Wednesday, August 24, 2011

Hilton Accounts: A tale of two decades

By Jitendra Antonio

After a long two decade silence, Hotel Developers PLC (HDEV), the owning company of the Hilton Hotel Colombo, yesterday released its audited annual financial accounts for the last 20 years, starting from 1990.
However, any of the audited financial account did not have a list of major shareholders.

“The Colombo Stock Exchange (CSE) or the Securities and Exchange Commission (SEC) does not have the authority to demand a share holder list from the company in their audited accounts”

“CSE rules very clearly mention about Annual Reports, not audited financial statements. Annual Reports need to have information about the shareholders” Renuka Wijewardena General Manager, Regulatory, told Mirror Business.

He also confirmed that the HDEV will not be allowed to move out from the ‘Default Board’, until the company submits the annual reports that are due since 1990.

“We are currently working with the SEC to get the company to disseminate its delayed annual reports and the quarterly reports” Wijewardena said.

The1990 financials of HDEV outlined that company’s turnover had rose to Rs.231.3 million in as 31 March 1990 compared to Rs.154.1 million in previous year.

However, the company reported a net loss of Rs.79.4 million in 1990 compared to Rs.256.7 million in 1989. Subsequently company’s accumulated losses had rose from Rs.286.6 million to Rs.366 million in 1990.

On the contrary 20 years later the accounts as per 31 March 2010, the company said that its loss attributable to ordinary shareholders had shot up from Rs.1.1 billion in 2009 to Rs.1.2 billion in 2010 whilst the Loss per Share (LPS) rose from Rs.26 to Rs.26.87 and the loss is worth about 45,226 ordinary shares of the company.

However, financials also outlined that revenue of the company had increased to Rs. 1.7 billion in 2010 compared to Rs.1.3 billion in 2009 whilst the revenue from rooms had rose from Rs.532.6 million in 2009 to Rs.728.9 million in 2010. Company’s cost of sales has topped from Rs.287.3 million to Rs.382.4 million as at 31 March 2010.

On the other hand the company’s audited accounts for 1990 said that its long term loan value had decreased from Rs.3.6 billion to Rs.2.4 billion in 1990 whilst the long-term loans consist of capital outstanding on the construction loan obtained from Mitsui and Taisei Consortium and furniture, fittings and equipment loan obtained from Mitsui & Company Limited.

“These loans were rescheduled on 28th June 1995 as per the Settlement Agreement No 1, and the rescheduled loan will be repaid to Mitsui and Taisei Consortium in 15 equal annual installments commencing from 1st July 1996 together with the interest thereon at the simple interest rate of 5.25% per annum.”

Financials outline adding that the company has issued 15 promissory notes to the above Consortium in respect of the loan payable.

Subsequently accounts also note that the values of the buildings, furniture and fittings and other operating assets have been restated as per the settlement agreement dated 28th June 1995 by reducing proportionately to write off 30% of the loan capital.

Accordingly the foreign exchange effect on the 30% capital write off and the foreign exchange effect on the  interest write off balance and exchange loss write off balance on fixed assets amounting to Rs. 1051.349 million and Rs. 43.773 million respectively have been adjusted. As a result of this reduction the value of the property, plant and equipment and depreciation charged there on has also been adjusted as a prior year adjustment.

In another note, in 1990 the company said that in terms of the settlement agreements dated 28th June1995 the loan payable to Mitsui & Taisei Consortium was reduced to Japanese Yen 9.27 billion.

Back in 1990, and 20 years since then, the company’s financials pin points that the leasehold land has been obtained on a 99-year lease from Cornel & Company Limited and that Cornel & Company Limited had failed to comply with the terms of the lease agreement by not making the balance 80% of the due payments to the UDA. In 1999 the UDA surrendered its right to the land to the GoSL by deed 673 and 674 and the land has subsequently been taken over by the Government of Sri Lanka.

While there had been no pending litigation till 1997 the first two legal cases related to the company had emerged in 1998 in which is filed by Cornel & Company Ltd., against Mitsui & Company Ltd., Taisei Corporation, and then Attorney-General, Nihal Ameresekere and the Company.

However as to date company has a total of five legal cases pending and the total loans that HDEV has to pay which stands at nearly Rs.11.7 billion with Rs.1.4 billion to Mitsui and Taisei Corporation and Rs.10.1 billion Ministry of Finance of Sri Lanka and Rs.105.1 million to Bank of Ceylon till 2010
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