Galadari Hotels (Lanka) PLC has returned to its loss making mode in 2011 losing Rs.226.1 million last year against a modest profit of Rs.2.2 million a year earlier but expects a change in fortune from the upturn in tourist arrivals and by converting its massive debt to equity.
The recently released annual report is themed on "unleashing our potential" with the Chairman Mr. Khaled Aly Soliman saying that with the end of 30 years of civil strife and the resultant recovery "Sri Lanka’s tourism industry is beginning to bloom."
The company owes Galadari Brothers PLC Rs.5.75 billion (USD 52.09 million) while its debt to the National Insurance Trust Fund (of the Finance Ministry) is Rs. 583.4 million.
It has taken comfort from Galadari Brothers’ confirmation to the directors that the loan due may be repaid ``whenever net funds are available in excess of working capital requirement and any other commitments made in the course of the company’s business.’’
The hotel stands on land leased by the government for 99-years with 68 years of the lease yet to run.
With the encouraging growth seen in tourist arrivals, Soliman was confident that increased tourist traffic will benefit the hotel and tourism industry assisting the long-term business strategy of the company.
"We remain confident that 2012 and the coming years will signify our determination to make greater progress in steering Galadari Hotels (Lanka) PLC’s business plans," he said.
These plans hinged on the conversion of the massive loans owing to Galadari Brothers Company LLC and the Government of Sri Lanka into equity.
The company said that the board is pursuing the proposed conversion of the loan into equity and obtaining approval of the authorities.
Also, Galadari Brothers had confirmed to the directors of the hotel that it will not request repayment of either the loan capital or interest due as at balance sheet date of December 31, 2011 within the next 12 months.
"Taking such into consideration, the directors have assessed and are confident that the company will be able to continue its operations for the foreseeable future, hence, we have adopted the going concern assumption in the preparation of presentation of these financial statements," the report said.
As at last balance sheet date, the company’s current liabilities exceeded current assets by Rs.54.13 million and its accumulated losses exceeded its stated capital by Rs.6.86 billion.
The auditors, KPMG, have said that the company’s financial conditions "indicated existence of a material uncertainty which may raise doubts in the company’s ability to continue as a going concern."
According to the 2011 balance sheet, the company had net assets of Rs.6.54 per share, down from Rs.6.99 the previous year, with the share trading at a high of Rs.43 and a low of Rs.26.50 during the year under review. This compared with a trading range of Rs.42 to Rs.31 the previous year.
The EPF owns 13% of the company in which there is a public shareholding of 17.74%.
Shareholders have received no dividends since inception of the hotel over 30 years ago but have been issued a complementary lunch voucher for two annually.
The directors of the company are: Messrs. K.A. Soliman (Chairman), S.H.A. Khoory, L.R. de Silva, Dr. J.A.S. Felix, P.M.A. Sirimane, M.H.A.W. Algarf and H.K.J. Dharmadasa.