Annual Report 2011 l The Erawan Group Public Company Limited
For 30 year
we have been committed to “integrity�, a quality which is fundamental and vital to our stable growth.
A
SUCCESS WITH INTEGRITY
Today
F
we strive to be a leader in the hotel investment and development business while enhancing our core values for a long term sustainable growth.
VISION 2015 To become Thailand’s leading hotel developer and investor. MISSION To continue growing quality hotel portfolio in Thailand which optimize values to shareholders as well as other stakeholders. Core Values “SPICE” • System System “Systematic management approach to enhance eef efffficiency as well as to lessen reliance on individuals” • People People “Competent workforce with dedication to further learning and continual improvement” Information “Accurate, adequate, and up-to-date database • Information for the purpose of management and decision-making” • Culture Culture “Sound corporate culture to support sustainable growth” • Environment Environment “Being a good, responsible corporate citizen by taking care of all stakeholders including community and environment” B
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SUCCESS WITH INTEGRITY
2011 in REVIEW
Our Capital Structure & Management
03
Financial Highlights The Erawan Group Public Company Limited
(Unit : Thousand Baht)
Description
Description
Revenues from Operations Total Revenues Gross Profit EBITDA Net Profit (Loss) Total Assets Total Liabilities Total Shareholders’ Equity Equity Attributable to Company’s Shareholders Paid - up Share Capital Number of Paid - Up shares (Thousand shares) Par Value Per Share (Baht) Earning Per Share (Baht) Dividend Per Share (Baht) Book Value Per share (Baht)
Significant Financial Ratio
Current Ratio (Times) Quick Ratio (Times) Liquidity Ratio (Cash Flow Basis) (Times) Gross Profit Ratio (%) Net Profit Margin (%) Return on Total Assets (%) Return to Equity (%) Debt to Equity Ratio (Times) Interest Bearing Debts to Equity Ratio (Times) Interest Coverage Ratio (Times)
04
2009
2010
2011
3,149,033 3,191,623 1,658,132 782,991 (229,411)
3,321,248 3,364,328 1,677,912 804,829 (275,017)
3,755,544 4,487,232 1,965,740 1,635,878 491,325
13,288,817 9,749,858 3,538,959 3,406,397 2,244,779 2,244,779 1 (0.10) 1.52
12,949,266 9,676,317 3,272,950 3,130,975 2,244,779 2,244,779 1 (0.12) 1.39
12,237,865 8,468,390 3,769,475 3,588,610 2,244,779 2,244,779 1 0.22 1.60
0.52 0.27 0.38 52.66% n/a n/a n/a 2.76 2.42 2.38
0.41 0.27 0.63 50.52% n/a n/a n/a 2.96 2.63 2.70
0.53 0.40 0.66 52.34% 10.95% 3.90% 14.62% 2.25 2.00 2.35
(Unit : Thousand Baht)
2007
2008
3,194
3,377
2009
2010
3,149
3,321
2011
Operating Income 4,000 3,000
3,756
2,000 1,000 0
EBITDA
1,636
1,600 1,400 1,200
1,207 1,011
1,000
782
800
805
600 400 200 0
Net ProďŹ t/(Loss) 500
491
402
250 0
79
(229)
(275)
Financial Highlights
05
Hotel and Resorts Portfolio The Erawan Group Public Company Limited
Bangkok
Grand Hyatt Erawan Bangkok
JW Marriott Bangkok
Courtyard by Marriott Bangkok
ibis Bangkok Sathorn
ibis Bangkok Nana
ibis Bangkok Riverside
Mercure Bangkok Siam and ibis Bangkok Siam (Under development)
Pattaya
Holiday Inn Pattaya
Bangkok
Huahin
ibis Pattaya
Pattaya Huahin
ibis Hua Hin (Opened January 2012)
Samui
Samui
Phuket
Renaissance Koh Samui ibis Samui Bophut Resort and Spa
Phuket
The Naka Island, a Luxury Collection Resort & Spa, Phuket
06 Hotel and Resort Portfolio
ibis Phuket Patong
ibis Phuket Kata
SUCCESS WITH INTEGRITY
Chairman Review The Erawan Group Public Company Limited
In 2011, Thailand welcomed as many as 19 million tourist arrivals, the highest ever in its history. This represented a tremendous growth of 20 percent, which was also the highest increase in South East Asia. The figure was impressive considering the fact that a number of tourists fell in Q4 of the year due to the country’s devastating flood in the Central including Bangkok and its vicinity. At ERAWAN, we continue to commit to build our business and organization for long-term sustainable growth. In 2011, we successfully implemented our plans set forth in the five-year Master Plan (20112015) and recorded Baht 491 million in net profit this year. Our commitment to transparency and good corporate governance has been well recognized. This year we received an “Excellent” rating for corporate governance from the Corporate Governance Report of Thai Listed Companies 2011 survey organized by the Thai Institute of Directors for the third consecutive year. We were also rated “Excellent” for our Annual General Meeting from the Stock Exchange of Thailand for the fourth consecutive year. As we have always given a priority to risk management while putting in place a comprehensive contingency plan to protect the interests of all stakeholders, during the country’s major flood in late 2011, we managed to effectively protect our properties in all risk areas. Plans were successfully formulated in advance and implemented to safeguard our properties, customers, suppliers and our staff. At the other front, to help flood victims, we donated fund and items via the Thai Listed Companies
Association, public and private agencies and other relief organizations. Our staff also voluntarily extended direct assistance to affected communities. For our own staff suffering from the flood, we provided shelters and financial assistance to help them get back to normalcy as soon as possible. We are deeply committed to the business philosophy of honesty and integrity. At ERAWAN, we believe that only success with integrity will make the business sustainable in the long run.
Mr. Prakit Pradipasen Chairman of the Board of Directors
Excellent CGR Report 2009-2011
07
Chief Executive Officer Review The Erawan Group Public Company Limited
Although 2011 was another year that Thailandâ&#x20AC;&#x2122;s hotel business and tourism industry were to confront with an unexpected, this time natural-made, event as the country suffered the disastrous flood in late 2011, we managed to grow our revenue by 13 percent from the previous year, bringing our net profit to Baht 491 million, thanks largely to our three strategies as follows: Our hotel growth strategy designed to expand and diversify our hotel portfolio to serve customers at all levels and to be strategically present in Thailandâ&#x20AC;&#x2122;s key destinations yielded a good result. Our gross revenue from the hotel business jumped more than 50 percent when compared to what we achieved in 2006 despite lower incomes from our two established luxury hotels in Bangkok along with the hotel industry which have been affected by a series of unexpected situations and intensified competitions. At present, we own 14 hotels with total of 3,512 hotel rooms. Our initiative to build an economy hotel chain under the international ibis brand as one of our key strategic direction has proven to be a right move. Our hotels in the economy segment has not only been well
ibis Huahin
08 Chief Executive Officer Review
received by domestic and international markets but also directly benefits from a wave of growing tourists from RIC countries such as China, Russia and India. Our midscale hotels which currently include Holiday Inn Pattaya and Courtyard by Marriott Bangkok have also been warmly welcomed by both corporate and leisure customers. The success of our expansion is clearly a result of an ongoing internal development of our resources. Over the years, we managed to secure land banks in the right locations to develop various projects as planned while controlling our investment costs to save almost Baht 500 million from the original budget. Thatâ&#x20AC;&#x2122;s why our investment projects still yield a projected long-term return although the tourism and hotel industry suffered from one after another devastating events during the past three to four years. As for projects which were slower-thanexpected in generating an expected return, we have closely monitored and continuously put in a plan for a turnaround. The key event last year on this front was when we changed hotel management operator for our resort at Koh Naka, Phuket in July 2011. The resort, which has resumed its operation since November
Holiday Inn Pattaya
The Naka Island, a Luxury Collection Resort & Spa, Phuket
SUCCESS WITH INTEGRITY
2011, has shown significant operating improvement and expected to generate positive EBITDA in 2012. A strategy designed to reinforce shareholdersâ&#x20AC;&#x2122; returns by selling the assets to recognize its market values introduced in late 2010 was aimed to yield an appropriate and recurring profits to our shareholders. As hotel investment is long term and requires some times before a net profit can be generated, this strategy will be an important tool to generate shortterm profits for our shareholders. Last year, we started implementing the strategy when we sold the Pleonchit Center Office Building to a property fund and recorded a difference between a net sales price and a book value of the building as our net profit in 2011. This significantly increased our dividend capability for our shareholders compared to a period when there had been no asset disposal. We plan to continue implementing this strategy as time and opportunity prevails. We believe that the two aforementioned strategies, when implementing simultaneously, will create a balance of both short- and long-term benefits to our shareholders.
Our third strategy aimed to strengthen a sustainable growth. This strategy will allow us to continue upgrading and enhancing our resources, internal systems, database to support decisionmaking, corporate culture and the pursuit of corporate governance while balancing optimal interests of all stakeholders including the environment and the community we live in. All of this has been critical success factors to help us survive through crisis after crisis from 2008 up to the present and we strongly believe that these fundamentals will continue to be the platform for our sustainable growth in the long run. With Thailandâ&#x20AC;&#x2122;s competitiveness and its potential as a tourism and business center in the region as well as the operations guided by our visionary strategies, we are confident that we will be able to generate returns to shareholders and benefits to other stakeholders while continue to play important role in boosting the standard of Thailandâ&#x20AC;&#x2122;s hotel industry.
Mr. Kasama Punyagupta Chief Executive Officer
Chief Executive Officer Review
09
President’s Report
The Erawan Group Public Company Limited
(A) 2011 Profit & Loss Overview The year of 2011 was a good year for hotel business and tourism industry of Thailand regardless the flood situation in Thailand in the fourth quarter of 2011. The overall tourist arrivals in 2011 were historically high at 19 million, a 20 percent growth from 2010, and the highest growth in the region. This once again reaffirmed the strong fundamental of Thailand’s tourism industry. In 2011 we completed the implementation of strategies set forth in our 5-yr Master Plan (2011-2015) as follows: Hotel Growth Strategy • We began construction of three new hotels in Hua Hin and Bangkok as planned. Our ibis Hua Hin with 200 room inventory was already opened on January 16, 2012 while the Mercure Bangkok Siam and ibis Bangkok Siam with total 380 rooms are scheduled to open in 4Q12. This will increase our room inventory from 3,312 at the end of 2011 to 3,892 at the end of 2012. Enhancing Return Strategy • As part of Asset Monetization program, on 1st April 2011, we sold and transferred one of our rental properties, Ploenchit Center building with leasehold right of land where the building is situated at total transaction value of Baht 1,423 million to Prime Office Leasehold Property Fund set up by a third party, SCB Asset Management. We recorded net gains from this disposal of asset at Baht 664 million in 2Q11. Net proceeds was partially used to prepay long term loan of Baht 460 million while the remaining balance has been reserved to support our expansion plan. • As part of Asset Improvement program, in July 2011, we entered the agreement with Starwood Hotels & Resorts Worldwide Inc., a global leading hotel operator, to manage our property under the brand “A Luxury Collection”. This partnership and additional brand will further strengthen our current hotel portfolio which already in partnership with world-class hotel operators such as Hyatt, Marriott, Accor and IHG and also broaden the brands platform for our hotel expansion. We rebranded our resort to “The Naka Island, a Luxury Collection Resort & Spa, Phuket” which reopened in November 2011 resulting in significant improvement of occupancy and RevPAR compared to the same period last year. Additionally, to support the company growth strategy and allow the company to maintain the capital structure at appropriate level, on 26th April 2011, the Company’s Annual General Meeting for the year 2011 resolved to approve the issuance of warrants to be given without cost to the existing shareholders not exceeding 224,477,900 units (details given in the Notification to the Stock Exchange of Thailand on 19th May 2011). These warrants were listed and traded on the Stock Exchange of Thailand on 27th May 2011 (details given in the Notification to the
10 President’s Report
SUCCESS WITH INTEGRITY
Stock Exchange of Thailand on 25th May 2011) and the issuance and offering of 35,743,099 ordinary shares to employees of the Company to motivate the employees to drive the performance towards the success of the strategic objectives set forth in the 5-yr Master Plan (see Note 24 in the Financial Statement). Our total operating income in 2011 was recorded at Baht 3,756 million, a 13% increase from the same period last year, despite the absence of 9-month income from Ploenchit Center which we divested in the second quarter of 2011. Our income from hotel operation increased 21% from the same period last year to record at Baht 3,536 million despite the slow-down from the flood situation in the fourth quarter of 2011 and the absence of 3-month income from Naka resort in Phuket which was closed for rebranding during August-October. Total income including the gains from disposal of Ploenchit Center was recorded at Baht 4,487 million, a 33% increase and EBITDA recorded at Baht 1,636 million, a 103% increase from last year. After the deduction of finance cost, non-cash depreciation, and tax, we recorded a net profit of Baht 491 million, compared to a net loss of Baht 275 million in 2010.
Courtyard by Mariott Bangkok
Grand Hyatt Erawan Bangkok
Presidentâ&#x20AC;&#x2122;s Report
11
Baht Million
Changes
Hotels’ Operating Income Rental and Service Income Total Operating Income
2010 2,930 391 3,321
2011 3,536 219 3,756
Gain from Disposal of Asset Other Income Total Income
43 3,364
664 67 4,487
N.A. +56% +33%
(2,559) 805
(2,851) 1,636
+11% +103%
Depreciation & Amortization Operating Profit
(684) 121
(646) 990
-6% +716%
Finance Costs Pre-Tax Profit/(Loss)
(361) (293)
(407) 584
+13% N.A.
Taxes Minority Interest Net Profit/(Loss) E.P.S
(20) (16) (275) (0.12)
(53) (39) 491 0.22
+169% +148% N.A. N.A.
Operating Expenses EBITDA
+21% - 44% +13%
*Details are explained in later section of this report
Income In line with our diversification strategy, the composition of our total income has changed in 2011. Our “Midscale Hotels” and “Economy Hotels” segment contributed more income to the group while income from rental properties decreased from the divestment of Ploenchit Center to property fund in the second quarter of 2011. Details illustrated in the table below.
12 President’s Report
SUCCESS WITH INTEGRITY
2009
2010
2011
Btm
% total
Btm
% total
Btm
% total
Luxury Hotels Luxury Resorts Midscale Hotels Economy Hotels
1,997 182 272 297
62.6% 5.7% 8.5% 9.3%
1,848 206 449 428
54.9% 6.1% 13.3% 12.7%
2,110 220 631 576
47.0% 4.9% 14.1% 12.8%
Income from hotel properties Income from rental properties
2,748 401
86.1% 12.6%
2,930 391
87.1% 11.6%
3,536 219
78.8% 4.9%
43 -
1.3% -
43 -
1.3% -
67 664
1.5% 14.8%
3,192
100.0%
3,364
100.0%
4,487
100.0%
Other income Gains from sales of Asset Total
Baht Million 4,500
4,487
4,000 3,500
3,192
+ 5%
3,364
+ 33%
3,000 2,500
143
132
2,000 1,500
172
1,000 500
Luxury Hotels Luxury Resorts Midscale Hotels Economy Hotels Rental Properties Other Income
0
2009
2010
2011
Presidentâ&#x20AC;&#x2122;s Report
13
Operating performance from all properties in 2011 as follows: Hotel Business Our income from hotel operations increased 21% from the same period last year to record at Baht 3,536 million in 2011. Room revenue which generated approximately 56 percent to total revenue produced 23% growth in 2011. Food and beverage revenue, a 38 percent of income from hotel business, also increased 15% from 2010. Hotel revenue breakdown by type of income in 2010 and 2011 are listed below.
Baht Million 4,000 3,500 3,000 2,500 2,000
220 160
1,347
1,170
1,500 1,000 500
1,600
1,969
Other Operations Food and Beverage Revenue Room Revenue
0
2010
2011
Luxury Hotels Our two luxury hotels in Bangkok, Grand Hyatt Erawan Bangkok Hotel and JW Marriott Hotel Bangkok recorded a higher income in 2011 despite the interruption from flood in the fourth quarter in 2011. The average occupancy increased from 60 percent to 68 percent, with a RevPAR improvement of 13%. Room revenue increased 12% and food and beverage revenue increased 11% from the same period last year.
14 Presidentâ&#x20AC;&#x2122;s Report
SUCCESS WITH INTEGRITY
Luxury Resorts We have two luxury resorts; both demonstrated good improvement this year. Our Renaissance Koh Samui Resort and Spa closed with 11 % higher occupancy resulted in a 13 % growth of RevPAR and room revenues. For our luxury resort in Phuket, we rebranded it from “Six Senses Sanctuary” to “A Luxury Collection” and renamed the resort to “The Naka Island, a Luxury Collection Resort & Spa, Phuket” with aim to optimize its financial return. The rebranding which transformed the resort from a wellness destination to a luxury pool villa resort has allowed it to capture the broader market demand. The resort closed for rebranding from August 2011 and reopened on 1 November 2011. As a result, it achieved a better performance in 2011 with the average occupancy increased 2% and RevPAR increased 3% from the same period last year. In total, income from our four luxury hotels increased 13% from previous year to Baht 2,330 million in 2011. Midscale Hotels We have 2 hotels under the midscale segment, Courtyard by Marriott Bangkok and Holiday Inn Pattaya. This segment was our highest income growth in 2011 at 41% above 2010. Total revenue was recorded at Baht 631 million with room revenue increased 46% and food and beverage revenue increased 30% from last year. The average occupancy increased 20% and the average RevPAR increased 46% from 2010. Economy Hotels Our hotel properties under this segment are all under “ibis” brand. At the end of 2011, we had total of 7 economy hotels with total of 1,704 rooms. The first four ibis hotels, namely ibis Phuket Patong , ibis Pattaya , ibis Bangkok Sathorn and ibis Samui Bophut , were opened in the second half of 2008. We added ibis Bangkok Nana and ibis Phuket Kata in 2009 and ibis Bangkok Riverside in November 2010. Our 8th ibis, ibis Hua Hin was recently opened in January 2012 and our 9th ibis, ibis Bangkok Siam will be opened in December 2012. This segment also shown the strong growth in 2011 with the occupancy grew by 10% resulting in a 16% growth in RevPAR from the same period last year. Our seven ibis hotels generated Baht 576 millions of aggregated revenues, representing a growth of 35% from the same period last year with majority of their revenues came from room sales. Food and beverages also increased 46% from 2011.
President’s Report
15
Revenue breakdown by segments in 2010 and 2011 are listed below.
(Baht Million) 2,500 2,000 1,500 1,000 500 0
2010 2011 Luxury
The Naka Island, a Luxury Collection Resort & Spa, Phuket
16 Presidentâ&#x20AC;&#x2122;s Report
2010 2011 Midscale
Holiday Inn Pattaya
2010 2011 Economy
ibis Pattaya
SUCCESS WITH INTEGRITY
Revenue breakdown by destinations in 2010 and 2011 are listed below.
(Baht Million) 3,000 2,500 2,000 1,500 1,000 500 0
2010 2011 Bangkok
2010 2011
Non-Bangkok
Rental Properties At the end of 2011, we have only Erawan Bangkok, the high-end retail shopping centers located adjacent to Grand Hyatt Erawan Bangkok Hotels, which continued to generate steady rental income. The average occupancy recorded at 89%, a 3% increase from last year which leading to a 10% increase in total income. The combined income from rental business (including those from shops in Grand Hyatt Erawan Hotelâ&#x20AC;&#x2122;s arcade) in 2011 was Baht 291 million representing a decrease of 44% from last year due to the absence of income from Ploenchit Center which we divested in April 2011.
Presidentâ&#x20AC;&#x2122;s Report
17
Profit from Operations Our Earnings before Interest, Tax, Depreciation and Amortization (“EBITDA”) recorded at Baht 1,636 million in 2011, with normalized EBITDA (excluding gain from asset disposal) to record at Baht 972 million, a 21% growth from 2010. We also recorded a higher EBITDA margin of 25 percent in 2011 vs. 24 percent in 2010. Our Depreciation and Amortization (“D&A”) decreased by Baht 38 million from last year to record at Baht 646 million for 2011 mainly from the absence of Ploenchit Center which we divested in April 2011. With the said EBITDA above, our Earnings before Interest and Tax (“EBIT”) stood at Baht 990 million for 2011 with normalized EBIT (excluding gain from asset disposal) to record at Baht 326 million, a 169% increase from 2010. Finance Costs Total interest expenses recorded at Baht 407 million in 2011. The increase came mainly from the recognition of interest expenses from new hotel opened in 4Q10 in our P&L which recorded only 2 months in 2010 but 12 months in 2011 and the increasing interest rates. The market interest rates increased approximately 1.1% from 2010 while our average cost of funding (combined both short term and long term loans) increased approximately 0.9% from last year to 5.4% in 2011. Gains from Asset Sale In 2011, we recorded a gain of Baht 664 million from the divestment of Ploenchit Center Building to Prime Off ice Leasehold Property Fund in 2Q11.
JW Marriott Bangkok
18 President’s Report
SUCCESS WITH INTEGRITY
(B) Financial Status Capital Expenditure We recorded Baht 544 million of capital expenditure during the year which mainly for i) ibis Hua Hin project which already opened in January 2012, ii) Mercure Bangkok Siam and ibis Bangkok Siam project which will be opened in December 2012 and iii) the rebranding of our resort at Koh Naka Phuket and the normal maintenance for our existing properties. Sources of funding to support this capital expenditure were our cash flow from operations and project loans. With improving performance of our hotels and rental properties, we generated Baht 991 million of operating cash flow before changes in operating assets and liabilities in 2011. We also additionally generated Baht 1,352 million of net proceeds from the divestment of Ploenchit Center in April 2011 of which the funds were used to 1) prepay Baht 460 million mortgage loan related Ploenchit Center, 2) repay scheduled long-term debt and reduce short-term loan, and 3) fund our investments. The breakdown of 2011 capital expenditure by asset type as follows:
11%
The Naka Island
37%
ibis Huahin
22% Others Hotels 5% Rental Properties & Others 25% Mercure & ibis Bangkok Siam
Presidentâ&#x20AC;&#x2122;s Report
19
Our total assets decreased from Baht 12,950 million at the end of 2010 to Baht 12,238 million as of 31 December 2011 as a result of annual depreciation of our assets and the divestment of Ploenchit Center. Our total interest-bearing debts declined from Baht 8,599 million to Baht 7,499 million and our total liabilities decreased from Baht 9,676 million to Baht 8,468 million, from the end of 2010 to the end of 2011. This is mainly due to scheduled principal repayment of long term loan in 2011 and the prepayment of mortgaged loan of Ploenchit Center. With additional profits for the year, our shareholder equities increased from Baht 3,273 million to Baht 3,769 million. Our total liabilities-to-equity ratio positively improved from 2.9 times at the end of 2010 to 2.2 times at the end of 2011 with net interest bearing debt-to-equity of 1.9 times. With net profit generated in 2011, the Board of Director proposed to the Annual General Meeting in 2012 to consider the dividend payment of Baht 0.08 per share representing a 37% payout ratio.
Mrs. Kamonwan Wipulakorn President
20 Presidentâ&#x20AC;&#x2122;s Report
Report of the Audit Committee to Shareholder
SUCCESS WITH INTEGRITY
The Erawan Group Public Company Limited
To Shareholders of The Erawan Group Public Company Limited, The Audit Committee, consisting of three independent directors with qualifications as announced by the Stock Exchange of Thailand and whose terms are three years each, performed its duties within its scopes of responsibility and as entrusted by the Board of Directors. In 2011, the Audit Committee met four times to consider the following: 1. To review the quarterly financial statements and the 2011 financial statements where it exchanged views with the auditor, Executive Vice President and Chief Financial Officer and the internal auditor to determine that the financial statements of the Company and its subsidiaries were having accurate and complete information deserved to be trusted and were in line with the Generally-Accepted Accounting Principles, the SET’s announcements and the SEC’s notifications. 2. To evaluate an adequacy of the internal control system to see if the Company had an appropriate internal control system that well responded to its business, as well as a way and mean to take care of its properties and to prevent the Company from suffering damages. The evaluation was conducted through the internal auditor’s report, the auditor’s report and through inquiries with the management. So far, no material defect has been found. As a result, the Company’s internal control system is perceived to be efficient and adequate. 3. To review connected transactions or conflict of interest and to disclose information of these transactions to see if they were normal, reasonable and was for the best benefits to the Company while in compliance with the authorities’ rules and regulations. 4. To give advice and approve the annual auditing plan; to acknowledge and submit an internal auditing result to the Board of Directors; to review an annual budget and to supervise and evaluate the Internal Audit Department’s performance. The Audit Committee, having reviewed the 2012 auditor and the soundness of the auditing fee, eventually proposed to the Board of Directors to seek the Annual General Meeting’s approval to appoint Mr.Charoen Phosamritlert, CPA No. 4068 and/or Miss Vannaporn Jongperadechanon, CPA No. 4098 and/or Mr. Vichien Thamtrakul, CPA No. 3183 of KPMG Phoomchai Audit Ltd. as the Company’s auditor.
Mr. Sansern Wongcha-um Chairman of the Audit Committee 21 February 2012
Report of the Audit Committee to Shareholder
21
Report of the Board’s Responsibility in the Financial Statements The Erawan Group Public Company Limited
The Board of Directors was responsible for the financial statements of The Erawan Group Public Company Limited and its subsidiaries. The financial statement was done according to the Generally-Accepted Accounting Principles in Thailand where an appropriate accounting policy was chosen and implemented. In addition, discretion was exercised, the best estimates were selected and adequate information was disclosed in Notes to Financial Statement. The Board of Directors appointed the Audit Committee, which consisting of 3 independent directors, to responsible for auditing the company’s financial statements and to evaluate the internal control system for efficiency. The Audit Committee’s opinion in this matter was in Report of the Audit Committee to Shareholder. In this regard, the Board of Directors is of the opinion that the Company’s internal control system is proven satisfactory and contributes to the Company’s credibility as of 31st December 2011.
Mr. Prakit Pradipasen
Chairman of The Board of Directors
22 Report of the Board’s Responsibility in the Financial Statements
Mrs. Kamonwan Wipulakorn
President
SUCCESS WITH INTEGRITY
ABOUT ERAWAN
23
Corporate Prof ile The Erawan Group Public Company Limited
1991
1997
Grand Hyatt Erawan Bangkok Hotel JW Marriott Hotel Bangkok
2004 Erawan Bangkok
The Company was founded
1985
JW Marriott Hotel Bangkok
Amarin Plaza
Converted in to a Public Company
1985 1988 Registered on Stock Exchange of Thailand
1991
1994
Grand Hyatt Erawan Bangkok Hotel
Established on 29 December 1982 and continue to develop various real-estate (Hotels and Rental Properties) over the past
30 years 24 Corporate Profile
1996
1997
Ploenchit Center
SUCCESS WITH INTEGRITY
Amarin Plaza Sold
Holiday Inn Pattaya
Courtyard by Marriott Bangkok Hotel
2 ibis Hotels : ibis Bangkok Nana and ibis Phuket Kata
Erawan Bangkok
2004
2005
2007
Renaissance Koh Samui Resort and Spa
Courtyard by Marriott Bangkok
2007
Ploenchit Center Sold; Erawanâ&#x20AC;&#x2122;s Subsidiary, Erawan Commercial Management Co.,Ltd, continues to manage the building The Naka Island, a Luxury Collection Resort and Spa Phuket; rebranded from Six Senses Sanctuary Phuket
2008
2009
Six Senses Sanctuary Phuket 4 ibis Hotels : ibis Phuket Patong, ibis Pattaya, ibis Bangkok Sathorn and ibis Samui Bophut
Holiday Inn Pattaya
2009
2010
2011 ibis Bangkok Riverside
7 ibis Hotels
2008-2010
Corporate Profile
25
Current Business Operations The Erawan Group Public Company Limited
The company and its subsidiaries’ core businesses are investment and development of diversified hotel properties across Thailand’s key destinations. Currently, the company owns 13 hotels and operates other business including retail space rental, and management of office building.
Hotels and Resorts
Grand Hyatt Erawan Bangkok
JW Marriott Hotel Bangkok
www.bangkok.grand.hyatt.com
www.marriott.com/bkkdt
Segment : Luxury Hotel Number of rooms : 380 rooms Location : Rajdamri Road, Bangkok, CBD. Remaining on the current lease : 30 years
Renaissance Koh Samui Resort and Spa
Segment : Luxury Resort Number of rooms : 45 deluxe rooms and 33 pool villas Location : Lamai Beach, Koh Samui, Surat Thani www.marriott.com/usmbr
26 Current Business Operations
Segment : Luxury Hotel Number of rooms : 441 rooms Location : Sukhumvit Soi 2, Bangkok, CBD. Remaining on the current lease : 33 years
The Naka Island, a Luxury Collection Resort & Spa, Phuket
Segment : Luxury Resort and spa Number of rooms : 67 pool villas Location : Koh Naka Yai, Phuket www.nakaislandphuket.com
SUCCESS WITH INTEGRITY
Courtyard by Marriott Bangkok
Segment : Midscale Hotel Number of rooms : 316 rooms Location : Rajdamri Road, Bangkok, CBD. Remaining on the current lease : 26 years
Holiday Inn Pattaya
Segment : Midscale Hotel Number of rooms : 367 rooms Location : Pattaya Sai 1 Road, Chon Buri www.holidayinn.com/pattaya
www.courtyard.com/bkkcy
ibis Phuket Patong
ibis Phuket Kata
www.ibishotel.com
www.ibishotel.com
Segment : Economy Hotel Number of rooms : 258 rooms Location : Patong Beach, Phuket
Segment : Economy Hotel Number of rooms : 258 rooms Location : Kata Beach, Phuket
Current Business Operations
27
ibis Pattaya
ibis Samui Bophut
www.ibishotel.com
www.ibishotel.com
Segment : Economy Hotel Number of rooms : 259 rooms Location : Pattaya Sai 2 Road, Chon Buri
ibis Bangkok Sathorn
Segment : Economy Hotel Number of rooms : 213 rooms Location : Rama IV Road, Bangkok, CBD. Remaining on the current lease : 27 years www.ibishotel.com
28 Current Business Operations
Segment : Economy Hotel Number of rooms : 205 rooms Location : Bophut Beach, Koh Samui, Surat Thani
ibis Bangkok Nana
Segment : Economy Hotel Number of rooms : 200 rooms Location : Sukhumvit Soi 4, Bangkok, CBD. Remaining on the current lease : 27 years www.ibishotel.com
SUCCESS WITH INTEGRITY
Properties Under Development
ibis Bangkok Riverside
Segment : Economy Hotel Number of rooms : 266 rooms Location : Charoennakorn Road, Chaophraya River,Bangkok Remaining on the current lease : 23 years
ibis Hua Hin
Segment : Economy Hotel Number of rooms : 200 rooms Location : Hua Hin, Prachuap Khiri Khan (Opened January 2012)
www.ibishotel.com
Mercure Bangkok Siam ibis Bangkok Siam
Segment : Midscale and Economy Hotel Number of room : 380 rooms Location : Siam Square, shopping area next to BTS National Stadium Station, Bangkok, CBD. Remaining on the current lease : 31 years
Current Business Operations
29
Rental Properties Erawan Bangkok
Retail Shops (up-scale) : 6,849 sq.m. Location : Adjacent to Grand Hyatt Erawan Hotel Rajdamri Road, Bangkok, CBD. Remaining on the current lease : 30 years www.erawanbangkok.com
Rental Properties Ploenchit Center Owner: Prime Office Leasehold Property Fund (managed by The Erawan Group PLC)
Office Building Location
30 Current Business Operations
: 42,590 sq.m. : Sukhumvit Road Bangkok, CBD.
Our Business Strategy
SUCCESS WITH INTEGRITY
The Erawan Group Public Company Limited
Core Business Strategies as follows; 1. Existing Properties: Maximizing value through continuous improvement and effective management. 2. Future Projects: Developing a well-diversified hotel and/or resort portfolio to meet diverse customersâ&#x20AC;&#x2122; needs to diversify risks and yield appropriate returns. 3. Ensuring stability and sustainable growth of the organization through development of systems, human capitals, core competencies, information database for decision making, and core corporate culture.
The Erawan Groupâ&#x20AC;&#x2122;s Third-Party Hotel Management Partners
Third-Party Hotel Management Company Selection Policy: Third-Party Hotel Management Companies selected to manage our properties are International hotel operators with reputable profile, and management experience. Criteria for hotel Brand selection is based on expertise of Management Company and suitability of the Brand for the property.
Our Business Strategy
31
Our Shareholders and Management The Erawan Group Public Company Limited
Shareholders As at 31st December 2011, the company’s paid up capital is Baht 2,244,779,001 divided into 2,244,779,001 ordinary shares at par value 1 Baht per share. Top ten shareholders holding the highest number of shares as of 31st December 2011 are as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Shareholder’s name
Number of shares
% of total shares
Mr. Sukakarn Wattanavekin City Holding Co., Ltd. Mrs.Wansamorn Wannamethee Mitr Phol Sugar Co., Ltd. MBK Company Limited
379,185,716 210,481,318 131,611,349 131,353,314 130,937,938 120,222,500 101,257,910 83,296,177 73,000,000 58,698,916 1,420,045,138
16.89% 9.38% 5.86% 5.85% 5.36% 5.36% 4.51% 3.71% 3.25% 2.61% 62.78%
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)
Mr. Isara Vongkusolkit Miss Jintana Kanjanakumnerd PAN-ASIA SUGAR FUND LIMITED
Mr. Supol Wattanavekin Total top ten shareholders holding
Investor will be able to see the updated shareholders list from the Company’s website at www.TheErawan.com before the Annual General Shareholders’ Meeting. Detail Groups of Major Shareholders are as follows: Major Shareholders Vongkusolkit Group Wattanavekin Group Total major shareholders Thai Institution Investor and Foreign Institution Investor MBK Company Limited Group Company’s executives Others Total
32 Our Shareholders and Management
Number of shares
% of total shares
871,994,642 709,907,357 1,581,901,999 239,354,501 141,468,738 16,330,705 192,094,692 2,244,779,001
39 % 31 % 70 % 14 % 6% 1% 9% 100 %
SUCCESS WITH INTEGRITY
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Directors that represent the major shareholders are as follows: Director’s Names 1. 2. 3. 4. 5.
Groups of Major Shareholders
Mr. Vitoon Vongkusolkit Mr. Chanin Vongkusolkit Mr. Gavin Vongkusolkit Mr. Supol Wattanavekin Mrs. Panida Thepkanjana
Vongkusolkit Group Vongkusolkit Group Vongkusolkit Group Wattanavekin Group Wattanavekin Group
Management Structure The Board of directors consists of thirteen (13) directors, the Board has appointed four committees namely: The Audit Committee (AC), The Investment Committee (IC), The Nominating and Corporate Governance Committee (NCG) and The Management Development and Compensation Committee (MDC). Name
Title
Education
1. Mr. Prakit Pradipasen
Chairman of the Board and Independent Director
• Master of Business Administration (MBA) Wayne State University, Michigan, U.S.A.
2. Mr. Sansern Wongcha-um
Independent Director and Chairman of the Audit Committee
• Master Degree of Business Economics University of Bridgeport, Connecticut, U.S.A.
3. Assoc. Prof. Manop Bongsadadt
Independent Director and Member of the Audit Committee
• Master of Architecture (M.Arch), Kansas State University, U.S.A.
4. Mr. Dej Bulsuk
Independent Director and Member of the Audit Committee
• Bachelor of Business Administration Thammasat University
5. Mr. Banyong Pongpanich
Independent Director
• Master of Business Administration (MBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University
6. Mr. Ekasith Jotikasthira
Independent Director
• Master of Business Administration (MBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University
7. Mr. Vitoon Vongkusolkit
Director
• Bachelor of Science Chulalongkorn University Our Shareholders and Management
33
Name
Title
Education
8. Mr. Supol Wattanavekin
Director
• Master of Business Administration (Executive) (EMBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University
9. Mr. Chanin Vongkusolkit
Director
• Master of Business Administration (Finance) St. Louis University, Missouri, U.S.A.
10. Mrs. Panida Thepkanjana
Director
• Master of Business Administration (MBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University • Master of Laws, Chulalongkorn University • Barrister-at-Law. The Institute of Thai Bar Association
11. Mr. Gavin Vongkusolkit
Director
• Master of Business Administration (Finance) The University of Sydney
12. Mr. Kasama Punyagupta
Chief Executive Officer
• Master of Business Administration (International Business) University of Bridgeport, Connecticut, U.S.A.
13. Mrs. Kamonwan Wipulakorn
President
• Master of Business Administration (Finance), Western Illinois University, USA.
Company Secretary: Miss Kanokwan Thongsiwarugs
Authority to sign on behalf of the Company Two of the following four directors namely, Mr. Vitoon Vongkusolkit or Mrs. Panida Thepkanjana or Mr. Kasama Punyagupta or Mrs.Kamonwan Wipulakorn, shall jointly sign a document together. Dividend Policy Approximately 35 percent of the net profits of the consolidated financial statements after deduction of all kind of reserves as specified by law and the Company (with additional conditions)
34 Our Shareholders and Management
SUCCESS WITH INTEGRITY
Roles and Responsibilities of the Board of Directors and the Committee Board of Director’s Roles and Responsibilities are: 1. To manage the Company according to the laws, the Objects in Detail, the Articles of Association and resolutions of the Shareholders’ Meeting with integrity and prudence for the Company’s interests. 2. To determine the company’s visions, obligations and business policy. 3. To review the business development plans to increase potential of itself. 4. To consider budgets to maximum the business’s economic values and for better returns to shareholders. 5. To formulate the compensation policy and a succession plan of executives. 6. To supervise and develop risk assessment. 7. To supervise and develop the Company’s corporate governance compliance. 8. To supervise and set up an internal control and an internal audit system. 9. To take care of interests of both major and minor shareholders so that they can equally exercise and maintain their interests while accessing accurate and complete information with transparence and accountability. 10. To appoint committees in order to determine scopes of work and monitor their performances. 11. To performance evaluation’s executives and the HR development policy. Term of Directors 3 years each term. At the Annual General Meeting (AGM), one-third of all directors shall resign by rotation. The resigning directors may be re-elected. The Audit Committee consists of three members as follows: 1. Mr. Sansern Wongcha-um Chairman 2. Assoc. Prof. Manop Bongsadadt Member of the Committee 3. Mr. Dej Bulsuk Member of the Committee Audit Committee’s Roles and Responsibilities are: 1. To review an annual financial statement already audited by auditors and to ensure that it meets the generally-accepted accounting principles; to consider and screen financial information together with the Financial and Risk Management Committee and the auditors before releasing it to the third party. 2. To consider and select, propose for appointment and determine auditor’s fees and met four times a year with the auditors. 3. To review material problems and obstacles the auditor may come across while performing his duty and to settle differences between the auditor and the management. 4. To review the appropriateness and effectiveness of the internal control system and internal audit systems are in place according to international standards. 5. To set up a defensive work system for business units in the company to increase operation efficiency and effectiveness. 6. To review an annual internal audit plan proposed by the Internal Audit Office. To provide opinion on the consideration of performance, appointment, removal, and remuneration of the Company’s internal auditor.
Our Shareholders and Management
35
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7. To promote and support the development of a financial reporting system that meets the international standards. 8. To control company’s compliance with the laws on Securities and Exchange and other legislations relating to its business. 9. To determine fraud prevention measures and review results of a corruption inspection report. 10. To review the accuracy and effectiveness of information technology relating to the internal control system; to offer advice for roles and regular updates. 11. To consider the Company’s information disclosure in case of connected transactions or transactions which may involve conflict of interest to ensure that all are correct, sound and carried out in a normal course of business. 12. To prepare the Audit Committee’s report to be signed by chairman of the Committee and disclosed it in the Company’s annual report. 13. To act otherwise as required by the laws or entrusted by the Board of Directors; when performing along its scopes of work, the Audit Committee shall be empowered to order President and Chief Executive Officer, senior executives, heads of department or related staff to provide their opinions, participate in meeting or submit documents deemed necessary or relevant.
Term of Audit Directors: 3 years each term. The Investment Committee consists of seven members as follows: 1. Mr. Vitoon Vongkusolkit Chairman 2. Mr. Banyong Pongpanich Member of the Committee 3. Mr. Supol Wattanavekin Member of the Committee 4. Mr. Chanin Vongkusolkit Member of the Committee 5. Mrs. Panida Thepkanjana Member of the Committee 6. Mr. Kasama Punyagupta Member of the Committee 7. Mrs. Kamonwan Wipulakorn Member of the Committee The Investment Committee’s Roles and Responsibilities are: 1. To supervise and approve investment projects and divestment transactions as set out in the Company’s master plan. The Committee’s responsibilities shall include preliminary approvals of project feasibility, financial returns, and review of risks associated with the project including financing and relevant legal commitments and proposed to the Board of Director for final approval. 2. To assess and formulate a systematic, clear-cut and efficient risk management plan. 3. To supervise and monitor risk assessment tasks as well as to adjust and develop the risk management on a regular basis. Term of Investment Directors: 3 years each term. The Nominating and Corporate Governance Committee consists of four members as follows: 1. Mr. Prakit Pradipasen Chairman 2. Mrs. Panida Thepkanjana Member of the Committee 3. Mr. Chanin Vongkusolkit Member of the Committee 4. Mr. Gavin Vongkusolkit Member of the Committee 36 Our Shareholders and Management
SUCCESS WITH INTEGRITY
Nominating and Corporate Governance Committee’s roles and responsibilities are: 1. To determine the Board of Directors’ composition and qualification of its members as well as members of board committees. 2. To nominate candidates for the Board of Directors and member of board committees. 3. To determine the Remuneration of Directors. 4. To propose corporate governance policies and guidelines to the Board of Directors and to review and update such policies and guidelines on ongoing basis. 5. To evaluate the Board of Directors and each committee’s performance and to ensure that the Board of Directors and management’s operations are being conducted within corporate governance policies and guidelines. 6. To promote knowledge acquisition for the Company’s nature of business, regulations, and strategy. Term of Nominating and Corporate Governance Director: 3 years each term. The Management Development and Compensation Committee consists of four members as follows: 1. Mr. Supol Wattanavekin Chairman 2. Mr. Vitoon Vongkusolkit Member of the Committee 3. Mr. Banyong Pongpanich Member of the Committee 4. Mr. Ekasith Jotikasthira Member of the Committee Management Development and Compensation Committee’s roles and responsibilities are: 1. To assess and evaluate performances; to determine annual remunerations and a compensation structure of President and Chief Executive Officer while offering him an advice regarding remunerations of senior executives. 2. To consider a plan to develop skills and competency of President and Chief Executive Officer Nominees (in case of change). 3. To determine significant HR policies i.e. and structure of staff’s remunerations for Annual Remunerations and Budgeting, Rewards (bonus), etc. 4. To consider an allocation of the Employees Share Options Program (ESOP) in case such allocation exceeds 5 percent of the program’s shares. Term of Management Development and Compensation Directors: 3 years each term. Independent Directors, who account for 46 percent of the Company’s Board of Directors, consist of: 1. Mr. Prakit Pradipasen Independent Director 2. Mr. Sansern Wongcha-um Independent Director 3. Assoc. Prof. Manop Bongsadadt Independent Director 4. Mr. Dej Bulsuk Independent Director 5. Mr. Banyong Pongpanich Independent Director 6. Mr. Ekasith Jotikasthira Independent Director Our Shareholders and Management
37
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The Company’s Executives consist of: 1. Mr. Kasama Punyagupta 2. Mrs. Kamonwan Wipulakorn 3. Mr. Krailuck Asawachatroj 4. Mr. Petch Krainukul 5. Mrs. Varisara Gerjarusak 6. Mr. Apichan Mapaisansin 7. Mr. Suchai Wuthworachairung 8. Miss Pakinee Pramtade 9. Mr. Viboon Chaisutyakorn
Chief Executive Officer President Executive Vice President and Chief Financial Officer Executive Vice President Executive Vice President Assistant Executive Vice President Assistant Executive Vice President Senior Vice President Vice President
Duties and Authorities of Chief Executive Officer (CEO) 1. To formulate the Company’s Vision and Mission. 2. To formulate the Company’s business plans and strategies to achieve Vision set forth for the Company. 3. To formulate development plans for the Company’s top executives and be responsible for succession plans of the Company’s Chief Executive Officer and President. 4. Be responsible for the Company’s long term strategic direction and expansion plans. 5. To provide advice to President for the Company’s overall management. Duties and Authorities of President 1. To formulate the Company’s business plan and strategy in accordance with the Company’s Vision and Mission. 2. To formulate the Company’s annual budget and allocate required resources to achieve annual goal. 3. To manage human resources including recruiting, setting compensations, welfare and benefits, setting evaluation methods, appointing, removing and transferring staff and issuing rules, regulations and announcements as deemed appropriate. 4. To set forth management structure, determine roles, duties and approval authorities. 5. To develop various systems to ensure effective and efficient operations. 6. To build and nurture corporate cultures to achieve long term sustainable growth. 7. To develop skills, knowledge and employee competency in accordance with the Company’s business plan. 8. To develop valid and sufficient databases to support decision making. 9. To represent and promote corporate image and profile to public. 10. To develop good corporate governance and ensure good practice throughout both at company and employee’s level.
38 Our Shareholders and Management
SUCCESS WITH INTEGRITY
Duties and Responsibilities of Company Secretary The Company Secretary shall have duties and responsibilities that are no fewer than what the Securities and Exchange Act (No. 4) B.E. 2551 and/or other related laws, rules and regulations have stipulated. This includes: 1. To support the Board to perform its fiduciary duties with integrity and care as a normal person may do in the same situation; to offer advice to directors, the Management and staff to ensure compliances to the laws, rules and regulations of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) and other relevant legislations. 2. To supervise the internal auditing, the internal control system, compliance to the principle of good corporate governance and to be a center in compiling risk management plans. 3. To coordinate matters relating to directors such as changes of qualifications, changes of roles and duties, terms of offices of committees, resignation on rotation, resignation prior to a due term and appointment of new directors. 4. To specify and inform a place where important documents of the firm are kept and to disclose related information based on duties and responsibilities to the SEC. 5. To monitor the Management’s performances to ensure good practices. 6. To prepare enough annual reports for distribution to shareholders and related persons. 7. To review invitation letters to the Annual General Meeting of Shareholders and the Extraordinary General Meeting of Shareholders, adequacy of documents, supporting documents and information disclosure to the meeting and minutes of the meeting. 8. To disclose related information under the Secretary’s duties and responsibilities to the SET. The Company’s Articles of Association of the Nomination of Directors Clause 18 the Shareholders’ Meeting shall elect directors according to the following rules and procedures: 18.1 Chairman of the Meeting shall propose names and work experiences of nominees submitted by the Board of Directors for approval. 18.2 Each shareholder shall have voting rights equal to the number of shares he holds. 18.3 An election of director may be done by voting either one or several persons as director as the Shareholders’ Meeting deems appropriate. However, each shareholder must exercise all of his voting rights existed under Clause 18.2 for each director. Dividing votes to a particular nominee is not permitted. 18.4 Those receiving the highest votes in a sequent order shall be elected as directors for an available number of directors. Should those elected in a subsequent order enjoy equal votes which however exceed the number of the existing directors, Chairman of the Meeting shall have a casting vote. Clause 48 A resolution of the Shareholders’ Meeting shall consist of the following votes: 48.1 In a normal case, majority votes of shareholders who attend the meeting (either by themselves or by proxy) and exercise their votes shall be considered a resolution.
Our Shareholders and Management
39
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Shareholding of the Board of Directors and Management The Erawan Group Public Company Limited
Title
Name 1. Mr. Prakit Pradipasen 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.
Chairman of the Board of Directors Mr. Sansern Wongcha-um Independent Director Assoc. Prof. Manop Bongsadadt Independent Director Mr. Dej Bulsuk Independent Director Mr. Banyong Pongpanich Independent Director Mr. Ekasith Jotikasthira Independent Director Mr. Vitoon Vongkusolkit Director Mr. Supol Wattanavekin Director Mr. Chanin Vongkusolkit Director Mrs. Panida Thepkanjana Director Mr. Gavin Vongkusolkit Director Mr. Kasama Punyagupta Chief Executive Officer Mrs. Kamonwan Wipulakorn President Executive Vice President Mr. Krailuck Asawachatroj and Chief Financial Officer Mr. Petch Krainukul Executive Vice President Mrs. Varisara Gerjarusak Executive Vice President Mr. Apichan Mapaisansin Assistant Executive Vice President
18. Mr. Suchai Wuthworachairung 19. Miss Pakinee Pramtade 20. Mr. Viboon Chaisutyakorn
Assistant Executive Vice President Senior Vice President Vice President
Ordinary Share (Units) 31 Dec.2011 31 Dec.2010 +(-) 150,058
150,058
-
319,729 660,000 11,457,870 58,698,916 5,493,550 3,797,416 97,213 9,999,999 -
319,729 660,000 3,001,500 11,457,870 58,698,916 5,493,550 3,797,416 97,213 11,510,211 -
(3,001,500) (1,510,212) -
839,082 1,000,000
839,082 1,000,000
-
1,745,716
1,825,716
(80,000)
1,088,697
1,088,697
-
Note: From report of securities held by the Companyâ&#x20AC;&#x2122;s directors as of 31st December 2011
40 Shareholding of the Board of Directors and Management
Hotel Industry
The Erawan Group Public Company Limited
Trend of the Tourism Industry Thailand tourism industry had clearly shown its strength and potential in the year 2011. Despite being adversely affected by the flood during the high season in the last quarter, annual international tourist arrivals had reached 19.1 million arrivals*, up 20 percent from 2010. The figure was well surpassed 16 – 17 million arrivals, a forecasted number by Tourism Authority of Thailand (TAT) at the beginning of 2011, but it was below a mid - year revised forecast of 19.5 million arrivals. Domestic tourism, however, took a greater impact from the flood as local tourism shrink to show 100 million* trips for the year, less than a projection by Kasikorn Research Center of 105 million trips. Nevertheless, income from tourism, international and local combined, soared 8 percent to reach an outstanding level of more than 1 trillion Baht. This firm development in 2011 was driven by many factors especially from political stability, growth in Asian economy leading to growth in Asian tourists, sharp increase in Russian visitors, and constant marketing activities by TAT such as tradeshows to stimulate tourist confidence and strengthen the image of Thailand tourism. The strength of the tourism industry was also reflected by a survey result of Travel & Leisure Magazine’s, which readers voted Bangkok as number one for World’s Best City Award 2011, the same position for two consecutive years.
Million Arrivals
Growth (%)
Number of International Tourist Arrivals
20 18
+19%
+20%
+16%
+13%
16 14
+5%
12
-1%
10 2004
2005
-3%
2006
Tsunami
2007
2008
2009
2010
2011 E
Coup D'etat
Airport Closure
Political Unrest & Flu Pandemic
Political Unrest
Flood Crisis
Sources: TAT; Ministry of Tourism and Sports; Department of Tourism * Preliminary information from TAT in January 2012
42 Hotel Industry
+8%
+1%
2012 F
SUCCESS WITH INTEGRITY
Holiday Inn Pattaya
During the first quarter of 2011, foreign tourist arrivals continued its momentum from the last quarter of 2010 showing 5.4 million arrivals, the best performing quarter of the year. Chinese, Russian, and Indians showed significant growth from the same quarter last year. Second quarter still demonstrated strong tourist confidence, as international arrivals saw a tremendous 54 percent growth from same period last year, a period with political riots in Bangkok CBD. Despite political uncertainty during pre- and post-election periods in the third quarter, international arrivals still increased by 28 percent compared with 2010. However, the flood during the fourth which devastated many areas particularly in the Northern and Central regions of Thailand as well as parts of Bangkok urged many foreign governments to issue Travel Warnings to their citizens not to visit affected areas within Thailand. Such Travel Warnings along with the news footage of flooded Don Muang Airport, and several tourist attractions greatly impacted the number of international tourist arrivals to Bangkok area due to many trip cancellations. Tourism situation at other major tourist destinations, unaffected by flood, such as Phuket, Samui, and Chiang Mai, had received no adverse impact from the Warnings and the news because of the rising popularity in commuting by chartered flights and direct flights directly to such resort destinations. In total, international arrivals during the last quarter dropped 9 percent compared with last year to 4.3 million arrivals.
Hotel Industry
43
As regards to domestic tourism during 2011, the situation appeared promising during the first half of the year as domestic trips increased 2 percent compared with same period last year. However, the flood adversely impacted the tourism industry during the last quarter of the year. Even though, countless Bangkok residences evacuated from the flooded areas to stay at accommodations in nearby destinations such as Pattaya and Hua Hin, the momentum of domestic tourism during such high season was greatly deteriorated especially during the festive period. Number of domestic trips dropped 5% from 2010 and less than its forecasted numbers to report an annual figure of 100 million trips. Thailand tourism industry in 2012 is expected to continue its positive trend and show concrete growth in terms of both number of tourist arrivals and income from tourism. Major positive factors contributing to its continued growth include strong Asian economy leading to greater number of Asian tourists, as well as the steady expansion of low-cost airlines in terms of more frequent flights, more routes, and more airport hubs. In 2012, tourists from China, Russia, and India (RIC), which currently contribute 18 percent of total international tourist arrivals, will play a significant role in stimulating Thailand tourism industry. TAT and the Tourism Council of Thailand (TCT) expect international tourist arrivals to grow by 8 – 10 percent which will bring the figure to a staggering 20.5 – 20.8 million* Preliminary forecast from TAT in January 2012 arrivals for 2012. As regards to marketing strategies, TAT will promote Thailand under the campaign “Amazing Thailand: Always Amazes You” to build up its strengths as a valued destination offering memorable travel experience to differentiate Thailand from other tourist destinations.
Million trips
Domestic Tourist Trips
Growth (%)
110 +17%
100 90
+7% +8%
80
+6% +2%
70
+2%
+1%
+3%
60
-1%
50 2004
Tsunami
2005
2006
2007
Coup D'etat
2008
Airport Closure
Sources: TAT; Ministry of Tourism and Sports; Department of Tourism *Preliminary forecast from TAT in January 2012 44 Hotel Industry
2009
2010
Political Political Unrest Unrest & Flu Pandemic
2011 E Flood Crisis
2012 F
SUCCESS WITH INTEGRITY
Renaissance Koh Samui Resort & Spa
For domestic tourism, TAT is fully committed to stimulate the industry back from a slump starting with a concept of volunteer tourism in the regions that experienced flood in the last quarter of 2011 and the campaign â&#x20AC;&#x153;Travel with a New Heart for a Sustainable Thailandâ&#x20AC;? will be launched to stimulate 2012 domestic tourism. In addition, TCT expects domestic tourism to fully recover in the second quarter, particularly during Songkran Festival and school holiday. However, the degree of tourism recovery depends largely on restoration of tourist attractions and tourist services as well as the effectiveness of marketing activities to stimulate Thai tourists. Domestic tourist trips are expected to reach 107.48 million trips or grow by 7 percent from 2011, according to TAT. Regarding new international- and regional-chain hotel supply, it is expected that many luxury and mid-scale hotels will commence their business in 2012, especially in Bangkok that several luxury and mid-scale hotels opened their doors since middle of 2011 and the opening will continue throughout 2012. This growing new supply in luxury and mid-scale segments tends to lead to intense competition within the segments since the highest contributing and fastest-growing tourist source markets, the RIC, have a tendency to travel as tour series groups and accommodate at economy hotels. Nonetheless, Thailand tourism industry is still a robust and prospective industry. Long-lasting tourism reputation; sincere Thai hospitality; variety and beauty of cultural and natural attractions, and value-for-money all contributes to Thailand as a competitive tourism product. In addition, sharp increase in number of Asian tourists and the travel behavior to travel more in neighboring countries will become main factors contributing to long-term sustainability of Thailand tourism industry.
Hotel Industry
45
Risk Factors
The Erawan Group Public Company Limited
Our company has the Investment Committee (“IC”) to supervising and managing policies, plans and investment projects approved by the Board. The Committee also ensures that the firm has a systematic, distinct and effective risk management system. Each head of department are responsible to analyze and formulate with the strategies to manage or mitigate the risks. Risks associated with our operations are: 1. Risk Management: Dependence of Third-party Hotel management The company has no policy to manage hotels by ourselves. International hotel operators are hired to utilize their reputations, experiences and expertise in managing and administering our hotels. These hotel operators include Hyatt International, Marriott International, Accor Hotels, InterContinental Hotels Group, and Starwood Hotels & Resorts Worldwide. The operators we have selected are amongst the world’s largest operators with proven track records, tested systems, reputations, and strong financial positions. Therefore, we believe that, even though hotel management agreements are of long-term nature and could exposed the company to the risk that brand reputations and operators’ capabilities to compete may decline during the contracted period, the possibilities of such deterioration of performances is minimal. Furthermore, all hotel management agreements with the hotel operators include termination for non-performance clause in case hotel performances have constantly not reached desired level. This clause, therefore, allows the company to appoint another international hotel operator to take over the management of the property. 2. Risk from Declining Demand and Increasing Supply The unbalanced situation of supply and demand could cause an intense competition in the hotel market, which may affect company’s income and operating profit. However, the company hires different highly-experienced hotel management operators to manage our properties base on their expert market segments. Such hotel operators can provide competitive advantage such as, wide-range of customer base to ensure certain level of demand, and proactive crisis management under unpredictable situation. Furthermore, the company has always been proactive in reestablishing and introducing new hotel competitive strengths as well as continuously manages its expenses to stay at the minimum. In addition, a strategy to diversify investment portfolio to luxury, mid-scale and economy hotels in various tourist destinations help to mitigate this demand-supply risk effectively. 3. External Risk Factors Impacting Company’s Assets and Business Operations External risk factors such as natural disaster, terrorism or political unrest that may have an impact on company’s properties and business operations are unpredictable and uncontrollable. However, the company has set certain emergency standard procedures based on international standard to reduce adverse impacts from such unpredictable events. For example, crisis management at different hotel properties during the flood, which was established according to the severity of each location, including constructing flood barriers to defend important sites of the hotels, preparation of food, beverages, and other consumer products, preparation of power generator, and temporarily close high-risk property and transfer hotel guests to other low-risk properties. Standard procedures to manage political unrest risks have also been implemented, including restricted access to and from properties, setup barriers within vicinity, and evacuation in accordance with international standard. Furthermore,
46 Risk Factors
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all hotel properties of the company are covered under all-risk, business interruption, and terrorism insurances to cover the aforementioned damages should they have direct impact to any of the properties. 4. External Risk Factors Affecting Hotel Business Performance External risk factors affecting hotel business performance, such as natural disaster, political unrest or epidemic, are beyond company’s control and prevention. Such external factors could cause sudden drop in number of international tourist arrival, which will have a direct impact on hotel revenue and net income. Nevertheless, precedent events have shown a pattern that these adverse impacts are short-lived, around 3 - 9 months, depending on severity. The company’s risk management strategies to handle these external factors are to have a flexibility and responsiveness in our systems. Sales and marketing activities are flexible for fast reaction to market condition, while proactive cost management policies allow the company to be resilient in difficult periods. 5. Interest rate risk Interest rate risk, which is a result of changes of market rates in the future, will affect our operating results and cash flow. For the purpose of financial risk mitigation in light of interest uptrend, the Company converted a portion of long term loan from floating rates into fixed rates. As of 31st December 2011, approximately 34 percent of our long term loans were subject to a fixed rate and 66 percent were subject to a floating interest rate. Our floating-rate term loans apply a Minimum Lending Rate (MLR), a 6-month Fixed Deposit Rate and 12-month Fixed Deposit Rate as a benchmark. 6. Human Resources Risk Loss of executive management or key personnel of the company is also considered a risk for the company. However, human resources development and management is one of the key priorities of the company. Over the past years, the company has recruited employees and managements in rapid growth departments and provides continuous training and development to existing employees. More importantly, the company has implemented a 3-layer succession plan from President and Chief Executive Officer down to Vice president level which supervised by the Management Development and Compensation Committee (“MDC”) and Executive Vice President of each department respectively. In addition, with a professionally run structure, the company operates under an efficient system and do not rely on sole capability or decision-making of a single individual. Authority has been decentralized to various level employees under the supervision of the Board of Directors. These structures of management will help reduce risk from loss of key personnel. In addition, key corporate cultures including “Team spirit” and “With integrity”, will also attract capable professionals with integrity to join the company. Lastly, competitive compensation and benefits, bonus scheme which links to corporate strategy map as well as long term stock option plan for executive management and employees also creates commitment and loyalty to employees which will help them to work more efficiently. This compensation structure will also help to retain quality employees with the company.
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Good Corporate Governance Award The Erawan Group Public Company Limited
Year 2011 • “Excellent” • “Excellent” AGM Assessments Program Project: AGM Assessments Program 2011 • “Excellent” CGR Report 2011 Project: Corporate Governance Report of Thai Listed Companies • Nomination to “Excellent CSR Awards 2011” Project: SET Awards 2011
Excellent CGR Report 2009 - 2011
Year 2005-2010 • “2nd Quartile Year 2005” (Top rating = 1st Quartile), Project: Corporate Governance Report of Thai Listed Companies • “good” AGM Assessments Program, Project: AGM Assessments Program 2006 • “very good” CGR Report 2006, Project: Corporate Governance Report of Thai Listed Companies • “very good” AGM Assessments Program, Project: AGM Assessments Program 2007 • Board of the Year for Distinctive Practices 2006/2007, Project: Board of the Year Awards 2006 • “very good” CGR Report 2008, Project: Corporate Governance Report of Thai Listed Companies • “Excellent” AGM Assessments Program, Project: AGM Assessments Program 2008 • “Excellent” CGR Report 2009, Project: Corporate Governance Report of Thai Listed Companies • “Excellent” AGM Assessments Program, Project: AGM Assessments Program 2009 • 1 in 3 Nomination to “IR Excellent” Awards 2009, Project: SET Awards 2009 • “Excellent recognized as Good Example” AGM Assessments Program, Project: AGM Assessments Program 2010 • “Excellent” CGR Report 2010, Project: Corporate Governance Report of Thai Listed Companies • “Excellent” IR Awards 2010, Project: SET Awards 2010 • Nomination to “Excellent CSR Awards 2010”, Project: SET Awards 2010
48 Good Coporate Governance Award
Corporate Governance Policy The Erawan Group Public Company Limited
The Erawan Group Plc. (ERW) is managed on the principle of good corporate governance. The business is run in compliance with the laws and on the basis of the Business Code of Conduct where information is disclosed in a transparent and straightforward manner. We have also put in place efficient auditing mechanisms. We operate our business by taking into consideration our responsibility in every aspect to shareholders and stakeholders, the structure of our Board of Directors, supervision mechanisms and efficient management responsibility. Aside from complying with the OCED’s best practices, we also implement other best practices normally practiced overseas; for example, The Erawan Group have set up four sub-committees to help supervising each task or the fact that our board consists of as much as 46 percent of Independent Directors out of the entire board. With regard to corporate governance, The Erawan Group has set up the Nominating and Corporate Governance Committee (NCG) to regularly review and update corporate governance policies and practices so the company will continue to have up-to-date criteria that it can be actually implemented. To comply with the policy, the Chief Executive Officer and President has been directed to promote corporate governance among staff of all levels. The President requires the Code of Conduct be made for employees of all levels as a clear guideline for practices under the corporate governance policy. Two Town Hall meetings a year are held to promote understanding in this subject matter. Besides, we also aim to do our success with integrity, which is one of the four values set as our corporate culture. We also ensure that staff understands the concept of Social Corporate Responsibility (CSR) where business is run by properly taking into consideration the interest of all stakeholders whether they are customers, suppliers, shareholders, creditors, employees, the society or the environment. The Erawan Group regularly conducts an opinion survey of stakeholders. Results of the survey are used to improve business efficiency and to be one of the factors evaluating our staff performances annually.
How we started our CSR? It started at the corporate leader who had the right understanding of the CSR framework. The CSR core is to be responsible in one’s own duty and to treat all stakeholders whether they are shareholders, employees, their families, customers, creditors, suppliers, competitors, government, the society and industrial counterparts with respect and sincerity. Today, when people heard about CSR, they tend to think of corporate activities held for the benefit of the community, society and the environment. This can be donations for various forms of campaigns to sponsoring a sports event to building schools to the less fortunate students or even promoting the use of green products. In short, any social project aims to return something good to the society we live in is considered a CSR project. While this is right, this aspect of CSR is only a minor part of the overall CSR activity. Beyond this activity is the fact that for a company to set up a policy, work plan or strategy, it must take into consideration direct and indirect effects to other stakeholders and the company must not focus at shareholders’ profits alone and only. In short, the Board of Directors must come up with a policy that achieves a right balance of corporate social responsibility to everyone and this policy must function not only during a good time when the business enjoys profits but also when the company confronts the crisis. At ERAWAN, we believe that CSR is our path to sustainable success. The reason is because CSR is a key factor that makes our organization accepted by all stakeholders and it’s something that makes them want to 50 Corporate Governance Policy
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F associate with us. For example, to retain good staff, The Erawan Group must start first by making them happy to come to work. Likewise, customers must be satisfied and wish to come back for our service times after time. Suppliers are glad to deal with us due to the way we do our business frankly while our decisions are made on the basis of facts and not the kickbacks or anything along that line. Minor and major shareholders are confident that they will get access to equal and direct information during the good and bad business time. Creditors are confident in the transparency of the information they receive from us as well as The Erawan Group accountability for debt payment, legal compliance as well as accurate tax record and payment. If every organization is able to take a good care of all stakeholders, the society and the economy will benefit as a whole. As such, one can see that social contribution projects are only a small part of the CSR. The organization will not achieve CSR if it continues to take advantage of other stakeholders. At ERAWAN we have committed to the CSR concept for more than six years. We started first by making sure that there was a right understanding of the issue in our organization. One of our questions was how everyone can naturally incorporate CSR in their daily life without taking so much effort. Thatâ&#x20AC;&#x2122;s why we made it one of our four the Erawan mottos considered our DNA. In addition, an important factor of our corporate strategy is to take into consideration the satisfaction of all stakeholders when interacting with us and this very factor became one of the criteria to evaluate our staff during the Balance Score Card process, which results in the overall assessment of everyoneâ&#x20AC;&#x2122;s performance in the organization. Creating awareness and accountability for all stakeholders is a time-consuming process and cannot be forced to happen overnight. Only when everyone in the organization witnesses by his own that something good out of his practice actually happens to the organization, then, he will be confident and feel like pursuing it. Only then that everyone will communicate on the same basis. We are confident and committed to this path as we believe that itâ&#x20AC;&#x2122;s the right path although the result cannot be felt in the short term. The end result is not merely an accolade or an award but it must really exist and can be felt by everyone in the organization. Those interacting with us can feel it by their heart without any publicity because in the end, all stakeholders who feel good after interacting with us will be the best and most effective publicity vehicle in the whole world to tell the rest who we really are.
Social and environmental projects in 2011 Despite various problems Thailand faced during the past few years which forced us to confront with a series of unexpected crises, we continue to carry out our corporate activities for communities and the society. As the Company sets to spend 0.5 percent of our net profit for corporate contributions, which is not much in monetary term, we intend to maximize our corporate projects, which could be carried out on an ongoing basis and are measurable, to answer most to the needs of relevant communities. We encourage staff, their families and the public to participate in our activities as a good citizen of the society. Most important of all, our social activities are not part of a publicity campaign. In our view, corporate contributions are what we do and expect nothing in return. Giving back to the society within our means is what we want to do despite the crisis. Of all corporate contribution activities, we divide them in four groups as follows. Corporate Governance Policy
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1. Tourism-related activities 1.1 The Welcome Guide to Thailand: The project has taught English to taxi drivers without charge since 2008. So far, we have organized 10 classes and trained 295 taxi drivers. Aimed to enhance Englishspeaking skills to taxi drivers, the project has been well-received and more classes have been requested. In 2011, three classes were held and one was organized at ibis Bangkok Riverside hotel. For the remaining 2 times, the Company currently collaborates with AOT Public Company Limited, who operates national airports, to hold English classes to taxi drivers of the International Suvarnabhumi Airport. The training was organized at the airport’s fire station. 1.2 Traditional gift to celebrate the Thai New Year: To continue the tradition of the Thai New Year, in 2011, we came up with a corporate gift with meaningful messages distributed to our corporate customers when we sought their blessings on this auspicious occasion. 2. Community activities 2.1 The Erawan Group for Flood Victims Project: As Thailand suffered the country’s worst flood in its 50-year history, we provided money and necessary items through various channels. Details are as follows. • Assistance to our staff: we provided temporary shelters without charge for staff whose homes were under water. They were later given money to help renovating their homes and resume their life. • The public: The Company offered hotel rooms to the public at a special rate during flood until the situation returned to normal. • Cash donation: We donated Baht 500,000 via the Association of Listed Companies’s flood victim assistance project • Cash and Food box donation: The Erawan Group donated 620,000 Baht to “Krob Krua Kao” Channel 3 to assist with flood relief operation. The donation included 200,000 Baht cash and 420,000 Baht worth of 14,000 food boxes. The company daily delivered 500 food boxes to the news station for 28 days during 3-30 November, 2012 • Survival kit donation: The Company distributed survival kits to the Sakae Temple Community, Ayutthaya Province, through the Support Service Department of the Royal Thai Army; and the Ladkrabang Community through the Ladkrabang District Office. • One-to-One assistance: The Erawan Group offered a tricycle for Ms. Son Daengsa-ard to help her start making a living again. We also financed construction materials for Mr. Sukchai Pansapsan of Wangnoi District, Ayutthaya Province to repair his home. The two were selected by TV Burapha Co., Ltd, who picked them from various flood victim candidates for their unique dedications to other community members although they, too, suffered from the flood. • Participation in the Beautiful Thailand Project: On December 4, 2011, we participated in the Beautiful Thailand project held by the Tourism Authority of Thailand (TAT) at Ayutthaya Province to restore the old capital suffering vast damage from the flood.
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2.2 The Nice & Neat Surrounding Project: In 2011-2012, together with other businesses in Rachaprasong area and the Pathumwan District Office, we renovated and will continue to renovate a traffic island section from Rachaprasong Road to the Chidlom Intersection. The project, which is designed to keep our neighborhood clean and beautiful, is currently ongoing. 2.3 The Love Charity Project: Set to provide education opportunities for needy children, the project built a library for the Ban Koh Naka School, the only school on the Naka Yai Island, Phuket Province, in 2011. Children now get access to books and computers from the library. 3. Energy-saving and environmental projects 3.1 The Trash for Egg Project: To promote waste recycling, we have collaborated with Recycle Wongpanich Group Co., Ltd. to buy recycled waste at the Pleonchit Center Building. The waste came from our staff, customers, suppliers and the public frequenting the building who exchanged their trash for eggs. The objective is to reduce the amount of garbage while promoting effective use of resource. So far, the project has been warmly received as the volume of recycled trash has significantly increased that we currently sell approximately one ton of recycled trash a month from once every two months a while ago. We also increase recycled waste drop-off locations inside the building and educate the public how to better separate waste. 3.2 The Erawan Letâ&#x20AC;&#x2122;s Green Project is to educate staff and tenants of the Ploenchit Center Building how to effectively separate and recycle waste through a training hosted by Dr Somthai Wongcharoen, Chairman of Recycle Wongpanich Group Co., Ltd. 4. The Thai Elephant Conservation Project To prevent the Thai elephants, our symbolic and beloved animal, from extinction, The Erawan Group has sponsored the project since 2005 through various forms. Between 2010-2011, together with the Return Elephants to the Nature Foundation, we planted trees and built small reservoirs at the Sub Langka Wildlife Sanctuary, Lopburi Province. The activity, which continued for two consecutive years, aimed to create an abundant habitat for elephants. The project was overwhelming participated by our staff, their family members, taxi drivers who attended the Welcome Guide to Thailand Project and other volunteers. All activities mentioned above were carried out with transparency. They were monitored and measured for possibilities to enhance their efficiency. What staff and participants got from these projects was getting awareness in this subject. While we intended to do our best in these activities, there was room to improve. So far, a unit, which reports directly to the Chief Executive Officer and President, has been set up to monitor and coordinate these projects for everyoneâ&#x20AC;&#x2122;s benefit.
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Corporate Contributions We believe that our staff has a public mind and that’s why mobilizing participation from our staff is not difficult. We offer an opportunity for staff to express ideas, propose a project either of their interest or viable under our policy framework, participate in an activity on a voluntary basis and solicit participation from the wider public. The activity should not be limited to our staff but rather open to all stakeholders. Everyone is doing this because we are happy to do it together. While this commitment is beautiful, the very important thing is how to induce all stakeholders to participate in this corporate contribution projects.
Good Corporate Governance can be divided into nine areas as follows: 1. Code of Conduct We have announced a policy to conduct our business based on the principles of good corporate governance. In 2005, we combined the best practices and the Code of Conduct, which not only were in line with our corporate strategy, but were also practicable, into our Code of Conduct manual. The manual was updated in 2008, which was indeed a significant move based on our motto of “Success with Integrity”. The updated Code of Conduct has been distributed to executive officers and staff for implementation to ensure our success with integrity and also to promote our corporate culture and ethical performances. Our Code of Conduct is now posted in our website at http://www.TheErawan.com, a mechanism to ensure that our executive officers and staff commit to their responsibilities to all stakeholders, communities, the society and the environment. 2. Qualifications, Structure, Duties and Responsibilities of the Board and the Management Not only qualifications of our directors are in line with the SET’s requirements but they are also much more intensive. Director’s term of office is three years each term with clear scopes of work and with power being balanced between non-executive directors. Half of the Board’s entire members are independent non-executive directors. The Board consists of Chairman of the Board, who is an independent Director and different person from the Chief Executive Officer where their roles, authority and responsibilities are clearly separated to maintain balance between managing and supervising the company. In addition, there are five other independent directors, five non-executive directors and two executive directors (Chief Executive Officer and President). The total number is 13. The Board has appointed four different committees in a move to clearly define duties and responsibilities. The Board also has a policy to promote rotation among directors to sit at different committees for appropriate timeframe and on appropriate occasions. Chairman of a committee has a duty to submit a clear-cut policy of his committee to the Board. Every committee must appoint a secretary, who will coordinate with directors and the Management to ensure that the policy is translated into action. In addition, the secretary must also record minutes of meeting in writing. The committees include the following: The Audit Committee (AC): The entire Audit Committee consists of independent Directors and at least three members, who must have adequate accounting knowledge to be responsible for auditing the company’s financial statements and its internal control system and to monitor the company’s risk management practices on a regular basis. In addition, the Audit Committee will also review the independence of the company’s Internal Audit Unit; approve appointment, transfer or termination of supervisor who works as its secretary; review legal compliance; 54 Corporate Governance Policy
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select, appoint and propose an auditor and auditor’s fees and review the auditing and disclose information about connected transactions to meet the criteria in an accurate and transparent manner. The Investment Committee (IC) (Name change from Financial and Risk Management Committee (FRC)): This Committee consists of no fewer than seven directors and is responsible for supervising and managing policies, plans and investment projects approved by the Board. The Committee also ensures that the firm has a systematic, distinct and effective risk management system. The Nominating and Corporate Governance Committee (NCG): This Committee consists of no fewer than four members. Its chairman shall be an independent non-executive director while the remaining two members are non-executive directors. The Committee is responsible for reviewing the structure of the Board, setting qualifications of a particular position, reviewing and recruiting experts to become our directors as well as assessing the Board’s performances and other committees appointed by the Board. The Nominating and Corporate Governance Committee also sees that directors, executive officers and staff of all levels comply with the Good Corporate Governance practices and Code of Conduct. The Management Development and Compensation Committee (MDC): The Committee, consisting of no fewer than four non-executive directors, is responsible for proposing development policies, assessing knowledge and skills of and compensations to new President and Chief Executive Officer, writing a senior management succession plan and reviewing the company’s HR development policy. The Board also appoints the company’s Secretary to perform duties as stipulated by the Securities and Exchange Act, No. 4, B.E. 2551 and/or other relevant legislations. The Secretary also monitors and coordinates with the Board, the Management and related internal and external parties. 3. Qualification of Directors Principles: The Board of Directors should consist of members with a variety of knowledge and experiences, whether it is in finance, economy, management, business administration, marketing and service, tourism and law. The idea is to ensure that together, they can formulate a right policy for the development of hotel and resort business while having specialized skills, ability to see things in a big picture and enough independence to audit the Management in a balancing manner. The Board of Directors has two significant roles; namely, supporting the Management on the basis of the Good Corporate Governance and formulate a strategy to achieve our business goals. General Qualifications: 1. Director should possess a variety of knowledge and experiences while being a professional with an ethical mind. 2. Director should fully understand his obligations and practices with a commitment to create long-term values to the business and shareholders. 3. Director should have enough time to perform his duties effectively. 4. Director should be able to assess himself and is ready to notify the Board of Directors upon change or if there is anything that prevents him from performing his job effectively. Corporate Governance Policy
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Director’s Term of Office and Retirement Criteria 1. Director shall be in office three years each term. The Board may nominate a director for shareholders to re-elect him/her after his term ends by reviewing his performances on an annual basis. The term of a committee’s member is also three years each term. 2. Director shall retire when he/she is fully 75 years old effective from the day following the Annual General Meeting of Shareholders. The calculation will start after the day the director is fully 75 years old. Specific Qualifications: Chairman of the Board of Directors: aside from the duties mentioned above, Chairman will have extra duties; namely, (1) acting as chairman of the Board of Directors’ meeting; (2) exercising a casting vote in case of tie at the Board of Directors’ meeting; (3) calling for the meeting of the Board of Directors; and (4) acting as chairman of the Shareholders’ Meeting. As a result, qualifications of the Chairman will be slightly different from those of other directors as follows: • Chairman must be Non-Executive Director (NED). • Chairman must not be involved in a day-to-day management, be an auditor, or others such as a legal consultant; nor shall he be employee, staff, advisor receiving monthly salary or a person with controlling power of the company, affiliated company, associated company, auditing company, or be a person who may have conflict of interest without having to have interest or stakes in such manner. Executive Director • Director who is also Chief Executive Officer (CEO) is advised not to become director in more than three other listed companies. Independent Director • Independent Director shall hold less than 1 percent of the total shares with voting rights in a company, its affiliated company, associated company or any other person with possible conflicts of interest (including shares held by related persons). • Independent Director must not be involved in the management and is currently not being and has never been employee, staff, advisor enjoying monthly income or person with controlling power of the company, its affiliated company, associated company and auditing company; nor shall he be a person with conflict of interest without having to have any interest or stake in such manner for no less than two years. • An Independent Director shall have neither blood nor registered relationship as a father, mother, spouse, sibling and children including spouse of children of executive officers, major shareholders, persons with controlling authority or anyone to be nominated as an executive officer or a person with controlling power of the company or its subsidiary. • An Independent Director shall have no business relationship with the company during the previous two years. Details are as follows: - No relationship as a provider of professional service including being an auditor (in any case), or of other professions such as being a legal consultant, a financial advisor or an asset appraiser with an annual transaction value exceeding Baht 2 million. - A business and trade relationship including normal transactions, renting or leasing of property, transactions relating to assets and services and giving or getting financial assistance with a transaction value from Baht 20 million or 3 percent of the Company’s NTA, whichever is lower. This however shall include values of all retroactive transactions during at least the six previous months prior to the latest transaction. 56 Corporate Governance Policy
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• An Independent Director shall possess no other characteristic that prevents him/her from expressing his opinion independently. • Independent Director must attend at least one of the following courses held by the Thai Institute of Directors (IOD); namely, Directors Certification Program (DCP) or Directors Accreditation Program (DAP) or Audit Committee Program (ACP) Member of the Audit Committee • He/she shall be an Independent Director appointed by the Board or Shareholders. • He/she shall not be a director entrusted by the Board to make any decision with regard to a business of the company, its parent company, subsidiary, affiliate, subsidiary of the same level or other entities that may have a conflict of interest. • His duties must not be fewer than what is stipulated by the SET. Transactions with Possible Effects to Independence • Being authorized to approve transactions or signing to bind the Company, to exempt collective decision. • Attending a meeting or voting in a matter he has an interest or a conflict of interest therein. Prohibited Characteristics Directors and executive officers must possess no qualifications that are conflicting with the company’s requirements and announcements made by the SEC and the SET. Additional information can be read in the company’s website. 4. Rules and Responsibility of the Board of Directors and the Management The Board of Directors determines policies and practices for the management, which include important tasks of an executive. In addition, the Board also allows the management to formulate a management policy based on the Company’s objectives and missions, which will be subject to the Board’s approval. The Board of Directors also sets to have its Independent Directors meeting every year so that all directors meet the management. 5. Board of Directors’ Meeting The company sets the number of the Board’s meetings and the meetings of its committees by scheduling them and letting directors and relevant parties know about them in advance throughout the year. Independent directors’ meeting was held on November 29, 2011 prior to the Board of Directors’ Meeting No. 7/2554 to allow them to freelyexchange their viewpoints. In addition, the Board convened its No.8/2554 meeting on December 20, 2011 without the presence of Chief Executive Officer, who was the highest management officer, to discuss operation performances and annual budget. In 2011, the Company organized 8 Board of Directors’ meeting, 4 Audit Committee’s meetings, 6 Financial and Risk Management Committee’s meetings (name changed to the Investment Committee), 2 Nominating and Corporate Governance Committee’s meetings and 2 Management Development and Compensation Committee’s meetings. Minutes of meeting were recorded in writing at each and every meeting and kept at the Office of Secretary and on a data server so that officers can conveniently access the database. Details of meeting attendance of directors are in the following table:
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58 Corporate Governance Policy
Director Chief Executive Officer President
12. Mr. Gavin Vongkusolkit** 13. Mr. Kasama Punyagupta
14. Mrs. Kamonwan Wipulakorn
Remafk
Chairman Independent director Independent director Independent director Independent director Independent director Director Director Director Director Director
1. Mr. Prakit Pradipasen 2. Mr. Sansern Wongcha-um 3. Assoc. Prof. Manop Bongsadadt 4. Mr. Dej Bulsuk 5. Mr. Banyong Bongpanich 6. Mr. Ekasith Jotikasthira 7. Mr. Vitoon Vongkusolkit 8. Mr. Supol Wattanavekin 9. Mr. Chanin Vongkusolkit 10. Mrs. Panida Thepkanjana 11. Mr. Krisda Monthienvichienchai**
Apr. 2011 – 2014
Dec. 2011 – 2013 Apr. 2011 – 2014
Apr. 2009 – 2012* Apr. 2009 – 2012* Apr. 2009 – 2012* Apr. 2009 – 2012* Apr. 2010 – 2013 Apr. 2011 – 2014 Apr. 2011 – 2014 Apr. 2010 – 2013 Apr. 2010 – 2013 Apr. 2011 – 2014 Apr. 2010 – 2013
Term
90%
5/5
1/1 7/8
7/8 7/8 8/8 7/8 6/8 6/8 8/8 8/8 6/8 8/8 6/7
92%
-
-
4/4 4/4 3/4 -
86%
-
6/6
4/6 6/6 5/6 5/6 5/6 -
100%
-
-
2/2 2/2 2/2 -
100%
-
-
2/2 1/1 2/2 2/2 -
Times of attendance/Number of Total attendance Investment Nominating Management Committee and Development Board of Audit (Financial Corporate and Directors Committee and Risk Governance Compensation Management Committee Committee Committee)
* To propose the Annual General Meeting of Shareholders on Tuesday 24th April 2012, to reappoint 4 directors who retire by rotation to succeed for another term. ** On 29th November 2011, Mr. Krisda Monthienvichienchai an authorized director resigned from the director of the Board and the Board appointed Mr. Gavin Vongkusolkit as the new director effective on 1st December 2011.
percent of directors’ attended
Title
Name
Times of Attendance 2011
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6. Evaluation of the Boardâ&#x20AC;&#x2122;s Performances We evaluate performances of our Board annually. Twelve directors conduct a self-evaluation and an evaluation of the entire board independently before sending evaluation results to the Nominating and Corporate Governance Committee for further assessment. Evaluation results are used to improve and develop directors and work processes according to the guidelines recommended by the SET and Institute of Thai Directors. Based on such evaluation, 82 percent of assessors agreed that the structure and components of directors were appropriate and that there were enough independent directors to achieve a balanced power. 84 percent agreed that the Board understood its independence in making decisions without being influenced by anyone. Meanwhile, 84 percent agreed that matters regarding the number of meetings, acknowledgement when the meeting would be held and the getting of documents in advance was getting much better than before. 82 percent agreed that every director shall bear the fiduciary duties of overseeing the management of the company that it operates in the best interests of the shareholders, for whom the director is responsible. 81 percent agreed that there was a good relationship with the Management Team and directors could directly discuss with the President and Chief Executive Officer. 79 percent agreed about better self-development among directors, better understanding about business and their duties and responsibilities. Details are in the following:
82%
84%
84%
82%
81%
79%
BOD Structure & Component
Rule duties & Responsibility
BODâ&#x20AC;&#x2122;s Meeting
Director Fiduciary Duty
Relations with Executive Management
Directorsâ&#x20AC;&#x2122; improvement & Management Development
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7. Nomination of Directors and Executives The Board entrusts the Nominating and Corporate Governance Committee to draft a clear nomination policy and process for directors. This refers to a process to initially check a nominee’s qualifications to ensure that his are in compliance with director’s qualifications; a selection and courting process of a nominee to be our director; a nomination process to the Board or shareholders and a reviewing process of director being re-nominated. An individual evaluation of a director’s performances while in the office will be used to support the consideration. Furthermore, the selection was independently conducted without being subject to anyone’s influence. The President and Chief Executive Officer conducted a two-hour orientation session and arranged for a management team to meet the new director so that he learned about the company, got access to corporate information and strategic plans. The Board designated the Management Development and Compensation Committee to recruit and formulate a succession plan of executives; namely, President and Chief Executive Officer, to ensure continued performances and to avoid business disruption. 8. Remunerations of the Board of Directors and Management The Board entrusts several committees to formulate a compensation plan for directors, executives and staff as follows: The Nominating and Corporate Governance Committee has a duty to formulate a compensation policy of directors where it is to review the soundness of compensations being paid on an annual basis on the basis of directors’ scopes of duties as well as their roles and responsibilities and the Company’s financial status and operation results vis-à-vis others in a similar business enjoying the same amount of revenues. Compensations will be paid in two types: meeting allowances (retainer fees or attendance fees) and bonuses. Director entrusted as a committee’s member shall receive additional compensations based on his additional responsibilities and this will be submitted to the Annual General Meeting of Shareholders for approval on an annual basis. The Management Development and Compensation Committee evaluates performances of President and Chief Executive Officer based on four aspects; namely, finance, customer satisfaction, internal process and HR and corporate development, as part of a review of his compensation and annual compensation. Together with President and Chief Executive Officer, the Committee formulates a policy to pay executives and Staffs based on the nature of their work. The President and Chief Executive Officer reviews annual compensations of executives based on a formulated policy through two evaluation processes; namely, (1) Balance Score Card (BSC) evaluation, which reviews strategic significances of each department vis-à-vis corporate strategy through a linkage that will eventually trigger corporate-level strategies to lower levels; namely, from corporate strategy, to departmental and section strategies;
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and (2) Competency Skill Behavior (CSB) evaluation, where behaviors that support corporate culture will be evaluated. Supervisors will evaluate each individual. Some of the evaluation will be based upon the company’s policies; others upon something else, depending on criteria set by department supervisors. To ensure effective evaluation and to access information from co-workers of various levels, the assessment is conducted from every direction. In this regard, supervisors will evaluate their supervisees and vice versa. In addition, staff of all levels is encouraged to conduct a self-evaluation. Results of both BSC and CSB evaluations are used to allocate the company’s overall returns to departments, sections and units. Remunerations in cash for the year ending 31st December 2011 totaled Baht 36,547,295.45: 1. Remunerations of directors of the Company’s Board of Directors and Committees totaled Baht 4,461,250.00 2. Remunerations of directors of the Company’s subsidiary totaled Baht 1,575,000.00 3. Remunerations, which were total wages of the nine (9) executives paid by the Company and its subsidiaries, totaled Baht 29,490,519.53 4. Provident fund of the executives under item 3 above totaled Baht 1,020,525.92
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160,000 3,100,000
Director Chief Executive Officer
President Total
12. Mr. Gavin Vongkusolkit* 13. Mr. Kasama Punyagupta
62 Remunerations of the Board of Directors and the Committees
14. Mrs. Kamonwan Wipulakorn
240,000
-
-
100,000 80,000 60,000 -
Audit Committee
Do not get paid as Executive Do not get paid as Executive 960,000
75,000
-
-
86,250
-
-
4,461,250
160,000
20,000 240,000
Remark: * On 29th November 2011, Mr. Krisda Monthienvichienchai an authorized director resigned from the director of the Board and the Board appointed Mr. Gavin Vongkusolkit as the new director effective on 1st December 2011.
20,000 240,000
300,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 220,000
Chairman Independent director Independent director Independent director Independent director Independent director Director Director Director Director Director
1. Mr. Prakit Pradipasen 2. Mr. Sansern Wongcha-um 3. Assoc. Prof. Manop Bongsadadt 4. Mr. Dej Bulsuk 5. Mr. Banyong Pongpanich 6. Mr. Ekasith Jotikasthira 7. Mr. Vitoon Vongkusolkit 8. Mr. Supol Wattanavekin 9. Mr. Chanin Vongkusolkit 10. Mrs. Panida Thepkanjana 11. Mr. Krisda Monthienvichienchai*
Board of Directors
Title
Name
Investment Nominating Management Committee Total (Financial and Corporate Development and (Baht/year) and Risk Governance Compensation Management Committee Committee Committee) 30,000 330,000 340,000 320,000 300,000 180,000 22,500 442,500 11,250 251,250 240,000 22,500 502,500 30,000 450,000 180,000 442,500 180,000 22,500 442,500 180,000 22,500 220,000
Compensation in cash for member of the Committee
Remunerations in cash for the year ending 31st December 2011
Remunerations for the Board of Directors and the committees in the year ending 31st December 2011
The Erawan Group Public Company Limited
Corporate Social Responsibility (CSR)
SUCCESS WITH INTEGRITY
The Erawan Group Public Company Limited
9. Corporate Social Responsibility (CSR) Corporate Social Responsibility, shortly called CSR, is one of the Erawan Plc.’s major business strategies. We truly believe that CSR will guide our business while let us be accountable to shareholders, staff, suppliers, creditors, the society, the environment and neighboring communities where our properties are located. To ensure that everyone here understands the same thing, we have determined CSR guidelines and principles for those involved as follows. Duties and Responsibilities of the Board to Shareholder The Board of Directors takes into consideration shareholders’ rights without limiting only to their fundamental rights as stipulated by laws. This refers to their rights to trade or transfer shares, to share the company’s profits, to adequately receive the company’s information, to attend meetings to vote at shareholders’ meeting in order to either appoint or remove directors and to appoint auditors and discuss important matters affecting the company. In this regards, important matters can range from allocating dividends to formulating or amending rules and regulations and the Memorandum of Association, increasing or reducing capital and approving special transactions. The Board of Directors also supervises to ensure that meeting’s time, date, place and meeting agendas are given to shareholders; that relevant documents and information required for making decisions at a meeting are available to shareholders, that shareholders are notified of applicable rules at the meeting, that voting procedures are not too complicated and that a meeting location is convenient and not expensive for shareholders to attend the meeting. The Board of Directors has allowed shareholders to propose agendas of the Annual General Meeting of Shareholders in advance prior to the meeting date. Clear rules and regulations in doing so have been posted in the company’s website to facilitate shareholders. Shareholders may submit a document to propose potential meeting agendas by January 31 of every year. The Board encourages shareholders to use Proxy Form B so that shareholders can determine a voting direction as there are names and information of six Independent Directors who can be alternative proxy for shareholders. In addition, the information must be posted in the Company’s website at least 30 days prior to the meeting. Documents must also be sent to shareholders in advance enough for them to study prior to the meeting. During the Meeting, the Company treats every procedure equally. No agendas are shortened, deleted or alternated. This is especially the case of an agenda to appoint directors where shareholders are entitled to vote for directors individually upon enough information. All ballots featuring yes, no and abstention votes are duly kept as evidence. At every the shareholders’ meeting, Chairman of the Board, Chairman of the Committees, Directors, Chief Executive Officer, President and Chief Financial Officer (CFO) attend the meeting to allow shareholders to express their views and ask questions about relevant matters to the meeting. During the past 5 years (2007-2011), the entire Board attended the meeting to allow shareholders to ask questions in an adequate fashion, which however did not delay the meeting. In addition, Q&A sessions, resolutions adopted at the meeting and votes received at each agenda were properly recorded in writing in the Company’s minutes of meeting and posted at the Company’s website within 14 days from the shareholders’ meeting date. Aside from the Board’s responsibilities to shareholders as mentioned above, the Board also formulates a Corporate Social Responsibility policy, which includes responsibilities to shareholders as follows. Corporate Social Responsibility
63
Responsibilities to Shareholders 1. To manage the Company in a way that will turn it into a quality corporation committed to integrity while creating sustainable strength and growth for shareholders in the long run. 2. To perform our job with thorough care and competency as a business may do under the same situation. 3. To perform our duty with integrity and to fairly treat both major and minor shareholders for the benefit of all relevant parties. 4. To manage the Company’s properties in a manner that avoids their depreciation. 5. To report the Company’s status and operation results regularly, accurately and completely based on existing facts. 6. To prevent the Company’s confidential information from being improperly disclosed to the third party. 7. To avoid doing anything that may lead to a conflict of interest against the Company without any advanced notice. 8. To respect the rights and to equally treat all shareholders, whether they are executive or non-executive shareholders, and foreign shareholders. Responsibility to Investor Relations The Erawan Group Plc. sets up the Investor Relations (IR) Department as a center to provide complete company information to retail and institutional investors, shareholders, analysts and the public sector. Contacts can be made directly at the Company’s office or visit us at www.TheErawan.com. Inquiries can also be made through IR@TheErawan.com. We conduct an Investor Relations IR Survey to gauge satisfaction in relation to our information disclosure at least once a year. In 2011, we conducted the survey by distributing questionnaires to analysts at the Quarterly Meeting held in November 2011, and also the last meeting of the year. All respondents were within a target group. More than 50 percent of the respondents had monitored our information for no less than 3 years. 85.11 percent of the respondents said they were satisfied with the information. Responsibility of the right to access information of stakeholders We give all stakeholders an access to information. We also determine guidelines and practices for our executive officers and staff to encourage their fair and equal interactions with all stakeholders. We also allow stakeholders to directly contact the Board, the Audit Committee and the Nominating and Corporate Governance Committee for their valuable suggestions that will not only benefit but also add more values to our management at our office, No. 2, Ploenchit Center Building, 6th Floor, Sukhumvit Road, Klongtoey District, Bangkok; or at the Office of Corporate Governance, email: GCG@TheErawan.com. All information is treated confidential and will be directly forwarded to the Board.
64 Corporate Social Responsibility
SUCCESS WITH INTEGRITY
Responsibilities to Employees 1. To determine an appropriate structure of remunerations in line with market rates, staff’s competency and responsibilities and their work performances through three levels of strategic assessments; namely, corporate strategy, department strategy and division strategy. The Competency Skill Behavior Assessment will be carried out in a 360-degree manner where supervisor will assess supervisees and vice versa and where everyone will have a self-evaluation at all levels. 2. To provide appropriate welfare and other benefits such as accident insurance to staff and executives working out of the office, health insurance and allowances for healthcare services as an out-patient, annual health check-up and coffee & tea corner for staff. 3. To ensure staff’s Understanding about their professional roles and responsibilities as well as their career goals, to provide an opportunity for staff to grow professionally and to acknowledge and recognize staff’s work. 4. Award and punishment will be conducted based on the concept of right and wrong and with integrity. 5. To ensure workplace safety, health and sanitation. 6. To have a clear and efficient working system that allows staff to exercise their knowledge and competency while supporting their knowledge enhancement and recognizing their participation role. 7. To promote the Code of Conduct to staff to help them duly understand and fully comply with the Code. 8. To comply with all the rules and regulations relating to labor laws and staff welfare. 9. To avoid action considered unfair and illegitimate that may affect staff’s advancement and job security while respecting an individual’s rights. Responsibilities to Customers 1. To set up a pricing policy considered fair and appropriate. 2. To treat all business deals equally without treating anyone more favorably where every deal is considered conducted on an arm’s length basis. 3. To procure and improve the procurement process considered appropriate and meeting business conditions. 4. To execute a fair contract with customers. (without depriving a customer of his benefits) 5. To disclose related and beneficial information accurately, completely and in time without any distortion. 6. To keep customer’s confidential information secret as if it is the Company’s own information and not using it for the Company’s own benefit. 7. Not demanding, receiving from or not giving any illicit profit to customers.
Corporate Social Responsibility
65
Responsibilities to Suppliers and Creditors 1. To offer a fair competition environment where the procurement and hiring process of goods and services is carried out properly, transparently and efficiently. This will include finalizing price negotiations, making quotations, bidding methods, special methods and procurement methods for government agencies and state enterprises. Questionnaire will be regularly issued to ask for opinions about the Company’s bid participation in order to regularly improve its procurement and hiring process of goods and services. 2. Avoid specify a particular product or choosing a particular product intentionally unless otherwise there is an enough reason to do so. In case of change of products or specifications of the product, suppliers must be informed. If necessary, a new price quotation must be submitted. An original supplier must be given an opportunity to equally offer his quotation. 3. Choose a quality supplier who is really interested in doing the job. Avoid inviting suppliers just to have enough participating suppliers as stated in a regulation. All bidders are to receive the same written details, information and conditions. If notified verbally, they shall receive a written confirmation later. 4. Executives or staff involving in the procurement or hiring process must disclose information and/or their personal relationship as well as that of their spouses or closed relatives or a personal relationship with a particular bidder that may directly result in an opaqueness of their job. They shall also exercise their responsibility by not attending a decision-making process when a particular supplier is chosen. 5. Not demanding and receiving gifts, favors or treats unless otherwise on appropriate occasions; refrain from having a special relationship with suppliers so much so that others may believe it may lead to an unfair treatment especially if it makes other suppliers misunderstand, refuse to participate in quoting prices or spread ill words that damages the Company’s reputation. 6. To prepare a fair contract and to comply with an agreement executed with suppliers and creditors. In case the Company is unable to comply with its contract, negotiate with suppliers/creditors without delay to find a solution and to prevent further damage. 7. To refrain from doing anything that will prevent suppliers from paying tax to the state. 8. To disclose related and beneficial information accurately, completely and in time without distortion. Responsibilities to Social and Environment The Erawan Group formulates a clear-cut policy for social, community and environmental causes. It plans to implement “The Erawan Group for the Society and the Environment” project, to which the Board has already approved to allocate 0.5 percent of its annual net profit as a social contribution. Of the entire budget, 50 percent will be spent for the benefits of communities closed to the Company’s properties whereas the other 50 percent will be spent for the benefit of the society in general.
66 Corporate Social Responsibility
Internal Control
SUCCESS WITH INTEGRITY
The Erawan Group Public Company Limited
F In 2011, the Board of Directors convened eight times at which the Audit Committee attended every time to give opinions about an adequacy and soundness of the internal control system. The Audit Committee summarized and reported internal audit activities to the Board of Directors on February 28, 2012 and the Board of Directors expressed the same opinions as the Audit Committee in this matter, which can be summarized as follows:
1. Internal Control System and Internal Auditing The Audit Committee has direct responsibilities to supervise the company’s internal control system in every aspect, whether it is finance and accounting, legal compliance and compliance to relevant rules and regulations. The Audit Committee formulates auditing mechanisms to ensure effective balance of power. There is also the Internal Audit Department to audit performances of all departments based on a risk-based auditing plan and to offer advice on how to set up a good internal control system. The Audit Committee has duties to review auditing plans; to control and supervise the Internal Auditing Department’s independence; to approve appointment, transfer and termination of the Internal Auditing Department’s supervisor and to ensure that the Internal Auditing Department remains independent. The Committee must also make sure that the Department can perform its auditing functions and balance the existing power according to the prevailing standards. The Department is to directly report its auditing work to the Audit Committee at least once each quarter to ensure that the company’s internal control and internal auditing work is conducted in a thorough manner and will not damage shareholders. 2. Protection of Information One of our priorities is focused at the use of our internal information and the prevention of our directors and executives from using internal information for their benefit or the so-called abusing self-dealing. This applies specifically to internal information not yet disclosed to the public or information that may affect our corporate strategy, business, trade negotiations and share prices, which, if abused, not only means that our shareholders are taken advantage of but it can damage shareholders in general. That’s why we have set our Executives Ethic Standards as a practice with heavy penalties in case of violations or intended violation of the 10 practices stated in the Code of Conduct under the topic of “Executives Ethical Standards” We also allow different levels of staff to get access to different types of internal information based mainly on their responsibilities and duties. Disciplinary actions are stated in our Work Regulations under the topic of “Disciplinary Actions and Penalties.” For example, Clause 3.2 Re: Disciplines with regard to confidentiality and corporate profits prohibits employees to “seek inappropriate benefit from the company or others relating to the company. Employees are prohibited to conduct personal business or to work for others in an identical or similar business as the company’s although the work may be performed outside the company’s office hours”. With regard to disciplinary actions and punishment, the company will normally appoint a disciplinary action committee to conduct an investigation and to ensure fairness to accused staff.
Internal Control
67
3. Conflictflof interest The Erawan Group requires an approval from either the Audit Committee or the Board, as the case may be, when conducting a transaction that may cause a possible conflict of interest. In addition, details of transactions with possible conflict of interest during the past year and their values are disclosed while explanations and reasons for the transactions are clearly stated in the Annual Report. The Erawan Group requires its executive directors involving in the transaction to disclose the information and/or types of relationship not only of his own, but also of his spouse, closed relatives as well as personal relationship with any bidder for transparency purpose to the Office of the Corporate Governance. In addition, director shall abstain from voting and/or not be part of the decision-making process. Connected transactions are shown in the Notes to Financial Statements and connected transactions table. All transactions were reasonable and were considered normal transactions. They were conducted for the company’s ultimate benefit. Connected transaction had already been reviewed by the Audit Committee and/or the Board on an arm’s length basis that they were in compliance with our requirements and rules and regulations of the SEC and the SET and that they were not against accounting standards Re: Disclosure of information in relation to connected persons or transactions. In 2011 The Erawan Group has the other connected transaction in addition to the items mentioned above as follows. All transactions were reasonable and were normal transactions. • Mitr Phol Sugar Group of Companies Revenue from Hotel Operation Baht 4,535,370.63 Receivables at end of period Baht 1,003,442.02 • Banpu Plc. Group of Companies Revenue from Hotel Operation Baht 4,005,337.84 Receivables at end of period Baht 332,859.00 • Pacific World (Thailand) Ltd. Revenue from Hotel Operation Baht 4,305,437.52 Receivables at end of period Baht 651,500.00
68 Internal Control
Agreement to rent Ploenchit Center’s space, 3-year lease agreement. • Rental and services income • Receivables at end of period • Payables of rent deposits
3. Bualuang Securities Public Company Limited
Type of business: Other financial intermediation Nature of relationship: • Mr. Sansern Wongcha-um, Indepentdent director, is Chairman of the Board of Bualuang Securities Public Company Limited
2,153,757.60 19,350.95 497,174.40
45,131,880.54 1,209,192.21 9,037,920.83
Agreement to rent Ploenchit Center’s space, 3-year lease agreement. • Rental and services income • Receivables at end of period • Payables of rent deposits
2. Mitr Phol Sugar Group of Companies Type of business: sugar factories Nature of relationship: • Mr. Vitoon Vongkusolkit and Mr. Chanin Vongkusolkit, the Company’s directors, are authorized director and director of Mitr Phol Sugar Co., Ltd. • Vongkusolkit Group holds 39 percent in the Company’s shares.
(Hyatt Regency Hua Hin Hotel) Type of business: hotels Nature of relationship: • Mrs. Panida Thepkanjana, director, is a closed relative to Mrs. Wansamorn Wannamethee and Khunying Natthika Wattanavekin, are authorized director of Chai Talay Co., Ltd. • Wattanavekin Group holds 31 percent of the Company’s shares.
1. Chai Talay Hotel Co., Ltd.
547,226.90 -0-0-
11,721,476.39 -0-0-
4,301,902.18 448,940.39
Transaction value (Baht) 2010 2011
2,468,884.44 243,106.48
Description Agreement to lease office space and the service agreement with The Erawan Hotel Public Company Limited • Rental and services income • Receivables at end of period
Person/entity with possible conflict of interest and nature of relationship
Connected transactions between businesses with the following relationships were executed;
Price agreed was a market price compared to space in nearby areas and not lower than the price offered to other tenants base of the business standard.
A major tenant, the agreed price was not lower than the average price agreed with other tenants based on the business standards.
Price agreed was a market price compared to space in nearby areas and not lower than the price offered to other tenants or service users based on the business standards.
Pricing policy and the Audit Committee’s opinions
Connected transactions SUCCESS WITH INTEGRITY
The Erawan Group Public Company Limited
Connected Transactions
69
Necessity and Soundness of Connected Transactions In case the Company signs an agreement or conducts a connected transaction with a subsidiary company, affiliate, related company and/or the third party, The Erawan Group will consider the necessity and soundness of such contract based mainly on The Erawan Group interests. Approval Measures or Procedures of Connected Transactions If the Company is to execute a contract or if there is any connected transaction between itself and its subsidiary, affiliate, related company, the third party and/or anyone with possible conflicts of interest, the Board of Directors requires The Erawan Group for the purpose of its benefits, to comply with the rules stated in the Stock Exchange of Thailand’s (SET) Announcement Re: Information disclosure and practices of listed companies in connected transactions. Meanwhile, prices and other conditions shall be as if the transaction is at an arm’s length where directors or staff having an interest in such transaction must not participate in any approval process. Policy or Outlook for Future Connected Transactions -NoneNote: Item No. 2 and No. 3 are not considered connected transactions as the Company terminated a rental agreement with the Mitr Phol Group of Companies and Bualuang Securities Public Company Limited after we had sold the Ploenchit Center Building to the Prime Office Leasehold Property Fund on April 1, 2011. Our status has changed from the building owner and landlord to a building manager since. As a result, all rental activities relating to the office building including any consideration to rent the Pleonchit Center’s space and at what price are subject to the Fund’s approval. The two businesses have entered an office space rental agreement with the Prime Office Leasehold Property Fund accordingly.
70 Connected Transactions
Audit Report of Certified Public Accountant The Erawan Group Public Company Limited
To the Shareholders of The Erawan Group Public Company Limited I have audited the accompanying consolidated and separate statements of financial position as at 31 December 2011 and 2010, and the related statements of comprehensive income, changes in equity and cash flows for the years then ended of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively. The Companyâ&#x20AC;&#x2122;s management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the consolidated and separate financial statements referred to above present fairly, in all material respects, the financial positions as at 31 December 2011 and 2010 and the results of operations and cash flows for the years then ended of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively, in accordance with Financial Reporting Standards. As explained in notes 2 and 3 to the financial statements, with effect from 1 January 2011 the Company has adopted certain new and revised financial reporting standards. The consolidated and separate financial statements for the year ended 31 December 2010 have been restated accordingly.
KPMG Phoomchai Audit Ltd. Bangkok 28 February 2012
72 Audit Report of Certified Public Accountant
Vannaporn Jongperadechanon Certified Public Accountant Registration No. 4098
Audit Fee
SUCCESS WITH INTEGRITY
The Erawan Group Public Company Limited
In 2011, the audit fee paid to the external auditor of KPMG Phoomchai Audit Limited was Baht 3,855,000 (The Erawan Group Plc. Baht 2,300,000 and the Company’s subsidiary Bath 1,555,000). The Company did not pay any non audit fee to the auditor, the auditor’s office, and person or company related to the auditor and the auditor’s office. The fee was excluding the out of pocket expenses.
Audit Fee
73
Statements of financial position The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2011 and 2010
(Unit: in Baht)
Consolidated financial statements Note
2011
Separate financial statements 2010
2011
(Restated)
2010 (Restated)
Assets Current assets Cash and cash equivalents Trade accounts receivable Inventories Advances - construction Value added tax refundable Other current assets
6 5, 7 8
5, 9
Total current assets Non-current assets Investments in subsidiaries 10 Investment in associate 11 Investments in other related parties 12 Long-term loans to subsidiaries 5 Property, plant and equipment 13, 16 Land held for development 14 Leasehold rights for land and buildings 15, 16 Intangible assets 17 Deposits for lease of land, building and equipment 16 Other non-current assets 18
450,196,331 134,393,606 52,821,584 37,644,306 39,362,933 56,894,127
220,384,384 148,046,349 72,898,210 15,023,839 50,625,364 49,537,238
140,711,404 74,702,818 9,229,593 36,525,750 19,268,382
93,907,272 79,207,822 28,045,046 13,905,283 15,882,989
771,312,887
556,515,384
280,437,947
230,948,412
338,271 338,271 2,486,924 2,571,029 9,493,559,805 10,151,618,552 104,236,832 104,206,832
2,301,159,871 338,271 1,913,031 1,393,545,475 5,711,589,259 -
2,299,159,881 338,271 1,975,973 1,080,774,007 6,242,901,679 -
1,604,762,025 46,482,693
1,793,652,235 60,833,747
806,148,906 29,960,745
963,996,368 39,744,993
120,625,917 94,059,935
204,341,948 75,188,645
115,328,049 33,903,134
202,314,317 28,655,926
Total non-current assets
11,466,552,402 12,392,751,259 10,393,886,741 10,859,861,415
Total assets
12,237,865,289 12,949,266,643 10,674,324,688 11,090,809,827
The accompanying notes are an integral part of these financial statements. 74
Statements of financial position (Continued)
SUCCESS WITH INTEGRITY
The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2011 and 2010
F (Unit: in Baht)
Consolidated financial statements Note
2011
Separate financial statements 2010
2011
(Restated)
2010 (Restated)
Liabilities and equity Current liabilities Short-term loans from financial institutions Trade accounts payable Accounts payable - construction Current portion of hire purchase payable Current portion of long-term loans from financial institutions Other current liabilities
19 5, 20
76,100,000 175,335,257 81,217,056
195,700,000 211,897,440 40,952,783
76,100,000 81,730,311 60,668,752
195,700,000 90,083,357 20,235,144
19
1,718,148
819,440
1,718,148
819,440
19 21
695,250,000 415,667,650
573,750,000 347,060,195
515,250,000 170,492,635
403,750,000 151,375,348
1,445,288,111
1,370,179,858
905,959,846
861,963,289
3,458,178 -
621,197 -
3,458,178 45,438,032
621,197 38,860,995
6,727,667,051
7,829,517,051
180,000,000 42,222,972 26,481,927 43,271,996
360,000,000 100,677,747 15,320,798 -
Total non-current liabilities
7,023,102,124
8,306,136,793
4,670,852,603 5,828,785,315
Total liabilities
8,468,390,235
9,676,316,651
5,576,812,449 6,690,748,604
Total current liabilities Non-current liabilities Hire purchase payable 19 Long-term loans from a subsidiary 5, 19 Long-term loans from financial 19 institutions Accounts payable for land leasehold rights 16 Deposits from lessees Deferred income 16, 22 Employee benefit obligations 23
4,357,900,000 5,314,750,000 180,000,000 40,031,238 26,481,927 17,543,228
360,000,000 99,232,325 15,320,798 -
The accompanying notes are an integral part of these financial statements. 75
Statements of financial position (Continued) The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2011 and 2010
(Unit: in Baht) Consolidated financial statements Note
2011
Separate financial statements 2010
(Restated)
2011
2010 (Restated)
Liabilities and equity Equity Share capital Authorised share capital Issued and paid-up share capital Premium on shares Employee stock options Other components of equity Retained earnings Appropriated Legal reserve Unappropriated Equity attributable to equity holders of the Company Non-controlling interests Total equity Total liabilities and equity
24 2,505,000,000 2,244,779,001 2,505,000,000 2,244,779,001 25 24
25
2,244,779,001 2,244,779,001 2,244,779,001 2,244,779,001 358,142,539 358,142,539 358,142,539 358,142,539 4,920,510 4,920,510 (433,287) (596,603) (352,802) (405,036)
115,108,000 866,092,809
3,588,609,572 3,130,974,798 5,097,512,239 4,400,061,223 180,865,482 141,975,194 3,769,475,054 3,272,949,992 5,097,512,239 4,400,061,223 12,237,865,289 12,949,266,643 10,674,324,688 11,090,809,827
The accompanying notes are an integral part of these financial statements. 76
79,608,000 103,158,000 67,658,000 449,041,861 2,386,864,991 1,729,886,719
SUCCESS WITH INTEGRITY
Statements of comprehensive income The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
F (Unit: in Baht) Consolidated financial statements Note
2011
Separate financial statements 2010
2011
(Restated) Income Revenues from hotel operations Rental of units in buildings and service income Gain on disposal of Ploenchit Center Net foreign exchange gain Dividend income Interest income Other income Total income Expenses Cost of hotel operations Cost of rental of units in buildings and service Depreciation and amortisation Selling expenses Administrative expenses Finance costs Total expenses Profit (loss) before income tax expense Income tax expense Profit (loss) for the year
2010 (Restated)
3,536,263,159 2,929,914,482 1,779,980,257 1,545,898,978 5 16 5 5 5, 27
219,280,684 391,333,097 178,537,866 384,011,760 664,330,168 - 664,330,168 2,568,225 3,573,512 1,232,838 982,813 18,085,498 6,180,234 411,737 65,880,663 39,065,891 58,609,269 38,112,615 54,760,908 35,810,011 4,487,231,739 3,364,328,256 2,743,489,862 2,024,104,976 1,700,519,759 1,488,413,277
5 28 5, 29, 30 5, 32
33
788,462,200
705,452,776
89,284,570 154,922,380 66,843,864 159,636,076 645,511,741 683,504,716 352,611,758 404,735,841 250,743,365 214,081,725 143,427,913 118,441,023 810,805,775 702,081,688 415,900,378 375,311,892 406,682,214 360,761,571 267,486,417 245,184,988 3,903,547,424 3,603,765,357 2,034,732,530 2,008,762,596 583,684,315 (239,437,101) (53,469,379) (19,866,597)
708,757,332 -
15,342,380 -
530,214,936 (259,303,698)
708,757,332
15,342,380
The accompanying notes are an integral part of these financial statements. 77
Statements of comprehensive income (Continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
(Unit: in Baht)
Consolidated financial statements Note
Separate financial statements
2011
2010 (Restated)
2011
Other comprehensive income (loss) Net change in fair value of available-for-sale investments
163,316
(405,505)
52,234
(296,893)
Other comprehensive income (loss) for the year, net of income tax
163,316
(405,505)
52,234
(296,893)
Total comprehensive income (loss) for the year
530,378,252 (259,709,203)
708,809,566
15,045,487
Profit (loss) attributable to: Equity holders of the Company Non-controlling interests Profit (loss) for the year
491,324,648 (275,016,542) 38,890,288 15,712,844 530,214,936 (259,303,698)
708,757,332 708,757,332
15,342,380 15,342,380
Total comprehensive income (loss) attributable to: Equity holders of the Company Non-controlling interests
491,487,964 (275,422,047) 38,890,288 15,712,844
708,809,566 -
15,045,487 -
Total comprehensive income (loss) for the year
530,378,252 (259,709,203)
708,809,566
15,045,487
Earnings (loss) per share Basic earnings (loss) per share (in Baht) Diluted earnings per share (in Baht)
34
0.22
(0.12)
0.32
0.01
0.22
-
0.32
-
The accompanying notes are an integral part of these financial statements. 78
2010 (Restated)
358,142,539 358,142,539 358,142,539 358,142,539
2,244,779,001 2,244,779,001 2,244,779,001 2,244,779,001
24
25
Balances at 31 December 2010
Balance at 31 December 2010 - as reported Impact of changes in accounting policies
The accompanying notes are an integral part of these financial statements.
Balance at 31 December 2011
Balance at 1 January 2011 - restated Employee stock options Comprehensive income (loss) for the year Profit Other comprehensive income Transfer to legal reserve
3
35 25
-
-
Balance at 1 January 2010 Comprehensive income (loss) for the year Profit (loss) Other comprehensive loss Dividend Transfer to legal reserve
358,142,539
Share premium
2,244,779,001
Note
Issued and paid-up share capital
The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
Statements of changes in equity
4,920,510 115,108,000
35,500,000
79,608,000 -
4,920,510
79,608,000 79,608,000 -
-
724,826,403
Unappropriated
866,092,809
491,324,648 (35,500,000)
410,268,161 -
449,041,861 (38,773,700)
449,041,861
- (275,016,542) 768,000 (768,000)
78,840,000
Legal reserve
-
-
-
-
Employee stock options
Retained earnings
Total equity
(275,016,542) 15,712,844 (259,303,698) (405,505) (405,505) - (6,300,012) (6,300,012) -
491,324,648 38,890,288 163,316 -
530,214,936 163,316 (433,287) 3,588,609,572 180,865,482 3,769,475,054
163,316 -
(596,603) 3,092,201,098 141,975,194 3,234,176,292 4,920,510 4,920,510
-
(596,603) 3,130,974,798 141,975,194 3,272,949,992 - (38,773,700) - (38,773,700)
(596,603) 3,130,974,798 141,975,194 3,272,949,992
(405,505) -
(191,098) 3,406,396,845 132,562,362 3,538,959,207
Equity attributable to NonUnrealised equity holders controlling surpluses of the interests (deficits) of fair Company value changes on investment
Other components of equity
Consolidated financial statements
(Unit: in Baht)
SUCCESS WITH INTEGRITY
79
80 25
358,142,539
-
2,244,779,001
358,142,539 -
358,142,539 -
2,244,779,001 -
-
24
The accompanying notes are an integral part of these financial statements.
Balance at 31 December 2011
Balance at 1 January 2011 - restated Employee stock options Comprehensive income for the period Profit Other comprehensive income Transfer to legal reserve
2,244,779,001
3
Balance at 31 December 2010 - as reported Impact of changes in accounting policies
358,142,539
-
2,244,779,001
25
358,142,539
2,244,779,001
Balances at 31 December 2010
Balance at 1 January 2010 Comprehensive income (loss) for the period Profit Other comprehensive loss Transfer to legal reserve
Note
4,920,510
-
4,920,510
-
-
-
-
Other components of equity
(Unit: in Baht)
15,342,380 (768,000)
708,757,332 (35,500,000) 103,158,000 2,386,864,991
35,500,000
67,658,000 1,713,607,659 -
67,658,000 1,729,886,719 (16,279,060)
67,658,000 1,729,886,719
768,000
66,890,000 1,715,312,339
15,342,380 (296,893) -
708,757,332 52,234 (352,802) 5,097,512,239
52,234 -
(405,036) 4,383,782,163 4,920,510
(405,036) 4,400,061,223 (16,279,060)
(405,036) 4,400,061,223
(296,893) -
(108,143) 4,385,015,736
Total equity attributable to Unrealised equity holders surpluses Legal reserve Unappropriated (deficits) of fair of the Company value changes in invesments
Retained earnings
Separate financial statements
Issued and Employee stock paid-up share Share premium options capital
The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
Statements of changes in equity (Continued)
SUCCESS WITH INTEGRITY
Statements of cash flows
The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
(Unit: in Baht) Consolidated financial statements 2011
Separate financial statements 2010
2011
(Restated) Cash flows from operating activities Profit (loss) for the year Adjustments for Depreciation and amortisation Doubtful debts expense (reversal) Unrealised (gain) loss from increase in value of investment in related company Employee benefit obligations Employee stock options Loss on non-refundable withholding tax deducted at source Transfer rental deposits and deferred income to income Transfer advance received from customers to income Dividend income Interest income Gain on sale of Ploenchit Center (Gain) loss on disposal of property, plant and equipment, intangible assets and leasehold rights Finance costs Income tax expense
2010 (Restated)
530,214,936
(259,303,698)
708,757,332
15,342,380
645,511,741 331,466
683,504,716 717,106
352,611,758 101,432
404,735,841 (914,539)
89,011 6,754,843 4,920,510
(18,638) -
3,405,062 4,920,510
-
376,795
3,794,537
-
3,302,220
(951,500) (560,950) (6,180,234) (664,330,168)
(5,343,191) (1,368,177) (982,813) (411,737) -
(951,501) (560,951) (65,880,663) (664,330,168)
(5,343,191) (1,368,177) (18,085,498) (39,065,891) -
14,788,536 406,682,214 53,469,379
(286,337) 360,761,571 19,866,597
3,424,534 267,486,417 -
(200,787) 245,184,988 -
991,116,579
800,929,936
608,983,762
603,587,346
The accompanying notes are an integral part of these financial statements. 81
Statements of cash flows (Continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
(Unit: in Baht) Separate financial statements
Consolidated financial statements 2011
2010
2011
(Restated)
2010 (Restated)
Changes in operating assets and liabilities Trade accounts receivable Inventories Advances - construction Value added tax refundable Other current assets Deposits for lease of land, building, and equipment Other non-current assets Trade accounts payable Employee benefit obligations paid Other current liabilities Deposits from lessees
13,199,848 20,076,625 (22,620,467) 11,262,430 7,030,448 (6,283,969) (14,598,129) (36,562,187) (2,256,547) 60,624,065 (58,085,426)
(4,284,401) 5,349,251 19,593,673 147,376,418 (6,267,833) 26,998,281 15,790,124 (18,786,899) (3,245,963) 3,770,476
4,282,143 18,815,452 (22,620,467) (740,203) (3,013,733) 14,245,875 (8,353,046) (1,832,244) 19,571,515 (32,349,811)
(2,735,763) 5,747,357 867,392 78,120,621 1,952,884 25,907,656 12,906,147 14,982,351 344,593 3,743,384
Cash generated from operating activities Income tax paid
962,903,270 (34,943,819)
987,223,063 (52,837,616)
596,989,243 (19,493,080)
745,423,968 (14,450,821)
Net cash from operating activities
927,959,451
934,385,447
577,496,163
730,973,147
158,409 (537,963,906) (700,859) (5,484,071) 1,352,047,347
347,271 (488,502,754) (156,279,790) (8,544,905) -
115,176 (1,999,990) (348,218,296) 37,989,571 (399,806,077) (2,388,829) 1,352,047,347
252,494 (184,861,134) 184,861,134 (457,451,218) 123,433,352 (170,188,057) (150,000,000) (3,511,734) -
1,295,972 6,180,234
3,850,275 982,812 411,737
1,438,404 63,337,920
6,299,303 18,085,498 38,055,372
815,533,126
(647,735,354)
702,515,226
(595,024,990)
Cash flows from investing activities Investments in other related parties Investments in subsidiary Short-term loans to a subsidiary Proceeds from short-term loans to a subsidiary Long-term loans to subsidiaries Proceeds from long-term loans to subsidiaries Acquisition of property, plant and equipment Acquisition of leasehold rights for land and buildings Acquisition of intangible assets Net proceeds from sale of Ploenchit Center Proceeds from sales of property, plant and equipment, and intangible assets Dividend received Interest received Net cash from (used in) investing activities
The accompanying notes are an integral part of these financial statements. 82
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Statements of cash flows (Continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
F (Unit: in Baht) Consolidated financial statements
Note
2011
Separate financial statements 2010
2011
(Restated) Cash flows from financing activities Repayment of short-term loans from financial institutions Finance lease payments Short-term loans from a subsidiary Repayment of short-term loans from a subsidary Long-term loans from a subsidiary Repayment of long-term loans from a subsidary Long-term loans from financial institutions Repayment of long-term loans from financial institutions Finance costs paid Dividend paid to non-controlling interests Net cash used in financing activities
Non-cash transactions Offsetting rental deposit received from lessees with accounts receivable Vehicles purchased under hire purchase contract Acquisition of plant and equipment, intangible assets and leasehold rights for land and buildings for which payment has yet to be made
(11,500,000) (1,130,340) 209,200,000
(980,350,000) (409,997,318) -
(168,650,000) (365,373,909) (6,300,012)
(1,513,680,630)
Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December
(119,600,000) (3,733,312) -
6
2010 (Restated)
(119,600,000) (3,733,312) 143,470,578 (143,470,578) 85,466,073 (78,889,036) -
43,500,000 (1,130,340) 11,027,304 (11,027,304) 31,646,562 (47,917,357) 139,000,000
(845,350,000) (162,400,000) (271,100,982) (246,574,309) -
(343,754,261) (1,233,207,257) (243,875,444)
229,811,947 220,384,384
(57,104,168) 277,488,552
46,804,132 (107,927,287) 93,907,272 201,834,559
450,196,331
220,384,384
140,711,404
93,907,272
121,429 7,469,000
4,016,134 1,449,000
121,429 7,469,000
4,016,134 1,449,000
(37,630,162)
38,086,089
(40,433,608)
18,911,350
The accompanying notes are an integral part of these financial statements. 83
Notes to the financial statements The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2011 and 2010
These notes form an integral part of the financial statements. The financial statements issued for Thai statutory and regulatory reporting purposes are prepared in the Thai language. These English language financial statements have been prepared from the Thai language statutory financial statements, and were approved and authorised for issue by the Board of Directors on 28 February 2012.
1. General information The Erawan Group Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office at 2 Sukhumvit Road, Klong Toey Subdistrict, Klong Toey District, Bangkok. The Company has 10 branches in Bangkok, Cholburi, Phuket, Surathani and Prajuabkirikhan. The Company was listed on the Stock Exchange of Thailand in June 1994. The principal businesses of the Company are engaged as a holding company with investments in various companies, engaged in hotel business, and in building rental business. Details of the Company’s subsidiaries and associate as at 31 December 2011 and 2010 were as follows:
Name of the entity
Direct subsidiaries
Erawan Hotel Public Company Limited Erawan Chaophraya Company Limited Erawan Rajdamri Company Limited Erawan Phuket Company Limited Erawan Samui Company Limited Erawan Naka Company Limited The Reserve Company Limited Erawan Commercial Management Company Limited
Indirect subsidiaries
Erawan Hotel Public Company Limited Erawan Chaophraya Company Limited
Associate
Rajprasong Development Company Limited
Notes to the financial statements 84
Type of business
Country of incorporation
Ownership interest (%) 2011 2010
Hotel Hotel Hotel Hotel Hotel Land owner Real estate development Management service
Thailand Thailand Thailand Thailand Thailand Thailand Thailand
72.59 95.77 99.99 99.99 99.99 99.99 99.99
72.59 95.77 99.99 99.99 99.99 99.99 99.99
Thailand
99.99
-
Hotel Hotel
Thailand Thailand
1.05 4.22
1.05 4.22
Service
Thailand
48.00
48.00
SUCCESS WITH INTEGRITY
2. Basis of preparation of the financial statements (a) Statement of compliance The financial statements are prepared in accordance with Thai Financial Reporting Standards (TFRS) and guidelines promulgated by the Federation of Accounting Professions (“FAP”), applicable rules and regulations of the Thai Securities and Exchange Commission. During 2010 and 2011, the FAP issued the following new and revised TFRS relevant to the Group’s operations and effective for accounting periods beginning on or after 1 January 2011: TFRS TAS 1 (revised 2009) TAS 2 (revised 2009) TAS 7 (revised 2009) TAS 8 (revised 2009) TAS 10 (revised 2009) TAS 16 (revised 2009) TAS 17 (revised 2009) TAS 18 (revised 2009) TAS 19 TAS 23 (revised 2009) TAS 24 (revised 2009) TAS 26 TAS 27 (revised 2009) TAS 28 (revised 2009) TAS 33 (revised 2009) TAS 34 (revised 2009) TAS 36 (revised 2009) TAS 37 (revised 2009) TAS 38 (revised 2009) TAS 40 (revised 2009) TFRS 2 TIC 31
Topic Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period Property, Plant and Equipment Leases Revenue Employee Benefits Borrowing Costs Related Party Disclosures Accounting and Reporting by Retirement Benefit Plans Consolidated and Separate Financial Statements Investments in Associates Earnings per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Investment Property Share-based Payment Revenue - Barter Transactions Involving Advertising Services
Notes to the financial statements
85
The adoption of these new and revised TFRS has resulted in changes in the Group’s accounting policies. The effects of these changes are disclosed in note 3. In addition to the above new and revised TFRS, the FAP has issued during 2010 a number of other new and revised TFRS which are expected to be effective for financial statements beginning on or after 1 January 2013 and have not been adopted in the preparation of these financial statements. These new and revised TFRS are disclosed in note 40. (b) Basis of measurement The financial statements have been prepared on the historical cost basis. (c) Presentation currency The financial statements are prepared and presented in Thai Baht. All financial information presented in Thai Baht has been rounded in the notes to the financial statements to the nearest million unless otherwise stated. (d) Use of estimates and judgements The preparation of financial statements in conformity with TFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements is included in the following notes:
Note 23
Measurement of defined benefit obligations
3. Changes in accounting policies (a) Overview From 1 January 2011, consequent to the adoption of new and revised TFRS as set out in note 2, the Group has changed its accounting policies in the following areas: • Presentation of financial statements • Accounting for property, plant and equipment • Accounting for employee benefits Notes to the financial statements 86
SUCCESS WITH INTEGRITY
Details of the new accounting policies adopted by the Group and the impact of the changes on the financial statements are included in notes 3(b) to 3(d) below. Other new and revised TFRS did not have any impact on the accounting policies, financial position or performance of the Group. The impact of the changes on the financial statements for the years ended 31 December 2011 is summarized as follows: (Unit: in thousand Baht) For the year ended 31 December 2011
Consolidated financial statements Note 2011
Statement of financial position Equity at 31 December 2010 - as reported TAS 19 Employee benefits
3(d)
Equity at 1 January 2011
Separate financial statements 2011
3,272,950 (38,774)
4,400,061 (16,279)
3,234,176
4,383,782
(6,754)
(3,404)
Statement of comprehensive income for the year ended 31 December 2011 Decrease in profit before income tax as a result of the adoption of: TAS 19 Employee benefits Increase in income tax expense (Decrease) in profit
3(d)
(6,754)
(3,404)
(b) Presentation of financial statements From 1 January 2011, the Group has adopted TAS 1 Presentation of Financial Statements (Revised 2009). Under the revised standard, a set of financial statements comprises: • • • • •
Statement of financial position; Statement of comprehensive income; Statement of changes in equity; Statement of cash flows; and Notes to the financial statements.
As a result, the Group presents all owner changes in equity in the statement of changes in equity and all non-owner changes in equity in the statement of comprehensive income. Previously, all such changes were included in the statement of changes in equity.
Notes to the financial statements
87
Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on reported profit or earnings per share. (c) Accounting for property, plant and equipment From 1 January 2011, the Group has adopted TAS 16 (revised 2009) Property, Plant and Equipment in determining and accounting for the cost and depreciable amount of property, plant and equipment. The principal changes introduced by the revised TAS 16 and affecting the Group are that; (i) (ii)
the depreciation charge has to be determined separately for each significant part of an asset. in determining the depreciable amount, the residual value of an item of property, plant and equipment has to be measured at the amount estimated receivable currently for the asset if the asset were already of the age and in the condition expected at the end of its useful life. Further more, the residual value and useful life of an asset have to be reviewed at least at each financial year-end.
The changes have been applied prospectively in accordance with the transitional provisions of the revised standard, which no material impact on the profit and earnings per share for the year ended 31 December 2011. (d) Accounting for employee benefits From 1 January 2011, the Group has adopted TAS 19 Employee Benefits. Under the new policy, the Groupâ&#x20AC;&#x2122;s obligation in respect of post-employment benefits is - retirement benefit recognised in the financial statements based on calculations performed annually by a qualified actuary using the projected unit credit method. Previously, this obligation was recognised as and when payments were made. The Groupâ&#x20AC;&#x2122;s and the Companyâ&#x20AC;&#x2122;s liability for retirement benefit employee benefit obligations as at 1 January 2011 has been determined to be Baht 39 million and Baht 16 million, respectively. The Group has opted to record the entire amount of this liability as an adjustment to retained earnings as at 1 January 2011, in accordance with the transitional provisions of TAS 19. The impact on the 2011 financial statements was as follows:
Notes to the financial statements 88
SUCCESS WITH INTEGRITY
(Unit: in thousand Baht)
Consolidated financial statements 2011
Statement of financial position as at 1 January 2011
Separate financial statements 2011
(Increase) in employee benefit obligations
(38,774)
(16,279)
(Decrease) in unappropriated retained earnings
(38,774)
(16,279)
Increase in employee expenses resulting in: (Increase) in cost of hotel operations and cost of rental of units in buildings and service (Increase) in selling expenses (Increase) in administrative expenses
(3,044) (410) (3,300)
(1,568) (71) (1,765)
(Decrease) in profit
(6,754)
(3,404)
(0.0030)
(0.0015)
Statement of comprehensive income for the year ended 31 December 2011
(Decrease) in earnings per share: - Basic earnings per share (in Baht)
4. Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements except as explained in note 3, which addresses changes in accounting policies. (a) Basis of consolidation The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the â&#x20AC;&#x153;Groupâ&#x20AC;?) and the Groupâ&#x20AC;&#x2122;s interests in associate. Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group. Losses applicable to non - controlling interests in a subsidiary are allocated to non - controlling interests even if doing so causes the non - controlling interests to have a deficit balance. Notes to the financial statements
89
Associate Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Investments in associates are accounted for in the consolidated financial statements using the equity method (equity-accounted investees) and are recognised initially at cost. The cost of the investment includes transaction costs. The consolidated financial statements include the Group’s share of profit or loss and other comprehensive income of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associate are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Foreign currency transactions Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. (c) Cash and cash equivalents Cash and cash equivalents in the statements of cash flows comprise cash balances, call deposits and highly liquid short-term investments. (d) Trade and other accounts receivable Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts. The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred.
Notes to the financial statements 90
SUCCESS WITH INTEGRITY
(e) Inventories Inventories are stated at the lower of cost (the weighted average method) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale. (f) Investments Investments in subsidiaries and associate Investments in subsidiaries and associate in the separate financial statements of the Company are accounted for using the cost method. Investment in associate in the consolidated financial statements is accounted for using the equity method. Investments in equity securities Marketable equity securities, other than those securities held for trading or intended to be held to maturity, are classified as being available-for-sale investments. Available-for-sale investments are, subsequent to initial recognition, stated at fair value, and changes therein, other than impairment losses on availablefor-sale monetary items, are recognised directly in equity. Impairment losses are recognised in profit or loss. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss. (g) Property, plant and equipment Recognition and measurement Owned assets Lands are stated at cost. Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. Notes to the financial statements
91
Leased assets Leases in terms of which the Group substantially assumes all the risk and rewards of ownership are classified as finance leases. Equipment and vehicles acquired by way of finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the profit or loss. Subsequent costs The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Depreciation Depreciation is calculated based on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. The estimated useful lives are as follows: Building and improvements Furniture, fixtures and equipment Vehicles
5 - 40 years 5 - 10 years 5 years
See Note 37 to the financial statements for changes in the estimated useful lives from 1 January 2010. No depreciation is provided on freehold land or assets under construction. Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Operating equipment consists of linen, crockery, glass, silver and kitchen utensils purchased to meet the normal requirements of the hotel operations have been regarded as a base stock and subsequent purchases are expended when incurred.
Notes to the financial statements 92
SUCCESS WITH INTEGRITY
(h) Leasehold rights Leasehold rights are stated at cost less accumulated amortisation and impairment losses. Amortisation Leasehold rights are amortised on a straight-line basis over the terms of the leases. (i) Intangible assets Intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally is recognised in profit or loss as incurred. Amortisation Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows: Computer softwares
5 - 10
years
Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. (j) Impairment The carrying amounts of the Groupâ&#x20AC;&#x2122;s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assetsâ&#x20AC;&#x2122; recoverable amounts are estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in profit or loss. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence
Notes to the financial statements
93
that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss. Calculation of recoverable amount The recoverable amount of available-for-sale financial assets is calculated by reference to the fair value. The recoverable amount of a non-financial asset is the greater of the assetâ&#x20AC;&#x2122;s value in use and fair value less cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised in other comprehensive income. Impairment losses recognised in prior periods in respect of other non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assetâ&#x20AC;&#x2122;s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (k) Trade, construction and other accounts payable Trade, construction and other accounts payable are stated at cost. (l) Employee benefits Provident fund The Group has a provident fund for its employees. The Groupâ&#x20AC;&#x2122;s contributions are made to match with the contributions from employees and are recorded as expenses on an accrual basis. Short-term employee benefits The Group recognized the commitments of short-term employee benefits as expenses when employee rendered services. Provision for retirement benefits
Notes to the financial statements 94
SUCCESS WITH INTEGRITY
The Groupâ&#x20AC;&#x2122;s net obligation in respect of long-term employee benefits (Legal Severance Payment) is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The discount rate is the yield at the reporting date on government bonds. The calculation is performed using the projected unit credit method. Share-based payments The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met. The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expenses in profit or loss. (m) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (n) Revenue Revenue excludes value added taxes and is arrived at after deduction of trade discounts. Revenue from hotel operations Hotel revenues from room, food and beverages and other services are recognised when the rooms are occupied, food and beverages are sold and the services are rendered. Rental and services income Rental and services income from units in office buildings and shopping center are recognised in profit or loss on an accrual basis. Dividend income Dividend income is recognised in profit or loss on the date the Groupâ&#x20AC;&#x2122;s right to receive payments is established. Interest income Interest income is recognised in profit or loss as it accrues Notes to the financial statements
95
(o) Deferred income The Company recognises deferred rental income as income on a straight-line basis over the terms of the leases. (p) Finance costs Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and contingent consideration, losses on disposal of available-for-sale financial assets, dividends on preference shares classified as liabilities, fair value losses on financial assets at fair value through profit or loss, impairment losses recognised on financial assets (other than trade receivables), and losses on hedging instruments that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. (q) Lease payments Payments made under operating leases are recognised in profit or loss on a systematic basis over the term of the lease and on a straight-line method for leases begin on or after 1 January 2008 unless another systematic basis is more representative of the time pattern of the userâ&#x20AC;&#x2122;s benefit. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. (r) Income tax Income tax expense on the profit or loss for the year comprises current tax. Current is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. (s) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all potential dilutive ordinary shares, which comprise convertible notes and share options granted to employees.
5. Related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control or joint control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Notes to the financial statements 96
SUCCESS WITH INTEGRITY
Relationships with related parties were as follows: Name of entities Erawan Hotel Public Company Limited Erawan Chaophraya Company Limited Erawan Rajdamri Company Limited Erawan Phuket Company Limited Erawan Samui Company Limited Erawan Naka Company Limited The Reserve Company Limited Erawan Commercial Management Company Limited Rajprasong Development Company Limited
Country of incorporation/ nationality Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand
Nature of relationships Subsidiary, 72.59% direct shareholding Subsidiary, 95.77% direct shareholding Subsidiary, 99.99% direct shareholding Subsidiary, 99.99% direct shareholding Subsidiary, 99.99% direct shareholding Subsidiary, 99.99% direct shareholding Subsidiary, 99.99% direct shareholding Subsidiary, 99.99% direct shareholding
Rajprasong Square Company Limited Chai Talay Hotel Company Limited
Thailand Thailand
Panel Plus Company Limited Petro Green Company Limited Mitr Phol Sugar Company Limited Phu Khieo Bio-Energy Company Limited Banpu Public Company Limited The Syndicate of Thai Hotels & Tourists Enterprises Limited Kiatnakin Bank Public Company Limited Pacific World (Thailand) Limited Eastern Sugar and Cane Company Limited
Thailand Thailand Thailand Thailand Thailand Thailand
Associate, 48.00% direct shareholding, some common directors Related company, 23.29% direct shareholding Related company, director is closed relative to a Companyâ&#x20AC;&#x2122;s director Related company, some common directors Related company, some common directors Related company, some common directors Related company, some common directors Related company, some common directors Related company, some common directors
Thailand Thailand Thailand
Related company, some common directors Related company, some common directors Related company, some common directors
The pricing policies for particular types of transactions are explained further below: Transactions Subsidiaries Interest income Dividend income Utilities income Rental and service expenses Interest expenses
Pricing policies At the rate of 4.84% - 5.48% per annum (2010: at the rate of 4.15% - 4.53% per annum) According to the shareholdersâ&#x20AC;&#x2122; approval Contractually agreed prices Baht 17 million per annum At the rate of 4.84% - 5.48% per annum (2010: at the rate of 4.15% - 4.53% per annum) Notes to the financial statements
97
Transactions Associate Management fee Other related parties Rental and services income Utilities income Other service income Land rental
Pricing policies At cost - allocated in proportion to shareholding Baht 350 - 560 per square meter per month (2010: Baht 308 - 583 per square meter per month) depending on location Contractually agreed prices Fair price under the best conditions Baht 14 million per annum
Significant transactions for the years ended 31 December 2011 and 2010 with related parties were as follows: (Unit: in thousand Baht)
Year ended 31 December Subsidiaries Interest income Dividend income Utilities income Rental and service expenses Interest expenses
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
-
-
62,521 2,348 16,376 3,134
38,940 17,350 1,918 16,264 1,874
Other related parties Rental and services income Utilities income Other service income Land rental Management fee
15,467 1,163 14,037 12,519 1,000
45,551 4,264 5,667 10,920 1,000
11,165 1,163 9,981 1,000
43,082 4,264 5,073 1,000
Key management personnel compensation Short-term employee benefit Post-employment benfits Share-based payment
37,604 618 2,584
35,154 -
36,029 618 2,584
33,354 -
Total key management personnel compensation
40,806
35,154
39,231
33,354
Notes to the financial statements 98
SUCCESS WITH INTEGRITY
Balances as at 31 December 2011 and 2010 with related parties were as follows: (Unit: in thousand Baht)
Consolidated financial statements 2011 2010 Trade accounts receivable from related parties Subsidiaries Erawan Hotel Public Company Limited Erawan Rajdamri Company Limited Erawan Samui Company Limited Erawan Phuket Company Limited Other related parties Mitr Phol Sugar Company Limited Banpu Public Company Limited Petro Green Company Limited Panel Plus Company Limited Phu Khieo Bio-Energy Company Limited Chai Talay Hotel Company Limited Pacific World (Thailand) Limited Eastern Sugar and Cane Company Limited Other companies Total
Separate financial statements 2011 2010
-
-
154 1,556 608 56
126 880 328 -
743 333 260 449 652 -
986 442 63 727 19 243 438 292 55
743 333 260 444 -
986 342 63 727 19 438 55
2,437
3,265
4,154
3,964
-
-
598
746
7,060
5,460
-
-
Other receivable - related party Subsidiary Erawan Chaophraya Company Limited
Prepaid expense - related party Other related party The Syndicate of Thai Hotels & Tourists Enterprises Limited
Notes to the financial statements
99
(Unit: % per annum)
Loans to related parties
(Unit: in thousand Baht)
Interest rate
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
2011
2010
5.48 5.48 5.48 5.48
4.53 4.53 4.53 4.53
-
-
114,354 19,798 854,522 238,709
79,316 20,036 598,568 228,740
5.48 5.48
4.53
-
-
3,779 162,383
154,114
-
- 1,393,545 1,080,774
Long-term loans Subsidiaries Erawan Samui Company Limited Erawan Naka Company Limited Erawan Phuket Company Limited Erawan Chaophraya Company Limited Erawan Commercial Management Company Limited The Reserve Company Limited
Movements during the years ended 31 December 2011 and 2010 of loans to related parties were as follows: (Unit: in thousand Baht)
Loans to related parties
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Short-term loans Subsidiary At 1 January Increase Decrease At 31 December
-
-
-
184,861 (184,861)
-
-
-
-
Subsidiaries At 1 January Increase Decrease
-
-
1,080,774 348,218 (35,447)
745,746 457,451 (122,423)
At 31 December
-
-
1,393,545
1,080,774
Long-term loans
100 Notes to the financial statements
SUCCESS WITH INTEGRITY
(Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Trade accounts payable - related parties Subsidiaries Erawan Samui Company Limited Erawan Rajdamri Company Limited Erawan Hotel Public Company Limited Erawan Chaophraya Company Limited
-
-
10 125 281 543
257 30
-
-
959
287
-
-
309 45
23
-
-
354
23
Other payable - related party
Erawan Commercial Management Company Limited Erawan Chaophraya Company Limited
(Unit: % per annum)
Loans from a related party
Interest rate 2011
2010
5.48
4.53
(Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Long-term loans Subsidiary Erawan Rajdamri Company Limited
-
-
45,438
38,861
Notes to the financial statements
101
Movements during the years ended 31 December 2011 and 2010 of loans from related parties were as follows: (Unit: in thousand Baht)
Loans from a related party
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Short-term loans Subsidiary At 1 January Increase Decrease At 31 December
-
-
143,471 (143,471)
-
-
-
-
38,861 85,466 (78,889)
55,132 31,646 (47,917)
-
-
45,438
38,861
-
11,027 (11,027) -
Long-term loans Subsidiary At 1 January Increase Decrease At 31 December
6. Cash and cash equivalents (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Cash on hand Cash at banks Highly liquid short-term investments
8,499 236,298 205,399
7,559 194,741 18,084
3,183 130,199 7,329
3,684 90,223 -
Total
450,196
220,384
140,711
93,907
Cash and cash equivalents of the Group as at 31 December 2011 and 2010 were denominated in Thai Baht.
102 Notes to the financial statements
SUCCESS WITH INTEGRITY
7. Trade accounts receivable (Unit: in thousand Baht)
Note Related parties Other parties Total Less allowance for doubtful accounts Net Doubtful debts expenses (reversal) for the year
5
Consolidated financial statements 2010 2011 2,437 134,229 136,666 (2,272)
3,265 146,722 149,987 (1,941)
4,154 71,867 76,021 (1,318)
3,964 76,460 80,424 (1,216)
134,394
148,046
74,703
79,208
331
717
101
(914)
Aging analyses for trade accounts receivable were as follows:
(Unit: in thousand Baht)
Consolidated financial statements 2011 2010 Related parties Outstanding: Less than 3 months 3 - 6 months 6 - 12 months
Other parties Outstanding: Less than 3 months 3 - 6 months 6 - 12 months Over 12 months Less allowance for doubtful accounts
Net
Separate financial statements 2010 2011
Separate financial statements 2011 2010
2,430 5 2 2,437
3,265 3,265
4,147 5 2 4,154
3,964 3,964
126,337 7,009 815 68 134,229 (2,272) 131,957
141,574 4,127 949 72 146,722 (1,941) 144,781
69,252 1,732 815 68 71,867 (1,318) 70,549
73,482 1,957 949 72 76,460 (1,216) 75,244
134,394
148,046
74,703
79,208
Trade accounts receivable of the Group as at 31 December 2011 and 2010 were denominated in Thai Baht. Notes to the financial statements
103
8. Inventories (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Food and beverage Operating suppliess Real estate for sale Others
31,242 12,225 9,355
32,801 15,365 17,684 7,048
7,108 1,583 539
9,118 989 17,684 254
Total
52,822
72,898
9,230
28,045
9. Other current assets (Unit: in thousand Baht)
Note Other advances Prepaid expenses Other receivables Undue input value added tax Others Total
104 Notes to the financial statements
5 5
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
526 26,401 1,522 5,618 22,827
1,240 24,009 1,577 9,735 12,976
326 9,158 681 4,964 4,139
322 9,083 843 3,843 1,792
56,894
49,537
19,268
15,883
Total
72.59 95.77 99.99 99.99 99.99 99.99 99.99 -
72.59 95.77 99.99 99.99 99.99 99.99 99.99
99.99
2.00
119.50 71.00 450.00 550.00 330.00 7.50 1.00 -
119.50 71.00 450.00 550.00 330.00 7.50 1.00 -
819,710 68,000 451,291 582,001 376,858 300 1,000
2,301,160 2,299,160
2,000
819,710 68,000 451,291 582,001 376,858 300 1,000
2010
2011
2011
2010
Cost method
-
-
-
2011
2,000
819,710 68,000 451,291 582,001 376,858 300 1,000
2011
-
819,710 68,000 451,291 582,001 376,858 300 1,000
2010
- 2,301,160 2,299,160
-
-
2010
Impairment At cost - net
(Unit: in thousand Baht)
Separate financial statements Paid-up capital
(Unit: in million Baht)
-
-
-
17,350
-
17,350 -
Dividend income 2011 2010
During the first quarter of 2011, the Company invested in 99.99% of Erawan Commercial Management Company Limited as a subsidiary company.
Companyâ&#x20AC;&#x2122;s name Erawan Hotel Public Company Limited Erawan Chaophraya Company Limited Erawan Rajdamri Company Limited Erawan Phuket Company Limited Erawan Samui Company Limited Erawan Naka Company Limited The Reserve Company Limited Erawan Commercial Management Company Limited
Ownership Interest 2011 2010
(Unit: %)
Investments in subsidiaries as at 31 December 2011 and 2010, and dividend income from those investments for the years then ended were as follows:
10. Investments in subsidiaries
SUCCESS WITH INTEGRITY
Notes to the financial statements
105
106 Notes to the financial statements
48.00
48.00
1.00
1.00 338
2011
2011
338
2010
Cost method
2010
(Unit: thousand Baht)
338
2011
338
2010
Equity method
-
2011
-
2010
Impairment
Consolidated financial statements Paid-up capital
(Unit: in million Baht)
338
2011
338
2010
At equity - net
-
-
Dividend income 2011 2010
Associate Rajprasong Development Co., Ltd. 48.00
48.00
Ownership interest 2011 2010
(Unit: %)
1.00
1.00
338
338
2010
2011
2011
2010
Cost method
-
2011
-
2010
Impairment
338
2011
338
2010
At cost - net
(Unit: thousand Baht)
Separate financial statements Paid-up capital
(Unit: in million Baht)
-
-
Dividend income 2011 2010
During the year, the Company did not record its shares in the operating result of investments in associate in the consolidated financial statements because it found that the amount was immaterial.
Associate Rajprasong Development Co., Ltd.
Ownership interest 2011 2010
(Unit: %)
Investments in associate as at 31 December 2011 and 2010, and dividend income from the investment for the years then ended were as follows:
11. Investment in associate
SUCCESS WITH INTEGRITY
The following summarised financial information on associated company which have not been accounted for using the equity method but have not been adjusted for the percentage of ownership held by the Group: (Unit: %)
Ownership interest
2011 Rajprasong Development Co., Ltd.
2010 Rajprasong Development Co., Ltd.
(Unit: in thousand Baht)
Total assets
Total liabilities
Total revenues
Net loss
48.00
2,233
228
2,000
(482)
48.00
1,772
248
2,005
(477)
12. Investments in other related parties (Unit: %)
(Unit: in thousand Baht)
Equity interest
Related companies
Rajprasong Square Co., Ltd. The Asia Recovery 2 Fund Less allowance for change in value
2011
2010
23.29 0.26
23.29 0.17
Total (Unit: %)
Rajprasong Square Co., Ltd. The Asia Recovery 2 Fund Less allowance for change in value Total
206 2,784 (503)
206 2,942 (577)
2,487
2,571
(Unit: in thousand Baht)
Equity interest
Related companies
Consolidated financial statements 2011 2010
2011
2010
23.29 0.13
23.29 0.13
Separate financial statements 2011 2010 206 2,060 (353)
206 2,174 (405)
1,913
1,975
Notes to the financial statements
107
108 Notes to the financial statements 9,771,769 18,503 (2,032) 47,528 (1,047,230) 8,788,538
1,553,199 1,553,199
At 31 December 2010 and 1 January 2011 Additions Adjustments Transfers Disposals
At 31 December 2011
9,392,293 48,954 (1,138) 337,909 (6,249)
1,552,989 3,224 (3,014)
Building and improvements
Cost At 1 January 2010 Additions Adjustments Transfers Disposals
Land
13. Property, plant and equipment
2,111,695
2,079,911 36,003 1,443 22,428 (28,090)
2,009,405 33,731 (287) 62,091 (25,029)
Furniture, fixtures and equipment
41,612
35,475 7,953 2,718 (4,534)
33,864 2,968 (1,357)
Vehicles
236,409
230,081 1,027 13,961 (8,660)
215,494 6,916 7,671 -
Operating equipment
Consolidated financial statements
512,796
81,338 522,977 (3,152) (88,367) -
142,830 354,801 (5,216) (411,077) -
Assets under construction
13,244,249
13,751,773 586,463 (3,741) (1,732) (1,088,514)
13,346,875 450,594 (6,641) (3,406) (35,649)
Total
(Unit: in thousand Baht)
2,563,794 297,880 (181) (380,160) 2,481,333
-
At 31 December 2010 and 1 January 2011 Depreciation charge for the year Adjustments Disposals
At 31 December 2011
2,234,869 334,008 (12) (5,071)
-
Building and improvements
Depreciation At 1 January 2010 Depreciation charge for the year Adjustments Disposals
Land
1,585,323
1,369,333 239,604 187 (23,801)
1,156,399 235,641 (22,707)
Furniture, fixtures and equipment
22,543
19,175 7,407 (4,039)
14,499 5,969 (1,293)
Vehicles
-
-
-
Operating equipment
Consolidated financial statements
-
-
-
Assets under construction
4,089,199
3,952,302 544,891 6 (408,000)
3,405,767 575,618 (12) (29,071)
Total
(Unit: in thousand Baht)
SUCCESS WITH INTEGRITY
Notes to the financial statements
109
110 Notes to the financial statements
Transactions eliminated on consolidation
At 31 December 2011 Owned assets Assets under finance leases
Transactions eliminated on consolidation
At 31 December 2010 and 1 January 2011 Owned assets Assets under finance leases
Transactions eliminated on consolidation
Net book value At 1 January 2010 Owned assets Assets under finance leases
6,307,205 6,307,205
1,553,199
7,207,975
1,553,199
1,553,199 -
7,207,975 -
7,157,424
1,552,989
1,553,199 -
7,157,424 -
1,552,989 -
Land
Building and improvements
526,372
526,372 -
710,578
710,578 -
853,006
852,956 50
Furniture, fixtures and equipment
19,069
12,790 6,279
16,300
15,044 1,256
19,365
19,365 -
Vehicles
236,409
236,409 -
230,081
230,081 -
215,494
215,494 -
Operating equipment
Consolidated financial statements
512,796
512,796 -
81,338
81,338 -
142,830
142,830 -
Assets under construction
9,493,560
338,510
9,155,050
9,148,771 6,279
10,151,619
352,148
9,799,471
9,798,215 1,256
10,306,491
365,383
9,941,108
9,941,058 50
Total
(Unit: in thousand Baht)
-
32 32
Land
-
-
Building and improvements
-
-
Furniture, fixtures and equipment Vehicles
-
-
Operating equipment
-
-
3,413
4,264
Assets under construction
3,413
4,264
558,530
544,891 13,639
588,642
575,618 13,024
Total
The gross amount of the Groupâ&#x20AC;&#x2122;s fully depreciated plant and equipment that was still in use as at 31 December 2011 amounted to Baht 1,106 million (2010: Baht 924.7 million).
Finance costs capitalised Finance costs capitalised during 2010 Rates of interest capitalised during 2010 (MLR-1.50 % per annum) Finance costs capitalised during 2011 Rates of interest capitalised during 2011 (MLR-1.50 % per annum)
2011 Eliminated
Depreciation for the year 2010 Eliminated
Note
Consolidated financial statements
(Unit: in thousand Baht)
SUCCESS WITH INTEGRITY
Notes to the financial statements
111
112 Notes to the financial statements
-
At 31 December 2010 and 1 January 2011 Depreciation charge for the year Disposals
At 31 December 2011
1,234,550
At 31 December 2011 -
1,234,550 -
At 31 December 2010 and 1 January 2011 Additions Adjustments Transfers Disposals
Depreciation At 1 January 2010 Depreciation charge for the year Adjustments Disposals
1,237,563 (3,013)
Land
Cost At 1 January 2010 Additions Adjustments Transfers Disposals
Note
1,144,176
1,357,113 167,220 (380,157)
1,153,246 208,943 (12) (5,064)
4,736,969
5,775,824 7,695 675 (1,047,225)
5,683,183 36,067 (904) 63,712 (6,234)
Building and improvements
681,725
566,093 134,296 (18,664)
(14,928)
444,701 136,320
962,555
966,098 18,354 646 (22,543)
953,878 22,318 (287) 7,030 (16,841)
Furniture, fixtures and equipment
8,315
8,722 3,500 (3,907)
(1,246)
7,669 2,299
19,047
15,453 7,507 (3,913)
15,249 1,450 (1,246)
Vehicles
-
-
-
114,395
114,403 660 (668)
111,648 2,720 35 -
Operating equipment
Separate financial statements
-
-
-
478,289
68,502 414,261 (3,153) (1,321) -
63,712 80,809 (5,215) (70,804) -
Assets under construction
1,834,216
1,931,928 305,016 (402,728)
1,605,616 347,562 (12) (21,238)
7,545,805
8,174,830 448,477 (3,153) (1,074,349)
8,065,233 143,364 (6,406) (27) (27,334)
Total
(Unit: in thousand Baht)
At 31 December 2011 Owned assets Assets under finance leases
At 31 December 2010 and 1 January 2011 Owned assets Assets under finance leases
Net book value At 1 January 2010 Owned assets Assets under finance leases
3,592,793 3,592,793
1,234,550
4,418,711
1,234,550 1,234,550 -
4,418,711 -
4,529,937
1,237,563
1,234,550 -
4,529,937 -
Building and improvements
1,237,563 -
Land
280,830
280,830 -
400,005
400,005 -
509,177
509,127 50
Furniture, fixtures and equipment
10,732
4,453 6,279
6,731
5,475 1,256
7,580
7,580 -
Vehicles
114,395
114,395 -
114,403
114,403 -
111,648
111,648 -
Operating equipment
Separate financial statements
478,289
478,289 -
68,502
68,502 -
63,712
63,712 -
Assets under construction
5,711,589
5,705,310 6,279
6,242,902
6,241,646 1,256
6,459,617
6,459,567 50
Total
(Unit: in thousand Baht)
SUCCESS WITH INTEGRITY
Notes to the financial statements
113
114 Notes to the financial statements
32
32
-
-
-
-
Building and improvements
-
-
Furniture, fixtures and equipment Vehicles
-
-
Operating equipment
-
-
3,413
1,799
Assets under construction
3,413
1,799
Total
The gross amount of the Companyâ&#x20AC;&#x2122;s fully depreciated plant and equipment that was still in use as at 31 December 2011 amounted to Baht 431 million (2010: Baht 411.7 million).
Finance costs capitalised during 2011 Rates of interest capitalised during 2011 (MLR - 1.50 % per annum)
Finance costs capitalised Finance costs capitalised during 2010 Rates of interest capitalised during 2010 (MLR - 1.50 % per annum)
Note Land
Separate financial statements
(Unit: in thousand Baht)
SUCCESS WITH INTEGRITY
14. Land held for development (Unit: in thousand Baht)
Consolidated financial statements 2011 2010 Land cost Development expense Total
Separate financial statements 2011 2010
95,382 8,855
95,382 8,825
-
-
104,237
104,207
-
-
15. Leasehold rights for land and buildings (Unit: in thousand Baht)
Consolidated financial statements Leasehold rights for land
Leasehold rights for buildings
Cost At 1 January 2010 Additions Disposals Adjustment
1,021,781 150,000 5,237
1,210,828 3,279 (768) (1,483)
2,232,609 153,279 (768) 3,754
At 31 December 2010 and 1 January 2011 Additions Disposals
1,177,018 (191,540)
1,211,856 700 -
2,388,874 700 (191,540)
At 31 December 2011
985,478
1,212,556
2,198,034
Amortisation At 1 January 2010 Amortisation for the year Disposal Adjustment
301,833 26,875 1,998
212,858 47,884 (768) -
514,691 74,759 (768) 1,998
At 31 December 2010 and 1 January 2011 Amortisation for the year Disposal
330,706 19,887 (69,671)
259,974 48,285 -
590,680 68,172 (69,671)
At 31 December 2011
280,922
308,259
589,181
Total
Notes to the financial statements
115
(Unit: in thousand Baht)
Consolidated financial statements Leasehold rights for land Net book value At 1 January 2010 Eliminated
719,948
Leasehold rights for buildings 997,970
Total 1,717,918 (4,992) 1,712,926
At 31 December 2010 and 1 January 2011 Eliminated
846,312
951,882
1,798,194 (4,542) 1,793,652
At 31 December 2011 Eliminated
704,556
904,297
1,608,853 (4,091) 1,604,762 (Unit: in thousand Baht)
Separate financial statements Leasehold rights for land Cost At 1 January 2010 Additions At 31 December 2010 and 1 January 2011 Disposal 31 December 2011
116 Notes to the financial statements
Leasehold rights for buildings
Total
845,645 150,000
278,481 -
1,124,126 150,000
995,645 (191,540)
278,481 -
1,274,126 (191,540)
804,105
278,481
1,082,586
SUCCESS WITH INTEGRITY
(Unit: in thousand Baht)
Separate financial statements Leasehold rights for land
Leasehold rights for buildings
Total
Amortisation At 1 January 2010 Amortisation for the year
210,689 22,776
56,299 20,366
266,988 43,142
At 31 December 2010 and 1 January 2011 Amortisation for the year Disposal
233,465 15,612 (69,671)
76,665 20,366 -
310,130 35,978 (69,671)
31 December 2011
179,406
97,031
276,437
Net book value At 1 January 2010 At 31 December 2010 and 1 January 2011 At 31 December 2011
634,956 762,180 624,699
222,182 201,816 181,450
857,138 963,996 806,149 (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Amortisation for the year Less Capitalised amortisation Eliminated
68,172 (450)
74,759 (381) (450)
35,978 -
43,142 -
Amortisation included in statements of income
67,722
73,928
35,978
43,142
16. Sale of Ploenchit Center to property fund On 1 April 2011, the Company sold and transferred Ploenchit Center Building including fixtures and equipments and leasehold right for land where the building is located with remaining lease of approximately 13 years 10 months to Prime Office Leasehold Property Fund at the price of Baht 1,423.1 million. Costs of leasehold right for land, building, equipment, net other assets and selling expenses amounting to Baht 758.8 million. The net profit is included in the statement of comprehensive income of Baht 664.3 million.
Notes to the financial statements
117
17. Intangible assets (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Cost At 1 January Additions Transfers Disposals Adjustments
150,775 3,731 1,733 (8,946) -
143,189 5,115 3,322 (44) (807)
102,680 2,389 (8,946) -
99,233 3,556 25 (44) (90)
At 31 December
147,293
150,775
96,123
102,680
89,941 19,259 (8,390)
69,049 20,936 (44)
62,935 11,617 (8,390)
48,947 14,032 (44)
At 31 December
100,810
89,941
66,162
62,935
Net book value At 1 January At 31 December
60,834 46,483
74,140 60,834
39,745 29,961
50,286 39,745
Computer software
Amortisation At 1 January Amortisation charge for the year Disposals
18. Other non-current assets (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Advance payment Withholding tax deducted at source
59,194 34,866
45,647 29,542
33,903
28,656
Total
94,060
75,189
33,903
28,656
118 Notes to the financial statements
SUCCESS WITH INTEGRITY
19. Interest - Bearing liabilities (Unit: in thousand Baht)
Note Current Short-term loans from financial institutions secured Current portion of long-term loans from financial institutions secured Current portion of hire purchase payable
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
76,100
195,700
76,100
195,700
695,250 1,718
573,750 819
515,250 1,718
403,750 819
773,068
770,269
593,068
600,269
6,727,667
7,829,517
4,357,900
5,314,750
3,458
621
45,438 3,458
38,861 621
6,731,125
7,830,138
4,406,796
5,354,232
7,504,193
8,600,407
4,999,864
5,954,501
Non-current
Long-term loans from financial institutions secured Long-term loans from related parties unsecured Hire purchase payable
Total
5
The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities and hire purchase payable, as at 31 December were as follows: (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Within one year After one year but within five years After five years
771,350 4,323,000 2,404,667
769,450 4,192,250 3,637,267
591,350 3,255,938 1,147,400
599,450 3,151,111 2,202,500
Total
7,499,017
8,598,967
4,994,688
5,953,061
Notes to the financial statements
119
Under the loan agreements, the Group has to comply with certain covenants and restrictions e.g. the percentage of shareholding of the major shareholders, changes in directors, guarantees to loans of aval to promissory notes of any persons or any companies, dividend payments, merger or consolidation with any companies, and maintenance of certain financial ratios. During the year 2010, the Company and certain subsidiaries were approved by various financial institutions to extend the due date of principal loan repayment which fall due in 2010 to commence in 2011. In addition, the Company and certain subsidiaries were approved by those financial institutions to extend the principal loan repayment period for another 1 - 6 years. Secured interest-bearing liabilities as at 31 December were secured on the following assets: (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Property, plant and equipment - net Leasehold rights for land - net
7,886,399 686,942
8,611,172 677,546
4,891,501 624,698
5,541,237 612,180
Total
8,573,341
9,288,718
5,516,199
6,153,417
As at 31 December 2011 the Group and the Company had unutilised credit facilities of totalling Baht 1,011.3 million and Baht 900 million, respectively (2010: Baht 441.3 million and Baht 250 million, respectively).
20. Trade accounts payable (Unit: in thousand Baht)
Note Related parties Other parties Total
5
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
175,335
211,897
959 80,771
287 89,796
175,335
211,897
81,730
90,083
Trade accounts payable of the Group as at 31 December 2011 and 2010 were denominated entirely in Thai Baht.
120 Notes to the financial statements
SUCCESS WITH INTEGRITY
21. Other current liabilities (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Management, royalty, marketing and other fees payable - hotel business Retention Advances from customers Value added tax payable Accrued expenses Income tax payable Deposits received - hotel business Others
19,098 58,619 18,973 11,547 124,350 42,506 87,330 53,245
25,358 65,957 23,709 14,852 100,542 9,468 56,656 50,518
9,230 15,350 4,477 5,565 70,228 36,374 29,269
10,099 13,457 6,775 8,160 58,569 24,232 30,083
Total
415,668
347,060
170,493
151,375
22. Deferred income (Unit: in thousand Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Leasehold rights - building, service and equipment - other parties Less accumulated amortisation
28,000 (1,518)
56,720 (41,399)
28,000 (1,518)
56,720 (41,399)
Net book value
26,482
15,321
26,482
15,321
1,518
2,814
1,518
2,814
Amortisation included in statements of income for the year
Notes to the financial statements
121
23. Employee benef it obligations (Unit: in thousand Baht)
Consolidated financial statements
Separate financial statements
31 December 2011 31 December 2010 31 December 2011 31 December 2010 Statement of financial position obligations for: Long-term employee benefits
43,272 43,272
-
17,543 17,543
-
(Unit: in thousand Baht)
For the years ended 31 December Statement of comprehensive income charge: Long-term employee benefits
Consolidated financial statements
Separate financial statements
2011
2010
2011
2010
6,754
-
3,404
-
6,754
-
3,404
-
The Group adopted TAS 19 - Employee Benefits with effect from 1 January 2011; the effect on the financial statements is discussed in note 3 (d). The Group recorded the entire amount of the transitional obligation as at 1 January 2011, totaling Baht 39 million for the Group and Baht 16 million for the Company, as an adjustment to retained earnings as at 1 January 2011. Long-term employee benefits The Group operate defined benefit plans based on the requirement of Thai Labour Protection Act B.E. 2541 (1998) to provide retirement benefits to employees based on pensionable remuneration and length of service. Movement in the present value of the defined benefit obligations: For the years ended 31 December
Consolidated financial statements 2011
2010
(Unit: in thousand Baht)
Separate financial statements 2011
2010
Defined benefit obligations at 1 January Benefits paid Current service costs and interest Transferred to subsidiary
38,774 (2,256) 6,754 -
-
16,279 (1,832) 3,404 (308)
-
Employee benefit obligations at 31 December
43,272
-
17,543
-
122 Notes to the financial statements
SUCCESS WITH INTEGRITY
The expense is recognised in the following line items in the statement of comprehensive income:
(Unit: in thousand Baht)
Consolidated financial statements Separate financial statements
For the years ended 31 December
2011
2010
2011
2010
Cost of hotel operations and cost of rental of units in buildings and service Selling expenses Administrative expenses
(3,044) (410) (3,300)
-
(1,508) (73) (1,823)
-
Total
(6,754)
-
(3,404)
-
Principal actuarial assumptions at the reporting date:
(Unit: %)
Consolidated/Separate financial statements 31 December 2011 4.7 3.5 â&#x20AC;&#x201C; 5.0
Discount rate Future salary increases
Assumptions regarding future mortality are based on published statistics and mortality tables.
24. Share capital
(Unit: thousand shares / in thousand Baht)
2011
2010
Par value per share (in Baht)
Number
Amount
Number
Amount
At 1 January ordinary shares increase in shares capital
1 1
2,244,779 260,221
2,244,779 260,221
2,244,779 -
2,244,779 -
At 31 December ordinary shares
1
2,505,000
2,505,000
2,244,779
2,244,779
At 1 January ordinary shares
1
2,244,779
2,244,779
2,244,779
2,244,779
At 31 December ordinary shares
1
2,244,779
2,244,779
2,244,779
2,244,779
Authorised
Issued and paid-up
Notes to the financial statements
123
At the annual general meeting of the shareholders of the Company held on 26 April 2011, the shareholders approved the following matters; (a) The issuance of new warrants to existing shareholders not exceeding 224,477,900 units and the issuance of ordinary shares to reserve for the conversion of the warrants. (b) The issuance and offering of 35,743,099 ordinary shares to employees of the Group. (c) To increase the authorised share capital by issuing ordinary shares of not exceeding 260,220,999 shares at a par value of Baht 1 each to reserve for the conversion of warrants and for the rights to purchase ordinary shares, in the Company by the employees of the Group. (d) Dividend omission for the year 2010 as a result of loss from operation for the year 2010 of the Group. Increase in authorised shares capital The Company registered increased authorised share capital of Baht 260,220,999 with the Ministry of Commerce on 6 May 2011. Employee Stock Option Plan (ESOP) During the year 2011, the Company issued stock option plan of 32,093,099 share options for the Groupâ&#x20AC;&#x2122;s employees. The period of the plan shall not exceed 5 years from grant date on 10 June 2011. The offering shall be completed within 30 December 2015. The Company has recorded the approximate fair value of the rights granted through the plan based on the binomial model. The fair value was separately calculated into 4 vesting periods as follows: No. 1 2 3 4
Exercise period
Number of exercised share
1 January 2012 - 30 December 2015 1 January 2013 - 30 December 2015 1 January 2014 - 30 December 2015 1 January 2015 - 30 December 2015
10% of total allocated share 20% of total allocated share 30% of total allocated share 40% of total allocated share
Exercise price 2.90 3.00 3.10 3.20
Based on the assumptions, the share price of Baht 2.44 at grant date, volatility rate of 24.7%, 5-year term of plan and risk free interest rate of 3.75%, the average fair value of the stock options among the 4 periods was from Baht 0.42 to Baht 0.51 per unit. The Company recorded the fair value of Baht 4.92 million over the period that the employees become entitled to the options in the statements of comprehensive income for the year ended 31 December 2011 and in equity as at 31 December 2011. 124 Notes to the financial statements
SUCCESS WITH INTEGRITY
Warrant During the year 2011, the Company issued warrants to existing shareholders, with details as follows: Number of warrants Conversion ratio Exercise price Term of warrant
224,477,528 units The existing shareholders at the ratio of 10 ordinary shares per 1 unit of warrant Baht 2.80 2 years and 7 months (18 May 2011 - 17 December 2013)
25. Additional paid-in capital and reserve Share premium Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution. Reserves comprise: Appropriations of profit and/or retained earnings Legal reserve Section 116 of the Public Companies Act B.E. 2535 Section 116 requires that a public company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution. Other components of equity Currency translation differences Fair value changes in available-for-sale investments The fair value changes in available-for-sale investments account within equity comprises the cumulative net change in the fair value of available-for-sale investments until the investments are derecognised or impaired.
26. Segment reporting Segment information is presented in respect of the Group’s business and geographic segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. Inter-segment pricing is determined on mutually agreed terms. Notes to the financial statements
125
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Business segments The Group comprises the following main business segments: Segment 1 Segment 2
Building rental business Hotel business
Geographic segments Management considers that the Group operates in a single geographical area, namely in Thailand, and has, therefore, only one major geographical segment. Business segments results in the consolidated financial statements for the years ended 31 December 2011 and 2010 were as follows: (Unit: in million Baht) Building rental business
Hotel business
Eliminations
Total
2011
2010
2011
2010
2011
2010
2011
Revenues from external Inter - segment revenues
219 21
391 20
3,536 -
2,930 -
(21)
(20)
3,755 -
3,321 -
Total revenues
240
411
3,536
2,930
(21)
(20)
3,755
3,321
91
138
280
41
(13)
(13)
358
166
732 (6) (3) (91) (407) (53)
43 (7) (1) (80) (361) (20)
(39)
(15)
491
(275)
Segment profit Unallocated income and expenses: Other income Depreciation and amortisation Selling expenses Administrative expenses Finance costs Income tax Net profit attribute to non-controlling interests Profit (loss) for the year
126 Notes to the financial statements
2010
SUCCESS WITH INTEGRITY
Business segment financial position in the consolidated financial statements as at 31 December 2011 and 2010 were as follows: (Unit: in million Baht) Building rental business Inventories Property, plant and equipment Leasehold rights for land and buildings Land held for development Other assets
Hotel business
Unallocated assets
Eliminations
Total
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
-
-
53
55
-
18
-
-
53
73
21
712 9,103
9,070
68
55
302
315
9,494 10,152
181
326 1,494
1,547
-
-
(71)
(79)
1,604 104 983
Total assets
1,794 104 826
12,238 12,949 (Unit: in million Baht) Building rental business
Interest-bearing borrowings Account payable for land leasehold rights Other liabilities
Hotel business
Unallocated assets
2011
2010
2011
2010 2011 2010
-
475
8,631
8,976
307
-
180
180
180
-
Eliminations 2010
2011
2010
268 (1,439) (1,120)
7,499
8,599
180 789
360 717
8,468
9,676
-
2011
Total
-
-
Total liabilities
27. Other income (Unit: in thousand Baht) Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Income from property tax Gain from sale of fixed assets Others
2,789 549 55,271
7,834 286 29,993
2,708 253 51,800
7,704 201 27,905
Total
58,609
38,113
54,761
35,810
Notes to the financial statements
127
28. Selling expenses
(Unit: in thousand Baht) Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Marketing expenses Employee benefit expenses
164,605 86,138
155,611 58,471
112,406 31,022
101,798 16,643
Total
250,743
214,082
143,428
118,441
29. Administrative expenses
(Unit: in thousand Baht) Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
Employee benefit expenses Management and other fee Repair and maintenance expenses Others
306,825 173,061 70,838 260,082
269,640 168,299 39,358 224,785
194,699 99,615 27,831 93,755
183,829 95,201 21,328 74,954
Total
810,806
702,082
415,900
375,312
30. Employee benefit expenses
(Unit: in thousand Baht)
Consolidated financial statements 2011 2010 Management Salaries, wages and other benefits Employee stock option plan
Other employees Salaries, wages and other benefits Employee stock option plan Total
128 Notes to the financial statements
Separate financial statements 2011 2010
38,222 2,584
35,154 -
36,647 2,584
33,354 -
40,806
35,154
39,231
33,354
926,190 2,337 928,527
779,388 779,388
444,311 2,337 446,648
387,693 387,693
969,333
814,542
485,879
421,047
SUCCESS WITH INTEGRITY
Defined contribution plans The defined contribution plans comprise provident funds established by the Group for its employees. Membership to the funds is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 3 % to 10 % of their basic salaries and by the Group at rates ranging from 3 % to 10 % of the employeesâ&#x20AC;&#x2122; basic salaries. The provident funds are registered with the Ministry of Finance as juristic entities and are managed by a licensed Fund Managers.
31. Expenses by nature The financial statement includes an analysis of expenses by function. Expenses by nature disclosed in accordance with the requirements of various TFRS were as follow:
(Unit: in thousand Baht)
Salaries and wages and other employee benefits Costs of food and beverage Rental expenses
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
969,333 556,040 44,150
485,879 257,434 20,143
814,542 462,068 47,037
32. Finance costs
(Unit: in thousand Baht) Note
Interest expense: Related parties Financial institutions Amortisation of transaction costs capitalised Less: amounts included in the cost of qualifying assets: - capitalised as cost of assets under construction Net
421,047 231,104 31,326
5
13
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
410,095
363,477
3,134 267,765
1,874 245,080
410,095
1,549 365,026
270,899
31 246,985
(3,413)
(4,264)
(3,413)
(1,800)
406,682
360,762
267,486
245,185
Notes to the financial statements
129
33. Income tax expense Income tax reduction - current Royal Decree No. 387 B.E. 2544 dated 5 September 2001 grants companies listed on the Stock Exchange of Thailand a reduction in the corporate income tax rate from 30% to 25% for taxable profit not exceeding Baht 300 million for the five consecutive accounting periods beginning on or after enactment. Listed companies that received income tax reduction under this Royal Decree are also eligible to continue the period of tax reduction under Royal Decree No. 475 but not beyond the 2010 accounting period ending on or after 31 December 2010. The current tax expense in the consolidated and separate statements of comprehensive income is not equal the amount determined by applying the Thai corporation tax rate to the accounting profit for the year principally because: (a) unutilised tax losses brought forward from previous years have been utilised during the year to set-off against the current yearâ&#x20AC;&#x2122;s tax charge. (b) the different treatment for accounting and taxation purposes of certain items of income and expenses. (c) losses suffered by certain subsidiaries cannot be set-off against the profits of other subsidiaries for tax purposes.
34. Earnings (loss) per share Basic earnings (loss) per share The calculations of basic earnings (loss) per share for the years ended 31 December 2011 and 2010 were based on the profit (loss) for the year attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding during the years as follows: (Unit: in thousand Baht / thousand shares)
Profit (loss) attributable to ordinary shareholders of the Company (basic) Weighted average number of ordinary shares outstanding (basic) Earnings (loss) per share (basic) (in Baht)
130 Notes to the financial statements
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
491,325
(275,017)
708,757
15,342
2,244,779
2,244,779
2,244,779
2,244,779
0.22
(0.12)
0.32
0.01
SUCCESS WITH INTEGRITY
Diluted earnings per share The calculations of diluted earnings per share for the year ended 31 December 2011 were based on the profit for the year attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding during the periods after adjusting for the effects of all dilutive potential ordinary shares as follows: (Unit: in thousand Baht / thousand shares)
Profit attributable to ordinary shareholders of the Company (basic) Effect of warrant Effect of ESOP Profit attributable to ordinary shareholders of the Company (diluted) Weighted average number of ordinary shares outstanding (basic) Effect of warrant Effect of ESOP Weighted average number of ordinary shares outstanding (diluted) Loss per share (diluted) (in Baht)
Consolidated financial statements 2011 2010
Separate financial statements 2011 2010
491,325 -
-
708,757 -
-
491,325
-
708,757
-
2,244,779 -
-
2,244,779 -
-
2,244,779
-
2,244,779
-
0.22
-
0.32
-
35. Dividends At the annual general meeting of the shareholders of a subsidiary held on 5 April 2010, the shareholders approved the appropriation of dividends of Baht 0.30 per share, amounting to Baht 23.9 million. The dividend was paid to shareholders on 4 May 2010
Notes to the financial statements
131
36. Financial instruments Financial risk management policies The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial instruments for speculative or trading purposes. Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved. Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board monitors the return on capital, which the Group defines as result from operating activities divided by total shareholders’ equity, excluding non-controlling interests and also monitors the level of dividends to ordinary shareholders. Interest rate risk Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s operations and its cash flows because loan interest rates are mainly floating or fixed. The Group is primarily exposed to interest rate risk from its borrowings (Note 19). The Group mitigates this risk by ensuring that the majority of its borrowings are close to the market rate. The effective interest rates of loans receivable as at 31 December and the periods in which the loans receivable mature or re-price were as follows: (Unit: % per annum)
Effective interestrate
2011
Loans receivable - related parties
2010
Loans receivable - related parties
132 Notes to the financial statements
(Unit: in thousand Baht)
Within 1 year
Separate financial statements After 1 year but After within 5 years 5 years
Total
5.48
-
1,393,545
-
1,393,545
4.53
-
1,080,774
-
1,080,774
SUCCESS WITH INTEGRITY
The effective interest rates of interest-bearing financial liabilities as at 31 December and the periods in which those liabilities mature or re-price were as follows: (Unit: % per annum)
Effective interest rate
2011
Loans payable financial institutions
2010
Loans payable financial institutions
(Unit: in thousand Baht)
Consolidated financial statements After 1 year but After within 5 years 5 years
Within 1 year
Total
5, MLR-1.50, MLR2.00, 6-month fixed deposit rate + 2.00
771,350
5,501,500
1,226,167
7,499,017
5, MLR-1.50, MLR2.00, 6-month fixed deposit rate + 2.00
769,450
4,192,250
3,637,267
8,598,967
(Unit: % per annum)
Effective interest rate
(Unit: in thousand Baht)
Separate financial statements After 1 year but After within 5 years 5 years
Within 1 year
Total
2011
Loans payable related party Loans payable financial institutions
5.48 5, MLR-1.50, MLR2.00, 6-month fixed deposit rate + 2.00
Total
-
45,438
-
45,438
591,350
4,116,500
241,400
4,949,250
591,350
4,161,938
241,400
4,994,688
-
38,861
-
38,861
599,450
3,112,250
2,202,500
5,914,200
599,450
3,151,111
2,202,500
5,953,061
2010
Loans payable related party Loans payable financial institutions Total
4.53 5, MLR-1.50, MLR2.00, 6-month fixed deposit rate + 2.00
Notes to the financial statements
133
During the year 2011, the Company entered into interest rate swap contracts with a local financial institution for long-term loans in Baht with principal amounts of totaling Baht 2,512 million, which will swap interest at float interest rates to fixed interest rates as stipulated in the contracts. The terms of each contract are approximately 4 years, expiring on 31 December 2014. Interest rate swap contracts protect the Group from movements in interest rates. Any differential to be paid or received on an interest rate swap contract is recognised as a component of finance costs over the period of the contract. The fair values of interest rate swap contracts as at 31 December 2011 and 2010 are as follows: (Unit: in thousand Baht)
Consolidated and Separate financial statements Fair values
Interest rate swap contracts
31 December 2011
31 December 2010
15,656
16,479
Foreign currency risk The Group operates mainly in Baht currency. Accordingly, the Company does not have material foreign currency risk. Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Group as and when they fall due. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. At the reporting date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. However, due to the large number of parties comprising the Groupâ&#x20AC;&#x2122;s customer base, Management does not anticipate material losses from its debt collection. Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Groupâ&#x20AC;&#x2122;s operations and to mitigate the effects of fluctuations in cash flows. Determination of fair values For financial assets and liabilities which have short-term maturity and long-term loans which carrying interest approximate to the market rate, their carrying amounts in the balance sheet approximate their fair value. The Company and its subsidiaries do not consider the fair value of financial assets and liabilities which have fixed interest rate over 1 year which is not significant when compare to the total loan amount. 134 Notes to the financial statements
SUCCESS WITH INTEGRITY
A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an armâ&#x20AC;&#x2122;s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument. 37. Changes in estimates Starting from 1 January 2010, the Company and certain subsidiaries have changed estimated useful lives of their building and building improvements from 30 years to 40 years. The effect of the change on the financial statements of the Group and the Company for the year ended 2010 was to decrease loss for the period by Baht 20.09 million. (Separate financial statements: increase profit Baht 6.71 million) respectively, and loss per share decreased by Baht 0.008 per share (Separate financial statements: earnings per share increased by Baht 0.002 per share). 38. Commitments with non-related parties (Unit: in million Baht)
Consolidated financial statements 2011 2010
Capital commitments
Separate financial statements 2011 2010
603.1
305.1
541.8
248.2
Within one year After one year but within five years After five years
16.3 12.9 0.3
33.8 2.8 -
7.9 4.4 -
13.2 0.9 -
Total
29.5
36.6
12.3
14.1
Within one year After one year but within five years After five years
32.6 155.8 1,853.8
46.5 213.9 2,669.5
12.9 74.1 1,567.0
27.3 135.5 1,852.9
Total
2,042.2
2,929.9
1,654.0
2,015.7
750 23.2
750 30.1
750 14
750 21.5
773.2
780.1
764.0
771.5
Contracted but not provided
Operating lease commitments
Long-term lease commitments
Other commitments
Guarantee for bank credit facilities Bank guarantees Total
Notes to the financial statements
135
Long-term agreements The Company and its subsidiaries have entered into several long-term lease agreements and several service agreements with third parties, local companies, overseas companies, and Government organizations as follows: Long-term lease agreements Erawan Rajdamri Company Limited entered into a building lease agreement with a Government organisation covering a term of thirty years, commencing 1 July 1987, whereby the subsidiary has to pay monthly rental at the rate for each year as specified in the agreement. However, on 9 January 2006 the subsidiary entered into the Building Renovation and Land and Renovated Building Lease Agreement. Under the terms of this agreement, the subsidiary is to pay remuneration of Baht 70.0 million, which had already been paid to the lessor, and monthly rental at the rate stipulated for each year, for a term of thirty years commencing 1 January 2008. Erawan Hotel Public Company Limited has an agreement with a related company to lease land for a term of thirty years up to the year 2021, renewable for another twenty years. The subsidiary is to pay land rental charges of Baht 14.1 million per annum (2010: 10.9 million per annum), and the land rental charge may be adjusted every ten years. Upon the expiration of the agreement, the ownership of buildings and building improvements on the leased land, including equipment, furniture and tools necessary for hotel operations, will be transferred to the lessor. Erawan Ploenchit Company Limited entered into two lease agreements for the leasehold rights to land on which its hotel building and office building are situated from the lessor. Ownership of all structures constructed on the leased land, including that of equipment, furniture and tools which are vital to the project’s operation, will be transferred to the lessor upon the termination of the agreements. The subsidiary is to pay land rental charges of Baht 24.3 million (for the year 2005 - 2014) per annum and the land rental charge may be adjusted every ten years. The term of the leases is a period of 30 years up to the year 2025. Under the terms of the lease agreements, the subsidiary shall assume obligation to pay the following leasehold rights and deposits for rental. 1. Leasehold rights amounting to Baht 360.0 million. The subsidiary will pay this amount within the 30th year of the lease and is recorded as part of “Accounts payable for land leasehold rights” in the balance sheets. 2. Deposits for rental amounting to Baht 180.0 million. The subsidiary has made the full payment of the deposits, which will be refunded in the 30th year and are presented as part of “Deposits for lease of land, building and equipment” in the balance sheets. As at 24 December 2002, Erawan Ploenchit Company Limited entered into an agreement to lease part of the land on which the hotel building is located for extend the period of agreement which allows the lessee to extend the term of the lease upon expiration of the agreement. The subsidiary was granted an extension of the term of the lease by 20 years as from 24 January 2025 to 23 January 2045 and is to pay rental of Baht 216.1 million, which had already been paid to the lessor. 136 Notes to the financial statements
SUCCESS WITH INTEGRITY
In addition to the above mentioned rental, the subsidiary also has a commitment to make the following rental payments: Rental from 2025 to 2034 at the greater of Baht 44.7 million per annum or an amount determined based on an average of the consumer price index of Thailand. Rental from 2035 to 2045 at the greater of Baht 89.4 million per annum or an amount determined based on an average of the consumer price index of Thailand. On 1 January 2008, the subsidiary has transferred all commitments according to these agreements to the Company. On 1 April 2002, Erawan Ploenchit Company Limited entered into a land lease agreement with third party for periods of 22 years and 10 months up to the year 2025. Under the agreement, the subsidiary agrees to pay rental totaling Baht 32.8 million, in three installments. The subsidiary had already paid the first and second installments of Baht 23.2 million and the remaining Baht 9.6 million will be repaid in 2025. In addition, the subsidiary is to pay a land rental charge of Baht 0.8 million per annum for the first three years, and such charge is then to be adjusted every ten years. Upon the expiration of the agreement, the ownership of all structures erected on the leased land, together with equipment, furniture and tools which are vital to the operation, are to be transferred to the lessor. On 1 January 2008, the subsidiary has transferred all commitments according to this agreement to the Company. On 1 April 2011, the Company sold and transferred Ploenchit Center Building to Prime Office Leasehold Property Fund. Erawan Chaophraya Company Limited entered into an agreement to lease land from a foundation for the purpose of land development and building construction. Under the terms of the agreement, the subsidiary is to pay rental charges of Baht 100,000 per month commencing 1 November 2004, and the rental charge may be adjusted every 10 years. The term of the lease is a period of 30 years up to the year 2034. The agreement is renewable upon its termination. In this regard, the subsidiary will have to give notice of its intention in writing to the lessor at least 1 year, and not more than 2 years in advance. Ownership of buildings and all structures constructed on the leased land will be transferred to the lessor upon the termination of the agreement. On 9 June 2006, the Company entered into a land lease agreement with an unrelated party for a period of 30 years up to the year 2038. Under the terms of this agreement, the Company is to pay lease remuneration of Baht 25.0 million. The Company had already paid this remuneration. In addition, the Company is to pay a land rental charge of Baht 1.2 million per annum for the first three years, and such charge is then to be adjusted every 3 years. Upon the expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred to the lessor. On 29 March 2007, the Company entered into a land lease agreement with an unrelated party for a period of 30 years up to the year 2039. Under the terms of this agreement, the Company is to pay lease remuneration of Baht 53.0 million. The Company had already paid this remuneration. In addition, the Company is to pay a land rental charge of Baht 0.4 million per annum for the first three years, and such charge is then to be adjusted every 3 years. Upon the expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred to the lessor. Notes to the financial statements
137
On 19 March 2010, the Company entered into a land lease agreement with 2 local companies for a period of 30 years up to the year 2043. Under the term of this agreement, the Company is to pay lease remuneration of Baht 150.0 million. The Company had already paid this remuneration. Upon the expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred to the lessor. Hotel management agreements On 24 February 1988, Erawan Hotel Public Company Limited entered into agreements with various companies in the Hyatt International Corporation Limited Group (HYATT) whereby HYATT will provide necessary hotel construction and management services to the subsidiary. Under the terms of the agreements, the subsidiary is committed to pay a management fee, license fee, and a share of marketing expenses to HYATT, at the rates indicated in the agreements. The term of the management agreement is for twenty years, counting from commencement of hotel operations, to be extended for at least 10 years, dependent upon certain conditions as specified in the agreement. On 29 October 2010, Erawan Hotel Public Company Limited entered into amendment agreement with Hyatt to amend certain conditions in the agreement. The subsidiary agreed to extend the term of the management agreement for another 9.5 years and extended for at least 10 years, dependent upon certain conditions as specified in the agreement. On 3 February 1994, Erawan Ploenchit Company Limited entered into an agreement with Marriott Worldwide Corporation Group (“Marriott”) to appoint the Marriott as management of the subsidiary’s hotel. The subsidiary also made agreements with Marriott relating to the hotel operations. Under the terms of the agreements, the subsidiary is committed to pay remuneration to Marriott at the rates, terms and basis specified in the agreements. The hotel management agreement will be terminated on 31 December 2032. On 1 January 2008, the subsidiary transferred all commitments under these agreements to the Company. On 4 July 2005, Erawan Rajdamri Company Limited and Erawan Samui Company Limited entered into management agreements with Marriott Group (“Marriott”), to appoint the Marriott to manage the subsidiaries’ hotel as a standardised Courtyard by Marriott and Renaissance hotel. Under the terms of the agreements, the subsidiaries are committed to pay remuneration to Marriott in accordance with the rates, terms and basis specified in the agreements. The terms of the hotel management agreements is to be for 30 years, counting from commencement of hotel operations, and is to be extendible for a further period of at least 10 years, dependent upon the fulfillment of certain conditions specified in the agreements. In December 2005, the Company entered into agreement with Intercontinental Hotels Group to manage hotel under the brand Holiday Inn which located at Pattaya. Under the term of the agreements, the Company is committed to pay remuneration in accordance with the rates, terms and basis specifies in the agreements. The terms of the hotel management agreement is to be for 15 years, counting from commencement of hotel operations, and is to be extendible for a further period of at least 5 years, dependent upon the fulfillment of certain as conditions specified in the agreements. 138 Notes to the financial statements
SUCCESS WITH INTEGRITY
During June 2006 to March 2008, the Company and Erawan Chaopraya Company Limited entered into agreements with Accor Group to manage 10 hotels of the Company and a subsidiary under the brand ibis which located in Thailand. Under the term of the agreements, the Company and a subsidiary are committed to pay remuneration in accordance with the rates, terms and basis specifies in the agreements. The terms of the hotel management agreement is to be for 15 years, counting from commencement of hotel operations, and is to be extendible for a further period of at least 5 years, dependent upon the fulfillment of certain conditions specified in the agreements. On 1 July 2009, the contract was extended from 15 to 20 years. A subsidiary, Erawan Phuket Company Limited agreed with the group of Six Senses Company in termination of their management services agreements in July 2011 and entered into management services agreements with the group of Starwood that will provide resort management services to the subsidiary under the terms of the agreements. The subsidiary is committed to pay management fees at the rates indicated in the agreements. The agreements will be expired in December 2032 with an option to extend for further period, dependent upon certain as conditions specified in the agreements.
39. Contingent liabilities Litigations and dispute a) During the year 2008, a customer, who had rented a rental building, sued the Company for the return of a deposit for the lease of a building, which the Company had deducted against overdue payments for electricity amounting to approximately Baht 1.3 million. On 28 December 2010, the first instance court had dismissed the case. At present, the case is in the process of appeal court. However, the Company expects that there will be no significant impact to the Company as a result of the case. b) In 2009, a subsidiary submitted a statement of claim to the Alternative Dispute Resolution Office, Arbitration Institute to consider the dispute with a contractor to pay for compensation arising from al leged breach of a construction contract. The contractor submitted a statement of defense and counter claim to the Arbitration Institute as well. The dispute is in the arbitration process and has not been finalised. Consequently, the subsidiary cannot estimate the impact as a result of the dispute.
40. Thai Financial Reporting Standards (TFRS) not yet adopted The Group has not adopted the following new and revised TFRS that have been issued as of the reporting date but are not yet effective. The new and revised TFRS are expected to become effective for annual financial periods beginning on or after 1 January in the year indicated in the following table. TFRS TAS 12 TAS 21 (revised 2009)
Topic Income Taxes The Effects of Changes in Foreign Exchange Rates
Year effective 2013 2013
Management is presently considering the potential impact of adopting and initially applying these new and revised TFRS on the consolidated and separate financial statements. Notes to the financial statements
139
41. Reclassification of accounts Certain accounts in the 2010 financial statements have been reclassified to conform to the presentation in the 2011 financial statements. These reclassifications have principally been made following changes in accounting policies consequent to the adoption of new or revised TFRS as disclosed in note 3. Other significant reclassifications were as follows: (Unit: in thousand Baht)
2010 Consolidated financial statements Before Reclass. After reclass. reclass. Statement of financial position Property, plant and equipment Land held for development Other current assets Other non-current assets Other current liabilities
10,255,826 95,184 30,703 (348,221)
Separate financial statements Before Reclass. After reclass. reclass.
(104,207) 10,151,619 6,242,902 104,207 104,207 (45,647) 49,537 15,883 44,486 75,189 28,656 1,161 (347,060) (151,375) -
Statement of comprehensive income Administrative expenses Director remuneration
666,928 35,154
35,154 (35,154) -
140 Notes to the financial statements
- 6,242,902 15,883 28,656 - (151,375) -
702,082 -
341,958 33,354
33,354 (33,354) -
375,312 -
SUCCESS WITH INTEGRITY
Corporate Information The Erawan Group Public Company Limited
The Erawan Group Public Company Limited Registration No. 0107537001943 Head Office Ploenchit Center, 6th Floor 2 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 Branch 1 Erawan Bangkok, 494 Ploenchit Road, Kwang Lumpini, Khet Phathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2250 7777 Fax: 66 (0) 2250 7788 Branch 2 JW Marriott Hotel Bangkok, 4 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2656 7700 Fax: 66 (0) 2656 9831 Branch 3 ibis Patong Phuket, 10 Chalermphrakiat Road, Patong, Kata, Phuket 83150 Thailand Telephone: 66 (0) 7630 3888 Fax: 66 (0) 7630 3889 Branch 4 ibis Pattaya, 463/79 Pattaya Sai 2 Road, Nongprue, Bang Lamung, Chon Buri 20150 Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189 Branch 5 ibis Samui Bophut 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320 Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889
Branch 6 ibis Bangkok Sathorn, 29/9 Soi Ngam Duphli, Rama IV Road, Kwang Thung Mahamek, Khet Sathorn, Bangkok 10120 Thailand Telephone: 66 (0) 2610 5188 Fax: 66 (0) 2610 5189 Branch 7 ibis Bangkok Nana, 41 Soi Sukhumvit 4, Sukhumvit Road, Kwang KlongToey, Khet KlongToey, Bangkok 10110 Thailand Telephone: 66 (0) 2667 5888 Fax: 66 (0) 2667 5889 Branch 8 Holiday Inn Pattaya, 463/68 Pattaya Sai 1 Road, Nongprue, Bang Lamung, Chon Buri 20150 Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556 Branch 9 ibis Phuket Kata, 88/8 Kata Road, Karon, Muang Phuket Phuket 83100 Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489 Branch 10 ibis Hua-Hin, 73/5 Moobaan Nongkae, Hua-Hin Prachuap Khirikhan 77110 Thailand Telephone: 66 (0) 3261 0388 Fax: 66 (0) 3261 0389 Home Page www.TheErawan.com
Corporate Information
141
Type of Business
Invest and develop hotel properties strategically located to match travelersâ&#x20AC;&#x2122; different demand.
Companyâ&#x20AC;&#x2122;s Capital as at 31 December 2011 Registered Capital 2,505,000,000 Baht : 2,505,000,000 ordinary shares at par value 1 Baht/share. Paid-Up Capital 2,244,779,001 Baht : 2,244,779,001 ordinary shares at par value 1 Baht/share. Other References Registrar of Ordinary Shares
Thailand Securities Depository Co., Ltd. No. 62 Rachadapisek Road, Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2359 1200-02 Fax: 66 (0) 2359 1259
Auditor
Mr. Charoen Phosamritlert Certificate Public Accountant (Thailand) No. 4068
Ms. Vannaporn Jongperadechanon Certificate Public Accountant (Thailand) No. 4098
Mr. Vichien Thamtrakul Certificate Public Accountant (Thailand) No. 3183
KPMG Phoomchai Audit Ltd. 48th Floor, Empire Tower 195 South Sathorn Road, Bangkok 10120 Thailand Telephone: 66 (0) 2677 2000 Fax: 66 (0) 2677 2222
Corporate Information 142
SUCCESS WITH INTEGRITY
Head Office The Erawan Group Public Company Limited
6 Floor, Ploenchit Center, 2 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 www.TheErawan.com th
Hotel Business Grand Hyatt Erawan Bangkok Hotel 494 Ploenchit Road, Pathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2254 1234 Fax: 66 (0) 2254 6267 www.bangkok.grand.hyatt.com JW Marriott Hotel Bangkok 4 Sukhumvit Road, Soi 2, Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2656 7700 Fax: 66 (0) 2656 7711 www.marriott.com/bkkdt
Renaissance Koh Samui Resort and Spa 208/1 Moo 4, Maret, Laem Nan Beach, Koh Samui, Suratthani 84310 Thailand Telephone: 66 (0) 7742 9300 Fax: 66 (0) 7742 9333 www.marroitt.com/usmbr The Naka Island, a Luxury Collection Resort and Spa, Phuket 32 Moo 5, Paklok, Thalang, Phuket 83110 Thailand Telephone: 66 (0) 7637 1400 Fax: 66 (0) 7637 1401 www.nakaislandphuket.com
Courtyard by Marriott Bangkok 155/1 Soi Mahadlekluang 1, Rajdamri Road, Bangkok 10330 Thailand Telephone: 66 (0) 2690 1888 Fax: 66 (0) 2690 1899 www.courtyard.com/bkkcy Holiday Inn Pattaya 463/68 Pattaya Sai 1 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556 www.holidayinn.com/pattaya ibis Patong Phuket 10 Chalermphrakiat Road, Patong, Katu, Phuket 83150 Thailand Telephone: 66 (0) 7630 3888 Fax: 66 (0) 7630 3889 www.ibishotel.com ibis Pattaya 463/79 Pattaya Sai 2 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189 www.ibishotel.com ibis Samui Bophut 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320 Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889 www.ibishotel.com
Corporate Information
143
ibis Bangkok Sathorn 29/9 Soi Ngam Duphli, Rama IV Road, Kwang Thung Mahamek, Khet Sathorn, Bangkok 10120 Thailand Telephone: 66 (0) 2610 5188 Fax: 66 (0) 2610 5189 www.ibishotel.com ibis Bangkok Nana 41 Sukhumvit Soi 4, Sukhumvit Road, Kwang Kloengteoy, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2667 5888 Fax: 66 (0) 2667 5889 www.ibishotel.com ibis Phuket Kata 88/8 Kata Road, Karon, Muang Phuket, Phuket 83100 Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489 www.ibishotel.com
144 Corporate Information
ibis Bangkok Riverside 27 Soi Charoennakorn 17, Charoennakorn Road, Banglamphulang, Klongsan, Bangkok 10600 Thailand Telephone: 66 (0) 2805 9888 Fax: 66 (0) 2805 9889 www.ibishotel.com ibis Hua-Hin 73/15 Moobaan Nongkae, Hua-Hin Prachuap Khirikhan 77110 Thailand Telephone: 66 (0) 3261 0388 Fax: 66 (0) 3261 0389 www.ibishotel.com
Rental Property Erawan Bangkok
494 Ploenchit Road, Pathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2250 7777 Fax: 66 (0) 2250 7788 www.erawanbangkok.com
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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