THE PURSUIT of EXCELLENCE - Colombo Stock Exchange · 2017-08-31 · To provide hospitality services to our customers with a passion for excellence. ... Financial Highlights 02 Events

TANGERINE BEACH HOTELS PLC ANNUAL REPORT 2016 - 2017

EXCELLENCEof

THE PURSUIT

Contents

Our VisionTo be an excellent service provider, with a deep sense of social responsibility.

Our MissionTo achieve our vision, we shall create a selection of holiday packages, caring to our valued customers in keeping with our corporate ideals.

Values & BeliefsTo provide hospitality services to our customers with a passion for excellence.

Reward the providers of capital with satisfactory return.

Foster cohesive work relationship among employees through training to achieve superior customer service.

To protect the environment – our Beaches, Fauna, Flora and contribute to safeguard the bio diversity.

Financial Highlights 02Events of Financial year 2016/17 04Chairman’s Message 08Managing Director’s Review 10Board of Directors 14Management Profile 17Financial Review 20Corporate Governance 23Risk Management 29Corporate Social Responsibility 32SWOT Analysis 33Audit Committee Report 36Remuneration Committee Report 37Related Party Transactions Review Committee Report 38

Financial ReportFinancial Calendar 2016/2017 41Annual Report of the Board of Directors 42Statement of Directors’ Responsibilities 44Independent Auditor’s Report 45Statement of Financial Position 46Income Statement 47Statement of Comprehensive Income 48Statement of Changes in Equity 49Statement of Cash Flows 50Notes to the Financial Statements 51Investor Information 82Value Added Statement 84Graphical Analysis of Value Addition 85Decade at a Glance 86Real Estate Portfolio 87Glossary of Financial Terms 88Notice of Meeting 89Notes 90Form of Proxy 91Corporate Information IBC

01Annual Report 2016/17Tangerine Beach Hotels PLC

Located on a vast expanse of sun-baked, sparkling sand that kiss the rolling surf, amidst gallantly swaying palm trees, the Tangerine Hotel is one of the nation’s choicest options for the ultimate family vacation. The year under review was exceedingly positive and saw an influx of patrons partake in the Tangerine experience. We are meticulous in upholding the high standards of hospitality we have grown to be respected and renowned for.

Our focal point since inception has been our burning passion for excellence in all aspects of service. It is this passion that has been instrumental in generating the repute we have earned as the epitome of luxury hospitality in Sri Lanka. We offer guests of all ages a slice of paradise on a silver platter and that is precisely what has and will continue to keep our patrons coming back for more.

EXCELLENCEof

THE PURSUIT

02 Annual Report 2016/17Tangerine Beach Hotels PLC

Financial Highlights

Year ended 31st March 2017 2016 % Rs.’ 000 Rs.’ 000 Change

Results for the yearGross Revenue 631,271 596,826 6Cost of Sales 231,326 197,503 17Operating Profit Before Interest & Tax 79,622 55,006 45Interest Expense 477 757 (37)Profit /(Loss) Before Tax 131,180 124,360 5Income Tax Expense (25,512) (20,497) 24Profit /(Loss) After Tax 105,668 103,863 2Profit /(Loss) Attributable to Shareholders 105,668 103,863 2Dividend Paid -Ordinary Shareholders 10,000 10,000

Financial Position at the end of the yearShareholders’ Funds (Stated Capital & Reserves) 3,102,744 3,007,012 3Total Assets 3,341,202 3,249,315 3Number of Shares in Issue (Millions) 20 20 -Cash & Cash Equivalent 275,668 233,293 18

RatiosReturn on Shareholders’ Funds (%) 3.41 3.45 (1)Return on Total Assets (%) 3.16 3.20 (1)Year on Year EPS Growth (%) 1.734 129.64 (99)Interest Cover (Times) 224.35 109.54 105Equity / Assets (%) 92.85 92.55 0.32Current Ratio (Times) 4.55 3.57 27Gearing Ratio (Times) 0.005 0.007 -Dividend Cover (Times) 10.57 10.39 -Dividend Yeild ( %) 0.01 0.01 -Dividend Pay- out Ratio 0.09 0.10 -

Information per Ordinary shareEarnings per Share (Rs.) 5.28 5.19 2Dividend per Share (Rs.) 0.5 0.5 -Net Asset per Share (Rs.) 155.14 150.35 3

Market Shareholder InformationMarket Value per Share as at 31st March (Rs.) 59.5 66.70 (11)Market Capitalisation (Rs.’ 000) 1,190,000 1,334,000 (11)Price Earnings Ratio (Times) 11.26 12.84 (12)


REVENUERs.631Mn

Rs.131MnPROFIT BEFORE TAX

Rs.5.28EARNINGS PER SHARE

Rs.3.34BnTOTAL ASSETS

291TOTAL STAFF

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Room Sales 36%

Food and Beverage Sales 59%

Other Hotel Related Revenue 5%

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April 2016A traditional Sinhala & Hindu New Year celebration was held on 14th April with Avurudu Games, Sweet meats and many more activities. Hotel was 98% booked out with many holiday makers from overseas as well as from Sri Lanka.

May 2016A Bhakthi Gee & Interdepartmental lantern competition was held to commemorate Vesak celebration.

June 2016Annual staff trip was arranged to Katharagama.

As part of our corporate social responsibility, Maternity House in Dediyawela is cleaned and necessary equipment was provided.

Events of Financial year 2016/17

July 2016Mighty mini cars club of Sri Lanka had their annual get together at Tangerine where many high profiled guests stayed and commended the facilities & services of the hotel.

Free WIFI connection is given to all rooms and public areas as we are committed to provide an excellent service for all our clients.

August 2016The month of August saw a appointment of Mr Predeep Krishantha as the Executive Chef of the hotel. A graduate from Ceylon Hotel School Mr Pradeep has over 20 years of experience, overseas as well as in Sri Lanka & highly regarded as one of the best in the current generations of chefs.

14 toilets were refurbished in the 400 series rooms as a part of our continuous improvement to all areas in the hotel.

As there were many kids residing in the hotel due to school holidays a kids’ party was arranged. Games, Entertainment & snacks were provided on the house.

September 2016A night club / conference hall formally known as Supper club is renovated & re named as “Waves”. It was re opened on 9th September with modern RGB lighting system. It has become a major revenue center for the hotel with many conferences, Parties and wedding functions taking place since it was re opened. On 14th September Ms Angeline Ondaatjie hosted a lunch from a VIP agent group from Azerbaijan at the newly opened Waves.


October 2016A training program on leadership is conducted for all executive staff by Professor Chandana Jayawardena.

Oktoberfest is held in Paruwa Restaurant for all in house guests.

November 2016As a team building exercise a Cricket match is played between the Supervisory & Management staff.

Annual Pirith ceremony was held as a practice of goodwill for all stakeholders.

December 2016Festive special dinners were organized on 24th (Christmas Eve ) & on 31st (New Year’s Eve) for all in house guests with an extended buffet, games and plenty of entertainment programs.

Tsunami commemoration was held on 26th December. In remembrance of all the victims , lanterns were lit and displayed near the beach fence of the hotel.

January 2017As a part of our corporate social responsibility a cleaning program is carried out at the Nagoda General Hospital Maternity ward by hotel staff.

February 201769th Independence day celebration was held on 4th February. All in house guests & staff participated in chain of events.

March 2017As a part of our corporate social responsibility a Training program is carried out for Navy officers on Table etiquettes.

EntER PaRadIsE

Step into the lap of luxury at the Tangerine Beach Hotel. With your every need catered to, relaxation is your

sole order of the day. Unwind and avail yourself to the arresting views many of our rooms afford. Contemporary

interiors and the finest of modern amenities are a recurrence throughout our 179 room property and pristine

white sands and placid waters are virtually at your doorstep. At just 40 km south from the Western coastline,

paradise is a stone’s throw away.


Rs.80MnOPERATING PROFIT

Chairman’s Message

On behalf of the Board of Directors, I am pleased to present a review of operations and the performance of Tangerine Beach Hotels PLC as reflected in the Audited Financial Statements for the year ended 31st March 2017. Year 2016 began in the backdrop of demanding business conditions.

The Sri Lankan tourism industry, a major foreign currency earner in the economy, continued its growth momentum during 2016. Tourist arrivals crossed the 2 million milestones for the first time in the history, reaching 2,050,832 arrivals, recording an impressive annual growth of 14.0 per cent in 2016. The significant increase in tourism related infrastructure development and investments, increased connectivity through the operation of new airlines and cruise lines, together with country specific promotional campaigns have

contributed to this impressive growth. Increased geo-political tension in major tourist destinations of the world also helped Sri Lanka to attract tourists.

The tourism industry faced increasing challenges on multiple fronts due to negative global and domestic factors. The tourist arrivals to Sri Lanka from China, India and the Middle East dominated the statistics, as the traditional European influx was decreased due to their burdens with economic/political and terrorism issues. The negative impact thus turned in lower volumes and deprived the industry of the much needed revenue.

The revenue for the year under review increased from the previous year despite maintaining of same average occupancy as last year. Despite all these constraints, the Company has 20

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We remain confident of the long-term growth prospects for Tangerine Beach Hotel.

been able to record an impressive operating profit of Rs. 80 million and a net profit after tax of Rs. 105.6 million.

We remain confident of the long-term growth prospects for Tangerine Beach Hotel. We are constantly looking for opportunities and we are working closely with a number of local travel agents and foreign tour operators with a view to securing contracts. We are expecting robust international arrivals growth in Sri Lanka in the coming years. The growth is a result of the Government’s strategy to diversify our source markets while at the same time continuing to develop our traditional European markets.

At Tangerine Beach Hotels, we firmly believe that our brand is strongly underpinned by the hard work of

our team members, who deliver our unique service culture in line with our vision, purpose and values. We continuously focus on initiatives in relation to engagement levels. We continued our strategic focus on staff development and training which commenced in many years ago, reflecting our commitment to retaining our best talent through the allocation of appropriate resources to meet learning and development needs.

To conclude, on behalf of the Board of Directors, I would like to express our gratitude to all stakeholders who contributed to our success in the 2016/17 financial year,especially our customers, guests, shareholders, our staff of Tangerine Beach Hotel,

business partners, suppliers and the communities in which we operate. I also take this opportunity to thank my fellow Board Members, and in particular our Joint Managing Director, for their wise counsel and unfailing support.

Angeline Ondaatjie

For and on behalf ofDesabandu George L. A. Ondaatjie

22nd August 2017


Managing Director’s Review

Rs.3.34BnTOTAL ASSETS

I am pleased to report that we are now well on our way into the execution of the final lap of the strategy, which we believe will bring about meaningful growth. Over the past two years, the company has worked diligently to build efficiencies and grow the business, but there is little we can do about the global economic decline and its impact on the group’s operations and guests, particularly in Sri Lanka where the effects of the weak rand and prolonged drought have pushed up prices of goods and services. All these factors have both a positive and negative impact on Tangerine Beach Hotels PLC.

Sri Lanka EconomyThe performance of the Sri Lankan economy in 2016 reconfirmed the necessity of addressing the deep rooted structural issues if the country is to progress steadily towards a higher growth trajectory, as envisaged. While the government’s recent efforts, with the support of multilateral agencies including the International

Monetary Fund, to formulate policy frameworks required to address these issues as well as emerging challenges are commendable, it is essential that such policies are implemented swiftly with consistency in order to improve productivity and efficiency of the economy and to attract much needed foreign direct investments and boost investments from the domestic private sector, while seamlessly integrating with the global production networks.

The Sri Lankan economy showed early signs of stabilisation during the year 2016 in response to corrective actions adopted by the government and the Central Bank. Unfavourable weather conditions and sluggish global economic recovery caused the economy to grow at a slower rate of 4.4 per cent in 2016 in real terms, in comparison to 4.8 per cent in the previous year, although a steady acceleration in quarterly growth was observed from the second quarter of the year amidst tightened fiscal and monetary policies.

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Although the services account and the secondary income account recorded surpluses, the increase in the trade deficit and the primary income account deficit caused the external current account deficit to widen during 2016. The services account continued to record a surplus during the year led by the increased earnings from tourism, followed by the export of transport, and telecommunications, computer and information services. Earnings from exports of services recorded a growth in 2016.

Sri Lanka TourismSri Lankan tourism industry, a major foreign currency earner in the economy, continued its growth momentum during 2016. Tourist arrivals crossed the 2 million milestone for the first time in the history, reaching 2,050,832 arrivals, recording an impressive annual growth of 14.0 per cent in 2016. The significant increase in tourism related infrastructure development and investments, increased connectivity through the operation of new airlines

and cruise lines, together with country specific promotional campaigns have contributed to this impressive growth. Increased geo-political tension in major tourist destinations of the world also helped Sri Lanka to attract tourists. Earnings from tourism continued its growth momentum in 2016, contributing towards the strengthening of the services account. As a result of the increase in tourist arrivals, together with higher spending and the increased duration of stay by tourists, earnings from tourism grew by 18.0 per cent to US dollars 3,518 million in 2016, in comparison to US dollars 2,981 million in 2015. According to the latest annual survey on tourist spending and duration of stay, conducted by the Sri Lanka Tourism Development Authority, the average spending per day by a tourist increased to US dollars 168.2 in 2016 from US dollars 164.1 in 2015. Further, the average duration of stay by a tourist was estimated at 10.2 days in 2016, which was a marginal improvement in comparison to 10.1 days in 2015.

The healthy growth in earnings from tourism can be mainly attributed to extensive tourism promotional activities and hotel and other related infrastructure development during the post conflict era. The upward trend in the performance of the tourism sector is expected to continue in the coming years, with efforts to uplift Sri Lanka’s brand value through tactical marketing campaigns and continued investments in enhancing the tourism infrastructure of the country. Meanwhile, outflows related to travel are also estimated to have increased by 8.6 per cent to US dollars 1,542 million in 2016.

SustainabilityWith Tangerine Beach Hotel continues to grow, the concept of sustainability has become more important. We discovered new alliances and the on-going expansion of our operations as opportunities not only to strengthen our business but also to spread our message of social consciousness and to do even greater good across the globe. Many of the initiatives that

A very successful year, a team of motivated employees, and profit form the basis for a safe and secure future.


Managing Director’s Review (Contd.)

we have implemented, such as tree planting, environmental protection and remediation, and supporting community crafts, have the potential to be adapted to and replicated in different locations.

Financial ReviewThe revenue of Tangerine Beach Hotel increased by 6% due to foreign currency appreciation and improved performance in Western Europe market segment. During the year under review, the profit before tax Increased by 5% to achieve Rs.105 million, compared to Rs. 103 million in the last year. Further the occupancy also marginally increased from 67.43% to 67.89%. We managed to attract a higher proportion of walk-in clients to our restaurants compared to last year, mainly due to the reputation we had in the past for serving quality signature food. This revenue was earned despite tough competition in the area as a result of the expansion in the number of rooms. Further a dividend of Rs. 0.50 per share amounting to Rs. 10 million is to be declared.

HR Developments• Extensive trainings for existing staff

by Heads of Departments and outside Resource Personnel.

• Promoting of recognised individuals from the existing staff to higher levels.

• Organizing of outward bound team building trainings.

• A new human Resources Manager was recruited to improve the standards.

Foreign Repeat GuestsHighest numbers of repeat client base consist of more than 350 repeaters mainly from UK, Germany, Holland, Russia and Ukraine. All repeaters are welcomed by the management team. Repeaters amenities are given

on arrival followed by a welcome dinner with the management team. Depending on the number of visits, such repeaters are awarded Medals, Privilege cards and Souvenirs etc. to positively acknowledge their loyalty.

Marketing Over ViewThe unrest in the Middle East did have a strong impact on air travel, since majority of the load to Sri Lanka is catered by key Middle Eastern airlines particularly to long haul destinations, Including to Sri Lanka over the Middle Eastern skies. The Brexit issue too posed a threat on British travelling out of the UK on holiday, especially because they have come out of a recession just a few years ago. In the domestic front, the floods in the low lying areas of Colombo and the epidemics particularly, Dengue continued to pose a threat with certain western European countries and the Middle East imposing travel warnings.

On a positive note, we have increased our business in the French market by over 100% YOY, with many French agents featuring the two hotels in their brochures as ideally suited for incentive groups. The “SNAV Congress” of French travel agents which were held in October last year did also create an awareness for the destination. The other new markets that generated a fair volume was the Czech Republic and the Polish markets. Our rates for the French markets were quoted in US dollars.

Even though there were issues caused by immigrants in Europe and Germany in particular, the arrivals showed an increase by over 10% at Tangerine Beach Hotel. The feedback ratings too have been very good with the Hotel consolidating the No 02 slot on Trip Advisor and averaging a healthy 92% on Holiday Check, the German feedback site of the German speaking nationals in the region. The revenue

figures were however lower with the Euro currency having depreciated which had an overall impact on our cost of operations and revenue. Last year’s May to October performance figures dropped drastically with the closure of the Main restaurant and the lounge bar from May to August 2016.

The overall occupancy ratios of Tangerine Beach Hotel was lower in comparison to the previous year due to competitive factors such as 03 star hotels were severely affected with higher category hotels offering much cheaper, incomparable rates in the region offered to Local DMCs for the Far Eastern and Indian markets. However, the overall occupancy YOY wasmarginally higher in 2016/2017. The new market segments that generated volumes were the Polish, Scandinavian markets and the French market being the 02nd largest contributor.

E-Marketing PlatformThe following have been implemented to enhance the presence of Tangerine Beach Hotel on the internet and to achieve a higher number of bookings improving the conversion rate.

Tangerine Beach Hotel recently upgraded the Website with Mobile Responsive Framework (Upgrade to Bootstrap framework) and complete new design layouts with new Images uploaded to the site. More prominence given to images and increase of the fonts to match up with the latest W3C trends.

Creation of Sub domain Architecture i.e. http://royalpalmsbeachhotel.tangerinehotels.com/ Adding sub domains for each hotel site within tangerinehotels.com primary domain and Integration with the Latest Direct Booking Engine which was previously shown as Bookings.lk Reservation Plugin.


Special Offers, Sign up box integration and connectivity with Social Media with direct link with Trip Advisor Reviews. Integration with Google Maps.

These new features enable the hotel to tie up with Thomas Cook Online Campaigns. With Hotels very own payment gateway’s which enables us to receive all payments direct to our account.

We tied up with Hisntant which is a Post Booking Software for all online and direct bookings where hotel has the opportunity to be proactive and engage with the client with special services/value additions upsell or room upgrades / cross sell / upgrade meals / Airport transfers prior to client arrival to hotel.

Inspire digital video platform – Youtube We will be featuring the Tangerine Beach Hotel with Inspire (“WORLDS FIRST DIGITAL MARKETING CONTENT PLATFORM FOR TOURSIM INDUSTRY”) a digital marketing platform to maximize the hotels awareness

The hotel has tied up HotelTravel.com / Makemytrip.com / Goibibo - NEW OTA (Online Travel Agent) in addition we run Social Media Campaigns regularly. Hotel will have their very own 360 Degrees video too. .

Marketing Strategies for 2016/17• Setting up the Hotel’s own

Booking Engine with competitive rates in operation to attract more direct bookings.

• Integration of booking engines with Tangerine Beach Hotel Trip Advisor page in order to attract more bookings.

• Offering special promotional rates for Online booking Engines to attract more FIT bookings.

• Offering special discounted rates for cooperate bookings promoted through Sales manager at Head office and direct from the hotel.

• The HSBC Credit Card promotional offer from (1st April 2016 to 31st March 2017)

• Direct approach with the Travel agents by the hotel management staff to identify their requirements and to build up good business relationships.

• Cocktail for Stakeholders in order to increase the market share for Banquets.

• Attending trade fares such as WTM, ITB & ATM (More outputs to be obtained by the Marketing & Sales team from the head office.)

Awards & Recognitions• ISO 22000:2005 in Food hygiene.

• Holidaycheck.com, Certificate of recommendation 2016.

• Schauinsland Reisen Top hotel partner award 2016.

• Trip Advisor Certificate of excellence 2016.

Looking to 2018The outlook for the global economy in 2017/18 is challenging. We expect continued drawbacks in the Chinese and European economies, instability of natural resources prices, geopolitical threats and volatile interest rates and stock markets. In spite of these headwinds, the Company will remain steadfast in our focus to deliver sustainable growth and value creation for our shareholders. The strong fundamentals built into our business, together with financial prudency maintained over our operations, put us in a good position to keep our growth

momentum. We envisage that there will continue to be a healthy demand for developments in choice locations at attractive prices. Secondly we have to be competitive in the region and government should reduce taxes which are levied on the industry and taxes on the imported food items for us to maintain a healthy bottom line to offer a better rate to the guests.

ConclusionWith the Company delivering another year of stable financial performance, we would like to record our thanks to the management, staff and business partners for their dedication and hard work in supporting the growth of the Company in this challenging environment. I would also like to express my appreciation to the Board of Directors for their guidance and counsel and for helping to steer in the direction of growth. Finally, a special acknowledgement is rendered to our shareholders, for the confidence and trust in the Company which spurs us on to greater achievements. We are ready to journey through 2018, leveraging on our core capabilities to achieve sustainable growth as a leading hotel in the region.

Angeline OndaatjieJoint Managing Director

22nd August 2017


Board of Directors

Desabandu G. L. A. Ondaatjie Chairman & Joint Managing Director

Mr. George Ondaatjie is a pioneer in the tourism sector and is the Founder of Mercantile Investments Group of Companies. He counts over 35 years’ extensive experience in the financial services, tourism and trading sectors. He is presently the Chairman of several companies which include Royal Palms Beach Hotels PLC, The Nuwara Eliya Hotels Co.PLC, and Nilaveli Beach Hotels (Pvt) Ltd. which was the first planned hotel development on the East Coast of Sri Lanka. He has been the Past Chairman of the Tourist Hotels Association, Pacific Asia Travel Association – Sri Lanka Chapter and Finance Houses Association. He has also been a Past Director of the Colombo Stock Exchange and the Pacific Asia Travel Association – International Chapter. He was awarded the prestigious “Desabandu” title by the Government of Sri Lanka in 1994 for his pioneering efforts as an Entrepreneur, Financier and Hotelier. He was also the recipient of the “Pioneer Award” at the Presidential Awards for Travel & Tourism 2008.

A. M. Ondaatjie Joint Managing Director

Ms. Angeline Ondaatjie was appointed to the Board on 14th August 1992 and appointed as Joint Managing Director on 01st May 2005. She has over 15 years experience in the tourism, financial services and manufacturing sectors. She holds a Masters Degree from the University of Texas in Austin, USA and a BSc Degree from the Massachusetts Institute of Technology (MIT) USA. She is presently the Managing Director of Tangerine Tours (Pvt) Ltd and Joint Managing Director of Royal Palms Beach Hotels PLC. She holds directorship in several companies including Mercantile Investments and Finance PLC, The Nuwara Eliya Hotels Co. PLC (Grand Hotel), Nilaveli Beach Hotels (Pvt) Ltd, Fair View Hotel (Pvt) Ltd and Lighthouse Hotel PLC. She is presently the Vice President Tourist Hotels Association and Director Sri Lanka Tourism Promotion Bureau and serves on the Education Council of MIT.

G. G. Ondaatjie Executive Director

Mr. Gerard Ondaatjie was appointed to the Board on 04th December 1993. He has over 15 years experience in the tourism, financial services and trading sectors. He holds a BSc Degree in Accountancy from the Arizona State University, USA. He is presently the Managing Director of Mercantile Investments and Finance PLC, The Nuwara Eliya Hotels Co. PLC (Grand Hotel) and Mercantile Fortunes (Pvt) Ltd and Chairman & Managing Director of Fair View Hotel (Pvt) Ltd. He is also the Executive Deputy Chairman of Nilaveli Beach Hotels (Pvt) Ltd and a Director of several companies which includes Royal Palms Beach Hotels PLC.


T. J. Ondaatjie Executive Director

Mr. Travice Ondaatjie was appointed to the Board on 20th July 1995. He has over 15 years experience in the tourism and the financial services sectors. He holds a BSc Degree from the Arizona State University USA. He is presently the Managing Director of Nilaveli Beach Hotels (Pvt) Ltd and a Director of several companies which include Mercantile Investments and Finance PLC, Royal Palms Beach Hotels PLC, The Nuwara Eliya Hotels Co.PLC (Grand Hotel) and Fair View Hotel (Pvt) Ltd.

C. A. Ondaatjie Non Executive Director

Mrs. Christabel Ondaatjie has been a Director of the Company since its inception. She has over 25 years experience in the tourism and trading sector. She is a Director of Nilaveli Beach Hotels (Pvt) Ltd. and Mercantile Fortunes (Pvt) Ltd.

N. H. V. PereraNon Executive Independent Director

Mr. Hasantha Perera was appointed to the Board on 25th November 1999. He is and has been attached to Lucian Perera Associates, a legal firm, for over a period of ten years. He is a Director of Mercantile Investments and Finance PLC, Royal Palms Beach Hotels PLC, Blue Oceanic Beach Hotels Limited, Yala Safari Beach Hotels Limited, Yala Properties ( Private ) Limited Ceylon Electro Mechanical Services (Pvt) Ltd, South Asia Economic and Trade Corporation ( Private ) Limited, Koggala Beach Hotel (Private) Limited, Desano Investments (Private ) Limited, Tisara Hotels ( Private ) Limited and Tisara Investments (Private ) Limited.

Mr. Hasantha Perera is a Non-Executive Director of Royal Palms Beach Hotels PLC and Mercantile Investments and Finance PLC, which are group companies and been a Director of the company for a period of over nine years. The Board taking account of all the circumstances is of the opinion that he should be considered as a Non Executive Independent Director.


S. D. De Silva Non Executive Independent Director

(Deceased 04/03/2017)

Mrs. Damayanthi De Silva was appointed to the Board on 21st October 2003. She is a past pupil of Visaka Vidyalaya and has been managing the estate and property owned by the family for over a period of fifteen years.

Mrs. S D De Silva has been a Director of the company for over nine years and the Board taking account of all circumstances is of the opinion that she should be considered as a Non-Executive Independent Director.

L. H. Jayasinghe Executive Director

Mr. Lakal Jayasinghe was appointed to the Board on 20th December 2007 and is presently the Director/General Manager of Tangerine Beach Hotels PLC. He has over 30 years experience in the tourism sector which he gained in Sri Lanka as well as overseas. He is a Fellow of the Ceylon Hotel School Graduates Association and holds a Diploma in Hotel Management.

P. S. R. Casie Chitty Non Executive Independent Director

Mr. Rajiv Casie Chitty was appointed to the Board of Tangerine Beach Hotels PLC on 05th February 2013. He is presently the Chief Operating Officer of the Commercial Credit and Finance PLC. He is also a Non-Executive Independent Director at ACL Cables PLC, Royal Palms Beach Hotels PLC and in some companies of the Ceylon Printers Group. Mr. Casie Chitty is immediate Past President of the Association of Chartered Certified Accountants (ACCA) Sri Lanka Branch.Mr. Cassie Chitty who holds a Master in Economics, University of Colombo is also a Fellow of the Association of Chartered Certified Accountants (ACCA) UK, an Associate Member of the Chartered Institute of Management Accountants (ACMA) UK, and is a Chartered Financial Analyst, USA.

Board of Directors (Contd.)


Management Profile

L. H. JayasingheDirector /General Manager

Refer Board of Directors profile

Arju VijayarajahLCHSGA

Executive Assistant Manager

He is presently the Resident Manager of Tangerine Beach Hotels PLC.He has over 25 years of experience in the hospitality industry during which he has served in hotels managed by companies such as John Keels PLC, Carsons PLC, Dulmini Enterprises (Pvt) Ltd & Aitken Spence PLC.He is a Licentiate member of the Ceylon Hotel Schools Graduates Association and holds a Diploma in Hotel management

Gihan LiyanageLCHSGA

Assistant Manager

Over 20 years of experience in the Hotel trade including Starwood properties in Dubai & Anantara Maldives. A licentiate member of Sri Lanka institute of Tourism & Hotel Management holding a Management Diploma. Currently reading for his Master’s degree in “Tourism Economics & Hotel Management” conducted by University of Colombo.

M. I. ShahabdeenFCA, CGMA, ACMA, MIH, ACQI, CPA

Group Financial Controller

Group Financial Controller of Tangerine Group of Hotels since 02nd February 2005 with overall responsibility for the Group’s Finance and Accounting, Taxation, Corporate Finance, Treasury and the Information Technology functions. He has over three decades of finance and general management experience in Sri Lanka and abroad in Senior Management Positions in the Hoteliering Sector both in Five Star and Resort hotels and also in the Catering & Support Services Sector at Greyhound Services Saudi Arabia Ltd., a subsidiary of Greyhound Support Services Incorporated,

USA. Prior to joining the Tangerine Group, he had been with Trans Asia Hotel PLC for a period of 17 years, holding senior management positions throughout. During this period, Trans Asia Hotels PLC was managed by Ramada International (Germany), General Hotel Management (Singapore) and by John Keells Holdings PLC and had the opportunity of experiencing to a wide and varied Five Star Hotel Management Systems and Procedures including to an array of three decades of exposure in the Information Technology. He is a Fellow of the Institute of Chartered Accountants, Sri Lanka, and Associate of the Chartered Institute of Management Accountants, UK, Member of the Institute of Certified Public Accountants, Sri Lanka, Member of the Institute of Hospitality, UK, Associate of the Chartered Institute of Quality Assurance, UK, Associate of the Society of Certified Management Accountants, Sri Lanka and Member of the Sri Lanka Institute of Directors. He is also a Director of Security Ceylon (Pvt) Limited.

Ravi FernandoMBA (UK), M.Sc. App Fin (Sjp), FMAAT, AFA,

MCSI, CBA, ACMI

Group Accountant

Ravi Fernando Joined Tangerine Group of Hotels on 1st June 2003 as Group Accountant With overall responsibility for the Group’s Finance and Accounting function. Ravi Fernando holds a Master of Business Administration from University of Lincoln UK, Master of Applied Finance from University of Sri Jayewardenepura, Associate Member of Institute of Financial Accountants UK, Fellow Member of Association of Accounting Technicians, Certified Business Accountant of CA Sri Lanka, Member of Chartered Securities & Investments UK, Associate Chartered Management Institute of UK. He has over Three decades of experience and expertise in Financial and Auditing, Insurance, Leisure Sectors and held key positions as Finance Manager at Kandy Hotels Company PLC, the Accountant at Aitken Spence Hotels, Ceylinco Insurance PLC, and Commercial Credit PLC.

He is also a Director of Fair View Hotel (Pvt) Ltd.

J .D. VazManager Finance & Administration

Mr. J D Vaz was appointed to the Board on 20th December 2007. He has over 35 years’ experience in the Finance & Administration field in the tourism sector. He is the Executive Director at Nilaveli Beach Hotels (Pvt) Ltd and presently the Finance & Administration Manager at Tangerine Beach Hotel and Royal Palms Beach Hotel.

Nelson MayadunnageFinance Controller

Possessing of 29 years’ experience in hospitality industry Five Stars and Resort sector diverse financial positions with multiple international chain hotels, such as Intercontinental, Accor, Taj and Aman resorts he has gathered an extensive insight within this area. Contributed implementation of PMS programs in all hotels served in last three decades. Past 11 years served as a Financial controller in Amanresorts, expertise- all aspects of financial management, including corporate accounting, regulatory and fiscal reporting, budget and forecasts preparation, as well as implementation of internal control policies and procedures.

M. Hareez JameelACA, ACMA, MAAT

Senior Accountant

Hareez Jammel is the Senior Accountant of Tangerine Beach Hotels Plc . He is an Associate Member of the Institute of Chartered Accountants of Sri Lanka, Associate Member of Associate of Institute of Certified Management Accountants of Sri Lanka and Member of Association of Accounting Technicians of Sri Lanka. He has more than 20 years of experience in Auditing, Accounting, Taxation & General management, out of which 15 years in the Hospitality Industry.

a gastRonoMIC EsCaPadE awaIts

The freshest locally sourced ingredients and bona fide chefs form the core of our gastronomic prowess. At

Tangerine Beach Hotel, flavour takes precedence and variety is a cherished constant. Guests are availed an

eclectic choice of gourmet dishes prepared to perfection by our culinary team who consistently strive to raise the

bar with their trademark creativity and technical skill.


Financial Review

Total RevenueThe revenue of Tangerine Beach Hotels Plc during the current financial year was Rs. 631 million compared to Rs.597 million achieved in the previous year. This increase in revenue was mainly due to the appreciation of the EURO during the year & improved performance in western Europe market, company recorded 67 % occupancy. Revenue from sale of rooms contributed to 36 % of the total revenue Food and Beverage revenue contributed 59 % and whilst the other revenue contributed 5 %.

2013

0

200

400

600

800

Rs. Mn

2014

2015

2016

2017

Gross ProfitGross profit of the Company for the year under review was Rs. 399.94 million compared to Rs. 399.32 million which was slight increase. How ever the gross profit margin from 67% to 63% due to an increase in beverage costs by 12.41%. Cost controlling initiatives helped mitigate the increases in other direct expenses

2013

0

100

200

300

400

500

Rs. Mn

2014

2015

2016

2017

Cost of SalesThe Cost of Sales of the company was Rs. 231 million compared to Rs. 197 million in the previous year Cost of sale increased by 4 % and as a percentage of revenue and cost of sales at 37% due to corresponding higher revenue in the current year.

2013

0

100

200

300

Rs. Mn

2014

2015

2016

2017

Selling and DistributionSelling and Distribution expenses increased by 65 % from Rs. 12 million in 2016 to Rs. 20 million in 2017. The Selling and Distribution increased during the year under review mainly due to the increase in Sales Promotion Expenses.

2013

0

5

10

15

20

25

30

35

Rs. Mn

2014

2015

2016

2017

Administration ExpensesThe Administration expenses increased from Rs. 279 million in the year 2015/2016 to Rs. 298 million in 2016/17. Increase in Depreciation Gratuity, laundry charges, and salaries & wages , Building ,house keeping, hotel equipment & kitchen utilizes maintenance resulted the increase in administration expense by 7 % compared to the previous year.


2013

0

100

200

300

400

Rs. Mn

2014

2015

2016

2017

Other IncomeOther Income of the company declined from Rs. 15 million to 6 million which reported in previous year mainly due to the reduction in the exchange gain.

2013

0

5

10

15

20

Rs. Mn

2014

2015

2016

2017

Finance CostThe Finance cost during the period decreased to 0.11 million by 9 % compared to RS. 1.26 million in the previous year .The decrease was mainly due to decrease in the interest expense.

2013

0

1

2

3

Rs. Mn

2014

2015

2016

2017

Earnings Per ShareThe Company Earnings Per Share for the 2016/17 was Rs. 5.28 against last year’s Rs. 5.19 which in 2015/16 was 1.73 % increase.

2013

0

2

4

6

8

Times

2014

2015

2016

2017

Price Earnings RatioCompany Price Earnings Ratio as at 31 March 2017 , 11.26 times against 12.48 times as at 31 March 2016.

2013

0

10

20

30

40

Times

2014

2015

2016

2017

Current AssetsCurrent Assets of the Company increased from Rs. 380 Million in 2016 to Rs. 460 Million at 31 March 2017. The increase is attributable to higher short term investment.

2013

0

100

200

300

400

500

Rs. Mn

2014

2015

2016

2017


Total AssetsTotal Assets of the Company increased by 2.8 % from Rs. 3,249 million in 2015/16to Rs. 3,341 million which in 2016/17 an increase of Rs. 92 million compared to the year ended at 31st March 2017.

2013

0

1,000

2,000

3,000

4,000

Rs. Mn

2014

2015

2016

2017

Total EquityTotal Equity increased by Rs. 95 million over the previous year to stand at Rs. 3,102 million as at 31st March 2017. The increase in Revaluation Reserve and Retained Earnings, contribute to this.

2013

0

1,000

500

1,500

2,000

2,500

3,000

3,500

Rs. Mn

2014

2015

2016

2017

Non-Current LiabilitiesNon- Current Liabilities of the Company increased from Rs. 135 million in the previous year to Rs. 137 million during the period under review. This increase is mainly due to higher deferred tax provision.

2013

120

125

130

135

140

Rs. Mn

2014

2015

2016

2017

Current LiabilityCurrent Liability of the Company decreased from Rs. 106 million in the previous year to Rs. 101 million as at 31st March 2017. Decrease of Rs. 5 million. Company Liabilities decreased mainly due to decline in amounts to related party payable & Income tax payable.

2013

0

50

100

150

Rs. Mn

2014

2015

2016

2017

Net ProfitThe profit after tax for the year was as Rs. 105 million compared to previous year profit after tax of Rs. 103 million. The increase in current year Profit compared to the previous year was due to increase in Finance Income and decline in Loss From Derecognition of Property, Plant & Equipment

2013

0

40

80

120

160

Rs. Mn

2014

2015

2016

2017

Financial Review (Contd.)


Corporate Governance is the system by which the company is directed and controlled. A good Corporate Governance structure encourages companies to create value through entrepreneurism, innovation and establishes accountability and transparency commensurate with the inherent risks and opportunities available to the Company. It influences how the objectives of the Company are set and achieved, risks identified and managed and organizational performance optimized. Tangerine Beach Hotels PLC uses the CSE listing rules as a guideline in their Corporate Governance framework. The Board of Directors is strictly committed towards achieving commendable Corporate Governance principles.

Board CompositionThe Board comprises of 08 Directors including the Chairman and Managing Director. This includes 02 Independent Non-Executive Directors, 05 Executive Directors and 01 Non-Executive Director.

Role and Function of the Board of DirectorsThe Board has overall control and oversight of the activities, the strategic direction and the governance of the Company. Its role includes control and oversight of the company’s businesses, risk management and compliance, the performance of management; approving and monitoring financial and other reports; and capital expenditure and reporting to shareholders.

Corporate Governance

The Board meets as a practice as and when required. Agendas and papers are circulated in advance to enable informed deliberation at meetings and decisions are made by consensus.

Board IndependenceNone of the Independent Directors have held executive responsibilities in their capacity as Independent Directors and had submitted a declaration confirming their Independence as at March 2017 in accordance with Section 07 of the CSE listing regulations on Corporate Governance.

The Responsibilities of the BoardThe Board of Directors is responsible for:

• Formulating of business strategies taking into consideration the Company’s strengths, competencies and risks

• Implementing and monitoring of such strategies

• Reviewing and ratifying systems in operation relating to risk management, internal control, codes of conduct and compliance with the laws, statutes and regulations

• Reviewing, monitoring and ratifying all capital expenditure, acquisitions and divestitures

• Monitoring Senior Management performance

• Ensuring that effective information and audit systems are in place

• Ensuring that due attention is given to annual and interim financial statements prior to Publication

• Determining the quantum of the final dividend

• Approving and monitoring financial and other reporting.

Regular Re-election of DirectorsDirectors retire at the Annual General Meeting in accordance to the Articles of Association of the Company. A retiring director is eligible for re-election.

Compliance with Legal RequirementsThe Board is conscious of its responsibility to the shareholders, the Government and the society at large, in which it operates and is unequivocally committed to upholding ethical behavior in conducting its business. The Board, through the Company’s Administrative and Finance Divisions, strives to ensure that the businesses of the Company comply with the laws and regulations of the country. The Board of Directors ensures that all Financial Statements are prepared in accordance with the Sri Lanka Accounting Standards and conform to the requirements of the Colombo Stock Exchange.


Attendance at Board Meetings

Name of Director 22/03/2017 30/11/2016 Meeting Attendance

G. L. A. Ondaatjie - - 0/2

A. M. Ondaatjie 2/2

G. G. Ondaatjie - - 0/2

T. J. Ondaatjie 2/2

L. H. Jayasinghe 2/2

Non - Executive Independent Directors

N. H. V. Perera 2/2

S. D. De. Silva ** - - 0/2

P. S. R. Casie Chitty 2/2

Non - Executive Directors

C. A. Ondaatjie - - 0/2

** Deceased on 04/03/2017

Audit CommitteeThe Audit Committee comprises of Three Independent Non-Executive Directors.

The members of the Audit Committee are as follows:Mr. N. H. V. Perera - ChairmanMrs. S. D. De Silva **,Mr. P. S. R. Casie Chitty

The Group Financial Controller, Financial Controller and the General Manager attend the Audit Committee meetings by invitation. The Audit Committee is assisted by the Internal Audit. Internal Controls have been designed to ensure transparency and good governance within the Company. A report of the Audit Committee is given on page 36.

The Audit Committee met four times during the year according to a predetermined agenda.

Attendance at Audit Committee MeetingsName of Director Position 08/02/

201711/11/ 2016

05/08/ 2016

24/05/ 2016

Meeting Attendance

N. H. V. Perera Chairman 4/4

S. D. De. Silva ** Member - - - - 0/4

P. S. R. Casie Chitty Member 4/4


Corporate Governance (Contd.)


Remuneration CommitteeThe Remuneration Committee consists of 03 Independent Non-Executive Directors. The Committee is chaired by the Non-Executive Director, N. H. V. Perera. The Group Financial Controller assists the committee by providing the relevant information and participating in the analysis and deliberations.

The objective of the Remuneration Committee is to review and recommend the remuneration payable to the Executive Directors.

The Remuneration Committee met once during the financial year.

Name of Director Attendance at Remuneration Committee Meetings

Position 08/02/2017 Meeting Attendance


S. D. De. Silva ** Member - 0/1

P. S. R. Casie Chitty Member 1/1


Related Party Transactions Review CommitteeThe Related Party Transactions Review Committee consists of two Non-Executive Independent Directors and an Executive Director, namely:

Mr. N. H. V. Perera - ChairmanMr. P. S. R. Casie ChittyMr. L. H. Jayasinghe

The Group Financial Controller assists the committee by providing the relevant information and participating in the analysis and deliberations.

The objective of the Related Party Transactions Review Committee is to be consistent with the Code of Best Practices on Related Party transactions issued by the Securities & Exchange Commission.

A report of the Related Party Transactions Review Committee is given on page 38.

The Related Party Transactions Review Committee met four times during the financial year.

Name of Director

Position Attendance at Related Party Committee Meetings

Meeting Attendance

08/02/2017

11/11/2016

05/08/2016

24/05/2016


P. S. R. Casie Chitty

Member 4/4

Lakal Jayasinghe

Member 4/4

Relationship with StakeholdersThe Board of Directors ensured that the top management team possesses right skills to deliver their best contribution towards the company. The Board has empowered such employees to make operational decisions and also encourage them to make recommendations to the Board on areas of strategic importance. The vision, goals and objectives of the company have been formulated and all the employees have been briefed clearly of their specific job to achieve overall results for the company.

The company maintains sound relationship with regulatory authorities The Shareholders have the right to voice their concerns to Board of Directors and exercise their votes at Annual General Meetings/ Extraordinary General Meetings of the company. The notice of such meetings, and relevant documents as required by the Companies Act No.07 of 2007 and Listing Rules of Colombo Stock Exchange are circulated to all the shareholders at least 15 working days prior to the date of the meeting

The Company SecretaryThe role of the company secretary comprises of advising the Board and ensuring that all requirements relating to the Companies Act, Board procedures and other related rules and regulations are adhered to and followed. All directors have access to the company secretary. The removal of the company secretary requires a board resolution to be passed as specified in the Company’s Articles of Association.


AccountabilityThe Board of Directors’ and the Audit Committee review the quarterly and annual audited Financial Statements and the accounts to ensure that a true, balanced and a fair view of the Company’s performance is presented to the shareholders.

DisclosureThe Board’s policy is to disclose all relevant information to stakeholders, within the bounds of prudent commercial judgement, in addition to preparing the financial statements in accordance with Sri Lanka Accounting Standards, the Companies Act No.07 of 2007 and in conformity with Stock Exchange disclosure requirements.

Going ConcernThe Board of Directors after reviewing the financial position and cash flow of the company is confident that the company has adequate resources to continue in operation for the foreseeable future. Accordingly, the “Going Concern Basis” has been adopted in the preparation of the Financial Statements.

Compliance ReportThe Directors confirm that to the best of their knowledge all taxes and duties payable by the Company and all contribution levies and taxes payable on behalf of and in respect of the employees of the company and all other known statutory dues payable as at the Balance Sheet date have been paid or are provided for in the accounts.

AuditorsThe auditors Ernst & Young were re-appointed at the Annual General Meeting held on the 30th of September 2016 and the Directors’ authorized their remuneration.

The auditors conduct the annual audit with the objective of providing credence to the accounting records, policies and Financial Statements of the Company

Management CommitteeThe executive directors and senior managers have been assigned and delegated to achieve Company objectives.

Internal AuditsSJMS Associates are appointed as the internal auditors of Tangerine Beach Hotels PLC. The internal audit function operates unconstrained to the external audit. Quarterly internal audits are conducted to identify any exposure to risk and any such vulnerability are reported to the management in order to facilitate early action.

Other InformationThe Annual Report contains statements from the Board including the responsibilities of the Directors for the preparation of the Financial Statements and the Directors are of the view that they have discharged their responsibilities as set out in this statement. The performance of the company during the year under review and the future prospects of the company are covered in the Chairman’s review of operations

Reference to SEC & ICASL Code CSE Listing Rules

Subject Applicable requirement ComplianceStatus

Details

7.10.1(a) Non-ExecutiveDirectors

At least one third of the total number of Directors should be Non-Executive Directors

Compliant Three out of the Eight Directors are Non-Executive Directors

7.10.2(a) Independent Directors

Two or one third of Non Executive Directors, whichever is higher should be Independent

Compliant Two out of the Three Directors are Independent Non-Executive Directors

7.10.2(b) Independent Directors

Each Non-Executive Director should submit a declaration of independence/non independence in the prescribed format

Compliant Non-Executive Directors have submitted the declaration





Details

7.10.3(c) Disclosure relating toDirectors

A brief resume of each Director should be included in the Annual Report including the areas of Expertise

Compliant Please refer ‘Board of Directors’ on pages 14 to 16.

7.10.3(d) Disclosure relating to Directors

Forthwith provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3 (a),(b) and (c) to the Exchange

Compliant No new directors appointed during the period.

7.10.5 Remuneration Committee

A listed company shall have aRemuneration Committee

Compliant Remuneration Committee consist of Three Non-Executive Directors.

7.10.5(c) Disclosure in the annual report relating to Remuneration committee

*Name of Directors comprising of the Remuneration Committee

Compliant Corporate Governance

*Statement of Remuneration Policy

Compliant Corporate Governance

*Aggregated Remuneration paid to Director

Compliant Notes to the Financial Statements

D.1.7 Related PartyTransactions.

Disclosure of Related Party Transactions

Compliant Notes to the FinancialStatements

7.10.6 Audit Committee The company shall have anAudit Committee

Compliant Names of the members of the Audit Committee are stated on page 24.

7.10 .6(a) Composition ofAudit Committee

Shall comprise of Non- Executive Directors a majority of whom will be independent

Compliant Audit Committee consists of Two Independent Non Executive Directors.

7.10.6(a) Audit CommitteeFunctions

A Non-Executive Director shall be appointed as the Chairman of the Committee

CEO & Chief Financial Officer shall attend Audit Committee Meetings

The Chairman of the Audit Committee or one member should be a member of a professional accounting body

Compliant

Compliant

Compliant

Chairman of the Audit Committee is an Independent Non- Executive Director

The General Manager and Group Financial Controller attended meetings by Invitation.

One member of the Audit Committee is a Chartered Management Accountant




Details

7.10.6(b) Audit CommitteeFunctions

Functions shall include:Overseeing of the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with Sri Lanka Accounting Standards.

Overseeing of the compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements

Overseeing the processes to ensure that the internal controls and risk management are adequate to meet the requirements of the Sri Lanka Auditing Standards.

Assessment of the independence and performance of the external auditors. Make recommendations to the Board pertaining to appointment, re –appointment and removal of external auditors, and approve the remuneration and terms of engagement of the external auditors.

Compliant The terms of reference of the Audit Committee have been agreed by the Board

7.10.6(c) Disclosure in the Annual Report relating to Audit Committee

a) Names of Directors comprising the Audit Committee

b) The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determination

c) The Annual Report shall contain a Report of the Audit Committee setting out the manner of compliance with their functions

Compliant

Compliant

Compliant

Please refer page 36.

Please refer Audit Committee Report on Page 36.

Please refer Audit Committee Report on page 36.



Tangerine Beach Hotels PLC identifies that operating a business involves both risk and reward. The hotel believes that in order to ensure reward, risk needs to be managed effectively. The risk framework involves risk identification, risk assessment and risk mitigation.

Risk is the probability of an undesirable outcome occurring due to a chosen activity or action.

The process of identifying potential risks and developing strategies to mitigate those risks is known as Risk Management.

The benefit of identifying, managing and mitigating risks is immense for the diverse hospitality industry in which Tangerine Beach Hotel operates.

Listed below are some of the risks and risk mitigation strategies used by Tangerine Beach Hotels PLC:

1Identify Risk

2Assess Risk

4Mitigate Risk

Transfer RiskReduce Risk

Plan for Risk

Risk MapReduce Loss of

Life and Property

Assess Present and Future RiskGoal-Measure Quantifiable RiskReduction

Map Risk Data

3Communicate

Risk

Business RiskBusiness Risk results from the adverse impact on the Company’s revenue and profitability. If business risk is not effectively managed, the revenues and cash flows will reduce. As a result, Tangerine Beach Hotel may not be able to achieve its business objectives and grow as it will lose its competitiveness within the industry.

Control Measures• Tangerine Beach Hotel manages

its business risk by strategizing on increasing its market share and constantly seeking to tap emerging markets. The Company boasts of an impressive foreign clientele consisting of Russian, Ukraine, Germany and UK clients apart from its local market.

• The business also utilizes the aid of various booking engines such as Agoda.com and Booking.com to increase its revenue and market position worldwide.

• Internal measures are taken by the Company as well to constantly review and streamline its costs and expenditure. This internal exercise helps the Company to revise rates and increase profitability while maintaining its competitive position.

Economic RiskEconomic Risk emerges from changes in economic variables such as inflation rates and interest rates which may distort the Company’s growth as a result. Higher inflation rates may cause costs to increase and lower profitability for the Company. On the other hand, an increase in interest rates may increase finance costs and result in inability to repay debt.

Control Measures• Tangerine Beach Hotel exercises

regular cost reviews and places strict cost controls while maintaining quality concurrently. Maintaining high quality and improving its impressive brand image enables the hotel to maintain its rates in a competent manner enabling any adverse effects of inflation to even out.

Risk Management


• Though higher interest rates are detrimental to the finance costs payable by the Company, Tangerine Beach Hotel uses these increased rates to invest its excess funds. Thus, the Company benefits from matching payments against receipts.

• The Hotel is cautious in investing its funds or entering into loans and takes into account both reliability and the most beneficial rates. The Hotel manages to do this effectively using the strength of its associate company Mercantile Investments and Finance PLC.

Foreign Exchange RiskForeign Exchange Risk disrupts revenue due to exposure to fluctuations in foreign currency. Tangerine Beach Hotel deals with a wide foreign clientele. Volatility in foreign exchange rates can cause a fall in revenue for the Company when translating its foreign currency payments to rupees.

Control Measures• The hotel seeks to denominate

most of its foreign sales contracts in the stable US Dollar which is considered a safe currency. The recent hike in the US Dollar due to the devaluation of the rupee was immensely beneficial with regard to foreign currency receipts.

• The Company is also able to monitor Foreign Exchange movements through its head office treasury function. The treasury function enables the Company to review and convert foreign currency at the best rates and thereby maximize revenue.

Natural Disaster Risk• Natural Disaster Risk is the

damage any natural hazards could cause to the business. Several examples of natural disasters that could affect the hotel include fire, tsunami and floods.

Control Measures• The Company has taken

numerous measures to transfer the risk to third parties in the form of insurance policies. These insurance policies cover the risk of the Company’s assets being damaged due to natural hazards.

• The Hotel has invested in physical security and contingency measures in the hotel premises such as emergency exits, fire hoses, fire extinguishers and fire alarms to safeguard the assets of the company.

Legal & Statutory RiskLegal & Statutory Risk is borne through litigation by the Government, customers and business partners as a result of the Company being unable to comply with legal and statutory requirements. This could result in losses arising from non-compliance with statutes and flawed contracts.

Control Measures• The Company obtains assistance

from the centralized legal division in all legal proceedings. The division provides guidance, direction and advice to the hotel upon entering business contracts and signing agreements. Hence, the hotel is safeguarded from incurring unexpected losses as a result

• Statutory compliance is given high priority and is regularly monitored and reviewed by the management. Statutory Compliance is included in the scope of Quarterly Internal Audit program to ensure continuity of the business. A compliance certification is handed over to the Audit Committee for review.

Operational RiskOperational Risk results through slack in internal controls, inefficient business processes, fraud, and undue care and system breakdowns. The Company would face several implications in the form of disrupted operations, losses and ineffective use of resources.

Control Measures• The Hotel has laid down clear

systems and procedures with regard to ensuring compliance with its internal controls. The Hotel uses a formal process where internal auditors are appointed to help detect the above mentioned operational risks by means of quarterly internal audits.

• The auditors review the processes for its efficiency and effectiveness. More stringent internal controls are placed if deemed necessary. This process promotes transparency and minimizes the risks associated with the Company operations.

• Further, there are CCTV cameras attached to key locations in the hotel premises to detect fraud and negligence.

Health and Safety RiskHealth and Safety Risk is caused by unhealthy and dangerous work practices. This could be of two fold, health and safety of customers and health and safety of the workers in the Company.

Risk Management (Contd.)


Control Measures• The Company does constant

maintenance to its chillers, elevators and the other assets it owns to ensure safe use. The Hotel also carries out constant refurbishment of its premises to ensure safety for both its customers and workers.

• The hotel has taken contingency measures and has ensured the availability of emergency exits and safety warnings.

Competition RiskCompetition Risk results through strong competitive actions from new entrants and existing players in the market. The risk of competition involves the threat of new entrants as well.

Control Measures• Tangerine Beach Hotel PLC

places significant emphasis on maintaining its competitive position in the market. The excellent brand quality, unique interior and superlative service by the staff remain exclusive to the hotel, hence giving Tangerine Beach a competitive edge over new and existing players in the market.

• To take further advantage of its attractive brand, Tangerine Beach enhances its brand standard through regular refurbishment of the hotel property and upgrading of the facilities being offered. This helps the hotel to remain consumer focused and blend in innovative changes to suit the various tastes of its guests and make their visits memorable and repeated.

• Another measure the Hotel takes to maintain its competitive position is through support from its associate travel arm Tangerine Tours (Pvt) Ltd. Besides this, long term relationships with other major tour operators are maintained to ensure successful business relationships. The hotel also maintains constant monitoring of its main competitors in the market as this enables them to respond faster to competitive strategies.


Corporate Social Responsibility

Annual religious ceremony ( Pirith) followed by Alms giving for the clergy.

Cleaning of the Maternity ward of Nagoda General Hospital by staff member of the hotel

Tsunami commemoration was held on 26th December. In remembrance of all the victims, Lanterns were lit and displayed near the beach fence of the hotel.

Monthly beach cleaning by staff members of the hotel.

Donation of chairs at Dediyawela Maternity clinic


SWOT Analysis

Strengths

• Established name in the market with over 30 years in existence.

• Professionally qualified well experienced senior management team & multi lingual staff

• Only Hotel in the region with flood light clay Tennis Court & a play ground

• Refurbished Banquet hall having the modern RGB lighting system & an attractive design.

• Refurbished Supper club having the modern RGB lighting system & an attractive design.

Opportunities

• Emerging markets such as USA & Australia can contribute to increase the market share

• Ideal location for foreign weddings which is a lucrative market

• Growing trend of the Sri Lankan wedding market

• Foreign policy of the new Sri Lankan Wedding market

Weakness

• Not having an elevator due to initial design of the Hotel

• Rooms are not designed for differently able guests, which is becoming a requirement in the present day.

• Should consider having specialized themed restaurants

• Uncompetitive rate structure for foreign markets

Threat

• Several new hotels coming up in the area such as Coco Royal and several more

• Reduction of domestic market share due to ultra- reduced rates offered by competitors

• Political instability in Ukrain which is one of the main markets for TBH

• Terrorism threat in Europe countries

Bask In luxuRy

Pick your haven from 179 exquisite ultra-luxurious hotel rooms that include 2 luxury suites, 4 executive

suites and 11 junior suites. Each suite is equipped with panoramic ocean views from your own private balcony

or patio and all the modern amenities you could possibly desire for the most opulent holiday getaway imaginable. Make a splash in our pool, soak up the sun by the beach or indulge in some much needed TLC at our lavish luxury

Ayurveda spa. Your wish is our command.


FunctionsThe primary function of the Audit Committee is to assist the Board of Directors in fulfilling its overall responsibilities. The Audit Committee functions include the review of Financial Statements, internal control procedures, compliance with accounting standards and statutory compliance. The Audit Committee assists the Board of Directors in discharging their duties. Where necessary the Audit Committee makes suggestions and recommendations to the Board in areas within its purview.

Members of the Audit CommitteeThe Audit Committee consists of Three Non-Executive Independent Directors namely Mr. N. H. V. Perera, Mrs. S. D. De. Silva and Mr. P. S. R. Casie Chitty.

MeetingsThe Audit Committee held 04 meetings during the year under review. The Statutory Auditors, the Group Financial Controller, Financial Controller and the General Manager also attend these meetings on invitation.

Name of Director

Position Attendance at Audit Committee Meetings

Meeting Attendance

08/02/2017

11/11/2016

05/08/2016

24/05/2016


S. D. De. Silva ** Member - - - - 0/4


Member 4/4


Internal Audit FunctionThe Committee reviews the internal audit reports to ensure that the Company’s systems and procedures are effective and that the internal controls provide reasonable assurance to the Directors that assets are safeguarded and that the financial reporting system can be relied upon in preparation and presentation. The Internal Audit function has been outsourced to Messrs SJMS Chartered Accountants. Generally, the audits are carried out on a quarterly basis. Based on the audit findings and recommendations of the Internal Auditors, the Audit Committee after discussing with the management recommends the implementation of those recommendations that are considered to be practical and necessary.

Audit Committee Report

Financial StatementsThe Audit Committee assists the Board in assuring the integrity of the Financial Statements and disclosures. The Committee discusses matters relating to the Financial Statements with the External Auditors before recommending to the Board the adoption of the Financial Statements.

External AuditorsThe Audit Committee has determined that Messrs Ernst & Young, Auditors are independent on the basis that they do not carry out any management related functions of the Company. The Audit Committee has recommended the Board of Directors the re-appointment of Messrs Ernst & Young (Chartered Accountants), for the financial year ending 31st March 2018, subject to the approval of the shareholders at the Annual General Meeting.

N. H. V. PereraChairman Audit Committee

22nd August 2017


The Remuneration Committee, appointed by and responsible to the Board of Directors, consists of three Non-executives independent Directors Mr. N.H.V. Perera, Mrs. S. D. De. Silva and Mr. P. S. R. Casie Chitty. The Committee is chaired by Mr. N.H.V Perera. The Committee met once during the financial year. The Group Financial Controller assists the committee by providing relevant information required by the committee.

N. H. V. PereraChairmanRemuneration Committee

22nd August 2017

Remuneration Committee Report


The Tangerine Beach Hotels PLC established the Related Party Transactions Review Committee (RPTRC) and as at the end of the financial year. The RPTRC comprised of the following Directors of the Hotel:

Mr. N. H. V. PereraMr. P. S. R. Casie ChittyMr. L. H. Jayasinghe

The RPTRC was formed by the Board to assist the Board in reviewing all Related Party Transactions carried out by the Tangerine Beach Hotels PLC by adopting of the Code of Best Practice on Related Party Transactions as issued by the Securities and Exchange Commission of Sri Lanka (SEC).

The mandate of the Committee includes:(1) The Purpose:The Committee is an entity under the Board of Directors, and was established to enhance corporate transparency and promote fair transactions. The committee is responsible for reviewing Related Party Transactions.

(2) Composition:The Related Party Transactions Committee shall comprise of two Non-executive Independent Directors and one Executive Director. Currently, the committee consists of three Directors. The head of the committee is Mr. N. H. V. Perera - Independent Director.

(3) Operation:The Related Party Transactions Committee held four meeting during the last financial year ending 31st March 2017.The Committee reviewed the Related party Transaction on quarterly basis.

Name of Director

Position Attendance at Related party Committee Meetings

Meeting Attendance

08/02/2017

11/11/2016

05/08/2016

24/05/2016



Member 4/4

Lakal Jayasinghe

Member 4/4

Related Party Transactions Review Committee Report

(4) Responsibilities:• To seek and receive reports

on Related Party Transactions between the Company and its affiliates.

• To review Related Party Transactions.

• To recommend corrective measures.

N. H. V. PereraChairmanRelated Party Transactions Review Committee

22nd August 2017

Financial ReportFinancial Calendar 2016/2017 41Annual Report of the Board of Directors 42Statement of Directors’ Responsibilities 44Independent Auditor’s Report 45Statement of Financial Position 46Income Statement 47Statement of Comprehensive Income 48Statement of Changes in Equity 49Statement of Cash Flows 50Notes to the Financial Statements 51


Interim Reporting1st Quarter 10, August 20162nd Quarter 11, November 20163rd Quarter 08, February 20174th Quarter 24, May 2017

Annual Reports2016/2017 22nd August 20172015/2016 22nd August 2016

Meetings37th Annual General Meeting 29th September 201736 th Annual General Meeting 30th September 2016

Financial Calendar 2016/2017


The Directors have pleasure in submitting their report, together with the Audited Accounts for the financial year ended 31st March 2017.

Review of the yearThe Chairman’s Review on pages 8 to 9 contains a review of operations during the financial year.

Principal ActivityThe principal activity of the Company, which is hotelering, remained unchanged.

Corporate GovernanceThe Board of Directors of the Company is responsible for the governance of the company, which include setting out strategic aims, providing leadership and supervising the management. The corporate governance practices of the Company are given on pages 23 to 28.

TurnoverThe net revenue of the Company for the year was Rs. 631,271,522/- (2015/16 Rs. 596,826,213/-) Segmental Analysis of revenue is given in Note 3 to the financial statements.

Results for the Year

31.03.2017 31.03.2016

Net profit for the year amounts to 131,180,488 124,359,528

Less: Provision for Taxation (25,512,693) (20,496,643)

Net Profit After Tax 105,667,795 103,862,885

Unappropriated profit brought forward 963,057,763 859,158,521

Profit available for appropriation 1,057,997,233 963,057,763

DividendsThe Directors approved a first and final Dividend of Rs. 0.50 per share for the Ordinary Shareholders for the Financial Year 2016/2017.

Capital ExpenditureThe total capital expenditure incurred on the acquisition of fixed assets during the year amounted to Rs. 67,329,093/- (2016 - Rs. 93,256,547/-) details of which are given in Note 9.5 to the Financial Statements.

Commitments & ContingenciesCompany guaranteed financial accommodation for Royal Palms Beach Hotel PLC, which is its associate, to a limit of Rs. 35 million during the financial year 2015/2016.

Property Plant & EquipmentThe details of property, plant & equipment of the Company are shown in Note 9 to the Financial Statements.

Annual Report of the Board of Directors

ReservesThe movements during the year of Capital and Revenue Reserves are shown in the Statement of changes in Equity on page 49.

DonationsDuring the year donations to Rs.156,000/- (2016- Rs. 27,300/-) were made to various charities by the Company.

Post Balance Sheet EventsThere have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the financial statements.

DirectorsThe names of the Directors are shown on pages 14 to 16.

In terms of Section 88(i) of the Articles of Association, Mr. T J Ondaatjie retires by rotation and being eligible, offers himself for re-election.

Special notice has been given of the intention to propose ordinary resolutions as set out in the notice of meeting to re-elect Mr. G L A Ondaatjie and Mrs. C A Ondaatjie as Directors of the company in terms of Section 211 of the Companies Act No. 07 of 2007.

Board CommitteesThe following members of the Board serve on the Audit Committee

Mr. N. H. V. Perera - ChairmanMr. P. S. R. Casie Chitty

The report of the audit committee is given on page 36 of this report.


The following members of the Board serve on the Remuneration Committee.

Mr. N. H. V. Perera - ChairmanMr. P. S. R. Casie Chitty

The following members of the Board serve on the Related Party Transactions Review Committee

Mr. N. H. V. Perera - ChairmanMr. P. S. R. Casie ChittyMr. L. H. Jayasinghe

Directors Interest RegisterThe Company maintains an Interest Register in compliance with the Companies Act No.07 of 2007.

Directors Interest in ContractsThe Directors of the Company have made the general disclosures provided for in Section 192(2) of the Companies Act No.07 of 2007. The related party disclosures and the Directors of each of those related parties are given on page 74.

Directors’ RemunerationThe aggregate emoluments paid to the Directors during the year, amounted to Rs. 5,293,875/-

Directors Shareholdings

As at 31st March 2017 Shares

2016Shares

Mr. G. L. A. Ondaatjie 2,025,700 2,025,700

Ms. A. M. Ondaatjie 164,842 164,842

Mrs. C. A. Ondaatjie 259,854 259,854

Mr. G. G. Ondaatjie 132,888 132,888

Mr. T. J. Ondaatjie 177,080 177,080

Mr. N. H. V. Perera 196,814 191,724

Mrs. S. D. De Silva ** 150,530 150,530

Mr. L .H. Jayasinghe - -

Mr. P. S. R. Casie Chitty - -


Mr. G L A Ondaatjie and Ms. A M Ondaatjie serve as Joint Managing Directors of the Company.

Public HoldingThe number of ordinary shares held by the public as at 31st March 2017 was 7,260,976 shares (2016-7,115,536), which amounted to 36.30% (2016-35.58%) of the issued ordinary shares of the Company.

The number of public shareholders as at 31st March 2017 was 1,356.

AuditorsMessrs. Ernst & Young Chartered Accountants are deemed re-appointed in terms of Section 158 of the Companies Act No.7 of 2007 as the Auditors of the Company. A resolution proposing the Directors be authorized to determine the remuneration of the Auditors will be submitted to the Annual General Meeting.

The Auditors Messrs. Ernst & Young were paid Rs. 613,100/- as audit fees. Fees for Non-Audit service of Rs. 65,600/- also incurred by the company.

As far as the Directors are aware, the Auditor does not have any relationship (other than that of an auditor) with the company other than those disclosed above. The Auditors also do not have any interests in the Company.

For and behalf of the Board

A. M. Ondaatjie Joint Managing Director

T. J. OndaatjieDirector

Mercantile Investments and Finance PLCSecretaries

22nd August 2017


Statement of the Directors’ Responsibilities in relation to the Financial Statements.

The responsibilities of the Directors, in relation to the Financial Statements of the Company differ from the responsibilities of the Auditors, which are set out in the Independent Auditors’ Report on page 45.

As per the provisions of the Companies Act No. 7 of 2007 the Directors are required to prepare Financial Statements for each Financial Year giving a true and fair view of the state of affairs of the Company as at the end of the Financial Year and of the results of its operations for the Financial Year.

The Directors consider that, in preparing these Financial Statements set out through page 46 to 81 appropriate Accounting Policies have been selected and applied in a consistent manner, supported by reasonable and prudent judgement and that all applicable Accounting Standards, as relevant, have been followed.

The Directors are confident that the Company has adequate resources to continue in operation and have applied the going concern basis in preparing these Financial Statements. Further, the Directors have a responsibility to ensure that the Company maintains sufficient accounting records to disclose with reasonable accuracy, the financial position of the Company and to ensure that the Financial Statements presented comply with the Companies Act No. 7 of 2007.

The Directors are also responsible for taking reasonable steps to safeguard the assets of the Company and in this regard to give proper consideration to the establishment of appropriate internal control systems to prevent and detect fraud and other irregularities.

The Directors are confident that they have discharged their responsibilities as set out in the statement. The Directors also confirm that to the best of their knowledge, all statutory payments payable by the Company as at the Balance Sheet date have been paid or where relevant, provided for.

By Order of the Board


22 August 2017Colombo.

Statement of Directors’ Responsibilities


TO THE SHAREHOLDERS OF TANGERINE BEACH HOTELS PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of Tangerine Beach Hotels PLC, (“the Company”), which comprise the statement of financial position as at 31 March 2017, and the income statement, statement of comprehensive income, statement of changes in equity and, statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, set out on pages 51 to 81.

Board’s Responsibility for the Financial StatementsThe Board of Directors (“Board”) is responsible for the preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards and for such internal control as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with

ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion, scope and limitations of the audit are as stated above.

b) In our opinion:

- 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, and

- the financial statements of the Company comply with the requirements of section 151 of the Companies Act No. 07 of 2007.

22 August 2017Colombo

Independent Auditor’s Report


As at 31 March 2017 2017 2016 Note Rs. Rs.

ASSETSNon-Current AssetsProperty, Plant & Equipment 9 2,193,329,027 2,192,953,683Intangible Assets 10 1,868,218 3,121,969Investments in Associate 11 685,980,327 672,733,696 2,881,177,572 2,868,809,348

Current AssetsInventories 12 15,613,208 15,581,684Trade and Other Receivables 13 92,533,510 114,600,935Other Non Financial Assets 14 8,868,236 6,445,577Amounts Due from Related Parties- Other Financial Assets 15.3 75,491 67,117Short Term Investments - Other Financial Assets 15.2 234,793,810 116,155,987Cash and Bank Balances 16 108,141,059 127,654,867 460,025,314 380,506,167Total Assets 3,341,202,886 3,249,315,515

EQUITY AND LIABILITIESCapital and ReservesStated Capital 17 244,800,000 244,800,000Revaluation Reserve 18 1,799,947,216 1,799,154,320Retained Earnings 1,057,997,233 963,057,763Total Equity 3,102,744,449 3,007,012,083

Non-Current LiabilitiesInterest Bearing Loans and Borrowings 21 1,075,362 5,376,834Deferred Tax Liabilities 8.2 109,182,545 99,652,090Post Employment Benefit Liability 22 26,989,265 30,690,253 137,247,172 135,719,177

Current LiabilitiesTrade and Other Payables 19 80,013,104 77,738,470Amounts Due to Related Parties 20 3,639,585 7,371,025Income Tax Payable 3,076,438 6,656,182Interest Bearing Loans and Borrowings 21 14,482,138 14,818,578 101,211,264 106,584,255Total Equity and Liabilities 3,341,202,886 3,249,315,515

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

M. I. ShahabdeenGroup Financial Controller

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

A. M. Ondaatjie T. J. OndaatjieJoint Managing Director Director

The Accounting Policies and Notes on pages 51 through 81 form an integral part of the Financial Statements.

22 August 2017Colombo

Statement of Financial Position


Year ended 31 March 2017 2017 2016 Note Rs. Rs.

Revenue 3 631,271,522 596,826,213Cost of Sales (231,326,732) (197,503,187)

Gross Profit 399,944,790 399,323,026Other Income 4 6,253,560 15,873,239Selling and Distribution Costs (20,182,858) (12,206,899)Administrative Expenses (298,887,815) (279,742,500)Loss From De-recognition of Property, Plant & Equipment 9 (1,251,849) (19,367,608)Legal Compensation - (33,000,000)Finance Income 6.1 21,821,193 12,556,303Finance Expenses 6.2 (1,157,399) (1,268,741)Share of Associate Company’s Profit 11.3 24,640,867 42,192,707

Profit Before Tax 5 131,180,488 124,359,528Income Tax Expenses 8 (25,512,693) (20,496,643)Profit for the Year 105,667,795 103,862,885

Earnings Per Share 7 5.28 5.19


Income Statement



Profit for the Year 105,667,795 103,862,885

Other Comprehensive IncomeOther comprehensive income to be reclassified to profit or loss in subsequent periods (net of tax): - -

Other comprehensive income not to be reclassified to profit or loss in subsequent periods (net of tax):

Acturial gains/(Losses) on defined benefit plans 22.1 (920,100) 924,829Revaluation of Land & Building 18.2 - 207,086,140Income Tax effect 18.2 1,016,679 (1,434,959)

Acturial gains/(Losses) on defined benefit plans - Associate 11.2 (591,890) 769,551Revaluation of Land & Building -Associate 18.3 - 106,153,981Income Tax effect -Associate 18.3 559,882 (10,032,707)

Net other comprehensive income not to be reclassified to profit or loss in subsequent periods 64,571 303,466,835

Other Comprehensive Income for the Year 64,571 303,466,835

Total Comprehensive Income for the Year 105,732,366 407,329,720


Statement of Comprehensive Income


Year ended 31 March 2017 Stated Revaluation Revaluation Retained Total Capital Reserve Reserve of Earnings Equity Associate Company Rs. Rs. Rs. Rs. Rs.

As at 1 April 2015 244,800,000 1,308,464,472 197,259,370 859,158,521 2,609,682,363Profit for the Year - - - 103,862,885 103,862,885Revaluation of Land & Building 205,651,181 96,121,274 - 301,772,455Actuarial Gains/Losses - - - 1,694,380 1,694,380Total Comprehensive Income - 205,651,181 96,121,274 105,557,265 407,329,720

Effect on Revaluation Surplus on De-recognised Property, Plant & Equipment - (8,341,977) - 8,341,977 -

Ordinary Dividends-2014/2015(Rs 0.50Per Share) (10,000,000) (10,000,000)

Balance as at 1 April 2016 244,800,000 1,505,773,676 293,380,644 963,057,763 3,007,012,083Profit for the year - - - 105,667,795 105,667,795Other Comprehensive Income - 1,016,679 559,882 (1,511,990) 64,571Total Comprehensive Income - 1,016,679 559,882 104,155,805 105,732,366

Effect on Revaluation Surplus on De-recognised Property, Plant & Equipment - (663,894) (119,771) 783,665 -

Ordinary Dividends-2015/2016(Rs 0 .50 Per Share) - - - (10,000,000) (10,000,000)

Balance as at 31 March 2017 244,800,000 1,506,126,461 293,820,755 1,057,997,233 3,102,744,449


Statement of Changes in Equity



Operating Activities Profit before tax 131,180,488 124,359,528

Adjustments for:Depreciation on Property, Plant and Equipment 9.2 63,965,053 58,870,994Allowance for Inventory 1,044,432 (40,563)Amortisation of Intangible Assets 10 1,253,751 533,117Provision for bad and Doubtful Debts 826,964 801,682Interest Income 6.1 (21,821,193) (12,556,303)Interest Expense 6.2 477,870 757,728(Profit)/Loss on Disposal of Property, Plant and Equipment 4 (3,350,111) (2,945,612)Derecognition of Property, Plant and Equipment 9 1,251,849 19,367,608Post employment Benefit Plans 22.1 5,427,409 4,729,382Share of Associate Profit 11.3 (24,640,867) (42,192,707) 155,615,645 151,684,854

Changes in working capital:- Receivable and Prepayments 17,912,998 (17,666,068)- Inventories (1,075,956) (1,557,319)- Payables (1,456,806) (18,377,578)

Cash Generated from Operations 170,995,881 114,083,889

Finance Costs Paid 6.2 (477,870) (757,728)Retirement Benefit Cost Paid 22 (10,048,500) (2,513,200)Income Tax Paid (17,409,078) (1,218,218)Net Cash Flows From/(Used in) Operating Activities 143,060,433 109,594,743

Cash Flows from/(Used in) Investing ActivitiesAcquisition of Property, Plant & Equipment 9.1 (67,329,093) (93,256,547)Acquisition of Intangible Assets 10 - (95,000)Disposal of Property, Plant & Equipment 5,086,957 3,018,020Investments in Fixed Deposit (57,085,484) -Interest Received 6.1 21,821,193 12,556,303Dividend Received 10,226,006 6,391,254Net Cash Flows from/(Used in) Investing Activities (87,280,421) (71,385,970)

Cash Flows from/(Used in) Financing ActivitiesRepayment of Interest bearing Loans and Borrowings 21.1 (4,301,472) (4,301,472)Dividend Paid on Ordinary Shares (10,000,000) (10,000,000)Net Cash Flows from/(Used in) Financing Activities (14,301,472) (14,301,472)

Net increase/(Decrease) in Cash and Cash Equivalents 41,478,540 23,907,301Effect of Exchange rate Changes on Cash and Cash Equivalents 896,436 (2,092,088)Cash and Cash Equivalents at the Beginning of the year 16 233,293,748 211,478,535Cash and Cash Equivalents at the end of the year 275,668,724 233,293,748


Statement of Cash Flow


1. Corporate Information1.1 General Tangerine Beach Hotels PLC (“Company”) is a PLC limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No. 236 Galle Road, Colombo 03, and the principal place of business is situated at St. Abrew’s Drive Road, Waskaduwa, Kalutara North.

1.2 Principal Activities and Nature of OperationsThe principal activity of the Company was hoteliering.

1.3 Parent Enterprise and Ultimate Parent EnterpriseThe Company does not have an identifiable parent of its own.

1.4 Date of Authorisation for IssueThe Financial Statements of Tangerine Beach Hotels PLC for the year ended 31 March 2017 were authorized for issue in accordance with a resolution of the Board of Directors on 22 August 2017.

2. Statement Of ComplianceThe Financial Statements which comprise the Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity and the Statement of Cash Flows, together with the accounting policies and notes 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 the requirement of the Companies Act No. 7 of 2007.

2.1 Basis Of Preparation2.1.1 Basis of MeasurementThe Financial Statements have been prepared on a historical cost basis except for Freehold Land and Financial Instruments available for sale that have been measured at fair value. The preparation and presentation of these Financial Statements is in compliance with the Companies Act No. 07 of 2007.

2.1.2 Comparative InformationThe presentation and classification of the financial statements of the previous year has been amended, where relevant for better presentation and to be comparable with those of the current year.

2.1.3 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.

2.2 Significant Accounting Judgements, Estimates And AssumptionsJudgements In the process of applying the Company’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the Financial Statements.

Going ConcernThe directors have made an assessment of the company’s ability to continue in business for the foreseeable future. Therefore the financial statements are continued to be prepared in a Going Concern Basis.

Impairment of Trade Debtors:The Company reviews at each reporting date all receivables to assess whether an allowance should be recorded in the statement of income. The Management uses judgement in estimating such amounts in the light of the duration of outstanding and any other factors management is aware of, that indicate uncertainty in recovery. Note 13.

Critical Accounting Estimates and AssumptionsThe financial statements are sensitive to assumptions and estimates made in measuring certain carrying amounts represented in the Statement of Financial Position and amounts charged to the Statement of income. These could result in a significant risk of causing material adjustments to the carrying amounts of assets and liabilities which are disclosed in the relevant Notes to the Financial Statements.

Fair Value of Property, Plant & Equipment:The Land and Building of the Company are reflected at fair value. When current market prices of similar assets are available, such evidences are considered in estimating fair values of these assets. In the absence of such information the Company determines within reasonable fair value estimates, amounts that can be attributed as fair values, with the assistance of an independent valuer. Further details are given in Note 9

Components of Buildings:In determining the depreciation expense, the Company with the assistance of an independent professional valuer determined the components of buildings that have varying useful lives. Approximation techniques and appropriate groupings

Notes to the Financial Statements


were used in such determination as well as in the assessment of the useful lives of each component.

De-recognition of Property Plant & Equipments subject to refurbishments:In order to comply with the LKAS 16 - Property Plant & Equipment, the company determined the cost of derecognised assets based on the quantity surveyor’s valuation.

Defined Benefit Plans:The Defined Benefit Obligation and the related charge for the year are determined using actuarial valuations. The actuarial valuations involve making assumptions about discount rates, future salary increases, mortality rates etc. Due to the long term nature of such obligations these estimates are subject to significant uncertainty. Further details are given in Note 22.

Useful lives of Property, Plant & EquipmentThe company reviews the residual values, useful lives and methods of depreciation of Property, Plant & Equipment at each reporting date. Judgement of the management is exercised estimation of these values, rates, methods and hence they are subject to uncertainty.

Useful life of Intangible AssetThe 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. 2.3 Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of the Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.3.1 Foreign CurrenciesThe Financial Statements are presented in Sri Lanka Rupees, which is also the Company’s functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. Differences arising on settlement or translation of monetary items are recognised in the profit and loss. 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.

2.3.2 Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Company has concluded that it is acting as a principal in all of its revenue arrangements.

The following specific recognition criteria must also be met before revenue is recognised.

a) Room Revenue

Revenue is recognised on the rooms occupied on daily basis.

b) Food & Beverage Revenue

Food & Beverage Revenue is accounted at the time of sale.

c) Other Hotel Related Revenue

Other Hotel Related Revenue is accounted when such service is rendered. d) Interest

Interest Income is recognised on a time proportion basis that takes in to account the effective yield.

e) Others

Other income is recognised on an accrual basis.

Net gains and losses of a revenue nature on the disposal of Property, Plant & Equipment has been accounted for in the Statement of income, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses.

Gains and losses arising from incidental activities to main revenue generating activities and those arising from a group of similar transactions which are not material, are aggregated, reported and presented on a net basis.

2.3.3 Expenditure Recognitiona) Expenses are recognised in the

statement of income on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the Property, Plant and Equipment in a state of efficiency has been charged to income in arriving at the profit for the year.

Notes to the Financial Statements (Contd.)


b) For the purpose of presentation of statement of income the directors are of the opinion that function of expenses method presents fairly the elements of the Company’s performances, hence such presentation method is adopted.

2.3.4 Taxation(a) Current Income Taxes

Current 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 taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

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 relevant tax legislations.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the Statement of Income.

(b) Sales Tax

Revenue, expenses and assets are recognised net of the amount of sales tax except where the sales tax incurred on a purchase of assets or service is not recoverable from the taxation authorities in which case the sales tax is recognised as a part of the cost of the asset or part of the expense items as applicable and receivables and payables are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

(c) Deferred Tax

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

Deferred 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 utilized.

The carrying amount of deferred 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 tax asset to be utilized. 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 asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted 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 income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

2.3.5 InventoriesInventories are valued at the lower of cost and net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which inventories can be sold in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

The cost incurred in bringing inventories to its present location and condition is accounted using the following cost methods:

Food and Beverage -At purchase cost on weighted average basis.Other Inventories -At purchase cost on weighted average basis.

2.3.6 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 Statement of Cash Flow, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.


2.3.7 Investment in AssociatesThe company’s investment in its associates is accounted for under the equity method of accounting in separate Financial Statements (amendments to LKAS 27). An associate is an entity in which the company has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in an associate is carried in the financial position at cost plus post acquisition changes in the company’s share of net assets of the associate. Goodwill relating to an associates included in the carrying amount of the investment is not amortised. The Statement of Income reflects the share of the result of operation of the associate. Where there has been a change recorgnised directly in the equity of the associate, the Company recognised its share of any such change and discloses this, when applicable, in the Statement of Changing in Equity.

The reporting dates of the associate and the company are identical and the associate’s accounting policies confirm to those used by the company for like transactions and events in similar circumstance.

2.3.8 Property, Plant and EquipmentProperty, Plant and Equipment (except for land & Building) is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing 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 Company recognises

such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major refurbishment is performed, its cost is recognised in the carrying amount of the Property, Plant and Equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the profit or loss as incurred.

Land and Building is measured at fair value less accumulated depreciation on building, less impairment losses. Valuations are performed with sufficient frequency (Once in 3 years) to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. A revaluation surplus is recognised in other comprehensive income and credited to the revaluation reserve in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in the Statement of income, in which case the increase is recognised in the Statement of income. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost.

An item of Property, Plant and Equipment is derecognised 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 income when the asset is derecognised.

The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end.

Depreciation is calculated on a straight line basis over the useful lives of the assets.

The useful lives of the assets are estimated as follows;

2017 2016

Buildings and building integrals 20-70 Years 20-70 Years

Motor Vehicles 6-16 Years 6-16 Years

Kitchen Equipment 8-12 Years 8-12 Years

Furniture and Fittings 15-20 Years 15-20 Years

Office Equipment 8-15 Years 8-15 Years

Recreational Equipment 3-8 Years 3-8 Years

Hotel Equipment 6-12 Years 6-12 Years

Computer Equipment 3-5 Years 3-5 Years

Linen & Furnishing 3 Years 3 Years



2017 2016

Cutlery, Crockery & Glassware 3 Years 3 Years

Plant & Machinery 10-20 Years 10-20 Years

Solar Heater System 10 Years 10 Years

Telephone System 8- 10Years 8- 10Years

Air Conditioning System 10-16 Years 10-16 Years

Wooden House 3 Years 3 Years

Gym Equipment 10-15 Year 10-15 years

Depreciation of an asset begin when it is available for use that is when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

2.3.9 Financial Instruments : Initial Recognition and Subsequent Measurementi. Financial Assets

Initial Recognition and Measurement Financial 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, or Available-for-Sale financial assets, as appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus transaction costs, in the case of assets not at fair value through profit or loss.

Subsequent Measurement The subsequent measurement of financial assets depends on their classification as described below:

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 amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account, any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the Statement of income. The losses arising from impairment are recognised in the Statement of income in finance costs.

DerecognitionA financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset or 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 company has transferred substantially all the risks and rewards of the asset, or (b)the company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

ii. Impairment of Financial Assets

The Company 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, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) 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 reorganisation 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.

Financial Assets Carried at Amortised Cost For financial assets carried at amortised cost, the Company 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 Company 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 asset’s 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.

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 income. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery. 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 write off is later recovered, the recovery is credited to finance costs in the statement of income. iii. Financial Liabilities

Initial Recognition and MeasurementCurrently, financial liabilities of the Company loans and borrowings which are carried at amortized cost. This includes directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, bank overdrafts and loans and borrowings.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized

cost using the effective interest rate method. Gains and losses are recognised in the statement of income when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance costs in the statement of income.

De recognitionA financial liability is derecognised 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. The difference in the respective carrying amounts is recognised in the statement of income.

iv. Offsetting of Financial Instruments

Financial assets and financial liabilities are offset with the net amount reported in the consolidated statement of financial position only if there is a current enforceable legal right to offset the recognised amounts and intent to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

v. Fair Value of Financial Instruments

Financial instruments of the Company comprise of financial assets and financial liabilities. 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 information presented herein represents the determination of fair values as at the reporting date.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:

• Income approach.

• Reference to the current fair value of another instrument that is substantially the same.

• Discounted cash flow analysis or other valuation models.

2.3.10 Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, except capitalized development costs, are not capitalized and expenditure is recognised in the statement of income when it is incurred.

The Company’s intangible assets include the value of computer software. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Company. Amortisation is calculated using the straight-line method to write down the cost of intangible assets to their residual values over their estimated useful lives as follows:

Computer software 5 yearsIntangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible



asset with finite useful lives are 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 amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognised in the statement of income in the expense category consistent with the function of the intangible assets.

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 income when the asset is derecognised.

2.3.11 Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, where 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. When the Company expects some or all of a provision to be reimbursed, 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 income net of any reimbursement.

2.3.12 Capital Commitments and ContingenciesCapital commitments and contingent liabilities of the company are disclosed in Note 23.

2.3.13 Retirement Benefit Obligationsa) Defined Benefit Plans – Gratuity

A defined benefit plan is a post – employment benefit plan other than a defined contribution plan.

The Company measures the present value of the promised retirement benefits of gratuity, which is a defined benefit plan with the advice of an independent professional actuary once in every year using the Projected Unit Credit method. Actuarial gains and losses are recognised in full in the period in which they occur in Other Comprehensive Income.

The present value of the defined benefit obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the defined retirement benefit obligation are given in Note 22 Any changes in these assumptions will impact the carrying amount of defined benefit obligation.

Provision has been made for retirement gratuities from the first year of service for all employees, in conformity with LKAS 19 on “Employee benefits’ However, under the payment of gratuity act no 12 of 1983, the liability to an employee rises only on completion of 5 years of continued service.

The gratuity liability is not externally funded.

b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with the respective statutes and regulations. The Company contributes

12% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

2.3.14 Impairment of Non Financial AssetsThe Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s 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 Companies of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is 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, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognised in the Statement of income in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation.


For assets, 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 Company makes an estimate of the recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot 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 income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

2.3.15 Dividend DistributionsThe Company recognizes a liability to make cash or non-cash distributions to owners of equity when the distribution is authorized and is no longer at the discretion of the Company. A corresponding amount is recognised directly in equity.

Non-cash distributions are measured at the fair value of the assets to be distributed. Upon settlement of the distribution of non-cash assets, any difference between the carrying amount of the liability and the carrying amount of the assets distributed is recognised in income as a separate line in statement of comprehensive income.

2.4 Standards Issued But Not Yet EffectiveCertain new accounting standards and amendments / improvements to existing standards have been published, that are not mandatory for 31 March 2017 reporting periods. None of those have been early adopted by the Company.

SLFRS 9 Financial InstrumentsSLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39. SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

SLFRS 15 Revenue from Contracts with CustomersSLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including LKAS 18 Revenue, LKAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. SLFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

SLFRS 16 - LeasesSLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases under a single balance sheet model similar for finance leases under LKAS 17. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. This information gives a basis for the users of financial statement to assess the effect that leases have on the financial position. SLFRS 16 is effective for annual reporting periods beginning on or after 01 January 2019, with early adoption permitted



3. RevenueFor management purposes, the Company is organised into business units based on the nature of services rendered, namely room sales, food and beverage sales and other hotel related revenue. The Board monitors the operating results for the purpose of performance assessment. Assets and liabilities are managed on a group basis and are not allocated to operating segments.

2017 2016 Rs. Rs.

Segmentation of the RevenueRoom Sales 229,454,642 229,959,165Food and Beverage Sales 376,074,321 341,887,859Other Hotel Related Revenue 25,742,559 24,979,189 631,271,522 596,826,213

4. Other Income 2017 2016 Rs. Rs.

Exchange Gain 2,638,058 12,627,207Profit/(Loss) on Property Plant & Equipment 3,350,111 2,945,612Scrap Sales 265,391 300,420 6,253,560 15,873,239

5. Profit Before Taxation 2017 2016 Rs. Rs.

Stated after Charging/(Crediting)Depreciation 63,965,053 58,870,994Amortisation of Intangible Assets 1,253,751 533,117Auditors’ Remuneration 613,110 573,000Allowances for Inventory 1,044,432 (40,563)Salaries & Wages 105,111,722 86,324,971Cost of Meals 12,148,863 12,209,014Defined Contribution Plans 12,718,925 10,921,090Post Employment Benefit Plans 5,427,412 4,729,382Directors’ Emoluments 524,000 280,000Administration Charges- Payable to a Related Party 3,600,000 3,600,000Repair and Maintenance Expenditure 26,895,900 28,893,209Power and Energy Expenditure 44,242,880 44,027,516Donations 156,000 27,300Exchange Gain/(Loss) 2,638,058 12,627,207Profit/(Loss) on Disposal of Assets 3,350,111 2,945,612Marketing and Promotional Fees 10,440,719 3,390,248Nation Building Tax 12,545,585 11,884,167


6. Net Finance Income/(Expenses) 2017 2016 Rs. Rs.

6.1Interest Income on Foreign currency deposit 1,329,933 1,136,718Interest Income on Fixed Deposit 20,298,117 11,219,311Interest Income on REPO 193,143 200,274 21,821,193 12,556,303

6.2Interest Expenses on Overdrafts (15,137) (35,200)Interest Expenses on Loans (462,733) (722,528)Bank Charges (679,530) (511,013) (1,157,399) (1,268,741) 20,663,794 11,287,562

7. Earnings Per ShareBasic Earnings Per Share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year and the previous year are adjusted for events that have changed the number of ordinary shares outstanding.

The following reflects the income and share data used in the Basic Earnings Per Share computations.

2017 2016Amount Used as the Numerator: Rs. Rs.

Net Profit for the Period 105,667,795 103,862,885Net Profit Attributable to Ordinary Shareholders for Basic Earnings Per Share 105,667,795 103,862,885

Number of Ordinary Shares Used as Denominator Number Number

Weighted Average Number of Ordinary Shares Applicable to Basic Earnings Per Share 20,000,000 20,000,000

Earnings Per Share 5.28 5.19



8. Income TaxThe major components of income tax expense for the years ended 31 March are as follows : 2017 2016 Rs. Rs.

Statement of Profit or LossCurrent Income TaxCurrent Income Tax Charge 15,077,269 14,677,220Under/(Over) Provision of Current Taxes in Respect of Prior years (111,711) (86,677) 14,965,558 14,590,543

Deferred Income TaxDeferred Taxation Charge/(Reversal) (8.2) 10,547,135 5,906,100Income tax Expense Reported in the Statement of Profit or Loss 25,512,693 20,496,643

Statement of Changes in EquityDeferred Income Tax Related to Items Charged or Credited Through OCI to Equity :Net Gain /(Loss)on Revaluation of Land and Buildings 1,016,680 (1,434,959)Income Tax Expense Reported in Equity 1,016,680 (1,434,959)

8.1 A Reconciliation Between Tax Expense and the Product of Accounting Profit Multiplied by the Statutory tax Rate is as Follows :

Accounting Profit Before Tax from Continuing Operations 131,180,488 124,359,528Less : Share of Associate Company’s Profits (24,640,867) (42,192,707)Accounting Profit Before Income Tax 106,539,621 82,166,821

Income Tax Expense at the Statutory Income Tax Rate of 12% (2016 - 12%) 12,784,755 9,860,019

Tax Effect of Dis-allowable Expenses 9,625,396 14,632,214Tax Effect of Income Exempt from Income Tax and Other Allowable Credits (14,206,656) (14,453,166)Under/(Over) Provision of Current Taxes in Respect of Prior Years (111,711) (86,677)Tax Expense on the Higher Tax Rates ( Other than the Business Income ) 6,873,775 4,638,154 14,965,558 14,590,543

Deferred Taxation Charge / Reversal 10,547,135 5,906,100Income Tax Expense at the Effective Income Tax Rate of 24% (2016 - 25%) 25,512,693 20,496,643


8.2 Deferred Tax Assets, Liabilities and Income Tax Relates to the Followings

Statement of Statement of Financial Position Comprehensive Income 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for tax Purposes 54,516,970 44,189,385 10,327,585 6,152,396 54,516,970 44,189,385 10,327,585 6,152,396

Deferred Tax AssetsDefined Benefit Plans (3,238,712) (3,682,830) 444,118 (154,962)General Provisions - Allowances for Doubtful Receivables (212,045) (112,809) (99,236) 91,470 Allowances for obsolete inventories (324,744) (199,412) (125,332) (182,804) (3,775,501) (3,995,051)Deferred income tax income / (expense ) 10,547,135 5,906,100

Statement of Changes in Equity 2017 2016 Rs. Rs.

Revaluation of Building 58,441,076 59,457,756 1,016,680 (1,434,959) 1,016,680 (1,434,959)Net Deferred Tax Liability 109,182,545 99,652,090



9. Property, Plant & Equipment9.1 Gross Carrying Amounts Balance Balance as at Additions Disposals Derecognition as at 01.04.2016 of Assets 31.03.2017At Cost or Valuation Rs. Rs. Rs. Rs. Rs.

Freehold Land 1,025,000,000 - - - 1,025,000,000Buildings on freehold land 925,000,000 21,225,025 - (1,251,849) 944,973,176Motor Vehicles 30,242,504 14,425,000 (950,936) - 43,716,568Plant & Machinery 58,099,610 85,000 (12,644,750) - 45,539,860Hotel Equipment 60,405,395 9,554,334 - - 69,959,729Kitchen Equipment 17,631,118 3,045,935 - - 20,677,053Furniture and Fittings 126,662,780 5,644,219 - - 132,306,999Office Equipment 1,030,225 45,720 - - 1,075,945Recreational Equipment 278,111 - - - 278,111Solar Heater System 6,171,101 - - - 6,171,101Telephone System 3,393,049 - - - 3,393,049Air Conditioning System 47,710,736 3,250,438 - - 50,961,174Gym Equipment 4,215,967 1,006,979 - - 5,222,946Computer Equipment 9,662,046 698,920 - - 10,360,966Linen and Furnishing 30,754,073 5,514,914 (5,096,464) - 31,172,523Cutlery ,Crockery and Glassware 7,134,904 2,832,609 (1,862,675) - 8,104,838Wooden House 755,631 - - - 755,631Total Gross Carrying Amount 2,354,147,250 67,329,093 (20,554,825) (1,251,849) 2,399,669,669

9.2 Depreciation Balance Balance as at Charge for Derecognition as at 01.04.2016 the year Disposals of Assets 31.03.2017At Cost or Valuation Rs. Rs. Rs. Rs. Rs.

Buildings on Freehold Land - 27,013,030 - - 27,013,030Motor Vehicles 8,845,177 3,905,338 (950,936) - 11,799,579Plant & Machinery 25,437,659 3,159,742 (10,907,904) - 17,689,497Kitchen Equipment 8,362,692 1,501,084 - - 9,863,776Furniture and Fittings 33,377,639 6,666,401 - - 40,044,040Office Equipment 594,157 86,677 - - 680,834Recreational Equipment 278,111 - - - 278,111Hotel Equipment 28,232,857 7,099,445 - - 35,332,302Solar Heater System 2,672,493 588,894 - - 3,261,387Telephone System 3,137,236 42,831 - - 3,180,067Air Conditioning System 18,749,027 3,008,726 - - 21,757,753Gym Equipment 525,163 407,274 - - 932,437Computer Equipment 5,421,181 1,773,118 - - 7,194,299Linen and Furnishing 19,053,182 7,527,790 (5,096,464) - 21,484,508Cutlery ,Crockery and Glassware 5,751,362 1,184,703 (1,862,675) - 5,073,390Wooden House 755,631 - - - 755,631Total Depreciation 161,193,567 63,965,053 (18,817,979) - 206,340,641


9.3 Net Book Values 2017 2016 Rs. Rs.

At Cost or ValuationFreehold Land 1,025,000,000 1,025,000,000Buildings on Freehold Land 917,960,146 925,000,000Motor Vehicles 31,916,989 21,397,327Plant & Machinery 27,850,363 32,661,951Kitchen Equipment 10,813,277 9,268,426Furniture and Fittings 92,262,959 93,285,141Office Equipment 395,111 436,069Hotel Equipment 34,627,427 32,172,538Solar Heater System 2,909,714 3,498,608Telephone System 212,982 255,813Air Conditioning System 29,203,421 28,961,709Gym Equipment 4,290,509 3,690,804Computer System 3,166,667 4,240,865Linen and Furnishing 9,688,015 11,700,890Cutlery ,Crockery and Glassware 3,031,448 1,383,542Total Net Carrying Amount of Property, Plant & Equipment 2,193,329,027 2,192,953,683

9.4a) Land and Building is measured at fair value less depreciation on building, less impairment losses. Valuations are

performed with sufficient frequency (Once in 3 years. The fair value of land and buildings was determined by means of a revaluation during the financial year 2015/2016 by Messrs P. P. T Mohideen an independent valuer in reference to market based evidence. The results of such evaluation were incorporated in these Financial Statements from its effective date which is 31 March 2016. The surplus arising from the revaluation net of deferred taxes ,was transferred to a revaluation reserves.

b) The Company continued its refurbishment of the hotel building during the year. In order to de-recorgnise the carrying amount of the items of property plant & equipment that were subject to refurbishment, the management used the Quantity Surveyor’s valuation as the cost of the replaced items.

c) Accordingly an amount of Rs. 1,251,849 was de-recognised and the related revaluation surplus amounting to Rs.663,894/- included under revaluation reserve was transferred to retained earnings, in accordance with LKAS 16.

d) 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 CarryingClass of Asset Cost If assets were Amount Amount carried at cost 2017 2016 Rs. Rs. Rs. Rs.

Freehold Land 9,782,792 - 9,782,792 9,782,792Buildings on Freehold Land 480,376,747 70,233,372 410,143,375 429,518,700 490,159,539 70,233,372 419,926,167 439,301,492



9.5 During the financial year, the Company acquired Property, Plant & Equipment to the aggregate value of Rs.67,329,093/- (2016 - Rs. 93,256,547/-) for cash consideration.

9.6 Property, Plant & Equipment includes fully depreciated assets which are still in use having a gross carrying amount of Rs.55,734,164/- (2016 - Rs.52,646,796/-).

9.7 Land and Buildings with a carrying value of Rs. 1,942,960,146/- are subject to a primary mortgage to Mercantile Investments as more fully described in Note 9.3 and Note 24.

10. Intangible Assets 2017 2016 Computer Computer Software Software Rs. Rs.

CostAs at 1 April 5,231,594 5,136,594Acquired During the Period - 95,000As at 31 March 5,231,594 5,231,594

AmortisationAs at 1 April 2,109,625 1,576,508Amortisation for the year 1,253,751 533,117As at 31 March 3,363,376 2,109,625Net Book Value 1,868,218 3,121,969

11. Investment In AssociateThe Company has a 28.41% interest in Royal Palms Beach Hotels PLC,situated at Kaluthara which is also involved in the hoteliering business. The companies’s interest in Royal Palms Beach Hotels PLC is accounted for using the equity method in the company financial statements. The following table illustrates the summarised financial information of the Royal Palms Beach Hotels PLC.

11.1. Share of the Associate’s Statement of Financial Position (28.41%) As per books of associate As per Shareholding 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Current Assets 465,598,381 464,101,853 132,276,500 131,851,336Non Current Assets 2,034,655,578 1,992,089,768 578,045,650 565,952,703Current Liabilities (89,175,594) (94,312,995) (25,334,785) (26,794,322)Non Current Liabilities (163,994,333) (161,421,243) (46,590,790) (45,859,773)Net Assets 2,247,084,032 2,200,457,383 638,396,575 625,149,944

Goodwill 47,583,752 47,583,752 685,980,327 672,733,696


11.2. Equity value of Investment in Equity Accounted Investee 2017 2016 Rs. Rs.

As at 1 April 672,733,696 540,751,557Comprehensive Income (Note 11.3) 24,640,867 42,192,708Other Comprehensive Income (Note 11.3) (591,890) 769,557Dividend Received (11,362,228) (7,101,400)Revaluation of Land & Building - 106,153,981Revaluation of Land & Building -Income tax Effect 559,882 (10,032,707)As at 31 March 685,980,327 672,733,696

11.3. Associate’s Revenue and ProfitRevenue 582,319,233 637,372,326Cost of Sales (201,417,878) (198,364,383)Other Income 9,304,198 20,974,369Selling and Distribution Costs (17,306,536) (16,740,833)Administrative Expenses (292,343,328) (277,265,379)Loss from De-recognition of Property, Plant & Equipment (907,800) -Other Expenses (620,577) (537,973)Finance Income 17,982,679 8,686,528Finance Cost (265,683) (360,717)Profits Before Tax 96,744,308 173,763,938Tax Expense (10,004,994) (25,246,464)Profit After Tax 86,739,314 148,517,474Other Comprehensive Income (2,083,537) 2,708,755Total Comprehensive Income 84,655,777 151,226,229

Share of the Associate’s Revenue and Profit ( 28.41%)Profits Before Tax 27,483,285 49,365,227Profit After Tax 24,640,867 42,192,708Other Comprehensive Income (591,890) 769,557Total comprehensive Income 24,048,977 42,962,265

Carrying Amount of the Investment 685,980,327 672,733,696Market Value of the Shares 311,041,013 433,184,973



12. Inventories 2017 2016 Rs. Rs.

Food and Beverage 7,138,523 6,445,167Housekeeping and Uniform 4,911,714 4,961,981Other Consumables 6,269,169 5,836,302 18,319,406 17,243,450Allowances for Obsolete Inventories (2,706,198) (1,661,766) 15,613,208 15,581,684

13. Trade and Other Receivables 2017 2016 Rs. Rs.

Trade Debtors-Related Parties (13.1) 18,520,529 11,694,945-Others 74,699,986 103,079,234Allowances for Doubtful Receivables (1,767,043) (940,079) 91,453,472 113,834,100Other Debtors 745,694 593,237Loans to Company Officers 334,344 173,598 92,533,510 114,600,935

13.1 Trade Dues from Related Parties 2017 2016 Rs. Rs.

Name of the Related PartyTangerine Tours (Pvt) Limited 18,520,529 11,694,945 18,520,529 11,694,945

14. Other Non Financial Assets 2017 2016 Rs. Rs.

Prepayments 8,200,617 5,610,082Other Receivables 667,619 835,495 8,868,236 6,445,577


15. Other Financial Assets15.1 Available for Sale Investments Directors Directors No. of Shares Cost Valuation Cost ValuationNon Quoted Equity Securities 2017 2016 2017 2016 2016 2016with Non Related Parties Rs. Rs. Rs. Rs. Rs. Rs.

Lanka Glass Company Limited 50,000 50,000 500,000 - 500,000 -Research International (Pvt) Limited 10,000 10,000 100,000 - 100,000 -Gross Carrying Value of Investments 600,000 - 600,000 -

Allowance for fall in value (600,000) (600,000)Total Current Non Quoted Equity Securities - -

Total Current Other Investments - -

Directors’ valuations are based on cost of investments less any decline in value other than temporary, as decided by the Board of Directors.

Investment in equity instruments is measured at cost in accordance with LKAS 39 because its fair value cannot be measured reliably. The company provided full provisions for these investments.

15.2 Loans and Receivables 2017 2016 Rs. Rs.

Short Term InvestmentsFixed Deposits at Mercantile Investments and Finance PLC-Related party 234,793,810 116,155,987 234,793,810 116,155,987

15.3 Loans and ReceivablesAmount due from Related Parties 2017 2016Name of the Related Party Relationship Rs. Rs.

Nilaveli Beach Hotels (Pvt)Limited Other Related Party 52,318 51,160The Nuwara Eliya Hotels Co.PLC Other Related Party 23,174 15,956 75,491 67,117



16. Cash and Bank Balances 2017 2016 Rs. Rs.

Cash at bank and in hand 108,141,059 127,654,867

For the Purposes of the Cash Flow Statement, the year end Cash and Cash Equivalents Comprise the Following:

Cash at Bank and in hand 108,141,059 127,654,867Short term Deposits 177,708,330 116,155,987Bank Overdraft (Note 21) (10,180,666) (10,517,106) 275,668,723 233,293,748

17. Stated Capital Number of Ordinary shares shares

At 31 March 2016 20,000,000 244,800,000At 31 March 2017 20,000,000 244,800,000

The holders of ordinary shares are entitled to receive dividends as declared from time to time on the residue of Profits and are eligible to participate in any surplus assets in a winding up. They are also entitled to one vote per share at meetings of the Company. There are no other preferences or restrictions on ordinary shares.

18. Revaluation Reserve 2017 2016 Rs. Rs.

18.1 Total Revaluation Reserve.Revaluation Reserve - Company (Note 18.2) 1,506,126,461 1,505,773,676Revaluation Reserve - Associate Company (Note 18.3) 293,820,755 293,380,644 1,799,947,216 1,799,154,320

18.2 Revaluation Reserve - Company On: Property, Plant and Equipment

As at the Beginning of the year 1,505,773,676 1,308,464,472Revaluations During the year(a) - 207,086,140Transfer to Retained Earning (a) (663,894) (8,341,977)Tax Effect on Surplus on Revaluation 1,016,679 (1,434,959)Revaluation Reserve 1,506,126,461 1,505,773,676

(a) Transfer to retained earnings represents the amounts transferred on impact of deferred tax, depreciation difference on cost and revalued amount of property, plant and equipment disposed and de-recognised during the year.


18.3 Revaluation Reserve - Associate Company On: Property, Plant & Equipment 2017 2016 Rs. Rs.

As at the Beginning of the Year 293,380,644 197,259,370Effect on Revaluation Surplus of disposed Property, Plant & Equipment - -Transfer to Retained Earning (119,771)Tax Effect on Surplus on Revaluation 559,882 (10,032,707)Revaluation During the Year - 106,153,981 293,820,755 293,380,644

The above Share of Associate Company’s Revaluation Reserve represents the Company’s Share of Revaluation surplus resulting from the revaluation of Property, Plant & Equipment of the Associate Company.

19. Trade and Other Payables 2017 2016 Rs. Rs.

Financial Liabilities (Note 19.1) 37,279,532 34,853,372Non Financial Liabilities (Note 19.2) 42,733,572 42,885,098 80,013,104 77,738,470

19.1 Financial Liabilities 2017 2016 Rs. Rs.

Trade Payables 24,787,256 24,316,897Other Payables 9,379,661 8,293,084Dividends Payable 609,440 520,868Payables to Contractors /other Suppliers 2,503,175 1,722,523 37,279,532 34,853,372

19.2 Non Financial Liabilities 2017 2016 Rs. Rs.

Advanced Received for Reservation 23,151,686 23,953,545VAT Payable 3,296,845 2,870,526TDL Payable 2,160,254 2,248,010NBT Payable 1,501,004 1,359,227EPF and ETF Payable 1,632,424 1,378,947Other Payables 10,991,359 11,074,843 42,733,572 42,885,098



20. Amounts Due to Related Parties 2017 2016Name of the Related Party Relationship Rs. Rs.

Royal Palms Beach Hotels Plc Associate company 1,772,076 3,753,514Security Ceylon (Pvt) Limited Other Related Party 1,081,246 1,217,754Tangerine Tours (Pvt) Limited Other Related Party 786,263 2,175,337Mercantile Investments and Finance PLC Other Related Party - 224,420 3,639,585 7,371,025

21. Interest Bearing Loans and Borrowings 2017 2016 Rs. Rs.

CurrentBank Overdraft 10,180,666 10,517,106Term Loans from Related Parties (21.1) 4,301,472 4,301,472 14,482,138 14,818,578

Non-currentTerm Loans from Related Parties (21.1) 1,075,362 5,376,834 1,075,362 5,376,834Total Borrowings 15,557,500 20,195,412

21.1 Term Loan - Mercantile Investments PLC - Related Party As At Repayment As At 01.04.2016 31.03.2017 Rs. Rs. Rs.

Susahanaya Loan 9,678,306 (4,301,472) 5,376,834 9,678,306 (4,301,472) 5,376,834

The Company has pledged its land and premises as security, by way of a primary mortgage, as more fully described in Note 26.3

Loan Obtained Rs. 45,000,0000Grant Date January 1, 2009Repayment period 114 months


22. Post Employee Benefit Liability 2017 2016 Rs. Rs.

Balance as at the Beginning of the Year 30,690,253 29,398,900Charge for the Year (Note 22.1) 6,347,512 3,804,553Payments Made During the Year (10,048,500) (2,513,200)Balance as at the end of the Year 26,989,265 30,690,253

22.1 Charge for the YearCurrent Service Cost for the Year 1,744,582 1,936,486Interest Cost for the year 3,682,830 2,792,896 5,427,412 4,729,382Actuarial (Gain)/Loss 920,100 (924,829) 6,347,512 3,804,553

22.2 Actuarial Assumptions 2017 2016

Discount Rate 12.50% 12.00%Salary Increment 10.00% 9.50%Mortality-A67/70 Mortality Table Issued by the Institute of Actuaries LondonRetirement Age 55 years. 55 years.Disability Rate Simple disability rate

Staff turnoverThe staff turn over rate used in the valuation 9% up to age 50 and thereafter 0 for 2016 & 2017

An actuarial valuation of the gratuity was carried out as at 31 March 2017 by Actuarial and Management Consultants (Pvt) Limited, a firm of professional actuaries. The valuation method used by the actuaries is the “Projected Unit Credit Method”, recommended by LKAS 19 Employee Benefits.

22.3 Sensitivity of Assumptions Employed in Actuary ValuationThe following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measures.



The sensitivity of the Comprehensive Income Statement and the Statement of Financial Position is the effect of the assumed changes in discount rate & salary increment rate on the profit or loss & employment benefit obligation for the year.

Increase/ (Decrease) in Discount Rate Sensitivity Effect on Comprehensive Income

Statement Increase / (Reduction) in results for the

year

Sensitivity Effect on Employee Benefit Obligation Increase / (Reduction) in the

Liability

1% (958,330) 958,330

-1% 1,048,391 (1,048,391)

Increase/ (Decrease) in Salary Increment

1% (1,207,995) 1,207,995

-1% 1,123,603 (1,123,603)

22.4 Maturity Profile 2017 2016

Weighted Average Duration of Defined Benefit Obligation 4.12 Years 3.84 Years

Distribution of Defined Benefit Obligation over the Future Working Life TimeLess than or Equal 1 year 8,458,477 9,833,603Over 1 year and Less than or Equal 5 years 9,924,494 295,392Over 5 years and Less than or Equal 10 years 5,608,305 9,422,335Over 10 years 2,997,989 11,138,923Total 26,989,265 30,690,253

23. Commitments and Contingencies23.1 Commitments23.1.1 Capital Expenditure CommitmentsThe Company does not have significant capital commitments as at the reporting date.

23.1.2 Financial CommitmentsCompany guaranteed financial accommodation for Royal Palms Beach Hotel PLC, which is its associate, to a limit of Rs. 35 million during the financial year 2015/2016.

23.2 ContingenciesContingent liabilitiesThere are no significant contingencies as at 31 March 2017


24. Assets PledgedThe Company has pledged land and Buildings with a carrying value of Rs. 1,942,960,146/- as security, by way of a primary mortgage, to obtain Rs. 45 million loan from Mercantile Investments and Finance PLC.

A total of 3,237,332 shares of Royal Palms Beach Hotels PLC, (Associate Company) amounting to Rs. 32,373,320 have been pledged against the facilities obtained by Commercial Bank of Ceylon PLC.

25. Related Party DisclosuresDetails of significant related party disclosures are as follows:

The following tables provides the significant amount of transactions, which have been entered into with related parties for the relevant financial year.

25.1 Transactions with Associate CompanyTangerine Hotel PLC holds 28.41% Share holding of Royal Palms Beach Hotels PLC. Amount Balance as at Terms of 2017 2016 2017 2016Nature of Transaction Transactions Rs. Rs. Rs. Rs.

Dividend Received 11,362,228 7,101,400Staff Quarters Rent Market terms 691,837 679,592Sewerage Treatment Plant rent Market terms 2,549,781 2,555,579Staff Meals Market terms (12,666,482) (10,407,831)Laundry Chargers Market terms (6,469,593) (10,214,659)Reimbursements of Expenses (7,478,526) (1,753,329)Fund Transfers for Settlements 25,354,454 19,369,723Amounts Payable to Royal Palms Beach Hotel PLC (1,772,076) (3,753,514)

25.2 Transactions with Key Management PersonnelThe Key Management Personnel (KMPs) are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Key Management Personnel of the Company are Board of Directors of the Company and personnel holding designation General Manager and above. Transactions with Key Management Personnel and transaction with the close family members (CFMs) of the KMPs, If any, also have been taken into consideration in the following disclosure.

a) Key Management Personnel Compensation

2017 2016 Rs. Rs.

Short-term Employee Benefits 5,293,875 4,767,000

25.3 Transaction with Other Related PartiesTransactions with entities that are significantly influenced by Key Management Personnel of the Company:

Some Key Management Personnel of the Company and their members of the families collectively have control directly or indirectly in certain entities with which the Company entered into the transactions, summarised as follows:



The Company carries out transactions with KMPs & their close family members in the ordinary course of its business on an arms length basis at commercial rates.

Amount Balance as at Terms of 2017 2016 2017 2016Nature of Transaction Transactions Rs. Rs. Rs. Rs.

Security Ceylon (Pvt) Ltd.Security Services As per Agreement (16,065,856) (14,446,605)Staff Meals Market Terms 1,924,506 1,597,633Fund Transfers For Settlements 14,277,859 12,525,569Amounts Payable to Security Ceylon (Pvt) Ltd (1,081,245) (1,217,755)

Nilaveli Beach Hotel (Pvt) LtdReimbursement Expenses 685,433 612,118Fund transfers for Settlements (684,276) (669,854)Amounts Receivable from Nilaveli Beach Hotel (Pvt) Ltd 52,318 51,160

Tangerine Tours (Pvt) Ltd.Meal costs Market Terms 52,743 55,682Administration Expenses As per Agreement (4,080,000) (3,996,000)Tour Operation As per Agreement 130,663,455 172,198,294Reimbursement Expenses (10,236,260) (7,846,260)Fund Transfers for Settlements (108,185,280) (87,785,269)Amounts Receivable from Tangerine Tours ( Pvt) Ltd 17,734,266 9,519,608

Mercantile Investments & Finance PLCFixed Deposit Investments Market Terms 234,793,810 116,155,987Interest Income on Fixed Deposits Market Terms 20,298,117 11,219,311Interest Bearing Loans and Borrowings As per Agreement 5,376,834 9,678,306Interest Expenses As per Agreement 462,733 722,528Head office Rent As per Agreement 1,726,784 1,359,184Repairs and Service to the Motor Vehicle Market Terms 939,665 1,108,755

The Nuwara Eliya Hotels PLCReimbursement Expenses 1,768,153 1,507,401Fund Transfers for Settlements (1,760,936) (1,507,401)Amounts Receivable from Nuwara Eliya Hotels PLC 23,174 15,957

Fair View Hotel (Pvt) Ltd.Advertising Expenses Market Terms 121,504 -Fund Transfers for Settlements (121,504) -


25.4 Commitments with Other Related Parties 2017 2016 Rs. Rs.

Guarantee Given (Note 23.1.2) - 35Mn

26. Fair Value of Financial Assets and LiabilitiesFinancial instruments of the Company comprise of financial assets and financial liabilities. 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 information presented herein represents the determination of fair values as at the reporting date.

26.1 Financial Instruments carried at Fair ValueThe Company does not have any financial instruments that are carried at Fair value as at the reporting date.

26.2 Determination of Fair Value and Fair Value HierarchyThe company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilitiesLevel 2: Other techniques for which all inputs which have a significant effect on the disclosed fair value are observable,

either directly or indirectlyLevel 3: Techniques which use inputs that have a significant effect on the disclosed fair value that are not based on

observable market data

26.3 Financial Instruments not carried at Fair ValueGiven below is a comparison, by class, of the carrying amounts and fair values of the company’s financial instruments that are not carried at fair value in the Financial Statements. This table does not include the fair values of non–financial assets and non–financial liabilities.

2017 2016 Carrying Fair Carrying Fair Value Value Value Value Level Rs. Rs. Rs. Rs.Financial liabilitiesInterest-bearing loans and borrowings Level 2 15,557,500 15,627,071 20,195,412 20,476,315 15,557,500 15,627,071 20,195,412 20,476,315

The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are not recorded at fair value in the financial statements:

For financial assets and financial liabilities that have a short term maturity it is assumed that the carrying amounts approximate their fair value. This assumption is also applied to trade and other receivables, cash and cash equivalents, other financial assets amount due from related parties, other payables and short term deposits amount due to related parties.

Interest-bearing loans and borrowingsSusahanaya Loan from Mercantile Investment and Finance PLC - Related Parties are obtained at the rate of 6%. this loan has been provided by the central bank through refinance scheme for re building of tsunami effected hotels within the country. Company uses discounted cash flow method to workout the fair value and AWPLR as at the reporting date has been used for the calculation.



26.4 Non Financial Assets Disclosed at Fair value

2017 Method Date of Valuation

Level**

Value Unobservable Inputs

Average Price per Perch/Sq.ft

Freehold Land Market Approach 31.03.2016 03 1,025,000,000 Estimated price per perch

600,000

Buildings Market Approach 31.03.2016 03 925,000,000 Estimated price per sq.ft

7,701

2016 Method Date of Valuation

Level **

Value Unobservable Inputs

Average Price per Perch/Sq.ft

Freehold Land Market Approach 31.03.2016 03 1,025,000,000 Estimated price per perch

600,000

Buildings Market Approach 31.03.2016 03 925,000,000 Estimated price per sq.ft

7,701

** Fair value measurement sensitivity to unobservable inputs - positive impact to the fair valueValuation was carried out by professionally qualified independent value in compliance with Sri Lanka Accounting Standard - SLFRS 13 (Fair Value Measurement).

27. Risk Management27.1 IntroductionThe Company has exposure to the following risks from its use of financial instruments;1. Credit Risk2. Liquidity Risk3. Market Risk

The Board of Directors has the overall responsibility for the establishment and oversight of the Company’s risk management framework, which includes developing and monitoring the Company’s risk management policies.

The Audit Committee oversees how management monitors compliance with the risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by it.


27.2 Credit Risk(a) Introduction

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.

Company has an established credit policy under which each new customer is reviewed individually for credit worthiness before standard payment and delivery terms are offered to the customer. The credit review includes bank and other reputed company references. Credit granted is subject to regular review, to ensure it remains consistent with the customer’s creditworthiness in relations to the anticipated volume of business.

The maximum exposure to credit risk is represented by the carrying value of each financial asset on the Reporting date.

(b) The Maximum Exposure to Credit Risk at the reporting Date

2017 2016 Note Rs. Rs.

Cash and Cash Equivalents 16 108,141,059 127,654,867Trade and other Receivables 13 92,533,510 114,600,935Other Financial Assets 15.2 234,793,810 116,155,987Amounts Due from Related Parties 15.3 75,491 67,117 435,543,870 358,478,906

(c) The Ageing of the trade Receivable as at the Reporting Date

Gross Receivable 2017 2016 Rs. Rs.

Not past due 0- 60 days 64,833,353 106,149,510Past due 61-90 days 16,743,505 6,841,047Past due 90-120 days 6,543,186 1,064,556Past due 120-180 days 3,695,429 508,069More than 180 days 1,405,042 210,997Total 93,220,515 114,774,179

Movement in the Impairment Allowance* 2017 2016 Rs. Rs.

Balances at 1 April (940,079) (138,397)Impairment Recognised (826,963) (801,682)Balances at 31 March (1,767,042) (940,079)



27.3 Liquidity Risk(a) Introduction

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

(b) The table below Summaries the Maturity Profile of Company’s Financial Liabilities based on Contractual Undiscounted Payments.

Contractual Maturities of Financial Liabilities31 March 2017 Total Up to 3 3-12 1 - 5 More than Months Months Years 5 Years Rs. Rs. Rs. Rs. Rs.

Trade and other Payables 80,013,104 74,003,382 6,009,722 - -Interest-bearing Loans and Borrowings 5,592,206 1,150,437 3,355,677 1,086,092 -Bank Overdraft 10,180,666 10,180,666 - - -Amounts Due to Related Parties 3,639,585 3,639,585 - - - 99,425,561 88,974,070 9,365,399 1,086,092 -

Contractual Maturities of Financial Liabilities31 March 2016 Total Up to 3 3-12 1 - 5 More than Months Months Years 5 Years Rs. Rs. Rs. Rs. Rs.

Trade and other Payables 77,738,470 77,738,470 - - -Interest-bearing Loans and Borrowings 10,356,408 1,214,782 3,549,420 5,592,206 -Bank Overdraft 10,517,106 10,517,106 - - -Amounts Due to Related Parties 7,371,025 7,371,025 - - - 105,983,009 96,841,383 3,549,420 5,592,206 -

(c) Undrawn Committed Borrowing Facilities

There are no undrawn borrowing facilities available to the Company as at the reporting date.


27.4 Market Risk(a) Introduction

Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate due to the changers in market prices. Mainly the changes in market prices, such as foreign exchange rates and interest rates will affect the company’s income or the value of its holdings of financial instruments.

(b) Foreign currency risk

The Company is exposed to foreign currency risk on revenue, and receivables and cash deposits denominated in currencies other than the functional currency of the Company. The currencies giving rise to this risk are primarily US dollars and Euro. The Company Finance team closely monitors the exchange rate movement, for necessary action.

If market rate appreciate or depreciate by 1% the effect of the same to the exchange gain/(loss) would be:

Sensitivity Effect on Comprehensive Income increase/(decrease) in Results for the Year +1% -1%

Euro (£) 328,442 (328,442)Dollar ($) 353,261 (353,261) 681,703 (681,703)

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market interest rates. The Company’s borrowing portfolio consist with fixed rate borrowings thus company does not have an interest rate risk as at the reporting date.

28. Capital ManagementThe company’s capital structure comprising share capital, reserves and retained earnings, as disclosed in the statement of Changes in Equity.

29. Legal CompensationThe cases (with regard to damages claimed as a result of a motor accident )referred to in financial year 2015/2016 were settled to a finality at an aggregate sum of Rs. 61,000,000/- in full and final settlement of all claims and demands as at 31st March 2016.

In compliance with the terms of settlement the Company has made claim against Sri Lanka Insurance Corporation Limited for the recovery of the aforementioned figure with further interest and cost as per Legal advice and intends pursuing such claim via Court.



30. Comparative InformationThe presentation and classification of following items in these Financial Statements are amended to ensure comparability with the current year.

Current As Reported Statement of Income and Cash Flow Presentation Previously

Share of Associate Company’s Profit 42,192,707 49,365,227Profit Before Tax 124,359,528 131,532,048Income Tax Expenses 20,496,643 27,669,163 103,862,885 103,862,885

As reported previously :Non Financial LiabilitiesAdvanced Received for Reservation 23,953,545Other Payables 18,931,553 42,885,098

Current Presentation:Non Financial LiabilitiesAdvanced Received for Reservation 23,953,545VAT Payable 2,870,526TDL Payable 2,248,010NBT Payable 1,359,227EPF and ETF Payable 1,378,947Other Payables 11,074,843 42,885,098

31. Events Occurring After the Reporting DateThere have been no material events occurring after the reporting date that require adjustments to or disclosure in the Financial Statements.

The Directors approved a first and final Dividend of Rs. 0.50 per share for the Ordinary Shareholders for the Financial Year 2016/2017.


No of Shares Held No of Members Shareholding %

1 - 1000 1136 141,798 0.71%

1001 - 10000 159 527,412 2.64%

10001 - 100000 51 1,590,837 7.95%

100001 - 1000000 17 3,675,336 18.38%

> 1000000 5 14,064,617 70.32%

1368 20,000,000 100.00%

Category Shareholding %

Resident 19,934,644 99.67%

Non Resident 65,356 0.33%

20,000,000 100.00%

Category Shareholding %

Individuals 6,255,692 31.28%

Corporate 13,744,308 68.72%

20,000,000 100.00%

Investor Information

No. of Shares Held

1-1000 0.71%

1001-10000 2.64%

10001-100000 7.95%

100001-1000000 18.38%

>1000000 70.32%


2017Rs.

2016Rs.

Market Value Per Share as at 31st March 59.50 66.70

Highest Market Value Per Share During the Year 74 90

Lowest Market Value Per Share During the Year 50.10 50

20 Largest Shareholders 2017 2016

No of shares % No of shares %

Nilaveli Beach Hotels (Pvt) Limited 5,336,738 26.68% 5,336,738 26.68%

Mercantile Investments and Finance PLC 3,899,644 19.50% 3,899,644 19.50%

Mr. G. L. A. Ondaatjie 2,025,700 10.13% 2,025,700 10.13%

Employees Providend Fund 1,629,471 8.15% 1,629,471 8.15%

N. Vaitilingam & Co. Ltd 1,173,064 5.87% 1,173,064 5.87%

Tangerine Tours (Pvt) Ltd 405,478 2.03% 405,478 2.03%

N. G. H. Cooray 315,056 1.58% 315,056 1.58%

Blue Oceanic Beach Hotels (Pvt) Ltd 295,172 1.48% 295,172 1.48%

Mr. N. J. H. M. Cooray 276,242 1.38% 276,242 1.38%

Jet Travels Ltd 267,032 1.34% 267,032 1.34%

Mrs. C. A. Ondaatjie 259,854 1.30% 259,854 1.30%

Mr. M. Keerthiratne 255,898 1.28% 255,898 1.28%

Ceylon Galvanising Industries Ltd 234,000 1.17% 234,000 1.17%

Mr. N. H. V. Perera 196,814 0.98% 191,724 0.96%

Mr. T. J. Ondaatjie 177,080 0.89% 177,080 0.89%

B. Surendra 174,244 0.87% - 0.00%

Ms. A. M. Ondaatjie 164,842 0.82% 164,842 0.82%

Mrs. K. M. N. Perera 152,756 0.76% 152,756 0.76%

Mrs. S. D. de Silva 150,530 0.75% 150,530 0.75%

Mr. G. G. Ondaatjie 132,888 0.66% 132,888 0.66%

Mercantile Fortunes (Pvt) Ltd - 0.00% 117,384 0.59%

17,522,503 87.61% 17,460,553 87.30%


Value Added Statement

For the Financial Year Ended 31st March 2017 2016 2015 Rs. (000) Rs. (000) Rs. (000)

Revenue 631,272 596,826 548,615LessCost of Sales (364,897) (355,891) (328,781) 266,374 240,935 219,834

Adjustment forOther Income 52,716 70,622 17,691Total Value Added 319,090 311,557 237,525

Distribution Of Value Added as FollowsTo employee as Remuneration 114,822 114,184 114,182

To Providers of CapitalDividends to shareholders 10,000 10,000 10,000

To Government as Taxes 34,635 34,641 22,560

To Expansion and GrowthRetained With Business as Deprecation 63,965 58,870 55,620 as reserves 95,668 93,862 45,163 319,090 311,557 237,525

Value Added Per Revenue 0.51 0.52 0.43Value Added per Employment 2.78 2.73 2.08Value Added Per Ordinary Share 15.95 15.58 11.88


Graphical Analysis of Value Addition

2015

Value Allocation to Employee 43%

To Government 9%

To Expansion and Growth 48%

2016


To Provider of Capital 3%

To Government 14%


2017


To Provider of Capital 3%

To Government 11%


2015 2016 20170

5

10

15

20

Rs.

Value Added Per Revenue

Value Added per Employment

Value Added Per Ordinary Share


Year Ended 31st March 2016 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Trading Results

Turnover net of Turnover Tax 631,272 596,826 548,615 658,179 530,872 485,501 357,772 257,093 222,240 225,908

Operating Profit/(Loss) before

interest exp. and other Income 79,622 55,006 33,181 159,625 87,666 (32,665) 42,084 9,355 (21,541) 6,535

Profit/(Loss) before Taxation 131,180 124,359 49,872 182,713 128,988 154,365 75,124 34,034 2,768 16,407

Taxation Provision (25,512) (20,497) (4,708) (33,434) (14,667) (26,459) (1,130) (4,530) 2,037 (9,063)

Profit after Taxation on

Ordinary Activities 105,668 103,863 45,164 149,279 114,321 127,906 73,994 29,504 4,805 7,344

Capital & Reserves

Stated Capital/Share Capital 244,800 244,800 244,800 244,800 244,800 244,800 244,800 244,800 244,800 244,800

Revaluation Reserve 1,506,126 1,505,773 1,308,464 1,320,912 1,330,293 1,221,992 1,076,811 1,063,246 602,904 602,294

Revenue Reserve 1,057,997 963,057 859,159 797,183 653,292 518,890 381,620 307,625 278,121 273,316

Capital Reserves of

Associate company 293,821 293,380 197,259 200,339 205,472 162,393 171,028 168,384 94,838 99,664

Total Equity 3,102,744 3,007,010 2,609,682 2,563,234 2,433,857 2,148,075 1,874,259 1,784,055 1,220,663 1,220,074

Assets Employed

Current Assets 460,025 380,506 344,102 328,475 227,940 207,627 123,768 89,770 60,468 57,606

Current Liabilities (101,211) (106,584) (118,265) (141,556) (108,506) (102,825) (87,102) (79,834) (68,311) (87,711)

Net Current Assets 358,814 273,922 225,837 186,919 119,434 104,802 36,666 9,936 (7,843) (30,105)

Property,Plant, & Equipment 2,193,329 2,192,953 1,970,922 1,971,819 1,912,506 1,524,320 1,510,700 1,495,073 1,018,461 1,036,048

Intangible Assets 1,868 3,121 3,560 3,714 1,741 1,970 - - -

Long Term Investments 685,980 672,733 540,751 533,988 528,077 464,117 437,034 409,295 316,644 325,055

Non- Current Liabilities (137,247) (135,719) (131,388) (133,206) (127,901) (109,527) (110,140) (130,249) (106,599) (110,924)

3,102,744 3,007,010 2,609,682 2,563,234 2,433,857 1,985,682 1,874,259 1,784,055 1,220,663 1,220,074

Ratio & Statistics

Gearing Ratio (Times) 0.005 0.007 0.01 0.01 0.01 0.055 0.06 0.07 0.09 0.09

Current ratio (Times) 4.55 3.57 2.91 2.32 2.10 2.02 1.42 1.12 0.89 0.66

Earnings per Share 5.28 5.19 2.26 7.46 5.72 6.40 3.70 1.48 0.24 0.37

Net assets per Share 155.14 150.35 130.48 128.16 121.69 99.28 93.71 89.20 61.03 61.00

Interest Cover (Times) 224.35 109.54 44.26 114.89 61.12 60.05 17.34 3.83 (0.48) 1.88

Return on Shareholder’s Funds (%) 3.41 3.45 1.73 5.82 4.70 5.95 3.95 1.65 0.39 0.60

Return on Total Assets(%) 3.16 3.20 1.58 5.26 4.28 5.76 3.57 1.48 0.34 0.52

Price Earning Ratio 11.26 12.84 34.98 8.64 11.44 13.74 26.41 51 117 82

Dividends per Share 0.50 0.50 - 1.00 0.50 - - - - -

Dividend Cover (Times) 10.57 10.39 - 7.46 11.43 - - - - -

Dividend Yield (%) 0.01 0.01 - 0.01 0.01 - - - - -

Dividend Pay- out Ratio 0.09 0.10 - 0.13 0.09 - - - - -

Decade at a Glance


Company & Location Building in (sq.F.t) Freehold property Land in Acers

Net Book value

Rs’000 Rs’000

2016/2017 2015/2016 2016/2017 2015/2016 2016/2017 2015/2016

Tangerine Beach Hotels PLC. St. Abrew’s Road, Nagashandiya Waskaduwa, Kalutara North

161,480 161,475 9.5625 9.5625 1,942,960 1,950,000

Total 161,480 161,475 9.5625 9.5625 1,942,960 1,950,000

Real Estate Portfolio


Accrual BasisRecording Revenue & Expenditure in the period in which they are earned or regardless of whether cash is received or disbursed in that period.

Contingent LiabilityContingency Liability is a possible obligation that arises from past events & whose existence will be committed only by the occurrence or non-occurrence of one or more uncertain future events not wholly with in the control of the enterprises.

EBITEarnings before interest and tax (includes other operating income).

Current RatioCurrent Assets divided by Current Liabilities.

Quick Assets RatioCurrent Assets excluding inventory divided by Current Liabilities.

Gearing RatioOwners’ Equity (Capital) to borrowed funds.

Capital ExpenditureThe Total of additions to Property Plant and Equipment.

Capital ReservesReserves identified for specific purposes and considered not available for distribution.

Debt/ Equity RatioDebt as a percentage of shareholder’s funds.

Interest Cover RatioAssociate Profit before interest and tax over Finance Expenses

Net AssetsTotal Assets minus Current Liabilities minus Long term Liabilities.

Net Assets per ShareTotal Assets less Total Liabilities divided by the number of Ordinary Shares in issue the end of the period.

Price Earnings RatioMarket Price per share over Earnings per share.

Return on EquityProfit attributable to shareholders as a percentage of average shareholder’s funds.

Shareholders’ Funds.Total issued and fully paid share capital reserves and revenue reserves.

Market Value per ShareThe price at which an ordinary share can be purchased in the stock market.

Market Capitalization.Number of shares in issues at the end of period multiplied by the market price at the end of period.

Total DebtLong term loans plus short term loans and over draft.

Corporate GovernanceThe process by which corporate entities are governed. It is concerned with the way in which power is exercised over the Management & direction of the entity the supervision of executive actions & accountability to owners & others.

Total Value AddedThe difference between net revenue (including other income) and expenses, cost of materials and service purchased from external source.

Glossary of Financial Terms


NOTICE IS HEREBY GIVEN that the 37th Annual General Meeting of Tangerine Beach Hotels PLC, will be held on 29th September 2017 at 11.30 a.m. at Tangerine Beach Hotel Kalutara to transact the following business.

1. To receive and adopt the Report of the Directors and the Statement of Accounts for the year ended 31st March 2017 with the Report of the Auditors therein.

2. To elect Mr. T J Ondaatjie who retires in terms of Article 88(i) of the Articles of Association of the Company.

3. To elect Mr. G L A Ondaatjie and Mrs. C A Ondaatjie in terms of Section 211 of the Companies Act No.07 of 2007.The Company has received special notice of intention to pass the following resolutions as ordinary resolutions.

a. “Resolved that the age limit of 70 years referred to in Sections 210 of the Companies Act No.07 of 2007 shall not be applicable to Mr. George Lawrence Andrew Ondaatjie who is 82 years of age and whose appointment as a Director of the Company be and is hereby approved and who is elected a Director of the Company not withstanding the provisions of the said Section 210 of the Companies Act.”

b. “Resolved that the age limit of 70 years referred to in Sections 210 of the Companies Act No.07 of 2007 shall not be applicable Mrs. Christabel Angela Ondaatjie who is 76 years of age and whose appointment as a Director of the Company be and is hereby approved and who is elected a Director of the Company notwithstanding the provisions of the said Section 210 of the Companies Act.”

4. To authorize the Directors to determine the remuneration of the Auditors, Messrs. Ernst & Young who are deemed to have been reappointed as Auditors in terms of Section 158 of the Companies Act No.7 of 2007.

5. To authorize the Directors to determine payments for charitable and other purposes for year 2017/18.

By Order of the Board


22nd August 2017Colombo

Note:Any member entitled to attend and vote at the Meeting is entitled to appoint a Proxy (whether member or not) to attend and vote instead of him. A Form of Proxy is enclosed with the Report of this purpose and Shareholders who are unable to attend the Meeting in person are requested to kindly complete and return such form of proxy in due time, in accordance with the instructions noted on the Form of Proxy.

Notice of Meeting


Notes


*I/We …………………......................……………………………………….........................................…………………………….

of ……………………………………………………………………….................................................................………………….

being a member/members of TANGERINE BEACH HOTELS PLC, do hereby appoint;

……………………………………..............................................................……………………………………………………… of

……………………........................……………………………………………………or failing *him/her

George Lawrence Andrew Ondaatjie or failing himAngeline Myrese Ondaatjie or failing herGerard George Ondaatjie or failing himChristabel Angela Ondaatjie or failing herTravice John Ondaatjie or failing himNawagamuwage Hasantha Viraj Perera or failing himLakal Hemendra Jayasinghe or failing himPrasanna Senani Rajiv Casie Chitty

As my/our proxy to represent* me/us and to vote for *me/us on *my/our behalf at the Annual General Meeting of the Company to be held on 29th September 2017 at 11.30 a.m at Tangerine Beach Hotel Kalutara and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

FOR AGAINST1) To receive and adopt the Report of Directors and the Statement of Accounts for the

year ended 31st March 2017, with the Report of the Auditors there on.

2) To re-elect Mr. T J Ondaatjie retiring in terms of Article 88(i) of the Articles of Association of the Company.

3) To re-elect Mr. G L A Ondaatjie in terms of Section 211 of the Articles of Association of the Company.

4) To re-elect Mrs. C A Ondaatjie in terms of Section 211 of the Companies Act No.07 of 2007

5) To authorize the Directors to determine the remuneration of the Auditors Messrs. Ernst & Young, Chartered Accountants who are deemed to have been reappointed as Auditors in terms of Section 158 of the Companies Act No.7 of 2007.

6) To authorize the Directors to determine payments for charitable and other purpose

for the year 2017/18

As witness* my/our hand this ............................................ day of ............................................ 2017

...........................................Signature of Shareholder/s

Note: Please delete the inappropriate words.

(Instructions as to completion are noted on the reverse hereof)

Form of Proxy


Instructions as to Completion1. Kindly perfect the form of proxy, after filling legibly your full name and

address and by signing in the space provided and please fill in the date of signature.

2. If the Proxy Form is signed by an Attorney, the relative Power of Attorney should also accompany the Proxy Form for registration, if such Power of Attorney has not already been registered with the Company.

3. In the case of a Company/Corporation, the Proxy must be under its Common Seal, which should be affixed and attested in the manner prescribed by its Articles of Association.

4. The completed Form of Proxy should be deposited at the Registered Office of the Company at No.236, Galle Road, Colombo 3, 48 hours before the time appointed for the meeting.

Name of the CompanyTangerine Beach Hotels PLC.

Status & Legal FormPublic quoted company with limited liability Incorporated in Sri Lanka on 21st May 1980

Company Registration No.PQ 162

Tax Payer Identification Number104065600

VAT Registration Number104065600 7000

Communication Registered Office236, Galle Road, Colombo 03, Sri LankaP.O. Box 195, ColomboTel : 2343720-7Fax : 2391193, 2448279Website : www.tangerinehotels.com

HotelTangerine Beach Hotel, St.Abrew’s Road, Nagashandiya,Waskaduwa.Tel : 034-2237295, 2237982, 2237983, 2237640Fax : 034-2237794E-mail : [email protected]

SecretariesMercantile Investments & Finance PLC

Remuneration CommitteeN. H. V. Perera - ChairmanS. D. De.Silva **P. S. R. Casie Chitty

Audit CommitteeN. H. V. Perera - ChairmanS. D. De. Silva **P. S. R. Casie Chitty

Corporate Information

Related party CommitteeN. H. V. Perera - ChairmanP. S. R. Casie ChittyL. H. Jayasinghe

External AuditorsErnst & YoungChartered Accountants

Internal AuditorsSJMS AssociatesChartered Accountants

BankersHatton National Bank PLCCommercial Bank of Ceylon PLCSampath Bank PLC

Board of DirectorsDeshabandu George L.A. Ondaatjie Chairman & Joint Managing Director

A.M. Ondaatjie - Joint Managing Director

G. G. OndaatjieT. J. OndaatjieC. A. OndaatjieS. D.De.Silva**N. H. V. PereraL. H. JayasingheP. S. R. Casie Chitty** Deceased on 04/03/2017

Corporate ManagementLakal H. Jayasinghe Director / General ManagerArju Vijayarajah Executive Assistant ManagerGihan Liyanage Assistant ManagerM.I. Shahabdeen Group Financial ControllerManil Galagoda Group EngineerRavi Fernando Group AccountantJ.D.Vaz Manager Finance & AdministrationNelson Mayadunnage Financial ControllerHareez Jameel Senior Accountant

Management TeamLakal H.Jayasinghe Director/General ManagerArju Vijayarajah Executive Assistant ManagerGihan Liyanage Assistant ManagerNelson Mayadunnage Financial ControllerMenaka Fernado Chief AccountantHareez Jameel Senior AccountantK. K. Pradeep Krishantha Executive ChefB. S. S.Bangsajayah Food & Beverage ManagerSarath Liyanage Group Purchasing ManagerPraboth Jayaweera Credit ManagerSanath Padukka Cost ControllerLakkana Kalawana Front Office ManagerKalpitha Dias HousekeeperIndrajith Hettiarachchi Maintenance Engineer (Ceased w.e.f. 28.09.2016)S. Lalith Kumara Assistant Engineer (Appointed w.e.f. 01.10.2016)

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THE PURSUIT of EXCELLENCE - Colombo Stock Exchange · 2017-08-31 · To provide hospitality services to our customers with a passion for excellence. ... Financial Highlights 02 Events