Chairman’s Message

It is with great pride that I present to you, your Annual Report and Financial Statements of The Lighthouse Hotel PLC for the financial year 2012/13. As a part of the Jetwing family, we have continued to make a significant contribution to the tourism industry in Sri Lanka.

Buoyant International Tourism

International tourism once again displayed resilience, amidst a diverse mix of challenges, including global economic volatility, extreme weather patterns, political conflicts and soaring energy prices during 2012. United Nations World Tourism Organization (UNWTO) cites that over a billion people crossed borders for reasons including leisure, business and wellness purposes. In tandem with growth in arrivals, international tourism receipts saw a comparable increase which hit an all time high reaching an estimated US$ 1,075 billion. This upward momentum is expected to continue, with Asia remaining a powerhouse for world tourism growth in 2013. Considering the buoyancy of the industry, UNWTO has highlighted the importance of supporting tourism as part of the solution to stimulate economic growth around the globe.

Booming Tourism Industry in Sri Lanka

Local tourism also maintained the growth momentum with arrivals increasing by 17.5% compared to 2011 and crossing the one million mark during 2012. Our nation’s unique destination, its hereditary beauty and the peace dividend intermingled to attract many visitors during the year. Government’s ongoing development projects of enhancing infrastructure, road development, expansion of hotels in the East and other parts of the country, the Southern Expressway, city beautification programs and the new marine port at Hambantota, contributed immensely to development of tourism during the year. Going forward, with the opening of the second international airport at Mattala and the rapidly improving road network would facilitate efficient tourist mobilisation which would be a boon for tourism in the future.

With the emerging opportunities in the leisure sector, many new entrants came into the industry while there was much potential for niche products such as villas, water and nature based activities and excursions. Apart from increasing the number of hotel rooms the need for more restaurants, spas, shops and other recreational activities has emerged as well.

Our Operations

Ours is a unique hotel, an icon of Galle, designed by the world renowned architect Geoffrey Bawa. The novel architecture, touch of history and our inimitable service and facilities has continued to attract guests across the globe. From a marketing perspective, we have positioned Jetwing Lighthouse as a member of the prestigious Small Luxury Hotels of the World (SLH). As part of our marketing efforts, we successfully included the hotel in our website as well as with tour operators. The hotel has over the years become a popular venue for weddings and conferences and a sought after destination for a diverse mix of clientele including the free independent traveller looking for tranquility to the incentive traveller.

We have also taken under our wing the management of two villas, Era Beach and Galle Heritage Villa. Era Beach is located in Thalpe, situated in an area famous for its stunning natural beaches, and the Galle Heritage Villa is in close proximity to the historical UNESCO World Heritage Site of Galle Fort, an original fort family home from the Dutch period, turned into an upscale boutique villa with a unique stylistic blend of the plush contemporary and familiar comforts. The revenue of these two properties has enhance the bottom line of the hotel. We also own ‘Jetwing Kurulubedda’ a property surrounded by nature just a kilometer away from the hotel.

In our efforts to expand our offering at Jetwing Lighthouse, we are in the process of adding another exclusive wing with 22 rooms, three spa rooms and a separate restaurant, optimizing the land usage. The rooms are due to be completed by end of this year.

Our Performance

Our turnover increased by 14% to Rs. 615 million during the year. The increase in profit before tax of Rs. 127 million was marginal compared to Rs. 124 million recorded the previous year. This was largely due to escalation in overheads pertaining to salaries, food, power and energy and the pressure on pricing due to the country not being positioned internationally as a high end destination. However, going forward, our revenue will be enhanced with the increase in the number of rooms.

Increasing Value Creation

Since inception, we have generated high returns to our shareholders. This is evident by our dividend payout ratio which has been maintained above 75% of the profit for more than a decade. Accordingly, for the year under review we have declared a dividend per share of Rs. 2/-, distributing Rs. 92 million out of the Rs. 112 million net profit during the fiscal year. Also we have created value for our shareholders through our current expansion project which is funded by the hotel and bank borrowings. I am also happy to state that we are a significant shareholder of the Rainforest Ecolodge (Pvt) Ltd. which is one of six Leed Platinum Certified Hotels in the world.

Our Sustainability Efforts

Recognizing our efforts towards the environment, Jetwing Lighthouse achieved another milestone by being awarded the ISO 14001 certification by the Sri Lanka Standards Institution (SLSI). The certification addresses various aspects of environmental management, which is promoted heavily through us by a dedicated initiative called the Jetwing Eternal Earth Programme. In addition to Community Outreach and Humanitarian Programmes, all Jetwing hotels, including Jetwing Lighthouse are designed to be as sustainable as possible with energy and resources used sparingly. In tandem with the changes in the industry, we are actively seeking new methods to enhance energy efficiency using alternatives such as biomass and solar energy.

Due to our focus on uplifting the communities around us, we launched a project to teach women and children in the area to swim. This was initiated based on the revelation that at least half of the women and children who lost their lives in the tsunami in 2004 could have been saved had they known to swim. In order to enhance survival skills, we conduct swimming lessons in a community pool built by us. This project was funded by an international agency while the land was provided by us. We also continued with our many sustainability initiatives which are detailed in the Sustainability Review.

Future

The tourism industry is an important driver of services growth and remains one of the core areas of focus in the country’s development plans. To achieve the target of 2.5 million visitors by 2016 the time has come to position and market our country as one of the most sought after destinations in the world. It is also envisaged that more tourists will shift from Colombo city, with greater options for transport and rapid development of the road network. Using Mattala International Airport as the gateway, a substantial rise in tourist arrivals is expected to the South and East of the country in the upcoming years.

However, given the pressure on margins and the rising overheads, year 2013/14 would be a challenging year for us, as we will have to perform exceedingly well to maintain the current level of profitability. We will continue to enhance our service standard and operations to ensure The Lighthouse Hotel PLC status as the most sought after hotel in the South. We will facilitate the development of our associates and also invest in product enhancement to make these aspects top class.

Whale watching in the south of Sri Lanka which was initiated by us seven years ago has emerged as one of the most popular activities in Sri Lanka’s growing tourism industry. We will continue to play a pivotal role in promoting Mirissa’s whale watching to the world in the upcoming years. This has also helped to uplift the livelihood in the surrounding community.

Thanks

In closing I wish to extend my appreciation to my colleagues on the Board for their invaluable insight and strategic guidance during the past year. I must also say a special thank you to a distinguished individual, whom I have much respect for and admiration towards. He has retired from the Board after serving eleven years; all of which have been marked by dedication and commitment. Mr. V.K. Wickremasinghe, you will be missed and we wish you all the very best for a glorious and happy future. I would like to recognize the contribution of Jetwing Hotels, their Management Team and Associates for the dedication and untainted support at all times. I am deeply grateful to the Tour Operators, Travel Agents and the esteemed guests who have been an integral part of the company since its inception. My gratitude goes out to the shareholders for the trust and confidence placed in us.

The team at Jetwing Lighthouse is both passionate and talented. I am confident that together we will forge ahead, unwavering, continuing the advancement of the hotel.

Hiran Cooray
Chairman

24th April, 2013