erawan: annual report 2010

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The Erawan Group

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  • Annual R

    eport 2010 The Erawan G

    roup Public Com

    pany Limited

    The Erawan Group Public Company Limited

    6th Floor, Ploenchit Center, 2 Sukhumvit Road, Klongtoey, Bangkok 10110, Thailand Tel.: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 Reg. No. 0107537001943

    www.TheErawan.com

    Annual Report 2010 The Erawan Group Public Company Limited

    The Erawan Group Public Company Limited concerns about environmental protection by using recycled paper produced by Thai company to publish the Annual Report 2010, for the purpose of reducing natural resources exploitation and the global warming crisis

  • Desig

    ned b

    y Plan

    Graf

    ik Co

    ., Ltd.

    Tel. 0

    2237

    0080

    # 30

    0

  • VISION 2015

    To become the leading hotel investor

    in Thailand.

    Core Values SPICE System Systematic management approach to enhance efficiency as well as to lessen reliance on individuals People Competent workforce with dedication to further learning and continual improvement Information Accurate, adequate, and up-to-date database for the purpose of management and decision-making Culture Sound corporate culture to support sustainable growth Environment Being a good, responsible corporate citizen by taking care of all stakeholders including community and environment

    MISSION

    To continue growing quality hotel portfolio

    in Thailand which optimize values to

    shareholders as well as other stakeholders.

    Back

  • Contents

    IN REVIEW

    Financial Highlights Hotel and Resorts Portfolio Chairman Review President and Chief Executive Officer Review CFOs Report Report of the Audit Committee to Shareholder Report of the Boards Responsibility in the Financial Statements ABOUT ERAWAN

    Corporate Profile Properties in Operation Properties under Development Our Business Strategy Our Capital Structure & Management Shareholding of the Board of Directors and Management BUSINESS OVERVIEW

    Hotel Industry Rental Property Risk Factors GOOD CORPORATE GOVERNANCE

    Corporate Governance Policy Remuneration of the Board of Directors and Management Corporate Social Responsibility Internal Control Connected Transactions APPENDICES

    Audit Report of Certified public Accountant Audit Fee Financial Statements Corporate Information

    004 006 007 008 010 021 022 024 026 030 031 032 040 042 044 046 050 062 063 067 069 072 073 074 134

  • Ibis Bangkok Riverside / Ibis Samui Bophut / Ibis Phuket Patong

    IN REVIEW

    Back

  • Financial Highlights The Erawan Group Public Company Limited

    004

    (Unit: Thousand Baht)

    2008 2009 2010

    DescriptionRevenues from Operations 3,375,977 3,149,033 3,321,248Total Revenues 3,412,960 3,191,623 3,364,328Gross Profit 1,921,298 1,658,132 1,677,912EBITDA 974,030 740,401 761,749Net Profit (Loss) 78,328 (229,411) (275,017)

    Total Assets 12,630,098 13,288,817 12,950,427Total Liabilities 8,871,685 9,749,858 9,677,477Total Shareholders Equity 3,758,413 3,538,959 3,272,950Equity Attributable to Companys Shareholders 3,657,970 3,406,397 3,130,975Paid-up Share Capital 2,244,779 2,244,779 2,244,779Number of Paid-Up Shares (Thousand Shares) 2,244,779 2,244,779 2,244,779Par Value Per Share (Baht) 1 1 1Earning Per Share (Baht) 0.04 (0.10) (0.12)Dividend Per Share (Baht) 0.01 - -Book Value Per share (Baht) 1.63 1.52 1.39

    Significant Financial RatioCurrent Ratio (Times) 0.41 0.52 0.44Quick Ratio (Times) 0.23 0.27 0.27Liquidity Ratio (Cash Flow Basis) (Times) 0.33 0.38 0.63Gross Profit Ratio (%) 56.91% 52.66% 50.52%Net Profit Margin (%) 2.30% n/a n/aReturn on Total Assets (%) 0.68% n/a n/aReturn to Equity (%) 2.14% n/a n/aDebt to Equity Ratio (Times) 2.36 2.76 2.96Interest Bearing Debts to Equity Ratio (Times) 2.06 2.42 2.63Interest Coverage Ratio (Times) 3.12 2.38 2.70

    Back

  • 2006 2007 2008 2009 2010

    Net Profit

    500

    400

    300

    200

    100

    0

    410 402

    (229) (275)

    78

    Revenues from Operations

    4,000

    3,000

    2,000

    1,000

    0

    3,331 3,194 3,149 3,376 3,321

    EBITDA

    1,200

    1,000

    800

    600

    400

    200

    0

    1,153

    1,011 974

    762 740

    005

    Unit: Baht Million

    Back

  • Hotel and Resorts Portfolio The Erawan Group Public Company Limited

    Grand Hyatt Erawan

    Bangkok

    JW Marriott Bangkok

    Courtyard by Marriott

    Bangkok

    ibis Bangkok Nana

    ibis Bangkok Sathorn

    ibis Bangkok Riverside

    Mercure ibis

    Bangkok Siam* ibis Pattaya

    Holiday Inn Pattaya

    ibis Hua Hin*

    ibis Samui Bophut

    Renaissance Koh Samui Resort and Spa

    ibis Phuket Patong

    ibis Phuket

    Kata

    Six Senses Sanctuary

    Phuket * Properties under Development

    Bangkok

    Pattaya Hua Hin

    Samui

    Phuket

    006 Back

  • 007

    SUCCESS WITH INTEGRITY SUCCESS WITH INTEGRITY

    Back

    Chairman Review The Erawan Group Public Company Limited

    The domestic political conflicts in 2010 made it another difficult year for Thailands hotel business and Thailands tourism industry. Thanks to our risk management plan and effective collaboration between the management and the Board of Directors as well as supports from all stakeholders including our suppliers, our hotel operators, our staff and financial institutions, we tolerated through the incident and recovered well afterward. Nevertheless, we did suffer a net loss at the bottom line, which was a result of external factors that were beyond our control.

    With promising demand trend from both foreign tourists and domestic markets, we continue developing and strengthening our fundamentals for long term sustainable growth through expanding a network of our hotels in locations and markets we felt confident. We committed to strengthen our supervision in all

    aspects of our operation in compliance with good corporate governance principles. It has been our key principle to treat all our stakeholders appropriately. We compel to do our business transparently and to provide sufficient and timely disclosure of information both in the normal situation and at time of crisis. During the political unrest in April and May this year, we took a great care of our customers, suppliers and staff and kept all concerned parties informed of the situation and our actions taken. With such continuous belief and practices, the Erawan Group was voted Excellence in corporate governance by the survey of the Corporate Governance Report of Thai Listed Companies 2553 (2010) conducted by the Institute of Directors (IOD) in 2010. We received 100 out of 100 scores for our excellent quality of the 2010 Annual General Meeting of Shareholders. We were also awarded IR Excellence among Group 1 listed companies in the SET with market capitalization of not exceeding Baht 10 billion and we were one of the two companies in the service business sector to be nominated for Corporate Social Responsibility Excellence.

    We would like to thank everyone for all supports through the difficult time this year. We will continue to operate the business and enhance our organization for the benefit of our shareholders and all stakeholders and be a good member of the society.

    Mr. Prakit Pradipasen Chairman of The Board of Directors

    Excellent CG Report 2009/2010

  • 008 Back

    Thailands tourism industry and hotel business was once again challenged in 2010 when the domestic political conflicts led to a prolonged demonstration in April and May. The incident caused business operators in the area including our three hotels and one shopping center to close temporarily. We did our best to protect our customers, our staff and our properties and fully engaged risk management action plans at all time. We also closely collaborated with other business operators in the area including our business competitors and took the lead role to seek for protection and remedy measures from the government. This led to the governments financial aids given to more than 2,000 business owners affected by the protest. Despite negative impacts from the incident, we managed to increase our revenues by 5 percent from the previous year mainly contributed from new hotels opened in recent years as part of our expansion. The business interruption during the political demonstration had adverse impact to both established hotels and the newly-opened hotels from achieving expected incomes. A l though the bus iness recovered we l l as we

    approached high seasons in the second half of the year, the lower-than-expected income was not sufficient to accommoda te i nc reas ing expenses such as depreciation and finance costs from the openings of new hotels. As such, we suffered another year of net loss of approximately Baht 275 million (See more information of the Companys financial performance in a CFOs report of Executive Vice President and Chief Financial Officer). Despite negative impacts from this incident, we continued to receive solid supports from our lenders. Our cash flow remained flexible and we continued the development of our 266-room Ibis Bangkok Riverside for the opening in the fourth quarter as planned. At the end of 2010, we own 13 hotels with total of 3,347 rooms across major tourist destinations of Thailand to capture diverse groups of customers from luxury through economy segments. We are now one of the largest hotel owners in term of number of hotels and rooms in Thailand.

    Through our implementation of Phase 1 expansion during 2005-2010, we were able to manage the de

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