Internal Capital Formation
As has been described in our section on Value Creation and Capital Formation, we will examine in more detail the formation of capital that is internal to the Company. While what is most visible and quantifiable is financial capital, internal capital also includes several intangibles that, as discussed previously, constitute institutional capital.
Financial Capital
Financial Performance
Revenue
The Company recorded a revenue growth of 11% by achieving a total revenue of Rs. 681 million during the financial year under review compared to Rs. 615 million achieved during the previous period. The growth in revenue is mainly due to increase in room revenue by 14% and food & beverage income by 8%. Room revenue has increased due to the addition of 20 super deluxe rooms and the 2 suites with effect from 21st December, 2013 and 2nd January, 2014 respectively and average room rates (ARR) by 6%. ARR has increased mainly due to increase in online sales which has higher yield and the favourable impact of foreign currency exchange rates. Food & beverage income has increased due to increase in number of guests as a result of increase in room inventory from December 2013. The Company also opened a new restaurant and a bar during the year under review.
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Further, foreign exchange rate fluctuations during the year under review mainly from August 2013 had a favourable impact to the Company’s revenue as majority of revenue generated through travel agents/tour operators are based on foreign currency contracts.
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Expenses
During the period under review total expenses have increased by 10% to Rs. 550 million from Rs. 502 million in the previous period. Cost of sales has increased by 7% compared to previous period and it is mainly due to increase in food prices. Administrative costs have increased by 8% whereas marketing and promotional expenses has decreased by 6%. Increase in power & energy cost by 19% and non-capital nature expenses incurred for the refurbishment have resulted in the increase in administrative costs. Payroll costs increased by 17% compared to previous period mainly due to salary revision to both executive and non-executive staff. In addition to the annual salary revision a salary adjustment have been made with effect 1st April 2013 for non-executive staff as per the revision of minimum monthly rates of wages as per the Wages Board for the Hotel and Catering.
Depreciation for the year was reported at Rs. 64 million which is an increase of Rs. 8 million compared to previous period. This is mainly due to additional depreciation charge from the capitalization of the new 22 rooms, restaurant and bar from December 2013.
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Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
The Company has reported an EBITDA of Rs. 198 million for the period under review compared to Rs. 174 million achieved during the previous period. This is reflected in an impressive compound annual growth rate of EBITDA over the last five years of 49%. The increase in EBITDA is mainly due to strong growth in revenue. Due to increase in room inventory and cost synergy arising from the same from December 2013 the EBITDA margin has increased marginally to 29% from 28% last year.
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Profitability
The Company recorded profit before tax of Rs. 136.5 million during the year under review compared to Rs. 127 million during the previous period. This shows a compound annual growth rate of pre-tax profits over the last four years of 47%.
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Income tax charge for the year has reduced by 6% to Rs. 14 million compared to the previous year as the increase in revenue has been offset by the reduction in interest income.
Profit after tax of the Company amounted to Rs. 122 million and represents an increase of 9% on the Rs. 112 million achieved in the previous period. Return on equity for the Company remained same at 5%.
Statement of Financial Position
The Company reported a strong financial position as at 31st March, 2014 with total assets amounting to Rs. 2,742 million compared to Rs. 2,510 million in the previous period. During the year under review, Property, Plant and Equipment additions amounted to Rs. 388.9 million mainly due to capitalization of the new rooms and the capital nature refurbishment work carried out in the Hotel. The Company also purchased properties in Unawatuna and in Dadella at a purchase consideration of Rs. 29 million and Rs. 0.7 million respectively.
As at 31st March, 2014, the Company had a gearing level of 6%. The Company borrowed US$ 1 million to part finance the construction of new rooms and as at year end US$ 522,500 remained as undrawn loan facilities. The loans were unsecured.
Shareholders’ Funds
Shareholders’ funds as at 31st March, 2014 increased marginally to Rs. 2,431 million from Rs. 2,404 million in the previous period mainly due to increase in net profits. The Company’s net asset per share as at 31st March, 2014 stood at Rs. 52.84 per share.
Cash flow Statement
Due to significant cash outflows made with regard to construction of new rooms and refurbishment activities and marginal increase in earnings, the Company’s cash position as at 31st March, 2014 has reduced to Rs. 12 million compared to Rs. 126 million in the previous period. Cash outflow from investing activities amounted to Rs. 380 million compared to Rs. 116 million in the previous period.
Statement of Economic Value Added and Distributed
| Year ended 31st March, | 2014 | 2013 | ||
| Rs. ’000 | % | Rs.’000 | % | |
| Total Revenue | 681,105 | 614,727 | ||
| Other Income | 7,783 | 14,413 | ||
| 688,888 | 629,140 | |||
| Less: Purchase of Goods and Services | (371,230) | (348,162) | ||
| Value Added | 317,658 | 280,978 | ||
| Distributed as follows: | ||||
| To Government as taxes | 14,278 | 4 | 15,138 | 5 |
| To employees as salaries and other benefits | 115,013 | 36 | 98,145 | 35 |
| To providers of Capital | ||||
| - Dividends to shareholders | 92,000 | 29 | 92,000 | 33 |
| - Interest on borrowings | 1,943 | 1 | 25 | 0 |
| Retained within the business | ||||
| As depreciation | 64,105 | 20 | 55,516 | 20 |
| As retained profits | 30,319 | 10 | 20,154 | 7 |
| Total | 317,658 | 100 | 280,978 | 100 |
Institutional Capital
Institutional capital covers a broad spectrum of non-financial components that are, like financial capital, internal to the Hotel. They include intellectual property, knowledge, systems, procedures, brand value, corporate culture, business ethics, integrity and the like.
Organizational Knowledge
Jetwing Lighthouse has been in operation for 18 years; a substantial amount of the 40 years of immersion in the hospitality and tourism sector by Jetwing. Thus we command a formidable storehouse of knowledge, experience and expertise in the field. Imbued as we are with a common ethos and orientation, the Hotel mirrors the dynamic path forward of the Jetwing Brand. Ours is one of Sri Lanka’s most environmentally conscious companies with a host of ‘firsts’ in terms of exemplary conservation practices. It is a testament to the level of organizational knowledge we bring to the table, that we have married these aspects with excellent hoteliering, to provide an unmatched product to the customer.
As an entity of standing and longevity in the field, we maintain valuable membership and connections with influential bodies such as the Tourist Hotels Association of Sri Lanka (THASL), the Small Luxury Hotels of the World, the Great Hotels of the World and the Hoteliers of South (HOST). These and others like them substantially enhance and endow us with invaluable trade experience and learning.
Brand Value
In terms of brand positioning, Jetwing Lighthouse has been established as a luxury resort that caters to affluent travellers, couples and families alike, accomplished through ‘barefoot elegance’ and Sri Lankan hospitality.
Jetwing Lighthouse is one of the most well known, most recognisable and iconic properties in Sri Lanka, and whilst it is by every yardstick a truly luxury resort, we proudly own a distinctive Sri Lankan identity, which speaks eloquently of our deep roots as a Sri Lankan enterprise.
We constantly ensure that our brand perception is relevant and remains at optimum levels by paying meticulous attention to channels such as guest feedback posted on review sites such as TripAdvisor, as well as comments we receive directly at the Hotel.
Corporate Culture, Business Ethics, Integrity
The corporate culture of Jetwing is firmly rooted in Sri Lanka, its’ ideals and qualities as well as in the family ethos and values. Our corporate culture is a shared one with the entire Jetwing Family and is underpinned by the core values described below. This is coupled with commitment to legendary and innovative service, a mission we abide by daily, which has brought Jetwing Lighthouse to the forefront of the industry. The Hotel also implements an open door policy with no red tape, whereby any associate can speak to senior management and ensure open communication both ways in the organization.
Our Core Values
- PASSION - We are passionate about what we do. Enthusiasm and devotion are a part of our DNA.
- HUMILITY - We demonstrate humility by being open minded and having a healthy respect for others.
- INTEGRITY - Integrity is a part of who we are. We value the honesty and say and do the right things consistently.
- TENACITY - Always tenacious, we take big challenges and persist until we succeed consistently.