of SlMl. the company is currently evaluating several potential management opportunities of boutique hotels and villas, with plans to expand its portfolio and footprint in the boutique hotels and villas space.

Lantern Beach Collectionthe newest addition to the Serendib leisure Hotels Group, the lantern Beach Collection in Mirissa, set on a pristine beach and delivering authentic personalised service, has been well received by its guests, recording increases in both revenue and occupancy. the year 2018-19 was the first full year of operations for the lantern Beach Collection following its acquisition and subsequent management by the Serendib leisure Hotels Group on 15th September 2017. the ubuntu villas which are a part of the lantern collection, are set a slight distance apart from the main lantern Boutique hotel, featuring a private pool, with its own chef and butler. the lantern Beach Collection closed the year with an impressive occupancy of 74% which was an improvement of 9 percentage-points compared to the previous year. total revenue generated by the hotel increased by 8% from 2018-19 while the hotel’s contribution to the Group’s topline was Rs. 76 Mn above the preceding year. the uK and Australia were the hotel’s top-source markets during the year under review.

E-Commerceonline sales have become an important component of the hospitality industry as rapidly evolving technology is disrupting traditional service delivery channels and the manner in which tourists book hotels. Consumer confidence in a property is boosted when it has a strong social media presence and a user-friendly and concise website for both mobile and desktop navigation. By taking into account the way technology is rewriting the rules in the industry, Serendib leisure Hotels Group was one of the first movers in this regard and has kept up to date with evolving trends. It has become important to stay ahead of the curve and ensure that regular updates are implemented to give guests a seamless booking experience and enhance ways of retrieving data about our properties. Serendib leisure Hotels Group has perceived



e-commerce and Social media marketing as one of the most significant upcoming trends in the industry and this is expected to become one of the largest revenue-generating channels for our hotels. the Group continues to invest in its human and technology resources in order to lead the industry in the new digital era. the Serendib leisure website is scheduled to undergo a total revamp to be strongly positioned for the digital revolution in the industry.

Online Reputation Management

Avani Bentota

Avani Kalutara

Club Hotel Dolphin

Hotel Sigiriya


2017/18

trip Advisor 4/5 4/5 4.5/5 4/5 4.5/5

Booking.com 7.9/10 8/10 7.8/10 8.6/10 8.9/10

Holiday Check 5/6 - 5.3/6 - -

Google.com 4/51 4/5 4.3/5 4.3/5 4.5/5

2018/19

trip Advisor 4/51 4/51 4.5/5 4/51 4.5/5

Booking.com 8.1/10 8/10 8/10 8.7/10 9.1/10

Holiday Check 5.5/6 5.3/6 5.5/6 4.7/6 -

Google.com 4.2/5 4.4/5 4.5/5 4.4/5 4.4/5

the Group has been able to achieve high levels of guest satisfaction scores across its properties as a result of tracking its online reputation. In a highly digital and technology driven environment, effectively managing the online reputation of our hotels is vital for business growth. using cloud-based platforms such as Review pro, the Management team continuously monitors and analyses data, on a daily basis, to immediately respond to guest feedback and enhance the guest experience, to stay ahead of its competitive set. the Review pro platform empowers the team to gain a clear understanding of how the brand is perceived and what informed actions can be taken to enhance its reputation further. the impact and success of these initiatives and immediate action taken, are clearly demonstrated in the improvements in rankings on review sites, which drive direct online bookings on brand.com and otA sites, while continuously strengthening the reputation of each property.

Global Review IndexTM (GRITM)

2017-18 2018-19

84%

83%

85%

86%

87%

88%

89%

90%

82%Avani

BentotaAvani

KalutaraClub Hotel

DolphinHotel

Sigiriya

85.1

%

85.7

%

89.4

% 88.1

%

85.0

%

87.3

%

89 %

89.4

%

Net Promoter Score® - NPS

2017-18 2018-19

40%

60%

80%

20%Avani

BentotaAvani

KalutaraClub Hotel

DolphinHotel

Sigiriya

30.9

39.4

54.3

48.0

35.6

75.7

102.

1

62.4

Competative Quality IndexTM (CQITM)

2017-18 2018-19

96%

94%

98%

100%

102%

104%

106%

92%Avani

BentotaAvani

KalutaraClub Hotel

DolphinHotel

Sigiriya

98.9

%

96.5

%

103.

5%

104.

2 %

99.3

%

99.1

%

102.

1 %

105.

0 %


the Reviewpro indicators are the Global Review Index ™ (GRI), Competitive Quality Index™ (CQI™) and the net promoter Score® (npS) that reflect online customer reviews and competitiveness of our hotel properties. the GRI, CQI and npS rankings for the financial year 2017/18 and 2018/19 are listed in the table above, amply demonstrating the consistent positive reviews of our properties.

GRITM, CQITM and NPS® rankings 2017/18 Vs 2018/19

Avani Bentota

Avani Kalutara

Club Hotel Dolphin

Hotel Sigiriya

2017/18

GRI 85.1% 85.7% 89.4% 88.1%

CQI 98.9% 96.5% 103.5% 104.2%

npS 30.9 39.4 54.3 55.8

2018/19

GRI 85.0% 87.3% 89.0% 89.4%

CQI 99.3% 99.1% 102.1% 105.0%

npS 35.6 75.7 48.0 62.4

Future Outlookthe Serendib Hotels Group closed the financial year 2018-19 with a strong performance having achieved commendable financial and operations results by crossing the Rs. 2 Bn revenue mark for the very first time, leading to a great start to the year 2019-20. However, following the impact of the easter Sunday terrorist attacks in Sri lanka, which have devastated the tourism industry, with several travel advisories issued on Sri lanka from all main source markets, the same trend cannot be expected to continue into 2019-20. Although travel advisories have been relaxed subsequently, it will take a further amount of time for traveller-confidence to be restored, and arrivals into the country to resume at its previous pace, which indicate bleak prospects for this year. therefore, the Serendib leisure Hotels Group remains cautiously discreet about the prospects for tourism earnings in 2019/20. Furthermore, the proposed presidential elections expected to be held at the end of the year, could lead to further uncertainties.

Despite this early setback, given the lonely planet’s selection of Sri lanka as the best place to visit in 2019, the number of nationalities that visit the island’s shores annually, and the one-of-a-kind tourism product that Sri lanka offers, tourism is bound to recover.

Meanwhile, the industry is looking to the travel and tourism authorities to play a critical role in embarking on a global advertising campaign to bring tourists back to Sri lanka, while taking necessary measures to lower barriers to stimulate tourism activity, considering the hundreds of livelihoods that depend both directly and indirectly on the industry. Whilst the potential of the tourism industry to become the highest foreign exchange-earner for Sri lanka has been amply demonstrated, the industry needs support from the authorities by way of better public infrastructure, sustainable tourism policies, and incentives and loans to tide over a challenging 2019 year.

Amidst the economic and political uncertainty that prevails in the country and its effect on livelihoods, the Group remains committed to retaining its valued staff during the tough times. the Serendib leisure Hotels Group will continue to be led by a sustainable outlook for its business while facing emerging challenges head-on.



Sustainability Report

At Serendib leisure Hotels Group, we take pride in stating that sustainability is treated as an essential part of our business and is ingrained into its very essence and soul. this has helped us evolve the way we do business and enabled us to contribute more towards our communities, employees and the environment at large, while yielding incremental returns.

SuSTaINaBILITy FRamEWORK

Sustainable Growth

+++

++our

Suppliersour

Customer

our people

our Community

our environment

the Serendib leisure Hotels Group focuses on five branches of sustainability, comprising of its suppliers, customers, environment, community and people. the goal of this framework is for our businesses to achieve sustainable growth, while positively impacting the people, communities and environment with which they co-exist.

the Serendib leisure Hotels Group’s stance on sustainability ensures that all stakeholders of the group, from its suppliers, guests, people, top management and the communities are involved in and are a part of the process. the sustainability policy is transparent and is built into everyday processes, and influence decisions that are made at each of the properties.

OuR SuPPLIERS

the Serendib leisure Hotels Group maintains long-lasting relationships with its trusted supplier base, to ensure that only the highest quality of products and services are sourced and ultimately served to guests, through a carefully curated supplier policy. each supplier is chosen through a set-out process after appraising several potential suppliers based on the quality of products and service provided, and prices offered.

the Group treats supplier relationships with importance, and therefore it ensures effective communication, favourable contracts, and constant monitoring of the quality of products and services supplied by its numerous suppliers. the supplier policy enables the Group to be in line with global best practices, certification standards and of international service quality.

the Serendib leisure Hotels Group sustainability policy illustrates how suppliers need to be engaged with, and the level of expected quality that needs to be met so that all products, whether sourced locally or internationally, are in sync with the sustainable brand image the Serendib leisure Hotels Group maintains. the Group ensures that all dues to suppliers are settled on time and that all trading takes place at a fair price.

our Hotels firmly believe in supporting and contributing towards the local businesses in the surrounding communities, by purchasing as many goods and services as possible from the local areas. As a result, our Group of Hotels made approximately 25% of purchases from their respective localities during the year 2018/19.

the properties continuously engage with suppliers through regular meetings and holding effective dialogue, while educating the suppliers on the resorts’ sustainability and supplier policies and the expected standards in terms of the quality of the goods and other services being sourced. our properties also maintain meticulous records on supplier practices and supplier credentials to ensure conformity and consistency.


OuR CuSTOmERS

Customer EngagementAs a key player in the competitive leisure industry, maintaining customer engagement at the highest level is imperative. Across the Serendib leisure Hotels Group, several practices are in place to ensure that our customers remain engaged throughout their stay, and subsequently too.

the Serendib leisure Hotels Group identifies engagement with customers at four levels, i.e. pre-arrival, arrival, during the stay and post-stay. prior to and during our guests’ stay, we ensure that all guest inquiries are responded to in a timely manner and that the guests are kept engaged and satisfied, by proactively meeting their requirements and needs. upon departure, all guests are invited to provide feedback in the form of reviews and surveys. Areas for improvement highlighted by guests are noted, and action is taken to implement the suggestions wherever possible.

Apart from these measures, initiatives such as the “Mystery Shopper” are implemented across the Serendib leisure Hotels Group, where the properties engage the services of an external company to conduct unannounced mystery guest audits. Audits are conducted once every quarter. the consolidated report following the visit is sent to the top Management and Hotel Management teams for follow up action.

It is imperative that our service levels continue to be enhanced, to ensure sustainability in the face of competition. All our hotels continuously aim to provide their customers with an unmatched experience through the services they offer, and thereby took various initiatives during the year to maintain and improve the status quo.

Serendib leisure Management limited (SlMl) operating Guidelines and Brand Standards for Hotels were developed and finalised during the year, to be rolled out to the hotels in the first quarter of 2019/20. Similarly, operational processes were established for key functions, streamlining service delivery to achieve consistency, to meet and exceed guest expectations. through the focused initiatives and training conducted, the Serendib leisure Hotels Group’s online reputation has steadily improved, with all hotels achieving the set KpI targets in 2018/19.

Health and Safetythe health and safety of our guests constitute an integral part of our Group’s sustainability model. Health and safety measures are implemented, updated and practiced in line with the latest international standards, and are considered un-compromisable and of utmost importance to the Serendib leisure Hotels Group.

Focus is especially placed on food safety and hygiene standards. the ISo 22000 and HACCp food safety management guidelines are followed and adhered to at all our properties, apart from Hotel Sigiriya which follows the GMp Guidelines.

International best practices on health and safety are followed across the group, while all hotels are subject to periodic internal audits on health and safety policy compliance. Maintenance and upgrades are carried out to the facilities and infrastructure, to ensure that the properties are in peak condition. We have aligned our health and safety systems to the internationally acclaimed travelife Sustainability System. Mystery audits are conducted at all properties quarterly and these reports are disseminated in a transparent manner to the management for relevant action where necessary. In addition, public Health and safety officers from the Government carry out regular audits of all properties to ensure compliance with health and safety measures.

OuR ENvIRONmENT

Managing Environmental ImpactsA key consideration of the Serendib leisure Hotels Group’s sustainability policy is the environment and its conservation, with continuous efforts being made to manage our hotels’ impact on the environment. these cover the areas of energy conservation, water conservation, waste management and overall increased efforts on recycling.


GRI Ref Description 2018/19 2017/18

en1 Direct energy Consumption (kWh) 7,073,920 6,728,137

en2 energy saved due to consumption (kWh) 520,415 420,289

en3 Investment to introduce energy efficient systems (lKR) 10,272,414 1,728,690

en4 Water withdrawal (m3) 188,960 217,463

en5 Water recycled and reused (m3) 170,064 195,717

en6 Waste generated (Mt) 629 526

en7 e-waste (kg) - -

en8 liquid waste (ltr) 2,670 5,400

en9 % of liquid waste treated - -

en10 environmental fines (lKR) no no

Avani Bentota conducted several environmental initiatives during the year. these included monthly beach cleaning programs with the participation of both employees and guests, while coconut trees that were cut down due to old age were replaced with new plants. ‘Shramadana’ campaigns were also carried out monthly to clean the stretch of road in front of the hotel. In terms of waste-disposal, used and burnt oil was collected for recycling to be used for soap manufacturing, food waste was sent to an animal feed instead of a landfill, and discarded plastic, cardboard, glass and tin was segregated and stored separately for recycling.

The coconut tree plantation ceremony at Avani Bentota Resort

Sustainability Report (Contd.)

Club Hotel Dolphin conducted beach cleaning programs every month with the support of the villagers and other hotels in the vicinity. the hotel also initiated a plastic-waste removal program whereby a truck would drive from house-to-house in the Kammala South region on a weekly basis, to collect used pet bottles for recycling, to prevent such items being discarded and polluting the beach or surrounding environment.

Hotel Sigiriya initiated a waste collection program in the area surrounding the Sigiriya rock. A three-kilometer radius was covered, and plastic, paper and non-degradable material was collected and disposed of, in an environmentally friendly manner. A tree planting program was also organised to celebrate World environment Day and tourism Day.

Completion of the waste collection program in Sigiriya


In terms of energy conservation, progress was made in converting CFl lighting to leD lighting at properties across the group. the “Say no to plastic Straws” concept was introduced across all hotels, with biodegradable straws provided to guests only on request. “laundering of linen” conservation programs were also implemented across all hotels.

Program to reduce the usage of plastic straws at the hotels

Club Hotel Dolphin invested Rs.7.8 Mn into the setting up of a bio-gas plant in the hotel, which converts food waste into bio-gas. this environmentally friendly initiative will also benefit the company in the long run through potential cost savings.

OuR COmmuNITy

Corporate Social ResponsibilitySerendib leisure Hotels Group has always been a strong advocate of the practice of corporate social responsibility right from its inception. this has inspired our businesses to be more socially accountable to themselves, their stakeholders, and the public. the main objective of these CSR projects is to make a tangible contribution to the society and to engage with local communities. During the year 2018/19 all hotels in the Serendib leisure Hotels Group conducted CSR projects to make an impactful difference both internally and externally.

Hotel SigiriyaDuring the year 2018/19, Hotel Sigiriya conducted several CSR initiatives, to support the surrounding communities.•Hotel Sigiriya took the initiative to construct a temple in the

Diyakapilla Village, with the support of the local villagers.

the construction of the temple was a long-term solution provided to the villagers, who previously had no other option but to travel long distances to reach the nearest temple, navigating through forest surroundings that were un-safe due to the presence of wild animals.

• the Hotel, with the assistance of in-house guests, conducted a program at the primary School in the Diyakapilla Village, which accommodates thirty students, to upgrade the computer and library facilities used by the students.

• the Hotel conducted several educational and awareness sessions at schools in the vicinity, covering topics such as the hospitality industry and job opportunities. the Hotel also donated books and bags to these schools to promote and facilitate the students’ education. the Hotel conducted Art competitions amongst the schools on World tourism Day.

• the hotel organised a blood donation camp in collaboration with the pidurangala temple, and additionally conducted an Alms Giving on the Wesak Full Moon poya Day at the temple.

•Hotel Sigiriya continued the maintenance and upgrade of a selected ward, throughout the year, at the Kimbissa Hospital which provides medical assistance to over twenty villages in the Sigiriya region.

Blood donation camp conducted in collaboration with the

Pidurangala Temple


Donation of carpets to the Kimbissa Hospital, Sigiriya

Avani Bentota• the Hotel conducted a ‘Wish tree program’ for the fourth

consecutive year at the D. p. Wijesinghe Child Development Centre, for thirty-four children between the ages of three to eighteen years. the hotel organised a Christmas party at the Centre and distributed Christmas gifts to the children, to share the joy and spirit of Christmas with them.

• the Hotel celebrated World Children’s Day for 2018/19 at the Dharmapala Junior School in Bentota, which is attended by students from less-fortunate families. Hotel volunteers spent the day with over one hundred and sixty children, who were presented with gift packs and shown a children’s movie in honour of the day.

•Avani Bentota continued its service to the community by conducting free english Classes i.e “Vishwahara education Centre” for thirty youth in the Bentota area for the eighth consecutive year, with the support of the udakotuwa temple – Bentota.

•Avani Bentota continued the maintenance of the Geoffrey Bawa-designed Bentota railway station, whose facilities are used by over six hundred members of the community.

Children’s Day celebrations at Dharmapala Junior School in Bentota

Club Hotel Dolphin• the hotel organised a free eye-care clinic, in collaboration

with Vision Care in July 2018. this clinic aided over 130 people including the hotel staff along with their families and 55 families from the Kammala South region.

• the Hotel contributed towards the utilities and continuous maintenance of the local Community Centre, to provide the families with proper facilities to carry out their community activities and boost community engagement.

•Club Hotel Dolphin, in collaboration with the ‘Dog Star Foundation’ carried out a campaign during the year, to sterilise all the stray dogs in the villages, beaches and the hotel surroundings.



The annual beach cleanup organised by the hotel staff

Program conducted to sterilise street dogs in the Negambo area

OuR PEOPLE

Human Capital DevelopmentHuman Capital is an invaluable asset to the Serendib leisure Hotels Group, which is why we have curated a set of policies and procedures to ensure the continuous development of our people. Serendib leisure Hotels Group’s key areas of focus relating to human capital development in the year consisted of employee engagement, Rewards and Recognition, training and Development, and Recruitment and Diversity.

Employee EngagementSerendib leisure Hotels Group’s initiatives bore fruitful results in terms of increasing employee engagement across the properties during the year. An independent professional firm

was invited to carry out employee engagement surveys across the Serendib leisure Hotels Group in February 2019. the results indicated that 79% of the Managerial staff and 64% of the operational staff within the Group were positively engaged with their respective companies, demonstrating a significant 16 and 21 percentage-point increase from the previous year’s engagement scores respectively.

2017 2018 2019

Managerial Staff

engagement Score 56% 63% 79%

engagement Ratio 5:01 6:01 20:01

operational Staff

engagement Score 56% 43% 64%

engagement Ratio 5:01 2:01 8:01

the Serendib leisure Hotels Group carried out several initiatives throughout the year centred around enhancing employee engagement.

Launch of Organisational Valuesthe Serendib leisure Hotels Group introduced a set of values to drive a new “exciting and inspiring” culture across the sector. the new journey was based on the theme “epIC” - exciting people and Inspiring Cultures. the ceremony for the launch of values took place in June 2018 with the participation of all executive staff within the Group. Following the grand launch, the new values were thereafter rolled out at the individual hotels with the participation of all executive and non-executive staff members.

Scan the QR Code with your smart device to See more about our values


The launch of the new Group values

Rewards and Recognitionthe Serendib Hotels Awards night 2018 was conducted in october 2018. the event was organised in-house, with selected employees personally taking on compeering and entertainment roles on-stage. Awards were distributed to both individual employees and hotels based on their commendable performances during the year. the Awards night was a success, helping to drive motivation and inspiration amongst all employees, to continue the high quality and standard of their work and performances.

Club Hotel Dolphin awarded the ‘Best Performing Hotel 2018’

Award winners at the Serendib Awards Ceremony

A new concept of ‘employee Appreciation Week’ was introduced across all Serendib leisure hotels in year 2018/19 where the team members were shown appreciation through various means. this included an entire week organised for the team members with several fun events and activities including such as; a wellness day, a sports day, a day where the Senior Managers helped to prepare and served staff meals, selection of best innovative business ideas, etc.

Appreciation week conducted by the Corporate Management Team



Lunch served by Heads of Departments during Appreciation Week

Employee Health and Safetyemployee-related health and safety practices followed at our hotels include internal training for staff to respond to emergencies such as fire or other similar crises.

the Serendib leisure Hotels Group constantly evaluates any potential health and safety risks that may occur and ensures that remedial action is taken. A key aspect of this has been to provide employees with a comprehensive health insurance plan, which also extends to cover guests. All Serendib properties are also instilled with the latest in health and safety systems.

Training and DevelopmentDuring the year 2018/19 multiple initiatives were executed across all properties to improve the skills of its employees and to boost engagement.

Training hours of employees

2018/19 2017/18

Avani Bentota Resort 2,598 287

Avani Kalutara Resort 1,895 946

Club Hotel Dolphin 3,114 2,375

Hotel Sigiriya 516 620

lantern Beach Collection 160 -

Serendib leisure Management ltd 1,275 1,450

9,558 5,678

Training & development cost (Rs.000)

2018/19 2017/18

Avani Bentota 3,416 1,837

Avani Kalutara 2,792 1,414

Club Hotel Dolphin 7,056 2,701

Hotel Sigiriya 2,311 2,762

lantern Beach Collection 47 -

Serendib leisure Management ltd 5,659 4,774

21,281 13,488

A leadership program was initiated for all Heads of Departments at the Hotels with the aim of developing their leadership capabilities. Similarly, a leadership training program titled ‘leAD’ was introduced to executive level employees within the Group. Five employees from the Serendib leisure Hotels Group were selected for the “Future leaders” program organised by Hemas Holdings plC, our parent company, with the objective of identifying, developing and promoting Junior and Middle-level Managers to take on Senior Managerial roles in the future. executive coaching was provided for a few selected Senior Managers, as a tool to unleash their potential. During the year, personal Development plans for all executive level employees were introduced across the Serendib leisure Hotels Group, to drive both career and personal development.

A ‘Shark tank’ program was conducted in the year by the Serendib leisure Hotels Group, where employees were given the opportunity to contribute new ideas related to improving the productivity and efficiency of our businesses, revenue and cost innovation, tapping into new market segments and sustainability. employees deemed to have generated the best ideas were then selected to make an investment pitch to top management. A few ideas contributed by the employees of the Serendib leisure Hotels Group were selected as winning ideas, with financial rewards provided. the purpose of this venture was to tap into employees’ creativity and involve them in driving future business development and growth.

During the year, the Group organised and conducted a two-day food and beverage conference and workshop in Colombo for key Chefs and F&B executives from our hotels.

As a further measure to drive engagement, focus-group discussions were conducted at all the hotels, to address


staff-related concerns and implement solutions. Similarly, the Serendib leisure Hotels Group maintained sound communication with hotel staff, and Welfare and parent unions through quarterly meetings at the hotels to discuss and address any concerns raised.

Staff from the Shark Tank program conducted by 361 Degrees

Enhancing Staff Facilitiesthe Junior staff and Supervisors’ quarters at Hotel Sigiriya were both given an upgrade, including the cafeteria and common recreational areas. Additional facilities such as gyms were also set-up at both Hotel Sigiriya and Club Hotel Dolphin for sole use by the employees. these staff-welfare measures were implemented to boost employee morale and satisfaction.


Workforce Diversitythe Group also continued to place importance on the diversity of its workforce. Female employees comprised 10% of the entire employee headcount, while the number of employees aged over fifty years amounted to 9% of total employees.

Work Force2018/19

Male Female Total

Avani Bentota 157 18 175

Avani Kalutara 135 12 147

Club Hotel Dolphin 265 18 283

Hotel Sigiriya 119 12 131

lantern Beach Collection 52 7 59

Serendib leisure Management ltd 30 19 49

758 86 844

Age Diversity

2018/19

Below 30

years

Between 31 - 50

years

Above 50

years

Avani Bentota 45 107 23

Avani Kalutara 38 94 15

Club Hotel Dolphin 82 175 26

Hotel Sigiriya 61 60 10

lantern Beach Collection 41 16 2

Serendib leisure Management ltd

26 21 2

293 473 78 Recruitment and RetentionRecruiting and retaining the right talent is a vital aspect of the Serendib leisure Hotels Group’s Human Capital Development policy. During the year, the Group recruited 36 executive staff (25 Male recruits and 11 Female recruits) and 179 non-executive staff (145 Male recruits and 34 Female recruits).

the Group aims to retain and develop its staff with the goal of developing 80% of the top management team from within the Group, so that the right talent is presented with the opportunity to grow within the organization. Furthermore, providing adequate and need-identified training is also a part of the retention policy.


Awards and AccoladesIn the backdrop of an increasingly competitive domestic leisure industry, the Management of the Serendib leisure Hotels Group continues to conscientiously supervise and plan operations, while ensuring that the highest standards are maintained in terms of quality, which has been a cornerstone of its success through the years. During the year in review, the Group was able to continue its winning streak, as demonstrated by the achievement of recognised awards and accolades.

Avani Bentota Resort• travellife Gold Certification for sustainability in tourism

2016/18• tripAdvisor Certificate of excellence 2019

Club Hotel Dolphin•HolidayCheck 2019 Award•HolidayCheck 2018 Award• travellife Gold Certification for sustainability in tourism

2016/18• tripAdvisor Certificate of excellence 2019• tuI top Quality 2019• tuI top Quality 2018

Hotel Sigiriya• travellife Gold Certification for sustainability in tourism

2016/18• tripAdvisor Certificate of excellence 2018•Guest review awards 2018 Booking.com 8.6/10• tripAdvisor Certificate of excellence 2019

Lantern Beach Collection•Guest review awards 2019 Booking.com 9/10• tripAdvisor Certificate of excellence 2019

TUI Award 2019 presented to Adrian Jansz - GM Sales & Marketing

A sustainable futureSerendib leisure Hotels Group will continue to invest in its sustainable business model, to drive innovation and growth. We will continue our efforts in building the skills and capabilities within our workforce, required to evolve our businesses to be in line with global sustainability standards, while creating value for all stakeholders.

2015

• 2

016 • HALL of FAME • 2017 • 2018

CERTIFICATE ofEXCELLENCE


#WePersonaliseExperiences#WeEvolveWithOurCustomers

Annual Report 2018 | 2019 GOVERNANCE 57

We explore new horizons while rapidly advancing, providing you distinct, individually–tailored experiences that will remain in your memory forever


Corporate Governance

INTRODuCTION

Corporate Governance involves a set of relationships between a Company’s management, its Board, its shareholders and other stakeholders. Corporate Governance also provides the structure through which the objectives of the Company are set, and the means of attaining those objectives and monitoring performance, are determined.

THE COmPaNy’S PHILOSOPHy ON CORPORaTE GOvERNaNCE

Serendib Hotels plC is fully aware and committed to implementing governance standards that conform to best practices. As part of the corporate culture, it engages and interacts with all the stakeholders in a way that promotes mutual trust, better understanding and good faith.

the main scope of the Company’s Corporate Governance policies encompass; clear description of duties and responsibilities among the Board of Directors, checks and balances, clear business roles and strategies within the Company, ethical business conduct, engagement with stakeholders through risk mitigation, upholding corporate social responsibility in sustaining good corporate citizenship as well as disclosure of material information in a timely and accurate manner.

Set out below is the extent to which the Company complies with the Code of Best practice on Corporate Governance issued jointly by the Securities & exchange Commission of Sri lanka and the Institute of Chartered Accountants of Sri lanka:-

SECTION 1: THE COmPaNy

A. DIRECTORSThe Board

Corporate Governance Principle

SEC & ICASL Code Reference

Level of Compliance

Board Meetings A1.1 Six Board Meetings were held during the year to review the strategic direction of the operational units, annual budgets and progress towards achieving those budgets, key business risks and other matters. Ad hoc meetings are also held when necessary.

Apart from taking decisions at meetings, the Board also takes decisions via Circular Resolutions. these resolutions are required to be signed by all the Directors.

Responsibilities of the Board

A1.2 the Directors are responsible for;

• Formulating, implementing and monitoring overall business policy and strategy.

•ensuring effective systems are in place to secure integrity of information, internal controls and risk management.

•ensuring compliance with relevant laws, statutes and regulations.

•ensuring all stakeholder-interests are considered in corporate decisions.

•promotion of open and proper communication between the Company and its stakeholders.

Compliance with the law and independent professional advice

A1.3 the Board collectively and the Directors individually, act in accordance with the laws and regulations applicable to the business enterprise.

In discharging their duties, Directors may seek independent professional advice from external parties when necessary, at the expense of the Company.




Level of Compliance

Company Secretary A1.4 All Directors have access to the advice and services of the Company Secretary who is responsible to the Board for ensuring that proper Board procedures are followed and applicable rules and regulations are complied with.

the appointment and removal of the Company Secretary is a decision taken by the Board as a whole.

Independent judgment A1.5 the Directors exercise independent judgment on matters pertaining to strategy, performance, resource allocation and standards of business conduct, and act free from any undue influence and bias from other parties.

Dedication of adequate time and effort by the Directors

A1.6 the Members of the Board dedicate adequate time and effort in discharging their duties and responsibilities towards the Company.

the Directors who are unable to attend Board Meetings review Board papers and submit their observations on the discussion papers to the Chairman prior to the Board Meetings in order that their views may be discussed and recorded.

the Board has delegated some of its functions to its Sub-Committees. However the Board retains the right to make a final decision in respect of some of the selected matters coming under the purview of the Committees. the composition and the functions of these sub-committees are discussed in detail under the relevant sections of this Report.

the management of the hotel owned by the Company has been delegated to Serendib leisure Management limited, (Managing Agent) through a formal Hotel Management Agreement. the Managing Agent operates the hotel within the policy framework outlined by the Board and is assessed periodically by way of Management Reports and presentations.

Induction and training for Directors

A1.7 An Induction programme for new Directors is in place and includes the provision of key corporate documents, facilitation of visits to hotels, and meetings with the executive Director and the Senior Management team of the Company.

In addition, the Directors are also encouraged to participate in continuous professional and self-development activities.


Chairman and Managing Director



Level of Compliance

Separation of the role of Chairman & MD

A2 the role of the Chairman and executive Director is distinct, ensuring the balance of power and authority within the organisation.

Chairman’s Role



Level of Compliance

Role of Chairman in conducting meetings

A3 the Chairman encourages the participation of all the Directors in decision making, seeks and ascertains the views of the Directors, and thereby ensures that the Board functions in an efficient manner which is beneficial to the stakeholders and the Company.

Financial Acumen



Level of Compliance

Availability of those with sufficient financial knowledge

A4 the Board comprises several professional accountants who possess the necessary knowledge and competence to guide the Board on matters pertaining to finance.

Board Balance



Level of Compliance

non-executive Directors A5.1 the Board comprises ten Directors of whom nine Directors are non-executive Directors.

Independent Directors A5.2

A5.3

Four out of the nine non-executive Directors are considered Independent.

these Directors are independent of management and free of any business or other relationship that could materially interfere with or, could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement.

Annual Declaration A5.4 the Independent Directors have submitted written declarations of their independence as required by Section 7.10.2(b) of the listing Rules.

Corporate Governance (Contd.)




Level of Compliance

Determination of independence

A5.5 the Board annually determines the independence of each non- executive Director based on the declarations submitted by them.

therefore, the following Directors are considered Independent in terms of the listing Rules:

•Mr. M A Jafferjee

•Deshamanya Dr. R n A Athukorala

•Mr. W A t M Wijesinghe

•Ms. S l Speldewinde

Mr. M A Jafferjee meets the criteria of Independence specified in Rule 7.10.4 of the listing Rules except that he has served on the Board for more than nine years. However, the Board having evaluated all the factors concluded that his independence has not been impaired due to him serving on the Board for continually for a period exceeding nine years from the date of his first appointment.

Alternate Directors A5.6 the Alternate Director appointed by a non-executive Director is not an executive of the Company.

the Independent Directors have not appointed Alternate Directors.

Senior Independent Director

A5.7 & A5.8 Mr. M A Jafferjee is the Senior Independent Director of the Company.

Chairman’s meetings with neDs

A5.9 Chairman holds meetings with the non-executive Directors only, without the executive Director being present, whenever necessary.

Recording of concerns in Board Minutes

A5.10 Concerns raised by the Directors on matters of the Company which cannot be unanimously resolved are recorded in the Board Minutes.

Supply of Information



Level of Compliance

Management’s obligation to provide appropriate and timely information

A6.1

A6.2

the Board is provided with appropriate and timely information to discharge its duties. the Directors are also entitled to request for additional information where they consider such information necessary to make informed decisions.

the Agenda for the Board Meetings and connected discussion papers are circulated to the Directors at least seven days in advance to facilitate the effective conduct of the meeting.


Appointments to the Board



Level of Compliance

nominations Committee A7.1 the Board has not established a nominations Committee to make recommendations on Board appointments; instead appointments to the Board are made collectively and with the consent of all the Directors.

Assessment of Board composition

A7.2 the Board assesses its composition to ascertain whether the combined knowledge and experience of the Board matches the strategic demands faced by the Company and takes this into account when new Board appointments are considered.

Disclosure of required details of new Directors

A7.3 on appointment of a new Director, the Company communicates to the Colombo Stock exchange a brief resume of the Director which includes the nature of his experience in relevant functional areas, other Directorships, or Memberships in Board Sub-Committees and whether the Director is considered “Independent”.

Re - election



Level of Compliance

Re-election of Directors A8.1

A8.2

the Company’s Articles require a Director appointed by the Board to hold office until the next Annual General Meeting and seek re- appointment by the shareholders at that meeting.

one third of the Directors including the Chairman retire by rotation at each Annual General Meeting in conformity with the Articles of the Company. Directors who retire are those who have served for the longest period after their re-appointment/re-election.

In addition, a Director who has reached 70 years of age before the Annual General Meeting vacates office at the Annual General Meeting held after he attains the age of 70 years. A Director so re-appointed will hold office until the next Annual General Meeting at which he will be re-appointed.

Appraisal of Board Performance



Level of Compliance

Appraisal of the Board and Sub-committees

A9 the Board undertakes an annual evaluation of its own performance and the performance of its committees in discharging their key responsibilities.



Disclosure of Information in Respect of Directors



Level of Compliance

Information in respect of Directors

A10.1 the Biographical details of the Directors, nature of his expertise in relevant functional areas, membership in Board Sub-Committees, attendance at Board and Sub-Committee Meetings, other directorships and Director’s Interest in Contracts are disclosed under the relevant sections in the Annual Report.

the table below provides a record of the Directors’ individual attendance at Board and Sub-Committee Meetings:

Name of Director Capacity

No. of Board

Meetings Attended

No of Audit Committee Meetings Attended

No. of RPTRC

Meetings Attended

Mr. A n esufally Chairman/ non- executive Director

6/6 3/4 3/4

Mr. W M De F Arsakularatne

executive Director 6/6 - -

Mr. e J D Rajakarier non-executive Director

5/6 - -

Deshamanya Dr. R n A Athukorala

Independent Director 6/6 4/4 4/4

Mr. M A Jafferjee Senior Independent Director

6/6 4/4 4/4

Mr. S M enderby non-executive Director

6/6 - -

Mr. W A t M Wijesinghe

Independent Director 6/6 - -

Ms. S l Speldewinde

Independent Director 4/6 - -

Mr. S A Chojnacki non-executive Director

6/6 - -

Mr. I A H esufally non-executive Director

5/6 - -


Appraisal of the Managing Director



Level of Compliance

Setting of annual targets & appraisal of performance

A11.1

A11.2

At the commencement of each financial year, the Board in consultation with the executive Director, sets reasonable financial and non-financial targets to be met by the executive Director, based on the short, medium and long term objectives of the Company.

the performance of the executive Director is evaluated by the Board against pre-agreed performance targets.

B. DIRECTORS REMUNERATIONRemuneration Procedure



Level of Compliance

establishment of a Remuneration Committee

B1.1 the Board has delegated its powers to the Remuneration Committee of its parent Company, Hemas Holdings plC, to make recommendations to the Board on remuneration policy and practice, which is consistent with the objectives of the Company.

Composition B1.2

B1.3

the Remuneration Committee of the parent Company consists three non-executive Directors majority of who are independent.

the Chairman of the Committee is an Independent Director appointed by the Board of the parent Company.

the names of the Chairman and Members of the Committee are indicated in the Annual Report of the Board of Directors.

Determination of remuneration

B1.4 In terms of the Articles of the Company, the Board determines the fees payable to the Independent Directors.

Consultation of the Chairman and access to professional advice

B1.5 the Committee consults the Chairman on proposals relating to the remuneration of the executive Director and has access to professional advice in discharging their duties.

The Level and make up of Remuneration



Level of Compliance

executive Directors’ Remuneration package

B2.1 the Committee structures remuneration packages to attract, retain and motivate the executive Director.

Comparison of remuneration with other companies and group

B2.2 the Committee ensures that the remuneration of executives at each level of management is competitive and in line with their performance. Surveys are conducted as and when necessary to ensure that the remuneration is competitive with those of comparative companies.





Level of Compliance

B2.3 It also takes into consideration data concerning executive pay among the Group Companies.

performance related element of remuneration

B2.4 performance based incentives have been determined by the Remuneration Committee to ensure that the total earnings of the executive Director is aligned with the achievement of objectives and budgets of the Group Companies.

Disclosure of Remuneration



Level of Compliance

Disclosures B3.1 the Remuneration policy supports a strong performance-oriented culture and ensures that individual rewards and incentives relate directly to the performance of the individual, the operations and functions for which they are responsible for, and the Group as a whole.

the aggregate remuneration paid to the executive and Independent Directors are disclosed in note 33 of the Financial Statements.

C. RELATIONS WITH SHAREHOLDERSConstructive use of the Annual General Meeting and conduct of General Meetings



Level of Compliance

proxy votes C1.1 the Company counts all proxies lodged on each Resolution.

Separate resolutions C1.2 Separate Resolutions are proposed for each agenda item at the Annual General Meeting and in particular, for the adoption of the reports and accounts.

Availability of Board sub-committee Chairpersons

C1.3 the Chairpersons of the Board Sub-Committees are present at the Annual General Meeting to answer any questions raised by the Shareholders if so requested by the Chairman.

Adequate notice of AGM

C1.4 the notice of Meeting of the Annual General Meeting and the relevant documents are published and dispatched to the Shareholders 15 working days prior to the Meeting as required by the Companies Act, no. 7 of 2007.

procedure of voting at General Meetings

C1.5 the procedure for voting at the General Meeting is circulated along with the notice of Meeting.


Communication with Shareholders



Level of Compliance

policy and methodology for communication with Shareholders

C2 the Company disseminates information pertaining to the performance of the Company through the publication of the Interim Financial Statements and the Annual Report in a timely manner. Announcements are also made to the Colombo Stock exchange on any information which may materially affect the share performance.

the Company Secretary could be contacted in relation to Shareholder matters. the contact details are indicated in the Corporate Information section of the Annual Report.

Major Transactions



Level of Compliance

Disclosure on major transactions

C3 the Directors ensure that any corporate transaction that would materially affect the net asset base of the Company or the Group is communicated to the Shareholders.

there were no major transactions as defined under Section 185 of the Companies Act during the year under review.

D. aCCOuNTaBILITy aND auDIT

Financial Reporting



Level of Compliance

Board’s responsibility for statutory and regulatory reporting

D1.1 the Board is accountable for presenting the Consolidated Financial Statements of the Company and its subsidiaries, reports to regulators as well as information required to be presented by statute.

Declarations by Directors.

D1.2 the Declarations to be made by the Directors are included in the Annual Report of the Board of Directors on pages 75 to 80 of the Annual Report.

Statement of Directors and Auditors responsibility for the Financial Statements

D1.3 the Statement of Directors Responsibilities in the preparation of the Financial Statements is given on page 88 while the Independent Auditor’s Statement on pages 89 to 92 sets out the Auditors’ responsibilities.

Management Discussion Analysis

D1.4 Management Discussion and Analysis is given on pages 36 to 44 of this Report.

Declaration on Going Concern of business

D1.5 the Declaration by the Board that the Company is a going concern is given in the Annual Report of the Board of Directors.





Level of Compliance

Serious loss of Capital D1.6 the Directors ensure that in the event the net assets of the Company fall below 50% of the value of the Company’s Shareholder funds, an extraordinary General Meeting will be called to notify the Shareholders of the position and the remedial action being taken.

Related party transactions

D1.7 the transactions entered into by the Company with related parties are disclosed in note 32 to the Financial Statements.

Internal Control



Level of Compliance

Annual review of the system of internal controls

D2 the Board maintains a sound system of internal control to safeguard shareholder-investments and the Company’s assets. the adequacy and the effectiveness of the Internal controls are reviewed by the Internal Auditors under the direction of the Audit Committee.

Strategies adopted by the Company to manage its risks are set out in its report on Risk Management on pages 71 to 74.

Audit Committee



Level of Compliance

Composition D3.1 In terms of the listing Rules, the Audit Committee comprises two Independent Directors and a non-executive Director. the Chairman of the Committee is an independent Director.

Duties D3.2 the main purpose of the Committee is to assist the Board in the effective discharge of its responsibilities on financial reporting, risk management and internal control. It also reviews the nature and extent of non-audit services provided by the Auditors, seeking to balance objectivity and independence.

terms of Reference D3.3 the Committee has written terms of Reference dealing clearly with its authorities and duties.

Disclosures D3.4 the Members of the Committee are indicated in the Annual Report of the Board of Directors. the executive Director of the Company attends the Meetings by invitation.

A report of the Audit Committee setting out the manner of compliance by the Company during the period under review is set out on pages 83 to 84 of the Annual Report.


Code of Business conduct and ethics



Level of Compliance

Disclosure of Code of Business Conduct and ethics

D4.1 the Company has adopted a Code of Business Conduct and ethics and the Directors and Members of the Senior Management are committed to the code and the principles contained therein.

D4.2 the Chairman in his review on pages 20 to 23 of the Annual Report has affirmed that he is not aware of any violation of any of the provisions of the Code.

SECTION 2: SHaREHOLDERS

E: INSTITUTIONAL INVESTORSShareholder voting



Level of Compliance

Communication with shareholders

e1.1 the Company conducts a structured dialogue with the Institutional Shareholders based on the mutual understanding of objectives and the Chairman ensures that the views of the Shareholders are communicated to the Board as a whole.

evaluation of Governance disclosures

e2 When evaluating the governance arrangements, particularly in relation to Board structure and composition, institutional investors are encouraged to give due weight to all relevant factors drawn to their attention.

F: OTHER INVESTORSInvesting /Divesting decision



Level of Compliance

Individual shareholders F1 Individual investors are encouraged to carry out adequate analysis or seek independent advice when making investing and divesting decisions.

the Company places great emphasis on releasing its financial statements in a timely manner as to ensure that Shareholders have access to information on which they could make informed decisions.

Shareholder Voting



Level of Compliance

Individual shareholder voting

F2 All shareholders are encouraged to participate at General Meetings of the Company and a Form of proxy accompanies each notice, providing Shareholders who are unable to attend such Meeting, the opportunity to cast their vote.



G: SUSTAINABILITY REPORTING



Level of Compliance

principles of Sustainability Reporting

G1 the Sustainability Report on pages 46 to 55 details the sustainability practices of the Company.

the following table presents the Company’s compliance with Section 7.10 of listing Rules on Corporate Governance issued by the Colombo Stock exchange:

CSE Rule No. Applicable Rule RequirementStatus of compliance

Board of Directors

7.10.1 non-executive Directors one-third of the total number of Directors to be non-executive Directors.

Complied

7.10.2(a) Independent Directors one-third of the non-executive Directors to be Independent. Complied

7.10.2(b) Declaration of Independence

each non-executive Director should submit a declaration of Independence/ non-Independence.

Complied

7.10.3(a) and (b)

Disclosure relating to Directors Independence

names of Independent Directors and the basis for determination of independence of Directors if criteria for independence is not met, should be disclosed in the Annual Report.

Complied

7.10.3(c) A brief resume of each Director including his area of expertise should be included in the Annual Report.

Complied

7.10.3(d) upon appointment of a new Director, a brief resume of the Director to be submitted to the Stock exchange.

Complied

Remuneration Committee

7.10.5(a) Composition the Committee shall comprise of non-executive Directors, a majority of whom shall be independent.

the Chairman of the Committee shall be a non-executive Director.

Complied

7.10.5(b) Functions of the Remuneration Committee

the Committee shall recommend the remuneration payable to the executive Directors and Chief executive officer or equivalent role.

Complied

7.10.5(c) Disclosure in the Annual Report

the Annual Report should set out the names of the Members of the Remuneration Committee, a statement of Remuneration policy and the aggregate remuneration paid to executive and non-executive Directors.

Complied


CSE Rule No. Applicable Rule RequirementStatus of compliance

Audit Committee

7.10.6(a) Composition the Committee shall comprise of non-executive Directors, a majority of whom shall be independent.

the Chairman shall be a non-executive Director.

the Chairman or a Member should be a member of a recognised professional accounting body.

Complied

7.10.6(b) Functions • overseeing the preparation, presentation and adequacy of the disclosures in the financial statements in accordance with the SlAS.

• overseeing compliance with financial reporting related regulations and requirements.

• overseeing the processes to ensure that internal controls and risk management are adequate.

• Assessing the independence and performance of the external Auditors.

• Recommending to the Board the appointment, re-appointment and removal of the external Auditors and approving their remuneration and terms of engagement.

Complied

7.10.6(c) Disclosure in the Annual Report

the names of the Members of the Audit Committee should be disclosed in the Annual Report.

the Audit Committee to determine the independence of Auditors and disclose the basis of such determination in the Annual Report.

Annual Report to contain a report by the Audit Committee setting out the manner of compliance in relation with their functions.

Complied



Risk Management

Serendib Hotels plC takes a dynamic approach in risk management which ensures proactive identification, assessment and response of Key business risks. our risk assessment process takes the likelihood and the potential impact of an event in to account and lists out the action plans taken to mitigate the risk of such event.

We have adopted the ISo 31000 standard of risk management which provides a platform that ensures the quality of managing risk within the guidelines and principles of the framework. the framework elaborates on establishing the context, risk identification, risk assessment, risk response, treatment for the risk, risk reporting and monitoring.

THE GROuP RISK POLICy

our policy for risk management is to proactively manage risk to ensure continued growth of our business and to protect our people, assets and reputation.

this implies that we will:• Implement an effective and integrated

risk management system while maintaining business flexibility.

• Identify and assess material risks associated with our business, monitor, manage and mitigate risks.

Internal Control and Risk Managementthe group reviews and assesses significant risks on a regular basis and has implemented an oversight programme to ensure that there is a system of information gathering, awareness and action to mitigate exposure to identified risks.

the management team of Serendib leisure Management ltd, managing agent of Serendib Hotels plC, overlooks the risk management process of the Serendib leisure Hotels Group. the Group Risk Management Committee (GRMC) of Hemas Holdings plC (parent company of Serendib Hotels plC) reviews the company’s risk profile and provides guidance on required risk responses on a quarterly basis.

the Audit Committee of the Serendib Hotels plC reviews and monitors internal controls. the internal audit scope is approved by the Audit Committee at the start of the financial year and an internal audit per hotel is done by an external party on financial and internal control systems. the internal audit team of Hemas Group also performs a follow-up audit on the internal audit recommendations once a year, as well as an operational review in order to identify any operational risks.

Risk Management ProcessISo 31000:2009

Establishing the Context

Risk Identification

Risk Analysis

Mon

itorin

g an

d R

evie

w

Com

mun

icat

ion

and

Con

sulta

tion

Risk Evaluation

Risk Treatment

Risk assessment

Risk Management FrameworkISo 31000:2009

Mandate and Commitment

Design the Framework for Managing Risk

Continuous Improvement of the Framework

Monitoring and Review of the Framework

Implement Risk Management

PLAN

DOACT

CHECK


the management reports on compliance to financial and operational controls based on a check list drafted by GRMC on a quarterly basis. these audit reports, risk reports and compliance reports are reviewed quarterly by the Audit Committee and necessary recommendations are made on risk responses.

As a part of the Risk Management process, the Board reviews its strategies, processes, procedures and guidelines on a continuous basis to effectively identify, assess and respond to risks.

the group wide Risk Management programme is facilitated by the Group Risk and Control division with the inputs from Business Strategy, Corporate Finance, Group treasury and Group Human Resource divisions. Risk facilitation is exercised through risk workshops, risk reviews, essential control check lists and risk reporting.

RISK EvaLuaTION aND maPPING

the risk heat map is developed based on the assessment of the likelihood of occurrence and the potential impact of risks. likelihood of occurrence is assessed on the basis of past experience and preventive actions in place. A ranking of Rare, unlikely, Moderate, likely and Almost Certain is assigned to all risks based on the likelihood of occurrence. the impact of the event is evaluated by determining the loss it would cause and the extent of the impact. After considering the above two factors, the impact is categorised as Insignificant, Minor, Moderate, Major and extraordinary. the position of a risk in the risk heat map indicates whether it falls below or above the risk appetite level of Serendib leisure Hotels Group.

Risk Management (Contd.)

Risk and their corresponding mitigating action plans are then reviewed by the GRMC. the identified risk is then mapped on the below risk matrix and relevant action is taken as per the risk rating.

RISK maTRIx

Extraordinary S H H H E

Major S S H H H

Moderate M M S S H

Minor L L M S S

Insignificant L L L M S

Rare Unlikely Moderate Likely Almost Certain

Likelihood

Imp

act

Risk Rating Required Action

Extreme

•Board attention is required

• Immediate action by senior management with a detailed research and management of risk through appropriate responses

High

•Board attention is required

•Senior management responsibility specified

•Risk must be managed by senior management with a detailed risk treatment plan

Significant

•Senior management attention required

•Management responsibility specified

•Risks should be treated using one or more of the risk treatment options

Moderate

•Risks should be treated using one or more of the risk treatment options

•Risks should be managed using specific monitoring or treatment procedures

Low

•Risk is accepted with minimal treatment and can normally be managed using existing routine procedures

• low risks need to be monitored and periodically reviewed to ensure they remain acceptable


maNaGING RISK

the following framework depicts the specific and most relevant risks faced by the company and management actions to mitigate them

Risk category Risk Exposure Risk Mitigating Actions

1 Country Risk Slow down of tourist arrivals due to negative travel advisories.

•Actively participate in industry associations to lobby for releasing negative travel advisories.

• Join in destination marketing campaigns on social media and other digital media platforms.

2 Market Risk Adverse impact on yields and occupancies due to fluctuation in demand.

•Diversification of Group’s business risk by entering into boutique hotels and villa operations.

•Closely monitor the socio-economic environment of the traditional markets and target new emerging markets.

•Analyse resources and capabilities to identify core competencies and differentiate through brand and service excellence.

• Identifying new markets and developing new channels.

•participate in trade fairs both locally and internationally in order to promote the properties as well as attract new tour operators.

•using the corporate website to improve revenue through direct bookings and by partnering with popular online travel agents to push web based sales.

3 Human Resource Risk Risk of losing skilled/trained human capital and recruitment of staff for new hotel developments. trade union activities resulting in work disruptions.

•establish career development programs and succession plans in order to retain and motivate the talent pool of the company.

•provide focused and structured training for staff at all levels to aid personal and professional development.

• Develop a strong employer brand to attract staff of the right quality.

• Increasing employee engagement through designing recognition programmes.

4 Foreign exchange Rate Risk

Depreciation of the Rupee and loss on exchange in conversion of loans denominated in foreign currency.

•exchange rate movements taken into consideration when entering into contracts with travel agents.

•Structure Forex borrowings in proportion to the revenue currency mix.

•Hedge in Forward Rate Agreements (FRAs).

5 Interest Rate Risk Rising interest rates will increase borrowing cost.

•Borrowings in foreign currency to enjoy lower rates compared to locally sourced borrowings.

6 Credit Risk Risk arising due to default by customers. Impact on liquidity and profitability.

•Credit is allowed only for approved customers which is reviewed bi-annually.

•Monitor and review the overdue debtor balances monthly.

•obtain payments for advance bookings.

•Compliance to laid down credit Sop’s on credit control.

7 Regulatory Risk Changes to government regulations could adversely impact the operating environment.

•Compliance with existing regulations and statutes.

•Maintain good relationships with State agencies and ministries.


Risk category Risk Exposure Risk Mitigating Actions

8 environmental Risk Fire or natural disaster can halt or cease operations.

• Insurance is taken to cover all aspects of fire and natural disaster.

• Fire safety drills and training are provided to the staff at the Hotel.

9 Health and Safety Risk Risk of litigation due to non-adherence to laid down health and safety regulations. this could be due to, but not restricted to food poisoning, personal or accidental harm to guests or employees.

• Insurance taken to cover both employee and guest injuries. Further, regular maintenance of the property and equipments to be done to ensure all operating equipment are of good operating condition.

•Group has defined its food safety standards in its procedure Manual and all food handlers are taken through comprehensive trainings on the same.

• the hotel takes all precautionary measures, from sourcing the supplier to storage, and preparation of food to ensure contamination is avoided.

• tour operators safety standards are complied with and necessary action taken immediately on any concerns area related to health and safety based on audit inspections done by them.

• the company sources its products and services from approved suppliers.

•performing quarterly health and Safety audit reviews.

10 Reputation Risk Adverse impact on the corporate image and brand equity which is likely to diminish shareholder value.

•proper adherence to the statutory, Health & Safety concerns by obtaining appropriate quality certifications standards including HACCAp and environmental regulations.

•Continuous review of guest comments in order to exceed customer expectations and ensure quality standards are adhered and improved upon.

•Reputation management software (Reviewpro) is used to monitor, report and respond to the online reviews in the public domain/ review sites.

(eg. tripAdvisor, HolidayCheck, etc)•Maintenance of the highest ethical standards at all times in all

business activities.

•Conducting quarterly independent mystery audits monitored directly by group operational excellence division.

•Conducting meaningful CSR initiatives in the locale of the hotel.

Serendib Hotel plC’s risk management system engages risks posed to the group on a broad front. the risk management process is entrenched in the core values of the company and the senior management demonstrates leadership in championing the company’s risk management initiatives, thereby ensuring the company’s competitiveness and sustainability in the long term.

Risk Management (Contd.)


Annual Report of the Board of Directors

the Board of Directors of Serendib Hotels plC takes pleasure in presenting their Report together with the Audited Financial Statements of the Company and Consolidated Financial Statements of the Group for the year ended 31 March 2019.

PRINCIPaL aCTIvITy OF THE COmPaNy & GROuP

the principal activity of the Company and its subsidiaries which is operating a hotel remained unchanged during the year under review.

the Company owns and operates Avani Bentota Resort & Spa at Bentota. (Formerly known as “Serendib Hotel”)

SuBSIDIaRIES & aSSOCIaTES

Serendib Hotels plC is the major shareholder of Hotel Sigiriya plC, which owns Hotel Sigiriya in Sigiriya and of Dolphin Hotels plC, which owns Club Hotel Dolphin in Waikkal. the Company fully owns and operates Frontier Capital lanka (pvt) ltd. and its subsidiaries which owns the lantern Beach Collection in Mirissa. Serendib leisure Management limited a fully owned subsidiary of the Company manages all the above properties.

It also has a 5.9% stake in Jada Resort & Spa (pvt) ltd, which owns Avani and Anantara Kalutara Resorts in Kalutara.

the Directors to the best of their knowledge and belief confirm that neither the Company nor its subsidiaries have been engaged in any activity that contravenes laws and regulations.

REvIEW OF OPERaTIONS & FuTuRE DEvELOPmENTS

the financial and operational performance of the Company during the year under review and future developments are discussed in the Management Discussion & Analysis. these Reports together with the Audited Financial Statements reflect the state of affairs of the Company and the Group.

CORPORaTE GOvERNaNCE

the Directors confirm that the Company complies with the Rules on Corporate Governance laid down by the Colombo Stock exchange and has adopted the relevant rules on Corporate Governance issued by the Securities & exchange Commission of Sri lanka and the Institute of Chartered Accountants of Sri lanka. the Corporate Governance practices of the Company are given from pages 58 to 70 of the Annual Report.

RISK maNaGEmENT

the Company has put in place a process to identify, evaluate and manage any significant risks faced by the entity, where annual risk reviews are carried out by the Group Risk & Control Dept. the principal risks and mitigating actions are reviewed by the Audit Committee on a quarterly basis. A detailed overview of the Risk Management process is outlined in the Risk Management Report on pages 71 to 74

GOING CONCERN

the Board having considered 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 possesses adequate resources to continue its operations for the foreseeable future. For this reason, the Company continues to adopt the ‘Going Concern basis’ in preparing the Financial Statements.

FINaNCIaL STaTEmENTS & auDITORS REPORT

the Financial Statements of the Company and Group as at 31 March 2019 duly signed by the Directors are given from pages 93 to 98, while the Auditor’s Report on the Financial Statements is provided on pages 89 to 92.

aCCOuNTING POLICIES

the Financial Statements for the period ended 31 March 2019 have been prepared in accordance with the Sri lanka Accounting Standards which were in effect upto that date. the Accounting policies adopted in the preparation of these Financial Statements are given from pages 99 to 118.


Annual Report of the Board of Directors (Contd.)

RESuLTS

the Financial Results of the Group and Company for the year ended 31 March 2019 are tabulated below:-

Rs. Group Company

2019 2018 2019 2018

Revenue 2,038,942,903 1,842,060,617 515,839,774 522,941,630

Gross profit 1,522,484,528 1,367,774,437 395,043,359 397,666,566

profit Before tax 129,304,459 270,048,968 (92,648,880) 82,792,190

Income tax expenses (26,953,284) (77,596,872) 11,409,124 (7,562,066)

profit/(loss) After tax 102,351,175 192,452,096 (81,239,756) 75,230,124

Attributable to :-

equity holders of the parent 38,734,578 118,944,225 - -

non-Controlling Interest 63,616,597 73,507,871 - -

DIvIDENDS

the Directors have not recommended a payment of a dividend for the year under review.

PROPERTy PLaNT & EquIPmENT

the capital expenditure incurred by the Group and Company during the year amounted to Rs. 218,254,233/- (2018 - Rs. 54,658,687/-) and Rs. 59,305,480/- (2018 - Rs. 6,536,965/-) respectively.

Details of property, plant & equipment and their movement during the financial year are disclosed under note 13 to the Financial Statements.

STaTED CaPITaL

the stated capital of the Company as at 31 March 2019 amounted to Rs. 913,121,694/- (2018 - Rs. 913,121,694/-) divided into 75,514,738 (2018- 75,514,738) ordinary voting and 36,011,056 (2018- 36,011,056) ordinary non-voting shares.

EvENTS OCCuRRING aFTER THE REPORTING PERIOD

no circumstances have arisen since the Balance Sheet date that would require adjustment to or disclosure in the Accounts other than those disclosed in note 30 to the Financial Statements.

STaTuTORy PaymENTS & COmPLIaNCE WITH LaWS aND REGuLaTIONS

the Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries as at the reporting date have been paid, or where relevant, provided for in the Financial Statements.

the Company has also ensured that it has complied with the applicable laws and regulations including the listing Rules of the Colombo Stock exchange.

DETaILS OF maTERIaL ISSuES PERTaINING TO EmPLOyEES & INDuSTRIaL RELaTIONS OF THE ENTITy

During the year under review there were no material issues pertaining to employees & Industrial Relations other than those disclosed in note 29 to the Financial Statements found on pages 153 to 154.

EmPLOymENT

the number of employees of the Company as at the date of the Statement of Financial position were 175 (2018-179).

the Group adopts a non-discriminatory policy in recruitment and employment which gives full and fair consideration to persons in selection, training, development and promotions, ensuring that all decisions are based on merit.

SuSTaINaBILITy

the Company has taken specific steps, particularly in ensuring the conservation of the natural resources and


environment while addressing material issues highlighted by its stakeholders. every endeavour is made to minimise the adverse effect on the environment to ensure sustainable continuity of our natural resources. the Company’s sustainable practices are detailed on pages 46 to 55.

CORPORaTE DONaTIONS

Donations made by the Group during the year under review amounted to Rs. 935,325/- (2018 - Rs. 1,925,682/-).

DIRECTORS

the Board of Directors of the Company during the financial year under review is given below: -

Mr. A n esufally Non-Executive Chairman

Mr. W M De F Arsakularatne Executive Director

Mr. M A Jafferjee Senior Independent Director

Mr. e J D Rajakarier Non-Executive Director

Deshamanya Dr. R n A Athukorala Independent Director

Mr. S M enderby Non-Executive Director

Mr. W A t M Wijesinghe Independent Director

Ms. S l Speldewinde Independent Director

Mr. S A Chojnacki Non-Executive Director

Mr. I A H esufally Non-Executive Director

Mr. V H A perera (Alternate Director to Mr. A N Esufally)

Messrs W M De F Arsakularatne, W A t M Wijesinghe and S l Speldewinde retire by rotation in terms of Article 85 of the Articles of Association of the Company and being eligible offer themselves for re-election with the unanimous support of the Board.

BOaRD COmmITTEES

the following Members served on the Audit, Remuneration and Related party transaction Review Committees of the Board: -

auDIT COmmITTEE

Mr. M A Jafferjee Chairman/ Senior Independent Director

Mr. A n esufally Non-Executive Director


REmuNERaTION COmmITTEE

the Remuneration Committee of the parent and the ultimate parent Company, Hemas Holdings plC functions as the Remuneration Committee of the Company. the Remuneration Committee comprises two Independent Directors, Dr. Anura ekanayake and Mr. Shaktha Amaratunga and one non-Independent non-executive Director, Mr. Hussein esufally. In addition Mr. Dimuth De Alwis, Director - Group Human Resources Hemas Group and Mr. Kapila Welmillage, Managing Director talent Development and transformation Hemas Group attend meetings by invitation.

RELaTED PaRTy TRaNSaCTIONS REvIEW COmmITTEE

In compliance with the Colombo Stock exchange Rule no. 9 and the Code of Best practices on Related party transactions issued by the Securities & exchange Commission of Sri lanka the Directors have appointed a Related party transactions Review Committee comprising the following Members.

Mr. M A Jafferjee Chairman/ Senior Independent Director

Mr. A n esufally Non-Executive Director


the report of the Committee is given on page 85 of this report. the Committee has reviewed the related party transactions of the Company during the financial year and reported their comments and observations to the Board of Directors. the details of the related party transactions carried out during the year are set out in page 155 of the Annual Report. the Directors declare that the Company is in compliance with the Rules of the Colombo Stock exchange and the Code of Best practices on Related party transactions.

REmuNERaTION & OTHER BENEFITS OF DIRECTORS

Details of Directors emoluments paid during the year are disclosed in note 33 of the Financial Statements.



INTEREST REGISTER

In compliance with the requirements of the Companies Act no. 7 of 2007, an Interest Register was maintained by the Company during the accounting period ended 31 March 2019.

DIRECTORS’ INTEREST IN CONTRaCTS

In terms of Section 192 (2) of the Companies Act, the Directors have declared their interests in contracts in the Company and have refrained from voting on matters in which they were materially interested. Directors’ Interest in contracts with the Company is disclosed on pages 81 to 82 of the Annual Report.

DIRECTORS’ INTEREST IN SHaRES

In compliance with Section 200 of the Companies Act, the Directors have disclosed their relevant interest in shares of the Company.

the shareholdings of the Directors during the financial year were as follows:

31 March 2019 No of Shares

31 March 2018 No of Shares

Voting Non-voting Voting Non-voting

Mr. A n esufally 16,565 nil 16,565 nil

Mr. W M De F Arsakularatne nil nil nil nil

Mr. e J D Rajakarier nil nil nil nil

Deshamanya Dr. R n A Athukorala nil nil nil nil

Mr. M A Jafferjee nil nil nil nil

Mr. S M enderby nil nil nil nil

Mr. W A t M Wijesinghe nil nil nil nil

Ms. S l Speldewinde nil nil nil nil

Mr. S A Chojnacki nil nil nil nil

Mr. I A H esufally nil nil nil nil

Mr. V H A perera (Alternate Director to Mr. A n esufally) nil nil nil nil

PuBLIC HOLDING OF SHaRES

the number of ordinary voting shares held by the public as at 31 March 2019 was 13,626,982 amounting to 18.05% of the issued share capital of the Company and the number of non-voting shares held by the public as at 31 March 2019 was 9,593,819 amounting to 26.64% of the issued share capital of the Company.

the minimum public holding requirement as at 31 March 2019 as per section 7.6 (iv) of the listing Rules is as follows:

CategoryFloat Adjusted Market

Capitalisation (Rs.)Public Holding

PercentageNo. of

ShareholdersOption

ordinary (Voting) Shares 216,669,014 18.05% 1067 2

ordinary (non - Voting) Shares 120,882,119 26.64% 653 2

the Company’s ordinary voting and non-voting shares were transferred from the Main Board to the Diri Savi Board of the Colombo Stock exchange with effect from 29 June 2018.


RELaTED PaRTy TRaNSaCTIONS

Details of transactions carried out by the Company during the year ended 31 March 2019 which require disclosure in the Annual Report as per Colombo Stock exchange listing Rule 9.3.2 and Code of Best practices on Related party transactions published in accordance with the Securities and exchange Commission Directive Issued under Section 13(c) of the Securities and exchange Commission Act are as below.

Non-Recurrent Transactions

Name of the Related Party

Relationship Nature of Transaction

Value of the Related Party transaction

entered into during the financial year (Rs.)

Value of the Related Party transaction as

a % of the Equity and Total assets

Terms and Conditions of the Related Party Transactions

The rationale for entering into the transactions

Dolphin Hotels plC Subsidiary treasury loan - GBp 1.1 Mn

253,660,000 7.05% At a margin over 1 Month GBp lIBoR

to borrow funds at commercially favourable terms

4.92%

treasury loan - euR 0.8 Mn

157,800,000 4.39% At a margin over euRIBoR 3.06%

Aggregate value of non-Recurrent transactions

411,460,000 11.44%

7.98%

Recurrent Transactions

Name of the Related Party

Relationship Nature of Transaction

Value of the Related Party transaction

entered into during the financial year

(Rs.)

Value of the Related Party

transaction as a % of the Revenue

Terms and Conditions of the Related Party Transactions

Dolphin Hotels plC Subsidiary Short term treasury loan

118,000,000 5.79% At a margin over 1 Month AWplR payable on demand

All other related party transactions have been disclosed in note 32 to the Financial Statements. All related party transactions during the year has been on normal commercial terms on arms length basis and is not prejudicial to the interest of the Company and it’s non controlling interest.

COmPaNy SECRETaRIES

Messrs. Hemas Corporate Services (pvt) ltd. of Hemas House, no. 75, Braybrooke place, Colombo 02 functions as the Secretaries to the Company.

REGISTRaRS

Messrs. SSp Corporate Services (pvt) ltd. of no. 101, Inner Flower Road, Colombo 03, functions as the Registrars of the Company.

INTERNaL CONTROL

the Board has reviewed the internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of its effectiveness.


SHaREHOLDERS

the Company has made all endeavours to ensure equitable treatment to all its Shareholders.

auDITORS

During the year under review Messrs. ernst & Young, Chartered Accountants, served as the external Auditors of the Company. the Audit Fees payable and fees paid for other services rendered are as follows;

Audit Fees - Rs. 1,212,660/- (2018- Rs. 904,900/-)Fees for non-audit services - Rs. 516,680/- (2018 - Rs. 313,810/-)

the Directors have confirmed that to the best of their knowledge the Auditors have had no interest in or relationship with the Company or its subsidiaries other than that of external Auditors.

the Auditors have confirmed that they are independent in accordance with the Code of ethics of the Institute of Chartered Accountants of Sri lanka.

Messrs. ernst & Young have expressed their willingness to continue in office. A resolution to re-appoint them and to authorise the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

aNNuaL GENERaL mEETING

the Fifty First (51st) Annual General Meeting of the Company will be held at the Auditorium of the Institute of Chartered Accountants of Sri lanka, no. 30A, Malalasekara Mawatha, Colombo 7 on thursday, 25 July 2019 at 9:00 a.m.


aCKNOWLEDGEmENT OF THE CONTENT OF THE REPORT

As required by Section 168 (1) (K) of the Companies Act no. 7 of 2007, the Board of Directors hereby acknowledge the contents of this Report.

By order of the Board ofSerendib Hotels PLC


W M De F ArsakularatneExecutive Director

Hemas Corporate Services (Pvt) Ltd.Secretaries

22 May 2019


Directors’ Interest in Contracts with the Company

Related party disclosures as required by the Sri lanka Accounting standards no. 24 on Related party Disclosures are detailed in note 32 to the Financial Statements. In addition, the Company carried out transactions in the ordinary course of business with entities where the Directors of the Company are Directors of such entities.

Company Director/s Nature of Transaction Value 2018/19 Value 2017/18

Dolphin Hotels plC Mr. A n esufally


expenses Incurred on Behalf of the Company (1,600,561) (3,093,356)

expenses Incurred on Behalf of the others 2,660,137 4,774,963

Settlement of Dues from Related parties (3,198,031) (4,595,284)

Settlement of Dues to Related parties 1,410,109 7,847,495

treasury loans obtained (529,460,000) (30,000,000)

treasury loans repaid 30,000,000 -

loan Interest Cost (10,942,431) -

loan Interest paid 9,507,541 -

Hotel Sigiriya plC Mr. A n esufally


expenses Incurred on Behalf of the Company (2,210,515) (161,973)




treasury loans obtained (30,000,000) (30,000,000)

treasury loans repaid - 76,000,000

loan Interest Cost (2,875,407) (2,450,467)

loan Interest paid 2,543,919 301,167

Serendib leisure Management ltd

Mr. A n esufally


Mr. e J D Rajakarier





Jada Resort & Spa (pvt) ltd

Mr. A n esufally


Mr. S A Chojnacki

Sale of Goods / Services 2,296,748


expenses Incurred on Behalf of the Company (760,395) -


Income Receivable on Behalf of the Company (242,414) -

Sanctuary Resorts Wilpattu lanka (pvt) ltd

Mr. A n esufally


expenses Incurred on Behalf of the others 925,000 7,000

Settlement of Dues from Related parties (675,000) -

Sanctuary Resorts lanka (pvt) ltd

Mr. A n esufally



Settlement of Dues from Related parties (925,000) -

p H Resorts (pvt) ltd

Mr. A n esufally



Mr. S M enderby

Mr. S A Chojnacki

expenses Incurred on Behalf of the others - 30,480

expenses Incurred on Behalf of the Company (788,572) (987,626)

Settlement of Dues from Related parties (192,976) (30,480)

Settlement of Dues to Related parties 1,114,439 237,925


Company Director/s Nature of Transaction Value 2018/19 Value 2017/18

Kalutara luxury Resort (pvt) ltd

Mr. A n esufally


Mr. S A Chojnacki

Sale of Goods / Services 86,139 -

expenses Incurred on Behalf of the Company (321,293) (586,021)

Settlement of Dues from Related parties - (49,185)

Settlement of Dues to Related parties 241,231 586,020

Income Receivable on Behalf of the Company (24,690) -

Diethelm travel lanka (pvt) ltd

Mr. A n esufally


Sale of Goods / Services 7,228,664 -

expenses Incurred on Behalf of the others -


Settlement of Dues from Related parties - (6,842,348)


Income Receivable on Behalf of the Company (6,451,427) -

Hemas Holdings plC

Mr. A n esufally

Mr. I A H esufally


Mr. S M enderby

expenses Incurred on Behalf of the others 145,895 -




treasury loans obtained - (310,000,000)

treasury loans repaid 310,000,000 20,000,000

loan Interest Cost (35,914,988) (19,745,698)

loan Interest paid 35,914,988 16,760,006

Frontier Capital lanka (pvt) ltd

Mr. A n esufally

Mr. I A H esufally



expenses Incurred on Behalf of the Company (9,503) -

Settlement of Dues from Related parties (190,064) (346,644)

treasury loans granted 5,000,000 10,000,000

Recovery of treasury loans granted (5,000,000) (10,000,000)

loan Interest Income 191,684 -

Hemas Corporate Services (pvt) ltd

Mr. S M enderby expenses Incurred on Behalf of the others - 66,058

expenses Incurred on Behalf of the Company (657,059) (1,309,942)


Settlement of Dues to Related parties 834,083 1,332,744

Hemas travels (pvt) ltd

Mr. I A H esufally


Mr. S M enderby

expenses Incurred on Behalf of the Company - (352,209)

Settlement of Dues to Related parties 85,600 266,609

Vishwa Bpo (pvt) ltd

Mr. S M enderby expenses Incurred on Behalf of the Company (1,902,642) (1,914,625)


Director’s Interest in Contracts with the Company (Contd.)


Report of the Audit Committee

COmPOSITION

the members of the Audit Committee as at 31 March 2019 were as follows:

Mr. M A JafferjeeSenior Independent Non-Executive Director (Committee Chairman)

Mr. A n esufallyNon-Independent Non-Executive Director

Deshamanya Dr. R n A AthukoralaIndependent Non-Executive Director

the Audit Committee (“the Committee”) is formally appointed by the Board of Directors of the Company in conformity with the listing Rules of the Colombo Stock exchange. the Committee comprises two Independent non-executive Directors and one non-Independent non-executive Director who is a Fellow Member of both the Institute of Chartered Accountants of england & Wales and the Institute of Chartered Accountants of Sri lanka, thereby complying with the listing Rules of the Colombo Stock exchange. the Chairman of the Audit Committee is an Independent non-executive Director.

the Audit Committee held 4 meetings during the year under review. the attendance of the members at these meetings is detailed in the Corporate Governance Report found on page 63 of the Annual Report.

Mr. Malinga Arsakularatne, executive Director, Mr. Darshana perera, Director Finance of the Managing Agent, Mr. Shantha Kurumbalapitiya, Managing Director of the Managing Agent and Mr. prasenna Balachandran, Chief Risk & Control officer of the Hemas Group attends these Meetings by invitation. M/s Hemas Corporate Services (private) limited functions as the Secretaries to the Committee.

Mr. Dayan Gunasekera vacated his position as Director Finance - Serendib leisure Management ltd (Managing Agent) on 30 november 2018 and Mr. Darshana perera was appointed as Director Finance - Serendib leisure Management ltd from 01 December 2018.

the activities and views of the Committee have been communicated to the Board through verbal briefings and by tabling the Minutes of the Committee Meetings.

As permitted by the listing Rules of the Colombo Stock exchange, the Committee also functions as the Audit Committee for its quoted subsidiaries Dolphin Hotels plC & Hotel Sigiriya plC.

ROLE OF THE COmmITTEE

the Audit Committee operates within the terms of Reference outlined in its Charter and assists the Board in fulfilling their oversight responsibilities in the following areas;

(i) ensuring the quality and integrity of the Company’s Financial Statements and financial reporting process, including the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with the Sri lanka Accounting Standards.

(ii) Monitoring the system of internal accounting and financial controls of the Company.

(iii) ensuring compliance with legal and statutory requirements including financial reporting requirements, disclosure requirements of the Companies Act and other relevant financial reporting related regulations and requirements.

(iv) overseeing the performance of Internal Audit functions including the process to ensure that the internal controls and risk management of the Company are adequate.

(v) Assessing the independence and performance of the external Auditors of the Company and make recommendations to the Board pertaining to the appointment, re-appointment or removal of external Auditors and their remuneration and approve terms of engagement.

maIN aCTIvITIES CaRRIED OuT DuRING THE yEaR

the Audit Committee carried out the following activities during the year ended 31 March 2019;

•Reviewed and discussed the un-audited Quarterly Financial Statements with the Management prior to publication.

•Reviewed and discussed the Audited Financial Statements with both the Management and external Auditors prior to publication.

•Discussed the Management letter issued by the external Auditors along with the management responses and monitored follow up action.

•Approved the Internal Audit plan and monitored the performance of the Internal Auditors.


•Reviewed and discussed with the Internal Auditors, the Internal Audit reports and monitored follow-up action by the Management.

•Reviewed the Risk profile of the Group together with the remedial measures taken to manage them.

•Reviewed the Reports on statutory and regulatory compliance submitted by the Management.

• the Audit Committee met the external Auditors of the Company with the Management and also held a private discussion without the participation of the Management.

INTERNaL auDIT

the Internal Audit function of the Company is carried out by third party audit professionals, under the overarching control of the Hemas Group Risk & Control Division. Internal audit independently reviews the financial and internal control system of the company. It carries out independent audits in accordance with an Internal Audit plan which is approved by the Audit Committee before the commencement of the financial year.

the Internal Audit Report which includes recommendations to improve internal controls together with agreed management action plans to resolve the issues, is presented to the Audit Committee for review. the Hemas Group Risk & Control Division follows up on the implementation of recommendations and reports progress to the Audit Committee.

ExTERNaL auDIT

the external Audit function of the Company is carried out by Messrs. ernst & Young, Chartered Accountants. the external Auditors letter of engagement including the scope of the Audit is discussed with the external Auditors and the Management prior to commencement of the Audit.

the Committee is satisfied that the independence of the external Auditors has not been impaired by any event or service that gives rise to a conflict of interest. Confirmation has been obtained from the external Auditors of their compliance with the independence guidance given in the Code of ethics of the Institute of Chartered Accountants of Sri lanka.

Having reviewed the effectiveness of the external audit, the Committee recommended to the Board that Messrs. ernst & Young, Chartered Accountants, be re-appointed external Auditors of the Company for the year ending 31 March 2020, subject to approval by the Shareholders at the forthcoming Annual General Meeting.

M A JafferjeeChairman of Audit Committee

22 May 2019

Report of the Audit Committee (Contd.)


Report of the Related Party Transactions Review Committee

the Related party transactions Review Committee of the Company as noted below comprises two Independent non-executive Directors and one non-executive Director;

Mr. M A JafferjeeSenior Independent Non-Executive Director (Committee Chairman)

Deshamanya Dr. R n A AthukoralaIndependent Non-Executive Director

Mr. A n esufallyNon-Executive Director

Mr. Malinga Arsakularatne, executive Director, Mr. Darshana perera, Director Finance of the Managing Agent and Mr. Shantha Kurumbalapitiya, Managing Director of the Managing Agent attends these meetings by invitation and M/s Hemas Corporate Services (private) limited serves as Secretaries to the Committee.

Mr. Dayan Gunasekera vacated his position as Director Finance- Serendib leisure Management ltd (Managing Agent) on 30 november 2018 and Mr. Darshana perera was appointed as Director Finance - Serendib leisure Management ltd from 01 December 2018.

the objective of the Committee is to exercise oversight on behalf of the Board, that all Related party transactions (“Rpts”) of Serendib Hotels plC and its listed subsidiaries, other than those exempted by the Code of Best practices on Related party transactions issued by the Securities & exchange Commission of Sri lanka (“Code”) are consistent with the Code and that the required disclosures are made in a timely manner as required by the Code.

Accordingly, the Committee developed and recommended for adoption by the Board of Directors of Serendib Hotels plC and its listed subsidiaries, a Rpts policy which is consistent with the operating model and the delegated decision rights of Serendib Hotels Group which sets out, amongst others, the following:

•Definition and establishment of threshold values for each of the listed companies as per the Code which requires discussion in detail; Rpts which have to be pre-approved by the Board, those that require immediate market disclosure, those that require Shareholder approval and Rpts which require disclosure in the Annual Report.

• the principles that guide Rpts which require pre-approval of the Board and those transactions that do not require prior Board approval and therefore, can be reviewed retrospectively.

• establishment of a process to identify the recurrent Rpts from the total Rpts.

•Guidelines which Senior Management must follow in dealing with Related parties, including the conformance with the transfer pricing regulations and the Code.

• Identifying instances where an immediate market disclosure of an Rpt is required in line with the definitions of the code.

• Introduction of standardised documentation that should be used by the listed companies in the Group presenting the Rpt information to the Committee.

Further, in accordance with the Rpt policy, the criteria for identifying the Group’s Key Management personnel (KMp) was established and all executive & non-executive Directors of Boards, were identified as the KMps in order to establish greater transparency and governance. Also, declarations were obtained from each Director and KMp of the Company for the purpose of identifying parties related to them and to provide annual disclosure.

the Committee met four times during the year ended 31 March 2019. the attendance of the members at these meetings is detailed in the Corporate Governance Report found on page 63 of the Annual Report.

the RptRC Charter, operational procedures, activities and the observations by the Committee have been communicated to the Board of Directors through verbal briefings and by tabling the minutes of the Committee Meetings at subsequent Board Meetings.

the details of the Related party transactions reviewed and approved by the Committee are disclosed in note 32 of the Financial Statements for the year ended 31 March 2019 found on pages 155 to 156 of the Annual Report.

M A JafferjeeChairman of the Related Party Transactions Review Committee

22 May 2019


Group Financial Highlights

Revenue (Rs. Mn)2,500

0

500

1,000

1,500

2,000

2018 2019

1,84

2 2,03

9

10.7%

Current Ratio (Times)1.2

0

0.4

0.6

0.2

0.8

1.0

2018 2019

0.7

1.0

44.1%

Net Asset Per Share (Rs.)25

0

5

10

15

20

2018 2019

22.9

7

22.8

0

-0.8%

EBITDA (Rs. Mn)600

0

100

200

300

400

500

2018 2019

478

405

-15.2%

PAT (Rs. Mn)200

0

50

100

150

2018 2019

192

102

-46.8%

EBIT (Rs. Mn)400

0

100

200

300

2018 2019

304

215

-29.3%

PBT (Rs. Mn)300

0

50

100

150

200

250

2018 2019

270

129

-52.1%

Total Assets (Rs. Mn)6,000

0

1,000

2,000

3,000

4,000

5,000

2018 2019

5,15

9

5,25

2

1.8%

Total Debts (Rs. Mn)1,000

0

200

400

600

800

2018 2019

782

966

23.5%

Debt/ Total Equity (%)30

0

5

10

15

20

25

2018 2019

21.7

4

28.3

6

30.4%

Debt/ Total Assets (%)20

0

10

15

5

2018 2019

15.2

18.4

21.1%

Total Shareholders Funds4,000

0

1,000

2,000

3,000

2018 20193,

596

3,40

5

-5.3%

(Rs. Mn)

Financial ReportsStatement of Directors’ Responsibility in

Relation to Preparing Financial Statements 88

Independent Auditor’s Report 89

Statement of Financial Position 93

Statement of Profit or Loss 94

Statement of other Comprehensive Income 95

Statement of Changes in Equity 96

Statement of Cash Flows 98

Notes to the Financial Statements 99


Statement of Directors’ Responsibility in Relation to Preparing Financial StatementsThe Statement of Directors’ responsibilities is to be read in conjunction with the Report of the Auditors and is made to distinguish the respective responsibilities of the Directors and of the Auditors in relation to the Financial Statements.

The Companies Act No. 7 of 2007 requires the Directors to prepare and circulate among shareholders, Financial Statements which give a true and fair view of the state of affairs of the Company and of the Group as at the Balance Sheet date and the profit and loss of the Company and the Group for the financial year.

The Directors are required to ensure that in preparing the Financial Statements;

• appropriate accounting policies are used, selected and applied in a consistent manner, and material departures, if any, have been disclosed and explained.

• all applicable and relevant Accounting Standards have been followed.

• judgement and estimates have been made which are reasonable and prudent.

The Directors confirm that the companies within the Group maintain accounting records, which disclose with reasonable accuracy the financial position of the Company and the Group and that the Financial Statements have been prepared in accordance with the Companies Act No. 7 of 2007, Sri Lanka Accounting Standards and have provided the information required by or otherwise complied with the Rules of the Colombo Stock Exchange.

The Directors having reviewed the Group’s future financial projections cash flows and current performance are satisfied that the Company has adequate resources to continue its operations in the foreseeable future. The Directors have thus adopted a ‘Going Concern basis’ in preparing the Financial Statements.

The Directors have also taken reasonable steps to safeguard the assets of the Company and of the Group and to establish proper systems of internal control with a view to detect and prevent any irregularities.

The Directors are of the view that they have discharged their responsibilities as set out in this Statement.

ComplianCe RepoRt

The Directors confirm that to the best of their knowledge, all statutory payments relating to employees and the Government that were due in respect of the Company and its subsidiaries as at the Balance Sheet date have been paid or where relevant provided for in the Financial Statements.

By Order of the Board of SERENDIB HOTELS PLC

HEMAS CORPORATE SERVICES (PVT) LTDSecretaries

22 May 2019

Annual Report 2018 | 2019 FINANCIAL REPORTS 89

Independent Auditor’s Report

to tHe SHaReHolDeRS oF SeRenDiB HotelS plC

Report on the Audit of the Financial StatementsOpinionWe have audited the financial statements of Serendib Hotels PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiary (“the Group”), which comprise the statement of financial position as at 31 March 2019, and the statement of Profit or loss, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 March 2019, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for opinionWe conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group

in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics) and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.


Key audit matters

Key audit matter How our audit addressed the key audit matter

Annual impairment of Goodwill

The Group is required to annually test Goodwill for impairment which amounted to LKR 116.5 Mn as at 31 March 2019.

This annual impairment test was significant to our audit as the amounts are material to the financial statements. In addition, management’s assessment process includes a cash-flow forecast which is judgemental and based on assumptions, specifically relating to revenue growth and discount rates, which are affected by expected future market and or economic conditions.

We performed the following procedures, amongst others:

• We compared the cash flow forecast to the approved budgets, business plans and other evidence of future intentions and compared the estimates with those achieved historically.

• We involved our specialised internal resources to assist us, in assessing the appropriateness of the models and reasonableness of estimates used by the Group.

• We also assessed the adequacy of the related disclosures in Note 15 to the financial statements.

Revenue recognition.

During the year the Group adopted SLFRS 15 - Revenue from Contracts with Customers (SLFRS 15) which specifies how and when to recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures.

The various terms and conditions included in Group’s contract with its customers, coupled with relevant clarifications and extended guidance specifically relating to, Agent Vs Principal relationship were evaluated by the management to assess and conclude on the Group’s compliance with SLFRS 15 in preparation of financial statements.

The above process was significant to the audit as it related to the evaluation of revenue recognition principles.

Our audit procedures focused on the Group’s adoption of the New Revenue Standard included, amongst others, the following:

• We assessed the process followed by the Group to ensure all revenue streams are considered in its assessment, contracts assessed are representative of specified revenue streams and contractual term, and the appropriateness of conclusions reached on matters such as point and amount of revenue to be recognised.

• We also assessed the adequacy of corresponding disclosures made in Note 3 and 6 to the financial statements.

Other Information Included in the 2018/19 Annual ReportOther information consists of the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. Management is responsible for the other information.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard

Responsibilities of the Management and those Charged with GovernanceManagement is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Independent Auditor’s Report (Contd.)


In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal controls of the Company and the Group.

• Evaluate the appropriateness of accounting policies used

and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or


regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 2097.

22 May 2019Colombo

Independent Auditor’s Report (Contd.)


Statement of Financial Position

Group CompanyAs at 31st March Note 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

ASSETSNon-Current AssetsProperty, Plant and Equipment 13 4,016,720,753 3,993,245,946 708,954,611 713,789,110Leasehold Right 14 25,572,485 27,464,864 23,823,771 25,525,467Intangible Assets 15 160,113,716 170,369,800 14,138,786 19,611,865Investments in Subsidiaries 16 - - 953,267,015 718,767,015Other Financial Assets 17 212,202,487 272,088,466 206,741,408 264,088,466

4,414,609,441 4,463,169,076 1,906,925,591 1,741,781,923

Current AssetsInventories 18 33,761,300 28,221,248 7,597,308 7,434,354Trade and Other Receivables 19 341,671,293 350,781,570 75,195,720 84,224,671Taxation Recoverable 10,133,871 13,613,134 5,937,043 1,603,272Other Financial Assets 17 9,043,262 585,293 - -Cash and Cash Equivalents 20 442,356,840 302,487,021 56,550,245 42,895,835

836,966,566 695,688,266 145,280,316 136,158,132

Total Assets 5,251,576,007 5,158,857,342 2,052,205,907 1,877,940,055

EQUITY AND LIABILITIESEquityStated Capital 21 913,121,694 913,121,694 913,121,694 913,121,694Other Components of Equity 22 477,030,479 533,693,935 (25,578,307) 29,887,004Retained Earnings 1,152,504,494 1,115,060,183 203,559,004 284,363,924

Equity Attributable to Equity Holders of the Parent 2,542,656,667 2,561,875,812 1,091,102,391 1,227,372,622Non Controlling Interest 862,788,031 1,034,520,302 - -

Total Equity 3,405,444,698 3,596,396,114 1,091,102,391 1,227,372,622

Non-Current LiabilitiesInterest Bearing Loans and Borrowings 23 590,951,797 149,970,644 16,000,000 66,000,000Deferred Tax Liability 11 356,800,276 355,287,250 29,084,775 38,701,219Employee Benefit Obligation 24 65,575,400 59,367,413 16,472,648 14,288,652

1,013,327,473 564,625,307 61,557,423 118,989,871

Current LiabilitiesTrade and Other Payables 25 434,220,351 338,776,011 143,316,059 114,346,131Dividends Payable 26 9,498,386 8,102,747 3,201,691 3,201,691Income Tax Liability 14,150,189 14,506,419 - -Interest Bearing Loans and Borrowings 23 288,031,957 449,769,187 724,022,502 400,576,125Other Financial Liabilities 27 269,000 4,638,851 - -

Bank Overdraft 20 86,633,953 182,042,706 29,005,841 13,453,615

832,803,836 997,835,921 899,546,093 531,577,562

Total Equity and Liabilities 5,251,576,007 5,158,857,342 2,052,205,907 1,877,940,055

These Financial Statements are in compliance with the requirements of the Companies Act No.07 of 2007.

W.D.U. PereraDirector Finance

The Board of Directors is responsible for these Financial Statements.Signed for and on behalf of the Board by.

A.N. Esufally W.M.De.F. ArsakularatneChairman Director

The accounting policies and notes on page 99 through 163 form an Integral Part of the Financial Statements.

22 May 2019Colombo


Statement of Profit or Loss

Group CompanyYear ended 31 March Note 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Revenue 6 2,038,942,903 1,842,060,617 515,839,774 522,941,630Cost of Sales (516,458,375) (474,286,180) (120,796,415) (125,275,064)Gross Profit 1,522,484,528 1,367,774,437 395,043,359 397,666,566

Dividend Income 7 - - - 58,465,748Other Operating Income and Gains 8 42,591,404 66,139,313 2,940,195 15,682,158Sales and Marketing Expenses (61,084,253) (55,747,094) (27,777,660) (25,985,816)Administrative Expenses (1,289,424,904) (1,074,487,712) (386,509,101) (332,090,539)Operating Profit/(Loss) 214,566,775 303,678,944 (16,303,207) 113,738,117

Finance Cost 9 (100,448,605) (49,032,017) (77,121,458) (35,721,860)Finance Income 9 15,186,289 15,402,041 775,785 4,775,933Profit/(Loss) Before Tax 129,304,459 270,048,968 (92,648,880) 82,792,190Income Tax Expense 11 (26,953,284) (77,596,872) 11,409,124 (7,562,066)Profit/(Loss) for the Year 102,351,175 192,452,096 (81,239,756) 75,230,124

Attributable to:Equity Holders of the Parent 38,734,578 118,944,225Non Controlling Interest 63,616,597 73,507,871 102,351,175 192,452,096

Earnings Per Share - Basic 12 0.35 1.07 (0.73) 0.67



Statement of other Comprehensive Income


Profit/(Loss) for the Period 102,351,175 192,452,096 (81,239,756) 75,230,124

Other Comprehensive IncomeOther Comprehensive Income to be reclassified to

profit or loss in subsequent periods

Net Movement on Cash Flow Hedge 22 2,541,561 (28,247,155) 1,881,747 (395,495)

Net Other Comprehensive Income/(Loss) to be reclassified to profit or loss in subsequent periods 2,541,561 (28,247,155) 1,881,747 (395,495)

Other Comprehensive Income not to be reclassified to profit or loss in subsequent periods

Gain on Revaluation of Land and Buildings 13 - 19,291,081 - 7,574,667Changes in Fair Value of financial assets at FVOCI 17 (59,885,982) (58,018,019) (57,347,058) (58,018,019)Deferred Taxation Attributable to Revaluation

of Land and Buildings 11 - (72,316,343) - (1,717,030)Defined Benefit Obligation Actuarial Gain/(Loss) 24 (785,874) 1,915,193 754,348 975,761Deferred Taxation Attributable to Actuarial (Gain)/Loss 11 110,022 (91,534) (105,609) (105,477)

Net Other Comprehensive Income/(Loss) not to be reclassified to profit or loss in subsequent periods (60,561,834) (109,219,622) (56,698,319) (51,290,097)

Other Comprehensive Income/(Loss) for the Year, Net of Tax (58,020,273) (137,466,777) (54,816,572) (51,685,593)

Total Comprehensive Income /(Loss) for the Year, Net of Tax 44,330,902 54,985,319 (136,056,327) 23,544,531

Attributable to:Equity Holders of the Parent (18,640,351) 11,788,447Non Controlling Interest 62,971,254 43,196,872 44,330,902 54,985,319



Statement of Changes in Equity

Att

ribut

able

to E

qui

ty H

old

ers

of t

he P

aren

t

Oth

er C

omp

onen

ts o

f Eq

uity

Sta

ted

Rev

alua

tion

Cas

h Fl

ow

Fair

Valu

e O

ther

R

etai

ned

To

tal

Non

To

tal

Cap

ital

Res

erve

H

edge

R

eser

ve

Res

erve

E

arni

ngs

C

ontr

ollin

g

Res

erve

In

tere

st

G

RO

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N

ote

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

Bal

ance

as

at 3

1 M

arch

201

7

913,

121,

694

552,

631,

393

17,4

83,9

40

- 19

,940

,000

93

8,04

7,36

0 2,

441,

224,

387

805,

223,

472

3,24

6,44

7,85

9N

et P

rofit

for t

he Y

ear

118,

944,

225

118,

944,

225

73,5

07,8

71

192,

452,

096

Oth

er c

ompr

ehen

sive

Inco

me

Net

Mov

emen

t of C

ash

Flow

Hed

ge

22

- -

(18,

549,

207)

-

- -

(18,

549,

207)

(9

,697

,948

) (2

8,24

7,155

)Fa

ir va

lue

loss

on

Avai

labl

e fo

r sal

e in

vest

men

ts

17

- -

- (5

8,01

8,01

9)

- -

(58,

018,

019)

-

(58,

018,

018)

Rev

alua

tion

of L

and

& bu

ildin

g 13

15,2

71,9

75

15,2

71,9

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4,01

9,10

6 19

,291

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Def

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d Ta

xatio

n At

tribu

tabl

e to

R

eval

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n of

Lan

d an

d B

uild

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11

-

(47,

679,

877)

-

- -

- (4

7,67

9,87

7)

(24,

636,

466)

(7

2,31

6,34

3)A

ctua

rial G

ain/

(los

s) o

n

Def

ined

Ben

efit

Obl

igat

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24

- -

- -

- 1,

942,

047

1,94

2,04

7 (2

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1,91

5,19

3D

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Taxa

tion

Attri

buta

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to

Act

uaria

l Gai

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oss)

11

-

- -

- -

(122

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) (1

22,6

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31,1

63

(91,

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Tota

l com

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com

e /(L

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- (3

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7,90

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549,

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(5

8,01

8,01

9)

- 12

0,76

3,57

5 11

,788

,447

43

,196

,872

54

,985

,319

Pre

fere

nce

shar

es is

sued

dur

ing

the

year

- 23

4,50

0,00

0 23

4,50

0,00

0D

ivid

ends

- -

- -

- -

- (3

6,96

8,28

1)

(36,

968,

281)

Adj

ustm

ent i

n re

spec

t of

chan

ges

in G

roup

Hol

ding

- 72

,553

,730

-

- -

36,3

09,2

48

108,

862,

978

(216

,956

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) (1

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01)

Tran

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of r

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(1

9,94

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19,9

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00

- -

-A

cqui

sitio

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non

con

trollin

g in

tere

st

-

205,

524,

718

205,

524,

718

Bal

ance

as

at 3

1 M

arch

201

8

913,

121,

694

592,

777,

221

(1,0

65,2

67)

(58,

018,

019)

-

1,11

5,06

0,18

3 2,

561,

875,

812

1,03

4,52

0,30

2 3,

596,

396,

114

Impa

ct o

f SLF

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9

impl

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tatio

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(5

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1 A

pril

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913,

121,

694

592,

777,

221

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65,2

67)

(58,

018,

019)

-

1,11

4,48

1,38

9 2,

561,

297,

018

1,03

4,31

6,77

8 3,

595,

613,

796

Net

Pro

fit fo

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Yea

r

38

,734

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38

,734

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63

,616

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10

2,35

1,17

5O

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22

-

- 2,

311,

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311,

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229,

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on

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24

- -

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11

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- 11

5,82

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5,82

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-

38,0

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(18,

640,

351)

62

,971

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44

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Pre

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cqui

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g

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34,5

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(234

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alan

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31

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ch 2

019

91

3,12

1,69

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2,77

7,22

1 1,

246,

547

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1,15

2,50

4,49

4 2,

542,

656,

667

862,

788,

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3,40

5,44

4,69

8

The

acco

untin

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ies

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note

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pag

e 99

thro

ugh

163

form

an

Inte

gral

Par

t of t

he F

inan

cial

Sta

tem

ents

.


Yea

r en

ded

31

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ch

Att

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to E

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ance

as

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1 M

arch

201

7

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52)

83,9

29,1

33

- 14

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19

3,76

3,51

6 1,

203,

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Pro

fit fo

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r

- -

- -

- 75

,230

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75

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Oth

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- (3

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17

(5

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(58,

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Def

ined

Ben

efit

Pla

n A

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24

- -

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- 97

5,76

1 97

5,76

1D

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Taxa

tion

Att

ribut

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to A

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11

- -

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eval

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d an

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13

7,

574,

667

7,

574,

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d Ta

x at

trib

utab

le to

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alua

tion

Sur

plus

11

-

- (1

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- -

(1,7

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Tota

l Com

pre

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ive

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me

/(Los

s)

-

(395

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018,

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23,5

44,5

31Tr

ansf

er o

f res

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s

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(14,

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14

,500

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-

Bal

ance

as

at 3

1st M

arch

201

8

913,

121,

694

(1,8

81,7

47)

89,7

86,7

70

(58,

018,

019)

-

284,

363,

924

1,22

7,37

2,62

2Im

pact

of n

ew S

LFR

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plem

enta

tion

(213

,903

) (2

13,9

03)

Bal

ance

as

at 1

Ap

ril 2

018

91

3,12

1,69

4 (1

,881

,747

) 89

,786

,770

(5

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4,15

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058)

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ined

Ben

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Pla

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- -

754,

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754,

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Tota

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1,88

1,74

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Bal

ance

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201

9

913,

121,

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- 89

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5,07

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4 1,

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The

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.

Statement of Changes in Equity


Statement of Cash Flows


Operating ActivitiesNet Profit/(loss) Before Income Tax 129,304,459 270,048,968 (92,648,880) 82,792,190Adjustments forDepreciation of Property, plant and equipment 13 175,954,885 158,347,157 50,722,493 49,141,449Amortization 14 & 15 14,519,356 15,854,240 7,174,775 7,174,775Foreign Currency (Gains)/Losses 8,529,080 (27,364,273) 807,674 6,587,141Dividend Income - - (58,465,748)Finance Income 09 (15,186,289) (15,402,041) (775,785) (4,775,933)Finance Costs 09 100,448,605 49,032,017 77,121,458 35,721,860(Gains)/Loss on Disposal of Property,

Plant and Equipment 14,113,592 (756,317) 13,076,630 1,619Impairment of debtors 19 4,124,263 (4,581,293) 1,033,291 (1,587,002)Provision for Defined Benefit Plan 24 15,135,640 13,817,131 3,076,260 3,300,897

446,943,591 458,995,589 59,587,916 119,891,248Working Capital Adjustments:(Increase)/Decrease in Inventories (5,540,052) (515,114) (162,954) 382,681(Increase)/Decrease in Trade and other Receivables (1,597,932) 161,059,373 10,582,728 32,887,287Increase/(Decrease) in Trade and Other Payables 96,935,330 (499,476,366) 25,602,835 (54,710,193)

Cash Generated from Operations 536,740,937 120,063,482 95,610,524 98,451,023

Finance Cost Paid (92,934,894) (44,103,643) (64,750,940) (35,721,860)Defined Benefit Plan Costs Paid 24 (7,773,437) (5,744,153) (1,062,300) (2,318,322)Income Tax Paid (22,207,139) (11,244,920) (107,943) (3,666,851)

Net Cash Flows from Operating Activities 413,825,467 58,970,766 29,689,342 56,743,990

Investing ActivitiesAcquisition of Property, Plant and Equipment 13 (215,883,340) (53,286,071) (59,305,480) (6,536,965)Acquisition of Intangible Assets 15 (2,370,893) (1,372,616) - -Proceeds from Disposal of Property,

Plant and Equipment 2,339,993 29,572,168 340,856 28,037,768Acquisition of Subsidiaries - (431,938,522) - (447,575,806)Investment in preference shares of subsidiary - - (234,500,000) -Interest Received 6,728,320 14,154,122 775,785 4,775,933Dividend Received - - - 58,465,748

Net Cash Flows Used in Investing Activities (209,185,920) (442,870,919) (292,688,839) (362,833,322)

Financing ActivitiesProceeds from Interest Bearing Loans and Borrowings 23 721,050,850 150,000,000 101,730,850 150,000,000Proceeds from Related Party Borrowings 23 - 310,000,000 564,460,000 370,000,000Repayment of Interest Bearing Loans and Borrowings 23 (145,911,825) (166,526,449) (60,089,169) (102,198,548)Repayment of Related Party Borrowings 23 (310,000,000) (20,000,000) (345,000,000) (96,000,000)Proceeds from Preference Shares Issued - 234,500,000 - -Investment in Preference Shares (234,500,000) - - -Dividend Paid - (37,066,865) - (3,869)

Net Cash Flows From Financing Activities 30,639,025 470,906,686 261,101,681 321,797,583Net Increase/(Decrease) in Cash and Cash Equivalents 235,278,572 87,006,533 (1,897,816) 15,708,251Cash and Cash Equivalents at the

Beginning of the Year 120,444,315 33,437,782 29,442,220 13,733,969Cash and Cash Equivalents at the End of the Year 20 355,722,887 120,444,315 27,544,404 29,442,220



Notes to the Financial Statements

1. CoRpoRate inFoRmation

1.1 GeneralSerendib Hotels PLC is a public limited liability Company listed in the Colombo Stock Exchange incorporated and domiciled in Sri Lanka. The registered office is located at Level 3, Hemas House, No 75, Braybrooke Place, Colombo 2.

1.2 Consolidated Financial StatementsThe Consolidated Financial Statements of the Company for the year ended 31 March 2019 comprise Serendib Hotels PLC (the “Company”) and all its Subsidiaries whose accounts have been consolidated therein (the “Group”).

1.3 Principal Activities and Nature of OperationsThe principal activity of the Group/Company is hotel operation.

1.4 Parent Entity and Ultimate Parent EntityThe Company’s parent undertaking and controlling party is Hemas Holdings PLC, which is incorporated in Sri Lanka.

1.5 Date of Authorization for IssueThe consolidated Financial Statements of Serendib Hotels PLC for the year ended 31 March 2019 were authorised for issue, in accordance with a resolution of the Board of Directors on 22 May 2019.

1.6 Responsibility for Financial StatementsThe responsibility of the Directors in relation to the Financial Statements is set out in the Statement of Directors’ Responsibility Report in the Annual Report.

2. BaSiS oF pRepaRation

2.1 Statement of Compliance The financial statements of the Group have been prepared in accordance with Sri Lanka Accounting Standards, (SLFRS/ LKAS) as issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the Companies Act No. 07 of 2007.

This is the first set of the Group’s annual financial statements in which SLFRS 15 - Revenue from Contracts with Customers and SLFRS 9 - Financial Instruments have been applied. Changes to significant accounting policies are described in Note 3.

2.2 Going ConcernThe Directors have made an assessment of the Group’s ability to continue as a going concern and they do not intend either to liquidate or to cease trading.

2.3 Basis of MeasurementThe Financial Statements of the Group have been prepared on an accrual basis and under the historical cost convention other than Land and Building carried at valuation and otherwise stated.

2.4 Functional and Presentation CurrencyThe consolidated Financial Statements are presented in Sri Lankan Rupees, which is also the parent company’s functional and presentation currency. For each entity, the Group determines the functional currency and items included in the Financial Statements of each entity are measured using that functional currency.

2.5 Materiality and AggregationEach material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial.

2.6 Comparative InformationThe presentations and classification of Consolidated Financial Statements of the previous years have been amended for better presentation and to be comparable with those of the current year.

3. CHanGeS in aCCoUntinG poliCieS

The Group adopted SLFRS 15 - Revenue from contracts with customers (3.1) and SLFRS 9 - Financial Instruments - Recognition and Measurement (3.2), which resulted in changes to accounting policies. Several other amendments and interpretations in accounting standards apply for the first time in financial year 2018/19, but do not have an impact on the Consolidated Financial Statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued, but are not yet effective.

3.1 SLFRS 15 - Revenue from Contracts with CustomersSLFRS 15 replaced LKAS 18 Revenue and related Interpretations. SLFRS 15 established a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. SLFRS


15 required the Group to exercise judgement, taking into consideration all the relevant facts and circumstances when applying each step of the model to contracts with their customers.

The Group adopted SLFRS 15 using the full retrospective method of adoption with the date of initial application of 1 April 2017. The effect of the transition on the current period has not been disclosed as the standard provides an optional practical expedient. The group did not apply any of the other available optional practical expedients.

The Group carried out an impact analysis of the possible impact from adoption of the SLFRS 15 across all the revenue streams and the key aspects covered are as follows.

Identified all goods or services, or contract deliverables, which have been promised within usual course of carrying out the business. In determining this, the management looked at implicitly or explicitly promised services including customary business practices or policies of each hotel. Having considered the same, each business then determined the distinct performance obligation associated with the contracts they entered in to.

In connection with contracts with travel agents, tour operators, online travel agents, corporate customers and free-independent-travellers, the Group identified certain principal versus agent considerations. In recognising revenue from these transactions, the Group considered whether the nature of its promise is a performance obligation

to provide the hotel services itself (acting as a principal) or to arrange for the other party to provide those such services (acting as an agent). Certain online travel agent agreements had terms indicative that the hotels were in fact the principal, while in certain other circumstances, considerations that were suggestive of agency considerations were present. However, the accounting treatments that were adopted by the Group under the previous accounting standards were the same even prior to the application of SLFRS 15. Accordingly, this aspect of principal versus agent did not result in material changes to the reported figures.

The Group also revisited and concluded that its previous accounting treatment in respect of different types of discounts to customers such as credit card offers, early bird discounts and HolidayMania promotions can be continued taking due consideration to the practice that each Hotel regularly sells distinct goods or services on a stand-alone basis at their fair value.

The Group considered the obligation to transfer goods or services to the customers for which the Group has received consideration as contract liabilities. Accordingly, an amount of Rs. 54,449,106 which was included in other payables previously, has been reclassified to contract liabilities.

Certain services of the Group in practice require customers to make deposits in advance to book related services. According to SLFRS 15, customer’s non-refundable prepayment to an entity gives the customer a right to

receive a good or service in the future (obliges the entity to stand ready to transfer a goods or services). However, in certain cases, customers may not exercise all their contractual rights and hence the unexercised rights can occur at each reporting date. Having considered the historical patterns and amounts of such unveiled services that were subsequently refunded which were proved to be immaterial in relation to respective totals, the Group did not have a material change to the existing accounting policies and to the reported amounts as at the date of transition and during the year.

3.2 SLFRS 9 – “Financial Instruments” SLFRS 9 Financial Instruments replaces LKAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 April 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group applied SLFRS 9 retrospectively, with the initial application date of 1 April 2018. The group has not restated the comparative information, which continues to be reported under LKAS 39. Differences arising from the adoption of SLFRS 9 have been recognised directly in retained earnings and other components of equity.

Notes to the Financial Statements (Contd.)


The effect of adopting SLFRS 9 as at 01 April 2018 was, as follows.GroupRs.

Note Impact of adopting SLFRS 9

Assets

Trade & Other Receivable 3.2.2 (782,318)

Total Adjustment on equity

Retained Earnings (578,794)

Non Controlling Interest (203,524)

CompanyRs.

Note Impact of adopting SLFRS 9

Assets

Trade & Other Receivable 3.2.2 (213,903)

Total Adjustment on equity

Retained Earnings (213,903)

The nature and effects of the key changes to the Group’s accounting policies resulting from its adoption of SLFRS 9 - “Financial Instruments” are summarised below:Impact areas• Classification and measurement of financial assets and financial liabilities

• Impairment of financial assets

• Hedge accounting

3.2.1 Classification and measurement of financial assets and financial liabilitiesSLFRS 9 – “Financial Instruments” contains three principal classification categories for financial assets measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under SLFRS 9 – “Financial Instruments” is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. SLFRS 9 – “Financial Instruments” eliminates the previous LKAS 39 – “Financial Instruments: Recognition and Measurement” categories of held for trading, held to maturity, loans and receivables and available for sale. Under SLFRS 9 – “Financial Instruments”, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

a) Financial assets measured at amortised cost

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as FVTPL:• the asset is held within a business

model whose objective is to hold assets to collect contractual cash flows and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

b) Equity investments

Investments in equity instruments are always measured at fair value. Equity instruments are those that meet the definition of ‘equity’ from the perspective of the issuer as defined in LKAS 32 – “Financial instrument: Recognition & measurement”. For equity instruments, management has the ability to make an irrevocable election on initial recognition, on an instrument-by-instrument basis, to present changes in fair value in OCI rather than profit or loss. If this election is made, all fair value changes, excluding dividends that are a return on investment, will be included in OCI. There is no recycling of amounts from OCI, to profit and loss (for example, on sale of an equity investment), nor are there any impairment requirements. However, the entity might transfer the cumulative gain or loss within equity. All the equity instrument for which the irrecoverable option is not made should be measured at fair value through profit or loss.


c) Other

All other financial assets are classified as financial assets measured at FVTPL.The assessment of the Group’s business model was made as of the date of initial application, 1 April 2018. The classification and measurement requirements of SLFRS 9 did not have a significant impact to the Group. All financial assets previously held at fair value under LKAS 39 were continued to be measured at fair value itself. The following are the changes in the classification of the Group’s financial assets:i. Trade receivables classified as Loans

and receivables as at 31 March 2018 are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are classified and measured as Debt instruments at amortised cost beginning from 1 April 2018.

ii. Equity investments in non-listed companies classified as AFS financial assets as at 31 March 2018 are reclassified and measured as Equity instruments designated at fair value through OCI beginning from 1 April 2018. The Group elected to classify irrevocably its non-listed equity investments under this category at the date of initial application as it intends to hold these investments for the foreseeable future. There were no significant impairment losses recognised in profit or loss for these investments in prior periods. As a result of the change in classification, AFS reserve of LKR. 58,018,019 was renamed to Fair value reserve.

SLFRS 09 – “Financial Instruments” largely retains the existing requirement in LKAS 39 – “Financial Instruments: Recognition and Measurement’ for the classification of financial liabilities.

The Group has not designated any financial liabilities at fair value through Profit or Loss. Accordingly, there are no changes for classification and measurement in the Group’s financial liabilities.

In summary, upon the adoption of SLFRS 9, the Group had the following required or elected reclassifications as at 1 April 2018.

Group

Financial Assets

SLFRS-09 measurement Category (Rs.)

Amortised CostFinancial Assets

at FVOCI

LKAS 39 Measurement Category

Available for Sale Financial Assets

Equity Securities 272,088,466

Loans and Receivable

Trade & Other Receivable*** 349,999,252

Loans due from related parties 585,293

Company

Financial Assets

SLFRS-09 measurement Category (Rs.)

Amortised CostFinancial Assets at FVOCI

LKAS 39 Measurement Category

Available for Sale Financial Assets

Equity Securities 264,088,466

Loans and Receivable

Trade & Other Receivable*** 84,010,768*** The change in carrying amount is a result of additional impairment allowance. Refer the note on impairment (3.2.2) below.

3.2.2 Impairment of financial assets The adoption of SLFRS 9 has fundamentally changed the Group’s accounting for impairment losses for financial assets by replacing LKAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. Upon adoption of SLFRS 9 the Group recognised additional impairment on the Group’s Trade receivables resulting in a decrease in Retained Earnings and NCI as at 1 April 2018.



Set out below is the reconciliation of the ending impairment allowances in accordance with LKAS 39 with the opening loss allowances determined in accordance with SLFRS 9:

GroupRs.

Financial Assets

Allowance for Impairment under LKAS 39As at 31 March 2018

Re- Measurement Expected Loss under SLFRS 09

As at 01 April 2018

Trade & Other Receivable

10,360,489 782,318 11,142,807

CompanyRs.

Financial Assets

Allowance for Impairment under LKAS 39As at 31 March 2018

Re- Measurement Expected Loss under SLFRS 09

As at 01 April 2018

Trade & Other Receivable

3,041,560 213,903 3,255,463

3.2.3 Hedge accountingThe Group applied hedge accounting prospectively. At the date of initial application, all the Group’s existing hedging relationships were eligible to be treated as continuing hedging relationships. Therefore, adoption of SLFRS 9 has no impact on the presentation of comparative figures.

4. SUmmeRY oF SiGniFiCant aCCoUntinG poliCieS

The accounting policies set out below have been applied consistently for all periods presented in the Financial Statements by the Group and the Company except the accounting policies on financial instruments. Changes to the accounting policies have been disclosed in the note number 3.

4.1 Basis of ConsolidationThe consolidated financial statements comprise the Financial Statement of the Parent and its subsidiaries as at 31 March 2018. Control over an investee is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:• Power over the investee (i.e. existing rights that give it the current ability to direct

the relevant activities of the investee)

• Exposure, or rights, to variable returns from its involvement with the investee

• The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee

• Rights arising from other contractual arrangements

• The Group’s voting rights and potential voting rights

The Group re-assess whether or not it controls an investee if facts and circumstance indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.


The Financial Statements of the Subsidiaries are prepared for the same reporting period as the Group. When necessary, adjustments are made to the Financial Statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it de-recognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

4.1.1 Business combination and goodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition

date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in Statement of Profit or Loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration which is deemed to be an asset or liability that is a financial instrument and within the scope of LKAS 39 Financial Instruments: Recognition and measurement, is measured at fair value with changes in fair value either in profit or loss or as a change to Other Comprehensive Income (OCI). If the contingent consideration is not within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is measured at fair value with change in fair value either in the Statement of Profit or Loss or as a change to the Other Comprehensive Income (OCI).

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination transferred.

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

4.1.2 Non-controlling interestsThe proportion of the profits or losses after taxation applicable to outside shareholders of subsidiary companies is included under the heading “Non-Controlling Interests” in the Statement of Comprehensive Income. Losses applicable to the Non-Controlling Interests in a subsidiary is allocated to the Non- Controlling Interest even if doing so causes the Non-Controlling Interests to have a deficit balance.

4.1.3 Transactions eliminated in consolidationAll intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.



4.1.4 Investment in subsidiariesInvestment in Subsidiaries are initially recognised at cost in the financial statements of the Company. Any transaction cost relating to acquisition of subsidiaries are immediately recognised in the Statement of Profit or Loss. Following initial recognition, investment in subsidiaries are carried at cost less any accumulated impairment losses.

4.2 Foreign CurrencyTransactions in foreign currencies are initially recorded by the Group entities at the functional currency rates prevailing on the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are re-translated at the functional currency spot rate of exchange ruling at the reporting date.

Differences arising on settlement or transaction of monitory items are recognised in Profit or Loss with the exception of all monetary items that forms part of a net investment in a foreign operation. These are recognised in Other Comprehensive Income until the disposal of the net investment, at which time they are reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in Other Comprehensive Income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

The gain or loss arising on translation of non-monetary items measured fair value is treated in line with the recognition of gain or loss on change in fair value in the item (translation differences on items whose gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss respectively).

4.3 Current Versus Non-Current ClassificationThe Group presents assets and liabilities in the Statement of Financial Position based on current/non-current classification. An asset is current when it is:

• Expected to be realised or intended to sold or consumed in the normal operating cycle

• Held primarily for the purpose of trading

• Expected to be realised within twelve months after the reporting period or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.A liability is current when:

• It is expected to be settled in the normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within twelve months after the reporting period or

• It does not have a right at the reporting date to defer settlement of the liability at least 12 months after the reporting period.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

4.4 Fair Value MeasurementThe Group measures financial instruments such as Financial Assets at Fair Value Through OCI, Financial Assets at Fair Value Through Profit or Loss, Financial Derivatives and Non-Financial Assets such as certain classes of Property, Plant and Equipment, at fair value at each reporting date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarised under the respective notes.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • In the principal market for the asset

or liability or

• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.


A fair value measurement of a non-financial asset considers a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the Financial Statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the Financial Statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period. External valuers are involved for

recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Profit or Loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

4.5 Significant Accounting Judgments, Estimates and AssumptionsThe preparation of Consolidated Financial Statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

4.5.1 JudgementsIn the process of applying the Group accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements:

valuation of significant assets, such as properties and significant liabilities, such as defined benefit obligations.

Involvement of external valuers is decided upon annually after discussion with and approval by the Group’s Board Audit Committee wherever necessary. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Board Audit Committee whenever necessary after discussions with the Group’s external valuers decide which valuation techniques and inputs to use for each case.

At each reporting date the Management analyses the movements in the values of assets and liabilities which are required to be remeasured or reassessed as per the Group’s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Management in conjunction with the Group’s external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. This includes a discussion of the major assumptions used in the valuations.

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its



4.5.1.1 RevenueThe Group applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers:

a) Principal versus Agent Considerations

In determining whether the Group is the principal or the agent pertaining to the certain revenue contracts the Group has evaluated who has control over the goods and service before transferring it to the customer;The following factors were also considered;

• The primarily responsibility for fulfilling the promise to provide the specified goods or the service.

• Inventory risk before or after the specified goods has been transferred to the customer.

• The discretion in establishing the price for the specified equipment.

Based on the above factors, if the Group concludes that it has control over the goods & services before transferring it to the customer, Group act as the principal in which case revenue will be recognised at gross and if the Group does not have the control over the goods before transferring it to the customer, it will recognise revenue on the contract on net basis as an agent.

b) Evaluation of point of transfer of control of goods or services to the customer

The following factors were considered in determining the point of transfer of control to the customer.

• The entity has a present right to payment for the asset

about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

4.5.2.1 Revaluation of property, plant and equipmentThe Group carries its Land and buildings at revalued amounts with changes in fair value being recognised in OCI. The Group engages an independent valuation specialist to assess fair value of land and buildings. Land and buildings values by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the properties. The valuation methodology adopted, and the key assumptions to determine the fair value of the properties and sensitivity analyses provides in relevant notes as required.

4.5.2.2 Impairment of non - financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is

• The customer has legal title to the asset

• The entity has transferred physical possession of the asset

• The customer has the significant risks and rewards of ownership of the asset

• The customer has accepted the asset

Whilst the above indicators assist in the determination of transfer of control, non of the indicators above are meant to individually determine whether control has been transferred. Further not all of them must be present. Hence the above evaluation requires significant judgement.

4.5.1.2 Deferred tax assetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

4.5.2 Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the Financial Statements were prepared. Existing circumstances and assumptions


written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement of Profit or Loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in Other Comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the

carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Profit or Loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

a) Goodwill

Goodwill is tested for impairment annually as at 31 March and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

4.5.2.3 Defined Benefit PlansThe cost of defined benefit plans-gratuity is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, futures salary increases and retirement age. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are reviewed at each reporting date.

4.6 Revenue from Contracts with Customers4.6.1 Recognition of revenueRevenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

SLFRS 15 requires entities to exercise judgement, taking into consideration all the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

In determining the transaction price for the revenue contracts, the Group considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration to the customer (if any).

Room revenue is recognised based on the rooms occupied, on a daily basis, and food and beverage are accounted for at the time of sale.

In connection with contracts with travel agents, tour operators, on-line travel agents, corporate customers and free-individual-travellers, the Group identified certain principal versus agent considerations. In recognising revenue from these transactions, the Group considered whether the nature of its promise is a performance obligation to provide the hotel services itself (acting as a principal) or to arrange for the other party to provide those such services (acting as an agent).



4.6.1.1 Goods transferred at a point in time Under SLFRS 15, revenue is recognised upon satisfaction of performance obligation. The revenue recognition occurs at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods and services.

4.6.1.2 Services transferred over timeUnder SLFRS 15, the Group determines at contract inception whether it satisfies the performance obligation over time or at a point in time. For each performance obligation satisfied overtime, the Group recognises the revenue over time by measuring the progress towards complete satisfaction of that performance obligation.

4.6.2 Contract liabilitiesContract liabilities are Group’s obligation to transfer goods or services to a customer for which the group has received consideration from the customer. Contract liabilities includes advances received for reservations. Contract liabilities of the group have been disclosed in trade and other payables note.

4.7 Taxation4.7.1 Current income taxesCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the Commissioner General of Inland Revenue. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date in the country where the Group operates and generates taxable income. Current income tax relating to items recognised

directly in equity is recognised in equity and not in the Statement of Profit or Loss.

The provision for income tax is based on the elements of income and expenditure as reported in the Financial Statements and computed in accordance with the provisions of the Inland Revenue Act. No 24 of 2017 and amendments thereto.

Management has used its judgment on the application of tax laws including transfer pricing regulations involving identification of associated undertakings, estimation of the respective arm’s length prices and selection of appropriate pricing mechanism.

4.7.2 Deferred taxationDeferred income tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except;

i) Where the deferred income tax liability arises from the initial recognition of goodwill, an asset or a liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ii) In respect of taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of the temporary differences can be

controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:

i) Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ii) In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has


become probable that future taxable profits will allow the deferred tax assets to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.

4.7.3 Tax on dividend income Tax on dividend income from subsidiaries is recognised as an expense in the Consolidated Statement of Profit or Loss.

4.8 Property, Plant and EquipmentPlant and Machinery, Furniture, Fittings and Equipment, Motor Vehicles, Cutlery, Crockery, Glassware and Silverware are stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for long-term construction projects

if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group de-recognises the replaced part, and recognises the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Statement of Profit or Loss as incurred.

Where items of freehold land, buildings on leasehold land, land improvements and buildings on freehold land are subsequently revalued, the entire class of such assets is revalued. Any revaluation surplus is recognised in Other Comprehensive Income and accumulated in equity in the Asset Revaluation Reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the Statement of Profit or Loss, in which case the increase is recognised in the Statement of Profit or Loss. A revaluation deficit is recognised in the Statement of Profit or Loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

Depreciation is calculated on straight line basis over the estimated useful lives of the assets as follows:

2019 2018

Buildings on Leasehold Land Over A maximum Period of 60 Years

Over A maximum Period of 60 Years

Buildings on Freehold Land Over A maximum Period of 60 Years


Landscaping Over A maximum Period of 60 Years


Furniture, Fittings and Equipment 5 -15 Years 5 -15 Years

Motor Vehicles 5 -10 Years 5 -10 Years

Plant and Machinery 5 -10 Years 5 -10 Years

Cutlery, Crockery, Glassware and Silverware

2-3 Years 2-3 Years

An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit or Loss when the asset is de-recognised.



a) Leasehold Right / Prepaid Lease Rental

Prepaid lease rentals paid to acquire land use right are amortised over the lease term. Details of the lease rentals paid in advance are given in note 14 to the Financial Statements.

b) Operating Leases

Operating lease payments are recognised as an operating expense in the Statement of Profit or Loss on straight line basis over the lease term.

c) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

4.8 Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the Statement of Profit or Loss in the year in which the expenditure is incurred.

4.10 InventoriesInventories are valued at the lower of cost and net realisable value, after making due allowances for obsolete and slow moving items.

The cost incurred in bringing inventories to its present location and conditions are accounted using the following cost formulae:-

Foods and Beverages Stocks• At actual cost on weighted average

basis.

Maintenance and Others• At actual cost on weighted average

basis.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

4.11 Financial InstrumentsPolicy Applicable up to 1 April 2018

4.11.1 Financial assets4.11.1.1 Initial recognition and measurementFinancial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets, as appropriate and determine the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus transaction costs of assets, in the case of investments not at fair value through profit or loss.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit or Loss in the expense category consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit or Loss when the asset is de-recognised.


The financial assets include short-term deposits, trade and other receivables, other financial assets.

4.11.1.2 Subsequent measurementThe subsequent measurement of financial assets depends on their classification.

a) Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit or Loss. The losses arising from impairment are recognised in the Statement of Profit or Loss.

b) Available-For-Sale Financial Investments

Available-for-sale financial investments consists of equity securities. Equity investments classified as available for- sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the Available-For-Sale Reserve until the investment is

de-recognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to finance cost in the Statement of Profit or Loss and removed from the Available-For-Sale Reserve.

The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

For a financial asset reclassified out of the available for sale category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the Statement of Profit or Loss.

4.11.1.3 De-recognitionA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is de-recognised when,

i. The rights to receive cash flows from the asset have expired

ii. The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either

• The Group has transferred substantially all the risks and rewards of the asset, or

• The Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it.

In that case, the Group also recognises an associated liability. The transferred assets and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of



consideration that the Group could be required to repay.

4.11.1.4 Impairment of financial assetsThe Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

a) Financial Assets Carried at Amortised Cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes

the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the Statement of Profit or Loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the Statement of Profit or Loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the

previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the Statement of Profit or Loss.

b) Available-For-Sale Financial Investments

For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the Statement of Profit or Loss, is removed from other comprehensive income and recognised in the Statement of Profit or Loss. Impairment losses on equity investments are not reversed through the Statement of Profit or Loss; increases in their fair value after impairments are recognised directly in other comprehensive income.

4.11.2 Financial liabilities4.11.2.1 Initial recognition and measurementFinancial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, other financial liabilities or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The


Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, and other financial liabilities carried at amortised cost. This includes directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, other financial liabilities.

4.11.2.2 Subsequent measurementThe measurement of financial liabilities depends on their classification as follows;a) Loans and Borrowings/Other

Financial Liabilities

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the Statement of Profit or Loss when the liabilities are de-recognised as well as through the effective interest rate method (EIR) amortisation process.

Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Statement of Profit or Loss.

4.11.2.3 De-recognitionA financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms,

or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Statement of Profit or Loss.

4.11.2.4 Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

4.11.2.5 Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations. (Bid price for long position and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.

4.11.3 Derivative Financial Instruments and Hedge Accounting4.11.3.1 Initial recognition and subsequent measurementa) Derivative Financial Instruments

The Group uses derivative financial instruments such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to the Statement of Profit or Loss, except for the effective portion of cash flow hedges, which is recognised in Other Comprehensive Income.

b) Cash Flow Hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly as other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the Statement of Profit or Loss as finance expenses. Income are transferred to the Statement of Profit or Loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as other comprehensive income are transferred to the initial



carrying amount of the non-financial asset or liability. If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in equity is transferred to the Statement of Profit or Loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or roll over, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

Accounting Policies Applicable from 1 April 2018

4.11.4 Financial assets4.11.4.1 Initial recognition and measurementFinancial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income and fair value through profit or loss.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

4.11.4.2 Subsequent measurementFor purposes of subsequent measurement, financial assets are classified in four categories• Financial assets at amortised cost

(debt instruments)

• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon de-recognition (equity instruments)

• Financial assets at fair value through profit or loss.

a) Financial Assets at Amortised Cost (Debt Instruments)

The Group measures financial assets at amortised cost if both of the following conditions are met:

• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is de-recognised, modified or impaired.

The Group’s financial assets at amortised cost includes trade receivables, loans to employees and loans to related parties.

b) Financial assets at fair value through OCI (debt instruments)

The Group measures debt instruments at fair value through OCI if both of the following conditions are met:

• The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the Statement of Profit or Loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon de-recognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.

The Group do not classified any instrument under this category as of 31 March 2019.

c) Financial assets designated at fair value through OCI (equity instruments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under LKAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by instrument basis.

Gains and losses on these financial assets are never recycled to Statement of Profit or Loss. Dividends are recognised as other income in the Statement of Profit or Loss when the


right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

The Group elected to classify irrevocably its listed and non-listed equity investments under this category.

d) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the

Statement of Financial Position at fair value with net changes in fair value recognised in the Statement of Profit or Loss.

4.11.4.3 De-recognitionA financial asset is de-recognised when:

• The rights to receive cash flows from the asset have expired.

• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it.

4.11.4.4 Impairment of financial assets The Group recognises an allowance for Expected Credit Losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective

interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

4.11.5 Financial liabilities4.11.5.1 Initial recognition and measurementFinancial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.



All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, carried at amortised cost. This includes directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.

4.11.5.2 Subsequent measurement The measurement of financial liabilities depends on their classification as follows:

a) Financial Liabilities at Fair Value Through Profit or Loss

Financial liabilities are classified as measured at amortised cost or FVPL. A financial liability is classified as at FVPL, if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on de-recognition is also recognised in profit or loss.

b) Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process.Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that

are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit or Loss. This category generally applies to interest bearing loans and borrowings.

4.11.5.3 De-recognitionA financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires.

4.11.5.4 Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the Statement of Financial Position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

4.11.6 Derivative financial instruments and hedge accounting4.11.6.1 Initial recognition and subsequent measurementa) Derivative Financial Instruments

The Group uses derivative financial instruments such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

c) Cash Flow Hedges

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair

value of the derivative is recognised in OCI and accumulated in the hedging reserve. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

The Group designates only the change in fair value of the spot element of forward exchange contracts as the hedging instrument in cash flow hedging relationships. The change in fair value of the forward element of forward exchange contracts (‘forward points’) is separately accounted for as a cost of hedging and recognised in a cost of hedging reserve within equity.

4.12 Cash and Short-Term DepositsCash and short-term deposits in the Statement of Financial Position comprise cash at banks, and on hand and short-term deposits with a maturity of three months or less. For the purpose of the Group’s Statement of Cash Flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts. 4.13 ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group


expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Profit or Loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

4.14 Employee Benefits 4.14.1 Defined contribution plans - employees’ Provident Fund and Employees’ trust fundEmployees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with the respective statutes and regulations. The Group contributes 12% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

4.14.2 Defined benefit plans – gratuity A defined benefit plan is post-employment benefits plan other than a defined contribution plans - Employees’ Provident Fund and Employees’ Trust Fund. The liability recognised in the Statement of Financial Position in respect of defined benefit plans is the present value of the defined benefit obligation at the reporting date. The defined benefit obligation is calculated using the ‘Projected Unit Credit

asset representing the right to use the underlying asset during the lease term (the right-of-use asset - ROU). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessee will be also required to re-measure the lease liability upon the occurrence of certain events. The lessee will generally recognise the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset.

SLFRS 16 also requires lessee and lessor to make more extensive disclosures than under LKAS 17.

SLFRS 16 is effective for annual periods beginning on or after 1 January 2019.

5.2 Group’s readiness for the application of SLFRS 16The Group plan to adopt SLFRS 16 retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application.

Due to the adoption of SLFRS 16, the Group’s operation profit will improve, while its interest expense will increase. This is due to the change in the accounting for expenses of leases that were classified as operating leases under LKAS 17.

Other than SLFRS 16, other amendments and improvements are not expected to have a significant impact on the Group’s financial statements.

method’. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using interest rates that are denominated in the currency in which the benefits will be paid, and that have terms of maturity approximating to the terms of the liability.

Provision has been made in the Financial Statements for retiring gratuities from the first year of service for all employees, in conformity with LKAS 19 - “Employee Benefits”. Actuarial gain or loss are recognised in Other Comprehensive Income (OCI) in the period which it arises.

However, according to the Payment of Gratuity Act No. 12 of 1983, the liability for payment to an employee arises only after the completion of 5 years continued service. The liability is not externally funded.

5. StanDaRD iSSUeD BUt not Yet eFFeCtiVe

5.1 SLFRS 16 – LeasesSLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.

SLFRS 16 replaces LKAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

At the commencement date of a lease, a lessee will recognise a liability to make lease payments (lease liability) and an



6. ReVenUe

Group CompanyYear ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Accommodation, Food and Beverage 1,981,478,263 1,781,936,657 505,127,014 507,484,340Others (Hotel Operations) 57,464,640 60,123,960 10,712,760 15,457,290 2,038,942,903 1,842,060,617 515,839,774 522,941,630

7. DiViDenD inCome


Income from Investments - Subsidiaries - - - 58,465,748 - - - 58,465,748

8. otHeR opeRatinG inCome anD GainS


Rental Income from - Others 6,250,221 5,831,492 1,570,782 1,461,848Profit on Disposal of Property Plant and Equipment 329,728 756,317 - -Sundry Income 11,203,871 7,305,727 - 319,122Exchange gains on Operations 22,574,354 47,109,794 885,272 11,683,059Foreign Currency Encashment 2,233,230 687,953 484,141 687,953Reversal of bad debt provision - 4,448,030 - 1,530,176 42,591,404 66,139,313 2,940,195 15,682,158


9. FinanCe CoSt anD inCome

9.1 Finance Costs Group CompanyYear ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Interest Expense on Overdrafts 10,112,640 3,164,041 181,703 156,119Interest Expense on Loans and Borrowings - Related Parties 35,666,191 19,636,221 49,732,828 22,067,836Interest Expense on Loans and Borrowings - Others 32,483,312 25,942,232 15,323,366 13,482,905Exchange Loss on Loans 22,186,462 - 11,883,561 -Fair Value Loss on Forward Exchange Contracts - 289,523 - 15,000 100,448,605 49,032,017 77,121,458 35,721,860

9.2 Finance Income Group CompanyYear ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Interest Income from - Related Parties - - 191,683 479,565Interest Income from - Others 6,143,026 7,284,156 584,102 1,174,990Exchange gains on Loans - 6,889,458 - 3,121,378Fair Value Gain on Forward Exchange Contracts 9,043,263 1,228,427 - - 15,186,289 15,402,041 775,785 4,775,933

10. pRoFit BeFoRe taX

Group CompanyYear ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.Stated After Charging/(Crediting)Included in Administrative ExpensesEmployees Benefits including the following

- Defined Benefit Plan Costs - Gratuity 15,135,640 13,817,131 3,076,260 3,300,897- Defined Contribution Plan Costs - EPF and ETF 44,776,542 35,129,118 10,663,862 8,249,033

Depreciation and Amortization 190,474,241 174,201,397 57,897,268 56,316,225(Gain)/Loss on Disposal of Property, Plant and Equipment 14,113,592 (756,317) 13,076,630 1,620Directors' Fees and Remuneration 4,000,000 4,122,063 4,000,000 4,122,063Auditors' Remuneration (Fees and Expenses) 3,178,347 2,618,600 1,212,660 904,900Management Fees - - 26,165,199 29,733,960Charge on/(Reversal of) Impairment of Debts 4,906,581 (4,581,293) 1,707,771 (1,530,171)Legal Fees 2,640,208 628,887 1,240,960 46,157Donations 935,325 1,925,682 503,074 -

Included in Selling and Marketing ExpensesAdvertising & Sales Promotion Cost 58,897,946 55,747,094 27,777,660 25,985,816



11. inCome taX eXpenSe


Statement of Profit or lossCurrent Income TaxCurrent Tax Expense on Ordinary Activities

for the Year (11.1) 27,014,186 26,850,720 - 1,847,804(Over)/Under Provision of Current Taxes in Respect of Prior Years (1,683,952) 4,552,335 (1,687,071) 718,287Tax on Dividends 6,495,359 - -Deferred Income TaxDeferred Taxation Charge/(Reversal) 1,623,050 39,698,458 (9,722,053) 4,995,975 26,953,284 77,596,872 (11,409,124) 7,562,066

Statement of Other Comprehensive IncomeDeferred Taxation Charge/(Reversal) (110,022) 72,407,877 105,609 1,822,507 (110,022) 72,407,877 105,609 1,822,507Income Tax Expense Recorded in Total

Comprehensive Income 26,843,262 150,004,749 (11,303,515) 9,384,573

11.1 Reconciliation Between Current Tax Expense and the Accounting Profit

Group Company 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Accounting Profit/(Loss) Before Tax 129,304,459 270,048,968 (92,648,880) 82,792,190Consolidation Adjustment 120,771,321 61,335,178 - -Aggregate Dis-allowable Items 235,514,423 228,202,435 75,757,929 84,352,084Aggregate Allowable Items (324,746,504) (380,096,111) (73,319,864) (143,454,474) 160,843,699 179,490,470 (90,210,815) 23,689,800Tax Loss utilised (11.1.1) (15,225,341) (20,914,474) (2,346,567) (8,291,430)Taxable Profit/(Loss) from Trade Income 145,618,358 158,575,996 (92,557,382) 15,398,370Taxable Profit/(Loss) from Interest Income 23,670,059 8,497,680 - - 169,288,417 167,073,676 (92,557,382) 15,398,370

Income Tax - 14% (2018-12%) 20,386,570 24,471,370 - 1,847,804Income Tax - 28% (2018-28%) 6,627,616 2,379,350 - -Current Income Tax Expense 27,014,186 26,850,720 - 1,847,804


11.1.1 Movement of Tax losses

Group CompanyAs at 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Tax losses brought forward 399,211,343 255,079,083 241,773,195 255,079,083Tax loss - from business combinations - 128,588,832 - -Tax Losses utilised for 17/18 as per final

tax computation - (5,014,458) - (5,014,458)Tax Losses Utilised (15,225,341) (20,914,474) (2,346,567) (8,291,430)Tax losses incurred during the year 92,557,382 41,472,360 92,557,382 -Tax Losses Carried Forward 476,543,384 399,211,343 331,984,010 241,773,195

Effective tax rate 21% 10% 0% 2%

11.1.2 The business profit of the Company and Subsidiaries are liable for income tax at the rate of 14% which is applicable for tourism promotion as per the Inland Revenue Act 24 of 2017 (Up to 31 March 2018, the business profits of the company and subsidiaries were liable for tax at the rate of 12% under the Inland Revenue Act 10 of 2006 and amendments thereto). Other sources of income are taxable at 28%.

11.2 Deferred Tax11.2.1 GroupAs at 31 March 2019 2018 Rs. Rs.Deferred Tax Assets, Liabilities and Income Tax Relates to the Following;Deferred Tax Liability 416,413,574 404,051,653Deferred Tax Assets 59,613,298 48,764,403Net Deferred Tax Liability 356,800,276 355,287,250

Deferred taxation charge/(reversal) - statement of profit or loss/ other comprehensive income Statement of Profit Other Comprehensive or Loss Directly through EquityYear ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 12,361,923 47,937,975 - -Revaluation of Buildings - - - 72,316,343

Deferred Tax AssetsDefined Benefit Plans (1,136,774) (1,158,992) - -Collective Impairment of Trade and Other Receivables (694,677) 227,785 - -Carry Forward of Unused Tax Losses (8,907,422) (7,308,310) - -Actuarial (Gain)/Loss - - (110,022) 91,534 1,623,050 39,698,458 (110,022) 72,407,877



In accordance with changes brought by Inland Revenue Act No. 24 of 2017, Group has:

• Recognised deferred tax relating to revaluation of freehold land

• Recognised deferred tax provision as of 31 March 2019 based on the future tax rate applicable to company (14% & 28%)

Group has recognised deferred tax asset relating to carried forward tax losses for which future taxable profits would be available in excess of the profits arising from the reversal of existing taxable temporary differences based on management's forecast about the future.

Deferred tax assets/liability Statement of Statement Financial Position of Comprehensive IncomeAs at / Year ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 193,515,850 181,153,929 12,361,923 47,937,975Revaluation of Assets 222,897,724 222,897,724 - 72,316,343 416,413,574 404,051,653

Deferred Tax AssetsDefined Benefit Plans 8,561,491 7,424,717 (1,136,774) (1,158,992)Collective Impairment of Trade and Other Receivables 2,038,440 1,343,763 (694,677) 227,785Carry Forward of Unused Tax Losses 47,935,323 39,027,901 (8,907,422) (7,308,310)Actuarial (Gain)/Loss 1,078,044 968,022 (110,022) 91,534 59,613,298 48,764,403 Deferred Income Tax - Income/ (Expense) 1,513,027 112,106,335Net Deferred Tax Liability 356,800,276 355,287,250

11.2.2 CompanyAs at 31 March 2019 2018 Rs. Rs.

Deferred Tax Assets, Liabilities and Income Tax Relates to the Followings ; Deferred Tax Liability 78,444,825 75,056,996Deferred Tax Assets (49,360,050) 36,355,777Net Deferred Tax Liability 29,084,775 38,701,219


Deferred taxation charge/(reversal) - statement or profit or loss/comprehensive income Statement of Profit Other Comprehensive or Loss IncomeYear ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 3,387,829 7,348,827 - -Revaluation of Assets - - - 1,717,030

Deferred Tax AssetsDefined Benefit Plans (305,760) (353,805) - -Collective Impairment of Trade and Other Receivables (174,608) 129,609 - -Carry Forward of Unused Tax Losses (12,629,514) (2,128,656) - -Actuarial (Gain)/Loss - - 105,609 105,477 (9,722,053) 4,995,975 105,609 1,822,507

Deferred tax assets/liability Statement of Statement of Comprehensive Financial Position IncomeAs at / Year ended 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 72,788,341 69,400,512 3,387,829 7,348,827Revaluation of Assets 5,656,484 5,656,484 - 1,717,030 78,444,825 75,056,996

Deferred Tax AssetsDefined Benefit Plans 2,306,171 2,000,411 (305,760) (353,805)Collective Impairment of Trade and Other Receivables 600,426 425,818 (174,608) 129,609Carry Forward of Unused Tax Losses 46,477,761 33,848,247 (12,629,514) (2,128,656) (9,722,053) 6,713,005

Actuarial (Gain)/Loss (24,308) 81,301 105,609 105,477 49,360,050 36,355,777Deferred Income Tax - charge/(reversal) to comprehensive income (9,616,444) 6,818,482Net Deferred Tax Liability/(Assets) 29,084,775 38,701,219

12. eaRninGS peR SHaRe

12.1. Basic Earnings Per Share amounts are calculated by dividing the profit for the year attributable to ordinary equity holders of the Parent / Company by the weighted average number of ordinary shares outstanding during the year.



12.2 The following reflects the income and share data used in the Basic Earnings Per Share computation.


Amounts Used as the Numerator:Profit Attributable to Ordinary Shareholders 38,734,578 118,944,225 (81,239,756) 75,230,124

Year ended 31 March 2019 2018 2019 2018 Number Number Number Number

Number of Ordinary Shares Used as the Denominator:Weighted Average Number of Ordinary Shares in Issue

Applicable to Basic Earnings Per Share 111,525,794 111,525,794 111,525,794 111,525,794Earnings Per Share - Basic 0.35 1.07 (0.73) 0.67

As there were no potential ordinary shares outstanding as at the year end, Diluted Earnings/(Loss) per Share is equal to the Basic Earnings/(Loss) per Share for the year and last year.

13. pRopeRtY, plant anD eQUipment

13.1 Group13.1.1 Gross carrying amounts Balance Additions Disposals Transfers Balance As at As at 01.04.2018 31.03.2019 Rs. Rs. Rs. Rs. Rs.

At CostPlant and Machinery 503,496,321 90,417,568 (3,299,580) - 590,614,309Furniture, Fittings and

Equipment 634,353,640 57,649,573 (24,243,875) 1,741,284 669,500,622Cutlery, Crockery,

Glassware and Silverware 25,617,611 - - (1,741,284) 23,876,327Motor Vehicles 11,950,572 6,600,000 - - 18,550,572 1,175,418,144 154,667,141 (27,543,455) - 1,302,541,830

At ValuationFreehold Land 1,053,907,844 - - - 1,053,907,844Buildings on Freehold Land 1,678,726,053 13,117,202 - - 1,691,843,255Buildings on Leasehold Land 827,675,348 23,276,874 (13,350,030) - 837,602,192 3,560,309,245 36,394,076 (13,350,030) - 3,583,353,291Total Value of Depreciable Assets 4,735,727,389 191,061,217 (40,893,485) - 4,885,895,121


13.1.2 In the course of construction Balance Incurred Disposals Balance As at As at 01.04.2018 31.03.2019 Rs. Rs. Rs. Rs.

Capital Work in Progress - 24,822,123 - 24,822,123 - 24,822,123 - 24,822,123Total Gross Carrying Amount 4,735,727,389 215,883,340 (40,893,485) 4,910,717,244

13.1.3 Depreciation Balance Charge Disposals Transfers Balance As at for the As at 01.04.2018 Year 31.03.2019At Cost Rs. Rs. Rs. Rs. Rs.

Plant and Machinery 317,449,155 53,898,565 (2,856,081) - 368,491,639Furniture, Fittings and Equipment 391,809,686 63,539,157 (20,767,880) 1,155,767 435,736,730Cutlery, Crockery, Glassware

and Silverware 24,930,332 29,795 - (1,155,767) 23,804,360Motor Vehicles 5,766,139 2,176,608 - - 7,942,747 739,955,312 119,644,125 (23,623,961) - 835,975,476

At Valuation Buildings on Freehold Land 2,526,131 37,550,048 - - 40,076,179Buildings on Leasehold Land - 18,760,712 (815,876) - 17,944,836 2,526,131 56,310,760 (815,876) - 58,021,015Total Depreciation 742,481,443 175,954,885 (24,439,837) - 893,996,491



13.1.4 Net book valueAs at 31 March 2019 2018 Rs. Rs.

At ValuationPlant and Machinery 222,122,670 186,047,166Furniture, Fittings and Equipment 233,763,892 242,543,954Cutlery, Crockery, Glassware and Silverware 71,967 687,279Motor Vehicles 10,607,825 6,184,433 466,566,354 435,462,832

At Valuation and subsequent improvementsFreehold Land 1,053,907,844 1,053,907,844Buildings on Freehold Land 1,651,767,076 1,676,199,922Buildings on Leasehold Land 819,657,356 827,675,348 3,525,332,276 3,557,783,114

In the Course of ConstructionBuilding Work in Progress 24,822,123 - 24,822,123 -Total Carrying Amount of Property, Plant and Equipment 4,016,720,753 3,993,245,946

13.1.5 During the financial year, the Group acquired Property, Plant and Equipment to the aggregate value of Rs. 215,883,340 (2018 - Rs.53,286,071/-), the consideration for which was settled by cash.

13.1.6 Certain assets have been transferred in between existing asset categories to be inline with the Parent's policy.

13.1.7 Following companies had stated their properties at revalued amounts. The surplus arising from the revaluation had been transferred to revaluation reserve.


Property ExtentMethod of Valuation and Significant Unobservable Inputs

Range of Estimate for Unobservable Inputs

ValuationDate of

Valuation

Serendib Hotels PLC

Perera Sivaskantha & Company - Incorporated Valuers

Profit Basis of Valuation

Buildings on Freehold Land at Bentota 75,532 Sq. Ft75 Rooms

Average Daily Rate Rate of Return

Rs.15,000 - Rs.20,000 8% - 10%

558,675,000 31-Mar-2018

Dolphin Hotels PLC



Freehold Land & Improvements at WaikkalBuildings on Freehold Land at Waikkal

14A 2R 10P 220,339 Sq. Ft154 Rooms

Average Daily RateRate of Return

Rs. 12,000 - 15,000 8% - 10%

511,000,000 1,337,000,000

31-Mar-2018

Hotel Sigiriya PLC



Buildings and Swimming Pool on Leasehold Land at SigiriyaLand Improvements

65,763 Sq. Ft79 Rooms

Average Daily Rate Rate of Return

Rs. 10,000 - Rs.8,000 8% - 10%

283,200,00010,000,000

31-Mar-2018

Frontier Capital Lanka (Pvt) Limited

Sunil Fernando & Associates (Pvt) Ltd - Chartered Valuers


Freehold Land at MirissaBuilding on Freehold Land at Mirissa

A0 R1 P34 7,235 sq.ft6 Rooms

Average Room Rate Rate of Return

Rs.25,000 - Rs.28,0008% - 10%

156,887,645 113,987,500

31-Aug-2017

Evolution Capital (Pvt) Limited




R1 P38.4 7235 Sq. ft. 8 Rooms

Average Room Rate Rate of Return

25,000 - 30,0008% - 10%

146,805,902 120,679,000

31-Aug-2017

Lantern Villa (Pvt) Limited




R1 P34.00 7235 Sq.ft.8 Rooms

Average Room RateRate of Return

25,000-30,000 8% - 10%

145,495,297 116,037,500

31-Aug-2017

G.W.G. Abeygunawardene - Chartered Valuers

Residual Method of Valuation

Freehold Land at Mirissa R1 P5.24 Rate of Return 8% - 10% 88,000,000 21-Apr-2017



13.1.8 The movement of revaluation reserve and other information are disclosed under note 22.

13.1.9 Description of the above valuation techniques together with narrative descriptions on sensitivity of the fair value measurement to changes in significant unobservable inputs are tabulated below;

Valuation Technique Name of the CompanySignificant unobservable valuation inputs

Sensitivity of the fair value measurement to inputs

Profit Basis of ValuationIn a trade related property the best measure of value is the income generation. It is based on a hypothetical operator who is knowledgeable prudent and efficient rather than actual. The income is estimated taking the potential into account as against the past records of income and expenditure latter is taken on the basis of sector derived expenditure and EBITDA id thus arrived, the residual profits are deducted and the balance as rent for a fully operational unit is either capitalised at a market derived all risk rate or cast into a DCF.

Serendib Hotels PLC

Dolphin Hotels PLC

Sigiriya Hotels PLC


Evolution Capital (Pvt) Limited

Lantern Villa (Pvt) Limited

Average Daily RateDiscount Rate






PositiveNegative

PositiveNegative

PositiveNegative

PositiveNegative

PositiveNegative

PositiveNegative

Residual Method of ValuationResidual valuation is the process of valuing land with development potential. The sum of money available for the purchase of land is calculated from the value of the completed development minus the costs of development.

Lantern Villa (Pvt) Limited Discount Rate Negative


13.2 Company13.2.1 Gross carrying amounts Balance Additions Disposals Balance As at As at 01.04.2018 31.03.2019 Rs. Rs. Rs. Rs.

At CostPlant and Machinery 140,134,475 2,898,133 (2,052,942) 140,979,666Furniture, Fittings and

Equipment 240,396,404 10,527,748 (3,080,795) 247,843,357 380,530,879 13,425,881 (5,133,737) 388,823,023At Valuation and

Subsequent ImprovementFreehold Land 5,719,000 - - 5,719,000Buildings on

Leasehold Land 558,675,000 23,276,874 (13,350,030) 568,601,844 564,394,000 23,276,874 (13,350,030) 574,320,844Total Gross Carrying Amount 944,924,879 36,702,755 (18,483,767) 963,143,867

13.2.2 In the course of construction Balance Incurred Balance as at during the as at 01.04.2018 year 31.03.2019 Rs. Rs. Rs.

Capital work in progress - 22,602,725 22,602,725Total gross carrying amount - 22,602,725 22,602,725

13.2.3 Depreciation Balance Charge for Disposals Balance As at the year As at 01.04.2018 31.03.2019 Rs. Rs. Rs. Rs.

At CostPlant and Machinery 81,585,660 13,317,255 (1,616,286) 93,286,629Furniture, Fittings and

Equipment 149,550,109 25,936,972 (2,634,119) 172,852,962 231,135,769 39,254,227 (4,250,405) 266,139,591

At Valuation and subsequent improvementsBuildings on Leasehold Land - 11,468,266 (815,876) 10,652,390 - 11,468,266 (815,876) 10,652,390Total Depreciation 231,135,769 50,722,493 (5,066,281) 276,791,981



13.2.4 Net book values As at 31 March 2019 2018 Rs. Rs.

At CostPlant and Machinery 47,693,037 58,548,815Furniture, Fittings and Equipment 74,990,395 90,846,295 122,683,432 149,395,110

At Valuation and subsequent improvementsFreehold Land 5,719,000 5,719,000Buildings on Leasehold Land 557,949,454 558,675,000 563,668,454 564,394,000

In the course of constructionCapital work in progress 22,602,725 -Total Carrying Amount of Property, Plant and Equipment 708,954,611 713,789,110

13.2.5 The Company acquired Property, Plant and Equipment to the aggregate value of Rs. 59,305,480/- during the financial year (2018 - 6,536,964/-), the consideration for which was settled by cash.

13.3 The carrying amount of revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows:

Cumulative Depreciation Net Carrying Net Carrying If Assets were Amount AmountAs at 31 March Cost Carried at Cost 2019 2018Class of Asset Rs. Rs. Rs. Rs.

GroupBuildings on Freehold Land 1,340,436,287 194,402,142 1,146,034,145 1,168,374,750Buildings on Leasehold Land 794,513,906 178,689,197 615,824,709 629,066,407

CompanyBuildings on Leasehold Land 527,326,543 99,438,775 427,887,768 436,676,544

13.4 The details of assets pledged as securities for liabilities are set out in note 31.


14. leaSeHolD RiGHt


As at 1 April 27,464,864 29,295,858 25,525,467 27,227,163Amortisation for the Year (1,892,379) (1,830,994) (1,701,696) (1,701,696)As at 31 March 25,572,485 27,464,864 23,823,771 25,525,467

SeRenDiB HotelS plC

The Company has Obtained Leasehold Rights to two lots of Land Situated in Bentota from The Sri Lanka Tourist Board by the agreement dated 19/02/1969 and 28/02/1973 respectively (the lease expires on 01/02/2019 and 28/02/2033 respectively). The management intends to extend the lease period upon expiry.

The lease agreement dated 19/02/1969 has been expired on 01/02/2019 and SLTB has agreed to extend the lease period based on the request made by the company. The new lease rental amount is yet to be communicated by SLTB.

Hotel SiGiRiYa plC

The land situated in Sigiriya has been leased from the Sri Lanka Tourist Board. The initial lease expired on 25 July 2004 and has been renewed by Sri Lanka Tourist Board for a further period of 30 years up to 25 July 2034.

As per the agreements these leases can be renewed at the date of expiry. The Group has constructed buildings on these properties. If the lease agreement is not renewed on the expiration of the lease term, Sri Lanka Tourist Board will pay to the Group the value of the buildings and improvements constructed with the written approval of Sri Lanka Tourist Board as assessed by the Chief Valuer.

15. intanGiBle aSSetS

15.1 Computer Software Group CompanyAs at 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

At CostAt the Beginning of the Year 76,616,666 82,490,839 27,365,394 27,365,394Additions 2,370,893 1,372,616 - -Write off/ Reversal (814,131) (7,246,789) - -At the End of the Year 78,173,428 76,616,666 27,365,394 27,365,394

Amortisation and ImpairmentAt the Beginning of the Year 22,780,316 8,757,070 7,753,529 2,280,450Amortisation 12,626,977 14,023,246 5,473,079 5,473,079Write off/ Reversal (814,131) - - -At the End of the Year 34,593,162 22,780,316 13,226,608 7,753,529Carrying Value 43,580,266 53,836,350 14,138,786 19,611,865



15.1.1 Computer software are amortised over their economic useful life ranging 5-10 years.

15.2 Goodwill Group CompanyAs at 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Balance As at the Beginning of the Year 116,533,450 22,252,564 - -Additions on business combination (13.3) - 94,280,886 -At End of the Year 116,533,450 116,533,450 - -Total Intangible Assets 160,113,716 170,369,800 14,138,786 19,611,865

15.2.1 Goodwill as of year end is attributable to the following. 2019 2018 Rs. Rs.

Investment in Dolphin Hotels PLC 22,252,564 22,252,564Investment in Frontier Capital Lanka (Pvt) Limited 94,280,886 94,280,886 116,533,450 116,533,450

15.2.2 Group annually carries out an impairment test on Goodwill which has an infinite useful life. The caring valued has been determined using value in use. Valuation is carried out using the earnings growth method and the key assumptions in such computations are reviewed each year.

The key assumptions are as follows.

Discount Rate: Risk free rate adjusted by the addition of appropriate risk premium. (15% - 18%)Business Growth: Based on historical growth rate and future business plan (6% - 9%)Inflation Rate: Based on current inflation rate and the percentage of the total cost subject to the inflation (5% - 8%)


16. inVeStmentS in SUBSiDiaRieS

16.1

As at 31 MarchCountry ofIncorporation

Holding - % Cost Market Value Cost Market Value

2019 2018 2019Rs.

2019Rs.

2018Rs.

2018Rs.

Quoted Investments

Dolphin Hotels PLC Sri Lanka 65.18 65.18 207,799,814 546,148,517 207,799,814 535,843,828

Hotel Sigiriya PLC Sri Lanka 63.08 63.08 63,291,375 218,436,378 63,291,375 232,111,752

Total Quoted Investments in Subsidiaries

271,091,189 764,584,895 271,091,189 767,955,580

Non-Quoted

Serendib Leisure Management Ltd.

Sri Lanka 100 100 30,100,000 - 30,100,000 -

Sanctuary Resorts Lanka (Pvt) Ltd.

Sri Lanka 100 100 20 - 20 -

Frontier Capital Lanka (Pvt) Ltd. Sri Lanka 100 100 417,575,806 - 417,575,806 -

Frontier Capital Lanka (Pvt) Ltd. Sri Lanka 100 100 234,500,000 - - -

Total Non-Quoted Investments in Subsidiaries

682,175,826 - 447,675,826 -

Total Net Carrying Value of Investments in Subsidiaries

953,267,015 764,584,895 718,767,015 767,955,580

Other information pertaining to subsidiaries are as follows:

Name of the Subsidiary Name of the Operation Principal place of Business

Dolphin Hotels PLC Hotel Operation Waikkal

Hotel Sigiriya PLC Hotel Operation Sigiriya

Serendib Leisure Management Ltd Hotel Management Colombo

Sanctuary Resorts Lanka (Pvt) Ltd Non - Operating Colombo

Frontier Capital Lanka (Pvt) Ltd Hotel Operation Mirissa

In addition to the above Company has full control over the following sub subsidiaries as at 31 March 2019.

Country Incorporation

Nature of Operations Principal of Business

Holding - %

2019 2018

Evolution Capital (Pvt) Ltd Sri Lanka Renting Out Hotel Property Mirissa 100 100

Lantern Villa (Pvt) Ltd Sri Lanka Renting Out Hotel Property Mirissa 100 100



16.2 Material Partly-Owned SubsidiariesFinancial information of subsidiaries that have material non-controlling interests is provided below:

Proportion of interest held by non-controlling interests % ValueAs at 31 March 2019 2018 2019 2018

Dolphin Hotels PLC 34.82 34.82 71,508,307,422 664,096,247Hotel Sigiriya PLC 36.92 36.92 14,727,362,710 135,492,757

Total Comprehensive income allocated to material non-controlling interest: 2019 2018 Rs. Rs.

Dolphin Hotels PLC 5,109,189,193 23,567,835Hotel Sigiriya PLC 1,189,607,959 8,197,275

summarised financial information of material partly-owned subsidiaries; Dolphin Hotels PLC Hotel Sigiriya PLC 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Current Assets 1,038,234,153 373,999,887 156,930,259 137,391,488Non Current Assets 2,066,825,077 2,049,113,779 367,186,747 359,195,161Current Liabilities 304,344,886 303,623,379 76,923,142 84,987,182Non-Current Liabilities 747,058,186 212,263,933 48,294,549 44,654,620Total Equity 2,053,656,158 1,907,226,354 398,899,315 366,944,847

Revenue 952,909,756 877,784,032 375,610,424 325,235,156Profit Before Tax 176,815,627 189,680,838 41,109,481 47,183,657Profit After Tax 147,177,831 148,976,457 33,548,200 27,230,421Other Comprehensive Income (446,378) (81,291,692) (1,326,966) (5,072,902)Total Comprehensive Income for the year 146,731,453 67,684,765 32,221,234 22,157,519

Dividend paid to non-controlling interest - 11,010,567 - 25,957,714

Cash FlowsNet Cash Flows from operating activities 261,042,852 194,795,293 55,961,156 68,754,735Net Cash Flows from investing activities (589,794,430) (50,262,560) (56,969,670) 53,304,004Net Cash Flows from financing activities 538,984,449 (88,859,900) - (70,403,070)

The information relating to commitment and contingencies of the subsidiaries are disclosed in note 29 to these Financial Statement


16.3 Disposal of SubsidiariesSanctuary Resorts Wilpattu Lanka (Pvt) Ltd., a subsidiary of Serendib Hotels PLC divested its 100% stake in Sanctuary Resorts Wilpattu Lanka (Pvt) Ltd. at a total Consideration of Rs. 20/- on 20 September 2018.

The fair value of assets and liabilities disposed were as follows: Rs.

AssetsTrade and Other Receivables 715,000Cash and Cash Equivalents 1,719 716,719LiabilitiesTrade and Other Payables 1,297,700Bank Overdraft - 1,297,700Total Identifiable Net Assets (580,981)Gain on Disposal 581,001Sales Consideration 20Net cash and cash equivalent disposed (1,719)Net Cash Flow on Disposal of subsidiary (1,699)

17. otHeR FinanCial aSSetS


Other financial assets - Non current (17.1) 212,202,487 272,088,466 206,741,408 264,088,466Other financial assets - Current (17.2) 9,043,262 585,293 - - 221,245,749 272,673,759 206,741,408 264,088,466

17.1 Other Financial Assets - Non CurrentFair Value Through OCI Assets (17.1.1) 212,202,487 272,088,466 206,741,408 264,088,466 212,202,487 272,088,466 206,741,408 264,088,466

17.2 Other Financial Assets - CurrentAssets Measured at Amortised Cost - 585,293 - -Derivative Financial Instruments 9,043,262 - - - 9,043,262 585,293 - -



17.1.1 Fair value through OCI assetsThe Group/ Company has investments in unquoted equity shares of Jada Resorts & SPA (Pvt) Ltd. and Rainforest Ecolodge (Pvt) Ltd.


Jada Resorts & SPA (Pvt) Ltd (15.1.1) 204,010,863 260,088,456 204,010,863 260,088,456Rainforest Ecolodge (Pvt) Ltd (15.1.2) 8,191,624 12,000,010 2,730,545 4,000,010 212,202,487 272,088,466 206,741,408 264,088,466

17.2.1 Movement of the balance - Jada Resorts & SPA (Pvt) Ltd Group Company Rs. Rs.

Balance as at 01.04.2017 318,106,475 318,106,475Change in fair value (58,018,019) (58,018,019)Balance as at 31.03.2018 260,088,456 260,088,456Change in fair value (56,077,593) (56,077,593)Balance as at 31.03.2019 204,010,863 204,010,863

17.2.2 Movement of the balance - Rainforest Ecolodge (Pvt) Ltd Group Company Rs. Rs.

Balance as at 01.04.2017 12,000,010 4,000,010Change in fair value - -Balance as at 31.03.2018 12,000,010 4,000,010Change in fair value (3,808,386) (1,269,465)Balance as at 31.03.2019 8,191,624 2,730,545


The fair value of the unquoted equity shares in Jada Resorts & SPA (Pvt) Ltd is estimated using appropriate valuation techniques. The significant unobservable inputs used in this valuation are given below:

As at 31 March 2019 As at 31 March 2018

Valuation technique

Significant unobservable inputs

Range (weighted average)

Valuation technique

Significant unobservable inputs

Range (weighted average)

Jada Resorts & SPA DCF method Long-term growth rate for cash flows

4% - 8%6.0%

DCF method Long-term growth rate for cash flows

4% - 8%6.0%

Cost of Equity (Ke) 16% - 20%18%

Cost of Equity (Ke) 16% - 20%18%

17.3 Fair Value Reserve Group Company 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Balance At the Beginning of the Year (58,018,019) - (58,018,019) -Fair valuation loss (58,975,270) (58,018,019) (57,347,058) (58,018,019)Balance at the End of the Period (116,993,289) (58,018,019) (115,365,077) (58,018,019)

17.4 The Group / Company has invested in 1,200,001/ 400,001 equity shares of Rainforest Ecolodge (Pvt) Ltd. at Rs. 10 each. The fair value of the unquoted equity shares in Rainforest Ecolodge (Pvt) Ltd is estimated using net asset basis of valuation.

17.5 Assets Measured at Amortised CostAssets measured at amortised cost consist of short term loans given to related companies. These loans are unsecured and were granted in accordance with the Group’s treasury policy.

RelationshipAs at

01.04.2018Rs.

Loans Granted

Rs.

Loans Repayments

Rs.

As at 31.03. 2019

Rs.

Repayment Terms

Rates of Interest

Group

Hemas Holdings PLC Ultimate Parent Company

585,293 - (585,293) - on Demand At a margin over AWPLR

Company


Subsidiary - 5,000,000 (5,000,000) - on Demand At a margin over AWPLR

- 5,000,000 (5,000,000) -



18. inVentoRieS


Food 6,134,152 6,512,999 1,460,416 2,155,022Beverage 8,831,182 7,416,284 2,815,724 2,533,326House Keeping and Maintenance 8,658,222 7,561,011 2,680,836 2,124,483Printing and Stationery 544,882 1,142,371 488,389 473,670Linen, Cutlery & Other 9,592,862 5,588,583 151,943 147,853 33,761,300 28,221,248 7,597,308 7,434,354

19. tRaDe anD otHeR ReCeiVaBleS


Trade Receivable - Related Parties (19.4) 8,663,676 3,691,298 3,999,973 1,106,953Trade Receivable - Other 292,745,699 267,880,348 64,036,395 62,136,562Less: Debtors’ Impairment (19.3) (15,267,071) (10,360,489) (4,288,754) (3,041,560) 286,142,304 261,211,157 63,747,614 60,201,955Other Debtors 70,523 4,971,438 22,126 74,900Advances and Prepayments 43,984,411 73,588,138 6,572,796 19,962,315 44,054,934 78,559,576 6,594,922 20,037,215Non Trade Dues from Related Parties (19.5) 8,818,763 9,182,147 4,845,481 3,961,135Festival Advances (19.6) 2,655,292 1,828,690 7,703 24,366 11,474,055 11,010,837 4,853,184 3,985,501 341,671,293 350,781,570 75,195,720 84,224,671

19.1 Trade Debtors Age Analysis Group Neither past Past due but not impaired Total due nor 30-90 Days 91-120 Days >120 Days impaired

2019 286,142,304 185,867,907 98,454,688 1,819,709 -2018 261,211,157 155,608,962 94,372,964 2,824,042 8,405,189

Company Total Current 30-90 Days 91-120 Days >120 Days

2019 63,747,614 46,194,132 17,411,361 142,121 -2018 60,201,955 41,722,720 17,385,777 392,707 700,751


19.2 The group grants credit approvals to its customers subjected to the internal credit limits which are regularly reviewed and controlled by the Management. The average credit granted to such Debtors are 30 Days.

19.3 Movement in Individual and Collective Impairment During the Year Group Company Individual Collective Total Individual Collective Total Impairment Impairment Impairment Impairment Impairment Impairment Rs. Rs. Rs. Rs. Rs. Rs.

At 31 March 2018 4,881,680 5,478,809 10,360,489 - 3,041,560 3,041,560Impact on Adoption of SLFRS 09 - 782,318 782,318 - 213,903 213,903At 1 April 2018 4,881,680 6,261,127 11,142,807 - 3,255,463 3,255,463Charge/(reversal) to Profit or Loss - 4,124,263 4,124,263 - 1,033,291 1,033,291At 31 March 2019 4,881,680 10,385,391 15,267,071 - 4,288,754 4,288,754

19.4 Trade Dues Receivables from Related Parties Group CompanyAs at 31 March 2019 2018 2019 2018 Relationship Rs. Rs. Rs. Rs.

Hemas Holdings PLC Ultimate Parent Company 37,500 21,947 - -Diethlem Travel Lanka (Pvt) Ltd. Other Related Party 3,348,854 1,324,775 1,749,277 972,040Hemas Aviation (Pvt) Ltd Other Related Party - 8,649 - -Hemas Travels (Pvt) Ltd. Other Related Party 42,750 - - -Kalutara Luxury Resorts (Pvt) Ltd Other Related Party 61,449 - 61,449 -Jada Resorts and Spa (Pvt) Ltd. Other Related Party 5,165,623 2,335,927 2,189,247 134,913Peace Heaven Resorts Ltd Other Related Party 7,500 - - - 8,663,676 3,691,298 3,999,973 1,106,953



19.5 Amounts Due from Related Parties Group CompanyAs at 31 March 2019 2018 2019 2018 Relationship Rs. Rs. Rs. Rs.

Hemas Holdings PLC Ultimate Parent Company 159,977 103,832 145,895 -Hotel Sigiriya PLC Subsidiary - - 818,948 650,477Dolphin Hotels PLC Subsidiary - - 168,208 706,102Serendib Leisure Management Ltd Subsidiary - - 2,046,946 344,396Peace Heaven Resorts Ltd. Other Related Party 972,747 49,271 - -P H Resort (Pvt) Ltd. Other Related Party 699,097 936,881 - 192,976Kammala Hoteliers (Pvt) Ltd. Other Related Party 389,140 - -Kalutara Luxury Resort (Pvt) Ltd Other Related Party 283,562 2,867,450 78,903 78,903Hemas Aviation (Pvt) Ltd Other Related Party 43,241 54,182 -Hemas Travels (Pvt) Ltd. Other Related Party 337,399 14,073 -Jada Resorts and Spa (Pvt) Ltd Other Related Party 2,462,319 974,907 926,439 1,031,531Diethelm Travel Lanka (Pvt) Ltd Other Related Party 271,925 1,154,120Sanctuary Resort Lanka (Pvt) Ltd Other Related Party - - 384,095 956,750Sanctuary Resort Wilpattu Lanka (Pvt) Ltd Other Related Party 257,000 - 257,000 -Frontier Capital Lanka (Pvt) Ltd Other Related Party - - 19,047 -Forbes Air Services (Pvt) Ltd Other Related Party 1,744,257 2,344,427 - -Mowbray Hotels Limited Other Related Party - 499,921 - -Hemtours (Pvt) Ltd Other Related Party - 183,083 - -Diethelm Travel The Maldives Pvt Ltd Other Related Party 320,235 - - -N-able (Pvt) Ltd. Other Related Party 857,588 - - -Atlas Axillia Company (Pvt) Ltd Other Related Party 20,276 - - - 8,818,763 9,182,147 4,845,481 3,961,135

19.6 Festival Advances Group Company 2019 2018 2019 2018Summary Rs. Rs. Rs. Rs.

At the beginning of the year 1,828,690 2,501,876 24,366 1,649,380Loans granted during the year 6,645,194 5,482,609 1,758,700 102,750Less: Repayments during the year (5,818,592) (6,155,795) (1,775,363) (1,727,764)Balance as at end of the year 2,655,292 1,828,690 7,703 24,366


20. CaSH anD SHoRt teRm DepoSitS in tHe Statement oF CaSH FlowS

Components of cash and cash equivalents Group CompanyAs at 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

20.1 Favourable Cash and Cash Equivalent BalancesCash and Bank Balances 442,356,840 302,487,021 56,550,245 42,895,835 442,356,840 302,487,021 56,550,245 42,895,835

20.2 Unfavourable Cash and Cash Equivalent BalancesBank Overdraft (86,633,953) (182,042,706) (29,005,841) (13,453,615)Total Cash and Cash Equivalents for the Purpose

of Cash Flow Statement 355,722,887 120,444,315 27,544,404 29,442,220

21. StateD Capital - CompanY

Number Rs.As at 31 March 2019 2018 2019 2018

21.1 Fully Paid Ordinary Shares Voting Shares 75,514,738 75,514,738 614,282,951 614,282,951Non-Voting Shares 36,011,056 36,011,056 298,838,743 298,838,743

111,525,794 111,525,794 913,121,694 913,121,694

21.1 Rights, Preference and Restrictions of Classes of CapitalThe Holders of Ordinary Shares possess the right to receive dividends as declared from time to time. The holders of voting ordinary shares are entitled to one vote per share at a meeting of the Company.

22. ReSeRVeS

Group CompanyAs at 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.Summary(a) Revenue Reserves - General ReserveBalance at the beginning of the year - 19,940,000 - 14,500,000Transferred to retained earnings - (19,940,000) - (14,500,000)Balance at the end of the year - - - -

(b) Other Component of EquityAsset Revaluation Reserve (22.2) 592,777,221 592,777,221 89,786,770 89,786,770Cash Flow Hedge Reserve (22.3) 1,246,547 (1,065,267) - (1,881,747)Fair Value Reserve (17.3) (116,993,289) (58,018,019) (115,365,077) (58,018,019) 477,030,479 533,693,935 (25,578,307) 29,887,004



22.1 Revenue Reserve which is general reserve represents the amounts set aside by the Directors for general application. During the year of 2018 the Group transferred the entire reserve balance to retained earnings.

22.2 Asset Revaluation Reserve Group CompanyAs at 31 March 2019 2018 2019 2018On: Property, Plant and Equipment Rs. Rs. Rs. Rs.

Balance as at the beginning of the year 592,777,221 552,631,393 89,786,770 83,929,133Adjustment in respect of changes in Group Holding - 72,553,730 - -Revaluation Surplus during the year - 15,271,975 - 7,574,667Deferred Tax attributable to Revaluation Surplus - (47,679,877) - (1,717,030)Balance as at the end of the year 592,777,221 592,777,221 89,786,770 89,786,770

22.3 Cash Flow Hedge ReserveThe Group designated its identified foreign currency loans as a hedging instrument against its highly probable, specifically identified future revenue in foreign currency namely apartment revenue. Through which, the company hedged the risk of changes in value of the identified foreign currency loans, caused by the fluctuations in foreign exchange rates.

The effective portion of gain or loss on the hedging instrument is recognised in the cash flow hedge reserve, through Other Comprehensive Income while any ineffective portion is recognised immediately in the statement of profit or loss as finance income/cost. Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, (when the forecast sale occurs). If the forecast sales are no longer expected to occur, the cumulative gain or loss previously recognised in equity is transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction occurs as per hedge agreement.

Group CompanyCash Flow Hedge Reserve 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Balance At the Beginning of the Year (1,065,267) 17,483,940 (1,881,747) (1,486,252)Movement of Cash-flow Hedge Reserve

- Recognised through revenue 2,311,814 2,220,437 1,881,747 8,255,499 - Recognised through foreign exchange - (20,769,644) - (8,650,994)Balance at the End of the Year 1,246,547 (1,065,267) - (1,881,747)


23. inteReSt BeaRinG loanS anD BoRRowinGS

Group 2019 2018 Amount Amount Total Amount Amount Total Repayable Repayable Repayable Repayable Within 1 Year After 1 Year Within 1 Year After 1 Year Rs. Rs. Rs. Rs. Rs. Rs.

Bank Loans (23.1) 288,031,957 590,951,797 878,983,754 139,769,187 149,970,644 289,739,831Loans from

Related Parties (23.2) - - - 310,000,000 - 310,000,000 288,031,957 590,951,797 878,983,754 449,769,187 149,970,644 599,739,831

23.1 Bank Loans As at Loans Repayment Exchange As at 01.04.2018 Obtained Gain 31.03.2019 Rs. Rs. Rs. Rs. Rs.

Bank Loans (23.1.1) 289,739,831 721,050,850 (145,911,825) 14,104,898 878,983,754 289,739,831 721,050,850 (145,911,825) 14,104,898 878,983,754

23.1.1 Bank loans - summary Balance Loans Addition Repayment Exchange Balance As at Obtained on Business loss As at 01.04.2018 Combination 31.03.2019 Rs. Rs. Rs. Rs. Rs. Rs.

Serendib Hotels PLC. 126,576,125 101,730,850 - (60,089,169) 12,344,696 180,562,502Dolphin Hotels PLC. 52,287,349 592,320,000 - (53,335,551) 1,760,202 593,032,000Frontier Capital Lanka (Private) Limited - 27,000,000 - - - 27,000,000Lantern Villa (Pvt) Ltd 52,799,984 - - (15,600,015) - 37,199,969Evolution Capital (Pvt) Ltd 58,076,373 - - (16,887,090) - 41,189,283 289,739,831 721,050,850 - (145,911,825) 14,104,898 878,983,754



23.1.2 Bank loan - DetailedSerendib Hotels PLC

Bank Loans Balance As at

01.04.2018 Rs.

LoansObtained

Rs.

Addition Balance

CombinationRs.

RepaymentRs.

Exchange Gain

Rs.

Balance As at

31.03.2019 Rs.

Repayment Terms

Rates of Interest

Hatton National Bank PLC-Foreign Currency-EUR 660,000-Non Current

10,576,125 - - (10,089,169) (486,956) - 60 Instalments from Sep’ 13s

At a Margin over 3 Months EURIBOR

150 Mn - Loan from Hatton National BANK - June 2017

116,000,000 - - (50,000,000) - 66,000,000 15 Installments from July’ 17

At a Margin over 1 Months AWPLR

SCB LOAN - 650,000 30.07.18

- 101,730,850 - - 12,831,652 114,562,502 Repayable within one year

At a margin Over 3 Months EURIBOR

126,576,125 101,730,850 - (60,089,169) 12,344,696 180,562,502

Dolphin Hotels PLC


01.04.2018 Rs.

LoansObtained

Rs.

Addition Balance

CombinationRs.

RepaymentRs.

Exchange Gain

Rs.

Balance As at

31.03.2019 Rs.

Repayment Terms

Rates of Interest

Commercial Bank of Ceylon PLC-Foreign Currency (GBP) Loan

52,287,349 - - (53,335,551) 1,048,202 - 72 Instalments from Nov' 12

At a margin Over 1 Month

Euro LIBO

HSBC - GBP 1.2 Mn - 276,720,000 - - 712,000 277,432,000 60 Instalments from April’ 19


EURIBOR

HSBC - EUR 1.6 Mn - 315,600,000 - - 315,600,000 60 Instalments from April’ 19


GBP LIBO

52,287,349 592,320,000 (53,335,551) 1,760,202 593,032,000

Frontier Capital Lanka (Private) Limited

HNB - LKR - 27,000,000 - - - 27,000,000 Repayable within 2 months

At a margin Over Monthly

AWPLR

- 27,000,000 - - - 27,000,000


23. inteReSt BeaRinG loanS anD BoRRowinGS (Contd.)

Lantern Villa (Pvt) Ltd


01.04.2018 Rs.

LoansObtained

Rs.

Addition Balance

CombinationRs.

RepaymentRs.

Exchange Gain

Rs.

Balance As at

31.03.2019 Rs.

Repayment Terms

Rates of Interest

DFCC - LKR 14,666,656 - (4,333,342) - 10,333,314 60 Instalments from Oct'14

At a margin Over Monthly AWPLR

DFCC - LKR 38,133,328 - (11,266,673) - 26,866,655 60 Instalments from Nov'15


52,799,984 - (15,600,015) - 37,199,969

Evolution Capital (Pvt) Ltd

DFCC - LKR 37,927,073 - (11,202,509) 26,724,564 60 Instalments from Oct’14


Nations Development Bank

20,149,300 - - (5,684,581) 14,464,719 60 Instalments from Feb’16

Fixed Rate p.a.

58,076,373 - (16,887,090) 41,189,283

289,739,831 721,050,850 (145,911,825) 14,104,898 878,983,754

The disclosures relating to assets pledged as securities for above facilities are made in note 31.

23.2 Related Party LoansAs at 31 March Relationship 2019 2018 Repayment Rates of Terms Interest

Hemas Holding PLC Parent Company - 310,000,000 On Demand At a Margin over one Month AWPLR

As at Loans Repayment As at 01.04.2018 Obtained 31.03.2019 Rs. Rs. Rs. Rs.

Hemas Holding PLC 310,000,000 - (310,000,000) - 310,000,000 - (310,000,000) -



23.3 Company

2019 2018 Amount Amount Total Amount Amount Total Repayable Repayable Repayable Repayable Within After Within After 1 Year 1 Year 1 Year 1 Year Rs. Rs. Rs. Rs. Rs. Rs.

Bank Loans (23.3.1) 164,562,502 16,000,000 180,562,502 60,576,125 66,000,000 126,576,125Loans from Related Parties (23.3.2) 559,460,000 - 559,460,000 340,000,000 - 340,000,000 724,022,502 16,000,000 740,022,502 400,576,125 66,000,000 466,576,125

23.3.1 Bank loans As at Loans Repayment Exchange As at 01.04.2018 Obtained Gain 31.03.2019 Rs. Rs. Rs. Rs. Rs.

Bank Loans 126,576,125 101,730,850 (60,089,169) 12,344,696 180,562,502 126,576,125 101,730,850 (60,089,169) 12,344,696 180,562,502

23.3.2 Loans from related parties

Relationship Repayment Terms Rates of Interest 2019Rs.

2018Rs.

Hemas Holding PLC Parent Company On Demand At a Margin over one Month AWPLR

- 310,000,000

Hotel Sigiriya PLC Subsidiary Company On Demand At a Margin over one Month AWPLR

30,000,000 -

Dolphin Hotels PLC Subsidiary Company On Demand At a margin over AWPLR 118,000,000 30,000,000

Dolphin Hotels PLC Subsidiary Company On Demand At a margin over 1 Month GBP LIBOR

253,660,000 -

Dolphin Hotels PLC Subsidiary Company On Demand At a margin over 1 Month EURIBOR

157,800,000 -

559,460,000 340,000,000


23. inteReSt BeaRinG loanS anD BoRRowinGS (Contd.)

Movement of Loans from related parties As at Loans Repayment As at 01.04.2018 Obtained 31.03.2019 Rs. Rs. Rs. Rs.

Hemas Holdings PLC - LKR Loan 310,000,000 - (310,000,000) -Hotel Sigiriya PLC - LKR Loan - 35,000,000 (5,000,000) 30,000,000Dolphin Hotels PLC - LKR Loan 30,000,000 - (30,000,000) -Dolphin Hotels PLC - LKR Loan - 118,000,000 - 118,000,000Dolphin Hotels PLC - GBP Loan - 253,660,000 - 253,660,000Dolphin Hotels PLC - EUR Loan - 157,800,000 - 157,800,000 340,000,000 564,460,000 (345,000,000) 559,460,000

24. RetiRement BeneFit oBliGation


Balance at beginning of the year 59,367,413 56,493,585 14,288,652 14,281,838Acquisition of subsidiary - 1,268,250 - -Charge for the year (24.1) 15,135,640 13,817,131 3,076,260 3,300,897Benefits Paid (7,773,437) (5,744,153) (1,062,300) (2,318,322)Transfers (1,940,090) (4,552,207) 924,384 -Actuarial (Gain)/Loss (Note 24.2) 785,874 (1,915,193) (754,348) (975,761)Balance at the end of the year 65,575,400 59,367,413 16,472,648 14,288,652

24.1 Post Employment Benefit Expenses forCurrent service cost 8,902,062 6,982,971 1,575,952 1,587,076Interest cost 6,233,578 6,834,160 1,500,308 1,713,821 15,135,640 13,817,131 3,076,260 3,300,897

24.2 Actuarial (Gain)/Loss Immediately Recognised in other Comprehensive IncomeDue to experience (206,543) (1,828,018) (1,125,474) (942,845)Due to changes in financial assumptions (2,991,923) (265,862) (678,992) (32,916)Due to changes in demographic assumptions 3,984,340 178,687 1,050,118 - 785,874 (1,915,193) (754,348) (975,761)

Messer's K.A Pandith Actuaries, consultants and Actuaries, carried out an actuarial valuation of the defined benefit plan gratuity on 31 March 2019. Appropriate and compatible assumptions were used in determining the cost of retirement benefits. The principle assumptions used as follows:



24.3 The Principal Assumptions used were as follows; Group Company 2019 2018 2019 2018

a) Demographic AssumptionsRetirement Age 55 Years 55 Years 55 Years 55 Years

b) Financial AssumptionsDiscount Rate 11.5% 10.5% 11.5% 10.5%Future Salary Increment Rate 8.5% 8.5% 8.5% 8.5%

24.4 Sensitivity of Assumptions Employed in Actuarial ValuationThe following table demonstrates the sensitivity to a reasonable possible change in the key assumptions used, with all other variables held constant in the employment benefit liability measurement.

The sensitivity of the Statement of Profit or Loss and Statement of Financial Position is the effect of the assumed changes in discount rate and salary increment rate on the Profit or Loss and Employment Benefit Obligation for the year.

Sensitivity Effect on Defined Benefit Obligation Delta Effect of +1% Delta Effect of (-1%)Group 2019 2018 2019 2018

Increase/(Decrease) in Discount Rate (2,099,020) (3,976,117) 2,312,931 6,931,251Increase/(Decrease) in Salary Increment Rate 2,357,360 6,992,633 (2,173,335) (4,109,601)Increase/(Decrease) in Employee Turnover 254,970 742,329 (290,224) (859,814)

Sensitivity Effect on Defined Benefit Obligation Delta Effect of +1% Delta Effect of (-1%)Company 2019 2018 2019 2018

Increase/(Decrease) in Discount Rate (620,470) (1,122,496) 678,992 1,297,410Increase/(Decrease) in Salary Increment Rate 691,991 1,310,172 (642,516) (1,151,610)Increase/(Decrease) in Employee Turnover 96,441 176,789 (106,398) (201,967)


24.5 Following payments are expected weighted average life span obligation on the future years:


Years from the Current Period1st Following Year 12,276,489 3,639,669 2,234,552 749,4042nd Following Year 8,473,272 2,216,740 3,338,428 564,6403rd Following Year 9,249,910 6,433,479 3,584,302 1,389,9374th Following Year 7,803,011 4,571,783 1,594,055 2,768,3765th Following Year 7,733,381 3,167,250 1,985,586 566,964Sum of 6 Years to 10 38,243,234 35,225,710 8,362,222 6,723,799

25. tRaDe anD otHeR paYaBleS


Trade Payable - Non Related Party 60,246,273 49,923,011 10,455,977 10,004,150Amounts due to Related Parties (25.1) 26,680,238 22,821,093 14,011,770 13,333,145Contract liabilities 54,974,115 54,449,106 21,673,219 18,427,264Other payable 292,319,725 211,582,801 97,175,093 72,581,572 434,220,351 338,776,011 143,316,059 114,346,131

25.1 Amounts due to Related Parties Group CompanyAs at 31 March 2019 2018 2019 2018 Relationship Rs. Rs. Rs. Rs.

Hemas Holdings PLC Ultimate Parent Company 10,201,206 9,763,735 975,233 4,132,514Dolphin Hotels PLC Subsidiary - - 1,871,268 245,925Hotel Sigiriya PLC Subsidiary - - 519,201 43,956Serendib Leisure Management Ltd. Subsidiary - - 8,011,853 6,683,484P H Resort (Pvt) Ltd. Other Related Party 1,122,185 1,488,407 655,276 977,143Diethelm Travels Ltd. Other Related Party 702,033 954,720 409,044 296,709Peace Haven Resorts Ltd. Other Related Party - 80,000 - -Jada Resorts and Spa (Pvt) Ltd. Other Related Party 1,868,820 1,302,508 1,317,297 556,902Kalutara Luxury Resort (Pvt) Ltd Other Related Party 80,062 80,062Hemas Corporate Services Ltd. Other Related Party 855,885 923,405 17,983 195,007Hemas Developments (Pvt) Ltd. Other Related Party 2,746,330 2,413,828 - -Hemas Travels (Pvt) Ltd. Other Related Party 3,451,903 85,600 - 85,600Forbes Air Services Other Related Party 4,650,000 4,829,630 - -N-Able (Pvt) Ltd. Other Related Party 145,335 526,065 - -Vishwa BPO (Pvt) Ltd Other Related Party 715,940 453,195 158,553 115,905Atlas Axillia Company (Pvt) Ltd Other Related Party 20,005 - - -Hemas Aviation (Pvt) Ltd Other Related Party 120,534 - - - 26,680,238 22,821,093 14,011,770 13,333,145



25.2 The group through its central procurement team negotiates for the best credit terms while ensuring for quality, Price and time when deciding on its suppliers to procure. The average credit period for the group is 60 days.

27. DiViDenDS paYaBle


Unclaimed Dividends 9,498,386 8,102,747 3,201,691 3,201,691 9,498,386 8,102,747 3,201,691 3,201,691

27. otHeR FinanCial liaBilitieS Group CompanyAs at 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Derivative Financial Instruments 269,000 4,638,851 - - 269,000 4,638,851 - -

28. ReClaSSiFiCation oF CompaRatiVe inFoRmationThe Group/ Company has changed its presentation of Revenue, Cost of Sale, Other Income, Sales and Marketing Expenses, Administrative Expenses and Finance Cost and Finance Income in the Statement of Profit or Loss and Cash and Cash Equivalents, Trade and Other receivables, Trade and Other Payables, Other Financial Liabilities and Bank Overdraft in the Statement of Financial Position for better presentation of financial information. The management has reasonable evidence that such presentation would be more relevant for the understanding of the entity's financial performance to the user.


The effect of the reclassification on financial statements is summarised below.

28.1 GROUP As previously Increase Reclassified reported /decrease 31.03.2018 31.03.2018 Rs. Rs. Rs.

Revenue 1,875,799,414 (33,738,797) 1,842,060,617Cost of Sales (502,828,068) 28,541,888 (474,286,180) 1,372,971,346 (5,196,909) 1,367,774,437

Other Operating Income and Gains 55,949,348 10,189,965 66,139,313Sales and Marketing Expenses (55,743,165) (3,929) (55,747,094)Administrative Expenses (1,068,540,189) (5,947,523) (1,074,487,712)Operating profit 304,637,340 (958,396) 303,678,944

Finance Cost (48,742,494) (289,523) (49,032,017)Finance Income 14,154,122 1,247,919 15,402,041Profit Before tax 270,048,968 - 270,048,968Income Tax Expense (77,596,872) - (77,596,872)Profit for the Year 192,452,096 - 192,452,096

Current AssetsTrade and Other receivables 350,521,708 259,862 350,781,570Cash and Cash Equivalents 233,181,231 69,305,790 302,487,021 350,521,708 259,862 350,781,570

Current LiabilitiesTrade and Other Payables 343,160,112 (4,384,101) 338,776,011Other Financial Liabilities - 4,638,851 4,638,851Bank Overdraft 112,731,804 69,310,902 182,042,706 455,891,916 69,565,652 525,457,568 (105,370,208) (69,305,790) (174,675,998)



28.2 COMPANY As previously Increase Reclassified reported /decrease 31.03.2018 31.03.2018 Rs. Rs. Rs.

Revenue 533,643,164 (10,701,535) 522,941,630Cost of Sales (135,976,598) 10,701,535 (125,275,064) 397,666,566 - 397,666,566

Dividend Income 58,465,748 - 58,465,748Other Operating Income and Gains 14,136,982 1,545,176 15,682,158Sales and Marketing Expenses (25,985,816) - (25,985,816)Administrative Expenses (330,560,363) (1,530,176) (332,090,539)Operating profit 113,723,117 15,000 113,738,117

Finance Cost (35,706,860) (15,000) (35,721,860)Finance Income 4,775,933 - 4,775,933Loss on Deemed Disposal of Investment in Associates - - -Profit Before tax 82,792,190 - 82,792,190Income Tax Expense (7,562,066) - (7,562,066)Profit for the Year 75,230,124 - 75,230,124

29. CommitmentS anD ContinGenCieS

29.1 Commitments29.1.1 Serendib Hotels PLC has given Corporate Guarantees to Kalutara Luxury Hotel & Resort (Pvt) Ltd (Other Related Party) for USD 5.2Mn (Equivalent to LKR. 790.3Mn) in favour of The Hongkong and Shanghai Banking Corporation Limited.

29.1.2 Lease Commitments Group CompanyAs at 31 March 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Lease rental due on non cancellable operating leases:Within one Year 3,307,527 3,732,507 945,027 950,007One to five Years 13,741,998 13,269,484 4,291,998 3,819,484More than five Years 40,596,087 44,376,128 16,183,587 17,601,128 57,645,612 61,378,119 21,420,612 22,370,619

Lease Commitments Leased property Lessor

Serendib Hotels PLC Land Sri Lanka Tourist BoardHotel Sigiriya PLC Land Sri Lanka Tourist Board


29.1.3 There were no significant capital commitments as at the reporting date.

29.2 Contingencies

29.2.1 Wennappuwa Pradeshiya Sabha has filed a case against Club Hotel Dolphin at Magistrate Court- Marawila, charged for operating the Hotel without the required permit issued by the Pradeshiya Sabha in the years 2016 & 2017.

29.2.2 Weligama Pradeshiya Sabha has filed a case against Frontier Capital at Magistrate Court- Matara, charged for operating the Hotel without the required permit issued by the Pradeshiya Sabha in the years 2018.

29.2.3 P.M.P. Kumara Adikari has filed a case against Serendib Leisure Management Limited at claimed for back compensation and reinstatement on grounds of wrongful termination on misconduct charges.

30. eVentS oCCURRinG aFteR tHe Date oF tHe Statement oF FinanCial poSition

There have been no material events occurring after the reporting date that require adjustments to or disclosure in the Financial Statements.

31. aSSetS pleDGeD

The following Assets have been pledged as Security for liabilities.

Nature of Assets Nature of Liability

Carrying Amount of

Pledged Asset2019

Rs.

Property, Plant and

Equipment2018

Rs.

Included Under

Dolphin Hotels PLC

Freehold Land and Building

Primary Mortgage Bond No.1425 dated 11/02/2019 for Rs.592,320,000 executed over Club Hotel Dolphin's Hotel premises at Waikkal owned by the company to HSBC. (GBP Loan of 1.2 Mn and EURO Loan of 1.6M)

1,861,117,202 - Property, Plant and Equipment

Lantern Villa (Pvt) Ltd


Primary Mortgage of Rs.42 Mn over allotments of Land marked Lot X depicted in Plan No. 3625B dated 07/12/2010 made by M.L.M Razmi Licensed Surveyor and Lot 1 depicted in Plan No. 21031 dated 28/11/2010 made by M.G.Nazoor Licensed Surveyor together containing in extent A0-R1-P38.4 situated at Kamburugamuwa Village in Weligam Pradeshiya Sabaha in District of Matara together with everything else standing thereon owned by the Company.

Further mortgage of Rs. 20 Mn over the allotments of Land marked Lot X depicted in PLan No. 3625B dated 07/12/2010 made by M.L.M Razmi Licensed Surveyor and Lot 1 depicted in Plan No. 21031 dated 28/11/2010 made by M.G.Nazoor Licensed Surveyor together containing in extent A0-R1-P38.4 situated at Kamburugamuwa Village in Weligam Pradeshiya Sabaha in District of Matara together with everything else standing thereon owned by the Company.

346,501,689 286,033,385 Property, Plant and Equipment



Nature of Assets Nature of Liability

Carrying Amount of

Pledged Asset2019

Rs.

Property, Plant and

Equipment2018

Rs.

Included Under

Evolution Capital (Pvt) Ltd


Primary fixed mortgage of R. 20 Mn over land marked as Lot 0003 in zone 3 Cadastral Map No. 820079 made by Surveyor General, situated in Talaramba containing in extent of 0A-0R-28.05P owned by Lantern Villa (Private) Limited.

Primary fixed mortgage of R. 11 Mn over land marked as Lot 1 in zone 3 Cadastral Map No. 820079 made by Surveyor General, situated in Talaramba containing in extent of 0A-0R-19.041P owned by Lantern Villa (Private) Limited.

Rs.42 Mn Over the allotments of Land marked as Lot 1 and 2 depicted in Plan No. 21031 dated 28/11/2010 made by M.G.Nazoor Licensed Surveyor together containing in extent A0-R1-P34 situated at Kamburugamuwa in Weligam Korale in the District of Matara together with everything else standing thereon owned by the Company.

264,356,744 266,388,377 Property, Plant and Equipment

32. RelateD paRtY DiSCloSUReS

32.1 Terms and Conditions of Transactions with Related PartiesTransactions with related parties are carried out in the ordinary course of the business and are at arms length. Outstanding current account balances at year end are unsecured, interest free and settlement occurs in cash. Interest bearing borrowings are at pre-determined interest rates and terms.

32.2 Non-Recurrent Related Party TransactionsThere were no other non-recurrent Related Party Transactions which in aggregate value exceeds 10% of the equity or 5% of the total assets whichever is lower of the Company as per 31 March 2018 audited financial statements, which required additional disclosures in the 2018/19 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13(c) of the Security Exchange Commission Act. Other than the transactions disclosed in the Annual Report of the Board of Directors on page 79.

32.3 Recurrent Related Party TransactionsThere were no other recurrent related party transactions which in aggregate value exceeds 10% of the revenue of the Company as per 31 March 2018 audited financial Statements, which required additional disclosures in the 2018/19 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13(c) of the Security Exchange Commission Act. Other than the transactions disclosed in the Annual Report of the Board of Directors on page 79.

Terms and conditions on loans granted to related parties are disclosed in Note 17.5 to these financial statements.


32.4

Tr

ansa

ctio

n w

ith R

elat

ed E

ntiti

esD

etai

ls o

f sig

nific

ant r

elat

ed p

arty

tran

sact

ions

are

as

follo

ws:

Nat

ure

of T

rans

actio

n

P

aren

t

Sub

sid

iarie

s

Oth

er R

elat

ed P

artie

s

Tota

l

2019 Rs.

2018 Rs.

2019 Rs.

2018 Rs.

2019 Rs.

2018 Rs.

2019 Rs.

2018 Rs.

Sal

e of

Goo

ds /

Ser

vice

s-

--

-9,

611,

552

-9,

611,

552

-

Inte

rest

Inco

me

Rec

eiva

ble

--

191,

684

--

-19

1,68

4-

Exp

ense

s In

curr

ed o

n B

ehal

f of t

he O

ther

s14

5,89

5-

11,1

93,6

3426

,203

,761

3,99

3,33

18,

056,

320

15,3

32,8

6134

,260

,081

Exp

ense

s In

curr

ed o

n B

ehal

f of t

he

Com

pany

(4,3

33,7

41)

(6,3

69,5

71)

(69,

418,

272)

(102

,553

,449

)(1

9,90

7,21

8)(7

,888

,232

)(9

3,65

9,23

2)(1

16,8

11,2

52)

Set

tlem

ent o

f Due

s fro

m R

elat

ed P

artie

s-

(20,

119)

(10,

589,

295)

(29,

070,

207)

(10,

759,

933)

(14,

659,

091)

(21,

349,

228)

(43,

749,

417)

Set

tlem

ent o

f to

from

Rel

ated

Par

ties

7,49

1,02

222

,389

,280

67,7

46,1

9114

0,34

8,29

57,

245,

263

6,88

0,27

482

,482

,275

169,

617,

849

Loan

s C

apita

l Bor

row

ings

(310

,000

,000

)(5

59,4

60,0

00)

(60,

000,

000)

--

(559

,460

,000

)(3

70,0

00,0

00)

Loan

s C

apita

l Pai

d31

0,00

0,00

020

,000

,000

30,0

00,0

0076

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,000

--

340,

000,

000

96,0

00,0

00

Loan

s C

apita

l Gra

nted

--

5,00

0,00

010

,000

,000

-5,

000,

000

10,0

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00

Loan

Cap

ital R

epay

men

t Rec

eive

d-

-(5

,000

,000

)(1

0,00

0,00

0)-

-(5

,000

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)(1

0,00

0,00

0)

Loan

Inte

rest

(35,

914,

988)

(19,

745,

698)

(13,

817,

838)

(2,4

50,4

67)

--

(49,

732,

826)

(22,

196,

165)

Loan

Inte

rest

Pai

d35

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16,7

60,0

0612

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,460

301,

167

--

47,9

66,4

4817

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** O

ther

Rel

ated

Par

ties

incl

ude

Kal

utar

a Lu

xury

Hot

els

& R

esor

t (P

vt) L

td.

D

ieth

elm

Tra

vels

Lan

ka (P

vt) L

td.

P

H R

esor

ts (P

vt) L

td.

H

emas

Man

ufac

turin

g (P

vt) L

td.

Ja

da R

esor

ts a

nd S

pa (P

vt) L

td.

H

emas

Cor

pora

te S

ervi

ces

Ltd.

V

ishw

a B

PO

(Pvt

) Ltd

.

San

ctua

ry R

esor

ts L

anka

(Pvt

) Ltd

H

emas

Tra

vels

(Pvt

) Ltd

H

emto

urs

(Pvt

) Ltd

32.5

Te

rms

and

Con

diti

ons:

Man

agem

ent F

ees

Man

agem

ent f

ees

are

paid

bas

ed o

n th

e m

anag

emen

t agr

eem

ent w

ith S

eren

dib

Leis

ure

Man

agem

ent L

td.

Exp

ense

s In

curr

edE

xpen

ses

Incu

rred

on

beha

lf of

/ b

y R

elat

ed p

artie

s ar

e re

imbu

rsed

on

actu

al c

ost b

asis

.

Loan

sIn

form

atio

n re

latin

g to

loan

s re

ceiv

ed fr

om /

gra

nted

to re

late

d pa

rtie

s ar

e di

sclo

sed

in n

otes

23

& 1

7 re

spec

tivel

y

Gua

rant

ees

Gua

rant

ees

prov

ided

to re

late

d pa

rtie

s ar

e di

sclo

sed

in n

ote

29.1

.



33. tRanSaCtionS witH KeY manaGement peRSonnel oF tHe CompanY oR itS paRent

The Key Management Personnel of the Company are the Board of Directors of the Company.


a) Key Management Personnel Compensation

Short Term Employee Benefits (Cash & Non-Cash) 4,000,000 4,122,063 4,000,000 4,122,063 4,000,000 4,122,063 4,000,000 4,122,063

No significant transactions had taken place involving Key Management Personnel & their close family members except for what is disclosed above.

b) Directors’ Interest in Contracts

Directors do not have any other interest in contracts than ones mentioned on pages 81 to 82 of the annual report.

34. FaiR ValUe

34.1 Fair Value of Financial InstrumentsThe fair values of the financial assets are stated at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values.

Cash & cash equivalents/ trade & other receivables/related party loans:

The carrying amount approximates their fair value largely due to the short maturities of these instruments.

Fair Value Through Other Comprehensive Income Investments:

These investments are carried at fair value. Refer note 17 for their measurement basis/ assumptions.

Long-term floating - rate receivables/borrowings:

These are evaluated by the Group/Company based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk The fair value of all other financial liabilities approximate their carrying values.


Set out below is a comparison by class of the carrying value of Group's/Company's financial instruments that are carried in the Financial Statements.

2019 2018Group Carrying Fair Value Carrying Fair ValueFinancial assets: Amount Amount

Trade and other receivables 297,686,881 297,686,881 277,193,432 277,193,432Related Party Loans - - 585,293 585,293Fair Value Through OCI Investment 212,202,487 212,202,487 272,088,466 272,088,466Cash & cash equivalents 442,356,840 442,356,840 302,487,021 302,487,021

Financial liabilities:Interest bearing loans and borrowings 878,983,754 878,983,754 599,739,831 599,739,831Trade and other payable 434,220,351 434,220,351 338,776,011 338,776,011Other Financial Liabilities 269,000 269,000 4,638,851 4,638,851Bank Overdraft 86,633,953 86,633,953 182,042,706 182,042,706

CompanyFinancial assets:Trade and other receivables 68,622,924 68,622,924 64,262,356 64,262,356Fair Value Through OCI Investment 206,741,408 206,741,408 264,088,466 264,088,466Cash & cash equivalents 56,550,245 56,550,245 42,895,835 42,895,835

Financial liabilities:Interest bearing loans and borrowings 740,022,502 740,022,502 466,576,125 466,576,125Trade and other payable 143,316,059 143,316,059 114,346,131 114,346,131Bank Overdraft 29,005,841 29,005,841 13,453,615 13,453,615

34.2 Fair Value HierarchyThe Group/Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques.

Level 1: Quoted (unadjusted ) prices in active markets for identical assets or liabilities

Level 2: Other techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data



The Group/Company held the following financial instruments at fair value on the Statement of Financial Position.

GroupFinancial Assets 31-Mar-2019 Level 1 Level 2 Level 3

Fair Value Through OCI Assets

212,202,487 - - 212,202,487

Non-Financial Assets Measured at Fair Value

31-Mar-2019 Level 1 Level 2 Level 3

Land and Building 3,583,353,291 - - 3,583,353,291

Financial Assets 31-Mar-2018 Level 1 Level 2 Level 3

Fair Value Through OCI Investment

272,088,466 - - 272,088,466



Land and Building 3,560,309,245 - - 3,560,309,245

CompanyFinancial Assets 31-Mar-2019 Level 1 Level 2 Level 3


206,741,408 - - 206,741,408



Land and Building 574,320,844 - - 574,320,844

Financial Assets 31-Mar-2018 Level 1 Level 2 Level 3


264,088,466 - - 264,088,466



Land and Building 564,394,000 - - 564,394,000

35. FinanCial RiSK manaGement oBJeCtiVeS anD poliCieS

The Group's principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations and to provide guarantees to support its operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available for sale investments.

The Group are exposed to market risk, credit risk and liquidity risk.

The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by the Board of Directors (BOD) that advises on financial risks and the appropriate financial risk governance framework for the Group. BOD provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance


with group policies and group risk appetite. It is Group’s policy that all derivative activities for risk management purposes are required to be in line with the Group treasury policy of Hemas Holdings PLC (The Ultimate Parent of the Company) and to be approved by the Board of Directors of Serendib Hotels PLC.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

35.1 Market RiskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, fair value through OCI investments and derivative financial instruments.

The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the entity’s financial performance.

35.1.1 Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of change in market interest rates relates primarily to the Group's long term debt obligations with floating interest rates. The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

Interest rates sensitivityThe following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group's/Company’s profit before tax (affected through the impact on floating rate borrowings).

Increase/ (decrease) Effect on in basis points Profit Before Tax

Group2019 + 100 basis points (14,384,438) - 100 basis points 14,384,438

2018 + 100 basis points (6,015,484) - 100 basis points 6,015,484

Company2019 + 100 basis points (7,400,225) - 100 basis points 7,400,225

2018 + 100 basis points (4,663,180) - 100 basis points 4,663,180

35.1.2 Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's/Company’s operating activities (when revenue or expense is denominated in foreign currency).



Currency risk is managed by the Group's treasury function that monitors foreign currency cash inflows and outflows and its closing position on a daily basis. The Group also monitors its exposure to movements in exchange rates on a net basis. The Group mitigates this risk by hedging in Forward Rate Agreements (FRAs) where necessary.

Foreign currency sensitivityA strengthening/weakening of the Rupees as indicated below, against the foreign currencies as at 31 March would have increased/(decreased) Profit or Loss by the amounts shown below.

Foreign Change Effect Currency in exchange on Profit rate Before Tax

Group2019 GBP 1% 3,926,518 EURO 1% 3,354,052 USD 1% 7,486,467

2018 GBP 1% 3,983,502 EURO 1% 3,857,648 USD 1% 8,589,719

Company2019 GBP 1% 612,931 EURO 1% 601,182 USD 1% 2,366,294

2018 GBP 1% 504,318 EURO 1% 661,650 USD 1% 2,704,763

35.1.3 Equity price riskThe Group's listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Board of Directors reviews and approves all equity investment decisions.

35.2 Credit RiskCredit risk is the risk that counter-party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily from trade receivables) and from its financing activities, including deposits with banks.

Trade ReceivablesCustomer credit risk is managed by each company subject to the Group’s established credit policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on the credit risk evaluation model and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored by the management.


Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for Impairment collectively. The calculation is based on expected credit loss. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 19. The company does not hold collateral as security.

Financial Instruments and Cash DepositsCredit risk from balances with banks is managed by the Group’s treasury department in accordance with the Group Treasury policy. Investments of surplus funds are made only with approved counter-parties as per the Treasury Policy and within credit limits assigned to each counter-party. Counter-party credit limits are reviewed by the Board of Directors on an annual basis. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counter-party’s failure. The Group’s maximum exposure to credit risk for the components of the Statement of Financial Position is the carrying amounts as illustrated in Note 19.

35.3 Liquidity RiskThe Group monitors its risk to a shortage of funds by setting up a minimum liquidity level. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual payments.

Group On Demand Less Than 3 to 12 1 to 5 > 5 Total As at 31 March 2019 3 Months Months Years Years Rs. Rs. Rs. Rs. Rs. Rs.

Interest - Bearing Loans and Borrowings - 181,491,897 106,540,060 464,282,997 126,668,800 878,983,754

Trade and Other Payable - 434,220,351 - - - 434,220,351Bank Overdraft 86,633,953 - - - - 86,633,953 86,633,953 615,712,248 106,540,060 464,282,997 126,668,800 1,399,838,058

On Demand Less Than 3 to 12 1 to 5 > 5 Total As at 31 March 2018 3 Months Months Years Years Rs. Rs. Rs. Rs. Rs. Rs.

Interest-Bearing Loans and Borrowings - 49,323,904 426,399,969 169,841,656 - 645,565,529

Trade and Other Payable - 338,776,011 - - - 338,776,011Bank Overdraft 182,042,706 - - - - 182,042,706 182,042,706 388,099,915 426,399,969 169,841,656 - 1,166,384,246

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual payments.



On Demand Less Than 3 to 12 1 to 5 > 5 Total As at 31 March 2019 3 Months Months Years YearsCompany Rs. Rs. Rs. Rs. Rs. Rs.

Interest - Bearing Loans and Borrowings 559,460,000 130,562,502 34,000,000 16,000,000 - 740,022,502

Trade and Other Payable - 143,316,059 - - - 143,316,059Bank Overdraft 29,005,841 - - - - 29,005,841 588,465,841 273,878,561 34,000,000 16,000,000 - 912,344,402

On Demand Less Than 3 to 12 1 to 5 > 5 Total As at 31 March 2018 3 Months Months Years Years Rs. Rs. Rs. Rs. Rs. Rs.

Interest - Bearing Loans and Borrowings - 25,700,910 386,098,591 70,988,625 - 482,788,126Trade and Other Payable - 114,346,131 - - - 114,346,131Bank Overdraft 13,453,615 - - - - 13,453,615 13,453,615 140,047,041 386,098,591 70,988,625 - 610,587,872

35.4 Capital ManagementCapital includes ordinary shares. The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes managing capital during the years ended 31 March 2019 and 31 March 2018. The Group monitors capital using a gearing ratio, which is debt divided by total capital plus debt. The Group’s policy is to keep the gearing ratio below 40%.


Ten Year Financial Review

(Figures in Rs.’000 unless otherwise stated)

Year ended 31 March 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010

Restated RestatedTrading ResultsRevenue 2,038,943 1,842,061 1,769,176 1,768,249 1,575,999 1,278,216 1,447,478 1,047,460 895,775 675,422Profit /(Loss) Before Tax 129,304 270,049 172,824 363,811 328,739 236,979 432,843 111,846 153,496 81,789Profit /(Loss) for the year 102,351 192,452 128,084 301,363 279,472 201,707 367,476 91,261 129,278 64,885Non Controlling Interest 63,617 73,508 60,571 98,304 78,117 49,872 96,273 50,388 12,781 20,917Profit /(Loss) Attributable to Equity Holders of the Parent 38,735 118,944 67,514 203,059 201,356 151,835 271,202 40,874 116,497 43,968

Hotel OperationsAnnual Sales Growth (%) 10.7 4.1 0.1 12.2 23.3 (11.7) 38.2 16.9 32.6 15.7Room Occupancy (%) 79 75 76 79 78 68 77 80 79 65Current Ratio (Times) 1 1 1 1 1 1 1 1 1 1Interest Cover (Times) 2 7 13 16 10 6 11 3 5 6Debt / Total Equity Ratio (%) 28.4 21.7 9.6 13.4 20.0 47.0 53.5 41.4 64.3 7.2

Market/ Shareholder InformationReturn on Equity (%) 3.0 5.4 3.9 9.2 9.9 8.3 16.2 4.7 10.7 6.1Net assets per Share* (Rs.) 22.80 22.97 21.89 22.32 25.45 17.27 16.27 13.85 10.25 8.93Earnings/(Loss) per Share* (Rs.) 0.35 1.07 0.61 1.82 1.81 1.36 2.43 0.82 1.31 0.49Market value per share (Rs.) 15.9 17.5 23.10 27.50 28.00 28.00 23.70 24.80 32.02 19.00Price Earnings Ratio (Times) 46 16 38 15 16 21 10 30 25 38Dividend (per Share) Nil Nil 1.00 1.00 Nil Nil Nil Nil 0.20 Nil

Club Hotel Dolphin was partially closed for refurbishment from May to Sep’2010 and May to Oct’2013.Hotel Serendib was closed for refurbishment from April to Nov ‘2011, and was launched in Dec ‘2011 as Avani Bentota Resort.* Earnings / (Loss) Per Share and Net Assets Per Share: Comparative figures adjusted for rights issue and sub-division of ordinary shares in the proportion of 5:1

Annual Report 2018 | 2019 SUPPLEMENTARY iNfoRMATioN 165

Investor Information

analYSiS oF SHaReHolDeRS

a. Ordinary Voting Shares

31.03.2019 31.03.2018 No. of Total No. of Total Shareholders Holding % Shareholders Holding %

1 - 1,000 696 126,510 0.17 680 128,844 0.17 1,001 - 10,000 221 875,737 1.15 223 887,867 1.17 10,001 - 100,000 123 4,176,521 5.53 127 4,321,642 5.73100,001 - 1,000,000 28 7,352,102 9.74 28 7,192,517 9.52Over 1,000,000 4 62,983,868 83.41 4 62,983,868 83.41Total 1072 75,514,738 100.00 1,062 75,514,738 100.00

Categories of ShareholdersInstitutions 68 66,063,140 87.48 68 66,078,299 87.50Individuals 1004 9,451,598 12.52 994 9,436,439 12.50Total 1,072 75,514,738 100.00 1,062 75,514,738 100.00

b. Ordinary Non-Voting Shares

31.03.2019 31.03.2018 No. of Total No. of Total Shareholders Holding % Shareholders Holding %

1 - 1,000 419 102,369 0.29 412 101,302 0.28 1,001 - 10,000 155 551,032 1.53 161 573,980 1.59 10,001 - 100,000 61 2,219,220 6.16 61 2,066,915 5.75100,001 - 1,000,000 16 3,814,459 10.59 16 5,193,116 14.42Over 1,000,000 4 29,323,976 81.43 3 28,075,743 77.96Total 655 36,011,056 100.00 653 36,011,056 100.00

Categories of ShareholdersInstitutions 60 33,093,212 91.90 60 33,358,392 92.63Individuals 595 2,917,844 8.10 593 2,652,664 7.37Total 655 36,011,056 100.00 653 36,011,056 100.00

SHaRe tRaDinG inFoRmation

a. Ordinary Voting Shares 2019 2018

Highest Market Price (Rs.) 20.10 (09/04/2018) 26.50 (07.06.2017)Lowest Market Price (Rs.) 13.50 (25/03/2019) 17.10 (21.03.2018)Last Traded Price (Rs.) 15.90 (27/03/2019) 17.50 (28.03.2018)No. of Shares Traded 73,001 145,889No. of Trades 192 295Turnover (Rs.) 1,141,810.80 3,215,844.90


b. Ordinary Non-Voting Shares 2019 2018

Highest Market Price (Rs.) 18.00 (04/01/2019) 21.00 (31.05.2017)Lowest Market Price (Rs.) 10.00 (07/03/2019) 13.00 (06.02.2018)Last Traded Price (Rs.) 12.60 (25/03/2019) 15.00 (28.03.2018)No. of Shares Traded 1,385,855 642,239No. of Trades 451 473Turnover (Rs.) 18,583,314.90 11,327,047.90

pUBliC HolDinG

2019 2018 Voting Non-Voting Voting Non-Voting

Public holding as a percentage of the Issued share capital 18.05% 26.64% 18.05% 26.64%Number of shareholders representing the public holding 1,067 653 1,057 651

twentY maJoR SHaReHolDeRS

a. Voting Ordinary SharesAs at 31 March 2019 2018 No of Shares % No. of Shares %

Hemas Holdings PLC 42,802,738 56.68 42,802,738 56.68Lodging Investment (Labuan) Ltd. 18,886,578 25.01 18,886,578 25.01Seylan Bank Ltd./ B.S.M. De Silva 1,294,552 1.71 1,294,552 1.71Mr. E. J. De Soysa 800,000 1.06 800,000 1.06Mrs. B.C.R. Wickramaratne 650,342 0.86 610,627 0.81People’s leasing & Finance PLC/L. P. Hapangama 648,750 0.86 648,750 0.86Acuity Partners (Pvt) Limited/ Mr. B. S. M. De Silva 500,610 0.66 490,000 0.65Mrs. M V Fernando 400,000 0.53 400,000 0.53The Ceylon Chamber of Commerce Account No 02 370,000 0.49 370,000 0.49Dr B. G. S. De Silva 355,747 0.47 355,747 0.47Mrs. C. A. Wenceslaus 286,337 0.38 286,337 0.38Mrs. A. R. Gamage 248,838 0.33 248,838 0.33Dr. R. S. Deraniyagala 225,662 0.30 225,662 0.30People’s Leasing & Finance PLC/

Dr. H.S.D.Soysa & Mrs.G. Soysa 221,290 0.29 221,290 0.29Mrs. H. G. S. Ansell 216,825 0.29 216,825 0.29P. P. S. Fernando 216,000 0.29 216,000 0.29Miss J. C. Wickramaratne 203,145 0.27 203,145 0.27Hemtours (Private) Limited 181,875 0.24 181,875 0.24Mrs. S Poologasundram 161,706 0.21 161,706 0.21Dr. A. N. I. Perera 156,420 0.21 - -Total held by the above shareholders 68,827,415 91.14 68,776,938 91.08Shares held by the balance shareholders 6,687,323 8.86 6,737,800 8.92Total Issued Capital - Voting Ordinary Shares 75,514,738 100.00 75,514,738 100.00

Investor Information (Contd.)


b. Non -Voting Ordinary SharesAs at 31 March 2019 2018 No of Shares % No. of Shares %

Hemas Holdings PLC 19,260,487 53.48 19,260,487 53.48Lodging Investment (Labuan) Ltd. 7,156,750 19.87 7,156,750 19.87Hatton National Bank PLC - Candor Opportunities Fund 1,750,000 4.86 - -Askold (Pvt) Ltd 1,156,739 3.21 999,658 2.78Ceylon Guardian Investment Trust PLC A/C # 01 464,012 1.29 464,400 1.29Trading Partners (Pvt) Ltd 410,986 1.14 410,986 1.14Seylan Bank PLC/ W. D. N. H. Perera 360,450 1.00 - -Shalsri Investments (Pvt) Ltd 341,825 0.95 341,825 0.95J. B. Cocoshell (Pvt) Ltd 329,765 0.92 329,765 0.92Acuity Partners (Pvt) Ltd. /Mr. B. S. M. De Silva 310,790 0.86 309,570 0.86Ceylon Investment PLC A/C # 01 266,296 0.74 266,296 0.74Mr. D. F. G. Dalpethado 254,929 0.71 - -Mrs. C.A.D.S. Woodward 184,723 0.51 184,723 0.51Cocoshell Activated Carbon Company Limited 150,000 0.42 150,000 0.42Mr. H. A. Peiris 139,000 0.39 139,000 0.39Mrs. H. G. S. Ansell 136,300 0.38 136,300 0.38Mr. M.K. Kutubdeen 134,000 0.37 134,000 0.37People’s Leasing & Finance PLC/

Dr. H. S. D Soysa & Mrs.G.Soysa 118,232 0.33 118,232 0.33Dr. H. S. D. Soysa 112,781 0.31 112,781 0.31Mrs. B. Y. La Brooy 100,370 0.28 100,370 0.28Total held by the above shareholders 33,138,435 92.02 33,368,859 92.66Shares held by the balance shareholders 2,872,621 7.98 2,644,197 7.34Total Issued Capital - Non-Voting Ordinary Shares 36,011,056 100.00 36,011,056 100.00


Notice of Meeting

NOTICE IS HEREBY GIVEN that the FIFTY FIRST (51ST) ANNUAL GENERAL MEETING of SERENDIB HOTELS PLC will be held at the Auditorium of The Institute of Chartered Accountants of Sri Lanka, No. 30A, Malalasekara Mawatha, Colombo 7 on Thursday, 25th July 2019 at 9.00 a.m. for the following purposes:

AGENDA1. To receive and consider the Statement of Accounts for the year ended 31st March 2019 together with the Report of the

Directors and Auditors thereon.

2. To re-elect Mr. W M De F Arsakularatne, who retires by rotation in terms of Article 85 of the Articles of Association of the Company.

3. To re-elect Mr. W A T M Wijesinghe, who retires by rotation in terms of Article 85 of the Articles of Association of the Company.

4. To re-elect Ms. S L Speldewinde, who retires by rotation in terms of Article 85 of the Articles of Association of the Company.

5. To re-appoint Messrs. Ernst & Young, Chartered Accountants, as the Auditors of the Company for the ensuing year and authorise the Directors to determine their remuneration.

6. To authorise Directors to determine and make contributions to charity.

7. To consider any other business of which due notice has been given.

By Order of the Board ofSERENDIB HOTELS PLC

HEMAS CORPORATE SERVICES (PVT) LTDSecretaries

Colombo22 May 2019

Notes:(i) A member entitled to attend and vote is entitled to appoint a Proxy to attend and vote on his/her behalf.

(ii) A proxy need not be a member of the Company.

(iii) A Form of Proxy is enclosed for this purpose.

(iv) The instrument appointing a proxy should be deposited at the Registered Office at Hemas House No 75, Braybrooke Place, Colombo 02 not less than 48 hours before holding of the meeting.

(v) Shareholders/ Proxy holders attending the Annual General Meeting are kindly requested to bring with them their National Identity Card or any other valid form of identification.


Notes


Form of Proxy

I/We ....................................................................................................................................................... (NIC No......................................................)

of......................................................................................................................................................................................................................being a

Member/s of SERENDIB HOTELS PLC do hereby appoint ..............................................................................................................................

............................................................................................................................................................... (NIC No.......................................................)

of......................................................................................................................................................................... or failing him/her

Mr. Abbasally Nuruddin Esufally of Colombo 03 or failing himMr. Warnage Malinga De Fonseka Arsakularatne of Colombo 08 or failing himMr. Emmanuel Jude Dillipraj Rajakarier of Colombo 02 or failing himMr. Murtaza Ali Jafferjee of Colombo 04 or failing himDeshamanya Dr. Rohantha Neville Anthony Athukorala of Kalubowila or failing himMr. Steven Mark Enderby of Colombo 05 or failing himMr. Wijesinghe Arachchilage Thilan Manjith Wijesinghe of Colombo 07 or failing himMs. Sharlyn Linda Speldewinde of Mount Lavinia or failing herMr. Stephan Andrew Chojnacki of Colombo 02 or failing himMr. Imtiaz Abidhusein Hassanally Esufally of Colombo 03

as*my/our proxyholder to represent *me/us and to vote on *my/our behalf at the Fifty First (51st) Annual General Meeting of the Company to be held on Thursday, 25th July 2019 at 9.00 a.m. at the Auditorium of The Institute of Chartered Accountants of Sri Lanka, No. 30A, Malalasekara Mawatha, Colombo 7 and any adjournment thereof and at every poll which may be taken in consequence thereof.

For Against

1. To receive and consider the Statement of Accounts for the year ended 31st March 2019 together with the Report of the Directors and Auditors thereon.

2. To re-elect Mr. W M De F Arsakularatne, who retires by rotation in terms of the Articles of Association of the Company.

3. To re-elect Mr. W A T M Wijesinghe, who retires by rotation in terms of the Articles of Association of the Company.

4. To re-elect Ms. S L Speldewinde, who retires by rotation in terms of the Articles of Association of the Company.

5. To re-appoint Messrs. Ernst & Young as Auditors and authorise the Directors to determine their remuneration.

6. To authorise Directors to determine and make Contributions to charity.

Signature of Shareholder/s ............................................................................ NIC/Passport No ....................................................

Dated this ............................................ day of ........................................... 2019.

(i) *Please delete the inappropriate words.

(ii) Instructions regarding completion appear on the reverse hereof.

(Voting Shareholders)


instructions for Completion

1. Kindly perfect the Form of Proxy by filling in legibly your name in full, NIC No. and address and by signing in the space provided. Please fill in the date of signature.

2. Shareholders should fill in the appropriate Form of Proxy as per the class of shares held by them.

3. Please indicate with an “X” in the space provided how your Proxy is to vote on each resolution. If no indication is given, the Proxy in his/her discretion will vote as he/she thinks fit.

4. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association.

5. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

6. In case of joint holders the Form of Proxy must be signed by the first holder.

7. The completed Form of Proxy should be addressed to the Secretaries and deposited at the Registered Office of the Company at “Hemas House”, No. 75, Braybrooke Place, Colombo 02 not less than forty eight (48) hours before the time appointed for the meeting.

Form of Proxy(Voting Shareholders)


Form of Proxy

I/We ....................................................................................................................................................... (NIC No......................................................)

of......................................................................................................................................................................................................................being a

Member/s of SERENDIB HOTELS PLC do hereby appoint ..............................................................................................................................

............................................................................................................................................................... (NIC No.......................................................)

of......................................................................................................................................................................... or failing him/her

Mr. Abbasally Nuruddin Esufally of Colombo 03 or failing himMr. Warnage Malinga De Fonseka Arsakularatne of Colombo 08 or failing himMr. Emmanuel Jude Dillipraj Rajakarier of Colombo 02 or failing himMr. Murtaza Ali Jafferjee of Colombo 04 or failing himDeshamanya Dr. Rohantha Neville Anthony Athukorala of Kalubowila or failing himMr. Steven Mark Enderby of Colombo 05 or failing himMr. Wijesinghe Arachchilage Thilan Manjith Wijesinghe of Colombo 07 or failing himMs. Sharlyn Linda Speldewinde of Mount Lavinia or failing herMr. Stephan Andrew Chojnacki of Colombo 02 or failing himMr. Imtiaz Abidhusein Hassanally Esufally of Colombo 03

as*my/our proxy holder to represent *me/us and /or to speak on *my/our behalf at the Fifty First (51st) Annual General Meeting of the Company to be held on Thursday, 25th July 2019 at 9.00 a.m. at the Auditorium of The Institute of Chartered Accountants of Sri Lanka, No. 30A, Malalasekara Mawatha, Colombo 7 and any adjournment thereof and at every poll which may be taken in consequence thereof.

Signature of Shareholder/s ............................................................................ NIC/Passport No ....................................................

Dated this ............................................ day of ........................................... 2019.

(i) *Please delete the inappropriate words.

(ii) Shareholders of Non-Voting shares are entitled only to attend and speak at the meeting.

(iii) Instructions regarding completion appear on the reverse hereof.

(Non-Voting Shareholders)


instructions for Completion

1. Kindly perfect the appropriate Form of Proxy by filling in legibly your name in full, NIC No. and address and by signing in the space provided. Please fill in the date of signature.

2. Shareholders should fill in the appropriate Form of Proxy as per the class of shares held by them.

3. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

5. In case of joint holders the Form of Proxy must be signed by the first holder.

6. The completed Form of Proxy should be addressed to the Secretaries and deposited at the Registered Office of the Company at “Hemas House”, No. 75, Braybrooke Place, Colombo 02 not less than forty eight (48) hours before the time appointed for the meeting.

Form of Proxy(Non-Voting Shareholders)

Corporate Information

name oF tHe CompanYSerendib Hotels PLC

leGal FoRmA Public Quoted Company with Limited Liability, incorporated on 9th September 1966 under the Companies Ordinance No. 51 of 1938 (Cap 145) and re-registered under the Companies Act No. 7 of 2007.

CompanY ReGiStRation no

PQ 223

BoaRD oF DiReCtoRS

A N Esufally - Chairman (Alt V H A Perera)W M De F ArsakularatneE J D RajakarierM A Jafferjee Deshamanya Dr. R N A AthukoralaS M EnderbyW A T M WijesingheS L Speldewinde (Ms.)S A ChojnackiI A H Esufally

ReGiSteReD oFFiCe “Hemas House”, No. 75, Braybrooke Place,Colombo 02Tel: +94 (11) 4790500-6Fax: +94 (11) 2438933E-mail: [email protected]: www.serendibleisure.com

SeCRetaRieS

Hemas Corporate Services (Pvt) LtdLevel 9, “Hemas House”,No. 75, Braybrooke Place,Colombo 02Tel : + 94 (11) 4731731Fax : + 94 (11) 4731777

ReGiStRaRSSSP Corporate Services (Pvt) Ltd.No. 101, Inner Flower RoadColombo 03Tel : + 94 (11) 2573894Fax : +94 (11) 2573609

manaGinG aGent

Serendib Leisure Management Limited

aUDitoRS

Ernst & YoungChartered Accountants201, De Saram Place,Colombo 10

BanKeRS Commercial Bank of Ceylon PLCHatton National Bank PLCSampath Bank PLCDeutsche Bank AGNations Trust Bank PLCDFCC Bank PLCHong Kong & Shanghai Banking Corp.

Hotel

Avani Bentota Resort, BentotaTel: +94 (34) 4641464 - 7Fax: + 94 (34) 2275313

www.serendibleisure.com

serendib hotels plc...company secretary a1.4 all directors have access to the advice and services of...

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