Annual Report 2009
The Erawan Group Public Company Limited The Erawan Group Public Company Limited
6th Floor, Ploenchit Center, 2 Sukhumvit Road, Klongtoey, Bangkok 10110, Thailand Tel. : 66 (0) 2257 4588 Fax : 66 (0) 2257 4577 Reg. No. 0107537001943 www.TheErawan.com
Annual Report 2009
The Erawan Group Public Company Limited
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1 2
3
6
5 7
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10 11 12
1. Amphawa Floating Market, Samut Songkhram 2. Bang Phli Old Market, Samut Prakan 3. Sam Chuk 100 Years Old Market, Suphan Buri
4. Jet Samian Market, Ratchaburi 5. Taling Chan Floating Market, Bangkok 6. Ang Sila Old Market, Chon Buri
Designed by Plan Grafik Tel. : 0 2237 0080 # 300
12 Destinations of Traditional Thai Market
1. ตลาดน้ำอัมพวา จ.สมุทรสงคราม 2. ตลาดโบราณบางพลี จ.สมุทรปราการ 3. ตลาดร้อยปีสามชุก จ.สุพรรณบุรี
4. ตลาดเจ็ดเสมียน จ.ราชบุรี 5. ตลาดน้ำตลิ่งชัน กรุงเทพมหานคร 6. ตลาดเก่าอ่างศิลา จ.ชลบุรี 7. กาดกองต้า จ.ลำปาง
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“Suc c e ss wit h Int e g r i ty”
The Erawan would like to depict the uniqueness of Thai history and way of life through these 12 markets.
7. Kadgongta, Lampang 8. Nang Loeng Market, Bangkok 9. China Town, Bangkok
10. Takua Pa Old Town Market, Phang-nga 11. Klong Suan 100 Year Market, Samut Prakan 12. Ban Mai Market, Chachoengsao The Erawan Group Public Company Limited
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Contents
IN REVIEW ABOUT ERAWAN BUSINESS OVERVIEW GOOD CORPORATE GOVERNANCE APPENDICES
Annual Report 2009
Vision Mission and Core Values Our Business Strategy Financial Highlights Hotel and Resorts Portfolio Chairman Review President and Chief Executive Officer Review CFO’s Report Report of the Audit Committee to Shareholder Report of the Board’s Responsibility in the Financial Statements
004 005 008 010 011 012 014 025 026
Corporate Profile Properties in Operation Properties under Development Capital Structure and Management Shareholding of the Board of Directors and Management
028 030 034 035 043
Hotel Industry Rental Property Risk Factors
045 047 048
Corporate Governance Policy Remuneration of the Board of Directors and Management Corporate Social Responsibility Internal Control Connected Transactions
051 060 061 068 070
Audit Report of Certified Public Accountant Audit Fee Financial Statements Corporate Information
073 074 075 142
03
“Suc c e ss wit h Int e g r i ty”
IN REVIEW
Six Senses Destination Spa Phuket
The Erawan Group Public Company Limited
004 04
VISION
To be one of Thailand’s leading hotel and resort developers.
MISSION
To develop a well – diversified portfolio of hotels and resorts that fulfills diverse
customers’ needs while continuing to create values to all stakeholders
as well as Thailand’s tourism as a whole.
Core Values “SPICE”
• System: “Systematic management approach to enhance efficiency as well as to lessen reliance on individuals” • People: “Competent workforce with dedication to further learning and continual improvement” • Information: “Accurate, adequate, and up-to-date database for the purpose of management and decision-making” • Culture: “Sound corporate culture to support sustainable growth” • Environment: “Being a good, responsible corporate citizen by taking part in activities that promote community and environment”
Annual Report 2009
005 05
Our Business Strategy “Suc c e ss wit h Int e g r i ty”
The Erawan operate on three core business strategies as follows: 1. Maximizing value through effective management of current assets. 2. Developing a well-diversified hotel portfolio to meet diverse customers’ needs which yield diversified risk
and returns. 3. Ensuring stability and sustainable growth of our organization through development of systems, core
competencies, database, and core corporate culture.
Hotels
74%
100%
100%
100%
100%
100%
100%
Offices Building and Retail Shops
100%
100%
The Erawan Group Public Company Limited
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12 Destinations of Thai Hospitality
1 2
3
Annual Report 2009
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6
5
7
8
Bangkok
9 10
11 12
Pattaya
1. Grand Hyatt Erawan Bangkok Hotel 6. Holiday Inn Pattaya 2. Courtyard by Marriott Bangkok Hotel 7. ibis Pattaya 3. JW Marriott Bangkok Hotel 4. ibis Bangkok Nana 5. ibis Bangkok Sathorn
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“Suc c e ss wit h Int e g r i ty”
Samui
8. Renaissance Koh Samui Resort and Spa 9. ibis Samui Bophut
Phuket
10. Six Senses Destination Spa Phuket 11. ibis Phuket Patong 12. ibis Phuket Kata
The Erawan Group Public Company Limited
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Financial Highlights
(Unit: Thousand Baht)
Description 2007 Revenues from Operations 3,194,350 Total Revenues 3,391,397 Gross Profit 1,833,994 EBITDA 1,010,823 Net Profit (Loss) 401,921 Total Assets 10,255,349 Total Liabilities 6,504,816 Total Shareholders’ Equity 3,750,534 Equity Attributable to Company’s Shareholders 3,649,392 Paid-up Share Capital 2,214,574 Number of Paid-up Shares (Thousand shares) 2,214,574 Par Value Per Share (Baht) 1 Earning Per Share (Baht) 0.2 Dividend Per Share (Baht) 0.06 Book Value Per Share (Baht) 1.65 Significant Financial Ratio Current Ratio (Times) 0.22 Quick Ratio (Times) 0.1 Liquidity Ratio (Cash Flow Basis) (Times) 0.34 Gross Profit Ratio 57.41% Net Profit Margin 11.85% Return on Total Assets 4.24% Return to Equity 12.47% Debt to Equity Ratio (Times) 1.73 Interest Bearing Debts to Equity Ratio (Times) 1.37 Interest Coverage Ratio (Times) 3.42
Annual Report 2009
2008
2009
3,375,977 3,412,960 1,921,298 974,030 78,328
3,149,033 3,191,623 1,658,132 740,401 -229,411
12,630,098 8,871,685 3,758,413 3,657,970 2,244,779 2,244,779 1 0.04 0.01 1.63
13,288,817 9,749,858 3,538,959 3,406,397 2,244,779 2,244,779 1 -0.1 - 1.52
0.41 0.23 0.33 56.91% 2.30% 0.68% 2.14% 2.36 2.06 3.12
0.52 0.27 0.38 52.66% n/a n/a n/a 2.76 2.42 2.38
09 009
“Suc c e ss wit h Int e g r i ty”
Baht Million Net Profit
EBITDA
Revenue
3,149
3,376
2,858
3,500
3,194
3,331
4,000
3,000
2,500
402 2007
740
974
410 2006
78
258
500
2008
1,000
1,011
897
1,153
1,500
2007
2,000
2009
2008
2007
2006
2005
2009
2006
2005
2009
2008
2005
(229)
0
The Erawan Group Public Company Limited
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Hotel and Resorts Portfolio
Renaissance Koh Samui Resort and Spa ibis Samui Bophut
Grand Hyatt Erawan Bangkok
ibis Bangkok Nana
Courtyard by Marriott Bangkok
ibis Bangkok Sathorn
JW Marriott Bangkok
ibis Bangkok Riverside*
ibis Krabi* ibis Sriracha*
Six Senses Destination Spa Phuket ibis Phuket Kata
ibis Pattaya
Holiday Inn Pattaya
ibis Phuket Patong
ibis Hua-Hin* * Properties under Development รายงานประจำปี Annual Report 2009 2552
011
Chairman Review “Suc c e ss wit h Int e g r i ty”
The world’s economic slowdown, Thailand’s political uncertainties and the H1N1 influenza undoubtedly led to the adverse effect of the Thai tourism industry in 2009. For The Erawan, thanks to our risk management programs implemented since late 2008, we practically managed through the crisis although we did suffer from operating loss. This was certainly a result of an effective collaboration between our management and Board of Directors.
More importantly, this would not have been achieved without solid support from all stakeholders including our suppliers, our hotel management partners, our lenders and our employees, and our investors’ patience and understanding. Despite on-going events, we remain committed to strengthen our fundamental and enhance our development for sustainable growth. Supervision mechanisms were essentially based on the principle of corporate governance.
We committed to do our business on a transparency basis as well as to adequately, openly and regularly disclose relevant information on a timely basis. As a result, in 2009, The Erawan received the highest ranking, “Excellence”, from the survey of the Corporate Governance Report of Thai Listed Companies 2009 as evaluated by the Thai Institute of Directors. We were also one of the three listed companies with market capitalization of no more than Baht 10 billion in Group 1 that was nominated for the IR Excellence Award from the Stock Exchange of Thailand.
Last but not least, our annual general meeting of shareholders was rated “Excellence” in terms of quality assessment. We would like to express our deep appreciation to everyone who has supported us through the difficult times in 2009. We intend to continue developing our organization for the benefit of our shareholders and all stakeholders and we strive to be a good corporate citizen of a society we call home. Board of the Year for Distinctive Practices 2006/2007 Mr. Prakit Pradipasen Excellent CG Report 2009 Chairman of the Board of Directors The Erawan Group Public Company Limited
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President and Chief Executive Officer Review
2009 was indeed a year of test – the test of strength of Thailand’s tourism industry and hotel business.
All negative events ranging from the world’s economic crisis to political instability started since late 2008 and the H1N1 epidemic influenza inevitably affected our business. For The Erawan Group (“The Erawan”), we opened eight hotels as planned over of the past 18 months starting from mid 2008 as part of our Phase I expansion plan set forth 4 years ago to become Thailand’s leading hotel investment group. The said industry downturn led to a 20 percent reduction in revenues from our hotels operating before 2008 while those from newly-opened hotels failed to meet their targets. As a result, we incurred a net loss of Baht 229 million for 2009. Nevertheless, this did not cause us financial difficulties as we still registered nearly Baht 800 million of EBITDA which sufficiently cover our fixed obligations for the year. (More details of our financial performances in the CFO’s Report) Despite all the said unusual events, we continued to receive strong support from financial institutions in developing our hotels. In 2009,
we opened three new hotels including a 200-room ibis Bangkok Nana in Q1; a 367-room Holiday Inn Pattaya and
a 258-room ibis Phuket Kata in Q4. We now own 12 hotels with total of 3,089 rooms in Thailand’s major destinations which can accommodate a wide range of customers from luxury to economy segment and have become one of
the hotel owners with the largest number of rooms offered in Thailand. Our strategy set forth through the Phase I expansion aims not only to generate revenues and assets growth but also to diversify our risk that may incur from a particular market at different time. We experienced that despite difficulties during the past year, our new hotels under the Phase I expansion plan managed to contribute approximately 24 percent incomes to total revenues. As a result, our total revenues declined 7 percent only from
the previous year. With regard to project management, we successfully complete all new hotels with brand standards and lower than expected investments. We have so far saved more than Baht 400 million investment budget or approximately 6 percent of the total investment. As a result, our expected return of investment is still more or less closed to the original target we set for the project even though the hotel revenues during their ramp up periods did not reach the expected level.
Annual Report 2009
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President and Chief Executive Officer Review
“Suc c e ss wit h Int e g r i ty”
We believe we were able to get through the industry crisis this time and several other incidents in the past because of our well-prepared risk management plans as well as our ability to quickly adjust ourselves to cope with the situation. This included not only a timely investment readjustment of new projects and financial obligations rearranging but also an on-going review of cost reduction in personnel and operation expenses. In addition, it has been our intention to always restore and modernize our existing assets to increase our competitiveness, continue to enhance our corporation by upgrading our operating systems and human resources, build database to better serve decision-making and promote our corporate culture, all of which is for a sustainable growth. We commit to manage our business under the principle of good corporate governance and to raise corporate social responsibility (CSR) awareness to ensure that it is actually implemented among staff of all levels so that our interactions with all stakeholders will be in line with what we have set. (More details in Corporate Social Responsibility) To ascertain
the results, we regularly conduct a survey of stakeholders to improve our operations and practices. Such surveys have been applied as one of the important factors to determine annual remunerations of our employees at all levels. We remain confident in Thailand’s tourism competitiveness in the long run. Recovery of tourists’ arrivals since Q3 and particularly in Q4 once again demonstrated the resilience of the country’s tourism industry despite internal and external difficulties. Furthermore, Asia Pacific, in particular Southeast Asia, continues to be the region which international tourism organizations expect to see a higher growth rate than any other regions in the world.
We therefore strongly believe that all 12 hotels of The Erawan will respond well to the needs of a diverse mix of
the customers. This will not only benefit our shareholders and stakeholders but also strengthen the standard of Thailand’s hotel industry. Mr. Kasama Punyagupta President and Chief Executive Officer The Erawan Group Public Company Limited
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CFO’s Report
(A) 2009 Profit & Loss
Overview Thailand faced with number of turbulences over the year from internal political conflicts to the effects of the economic downturn which spread through every part of the world since late 2008. Knowing that we would face with such a challenging market environment in 2009, we implemented various risk management action plans from operating cost-savings at property level which can be timely adjusted to deal with different market scenarios at different time to an execution of various financial measures at the company level to prepare for the worst including prioritising capital expenditure and rearranging loan repayment which reduce our debt obligation in 2009 to only the interest charges and no long term loan principal repayments with no penalty. As such, repayment amounts for 2009 and 2010 were reduced by almost Baht 1 billion. Key financial covenants were also waived or relaxed to further mitigate financial risks. Having these counter measures put in place since before the end of 2008 allowed us to focus on business strategy for 2009 which is no doubt a challenging year for every industry. On demand side, Thailand tourism industry gradually picked up from its dip in Dec-08 with a rebound of tourist arrivals since January this year. Though not back to normal or near the level our hotels experienced during the good years, an increasing occupancy and revenue per available room (“RevPar”) on a month-on-month (“m-m”) basis during the first three months of this year represented a good sign of recovery and in line with pattern of recovery we experienced through several incidents in the past which demands progressively returned within 4 - 6 weeks.
Such promising demand recovery was however put on the brakes during the second quarter when the internal political conflicts led to violence in mid-April followed by concerns over the spread of H1N1 influenza across many countries in the world in early May which was certainly an unexpected factor. As political situations positively developed and the world learns how to handle H1N1 on everyday life, we saw demand picked up again in the third quarter and continued through the last quarter of the year. International tourist arrivals at Suvarnabhumi International Airport which is the main gate to Thailand started to show year-on-year (“y-y”) growth from September through the year end and Thailand was able to maintain total tourist arrivals at 14 millions level in 2009 despite the aforementioned hiccup and global economic downturn. Business operation wise, our focus has been on maximising top line while cost-savings initiatives remained in tact. The benefits from our hotel diversification strategy set out 4 years ago have become more visible under these market difficulties. In general, our midscale and economy hotels were relatively less affected than the luxury hotels. The strongest growth came from our economy segment.
Annual Report 2009
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CFO’s Report
“Suc c e ss wit h Int e g r i ty”
On new hotel developments, we opened 3 new hotels as planned in 2009 including our 5th ibis hotel (2nd in Bangkok), ibis Bangkok Nana in March, our 2nd midscale hotel, Holiday Inn Pattaya in October and our 6th ibis hotel (2nd in Phuket), ibis Phuket Kata in December. These newly opened hotels added another 825 rooms to our hotel portfolio. We now own 12 hotels, total of 3,089 rooms, from luxury to midscale and to economy segment across Thailand’s major tourist destinations. The construction of our 7th ibis (3rd in Bangkok) on the riverside of Bangkok’s renowned Chaophraya River is on schedule with target opening in the fourth quarter of 2010. This ibis Bangkok Riverside will be the largest among our ibis hotels with 267 rooms in total. All in all, the market weakness in 2009 led to 8 percent drop of hotel income despite 295 percent income growth of the 5 hotels opened in 2008 and approximately Baht 120 million additional income generated from the
3 new hotels opened in 2009. Our rental properties were not materially impacted and continued to generate income and profit growth to the consolidated performance. Consolidated earnings before interest, tax and depreciation
& amortization (“EBITDA”) remained positive at Baht 790 million which was above our finance costs, taxes and
non-recurring expenses. However the remaining balance was not sufficient to cover the non-cash item such as depreciation & amortization and hence leading to a net loss for the year of Baht 229 million in 2009. Baht Million Hotels’ Operating Income Rental and Service Income Total Operating Income Operating Expenses EBITDA Depreciation & Amortization Operating Profit Other Income Interest Expenses Pre-tax Profit (Loss) Taxes Minority Interest Normalized Net Profit (Loss) Non Recurring Items - Net* Net Profit (Loss) E.P.S.
2008 2,986 389 3,376 (2,299) 1,077 (505) 572 28 (274) 327 (93) (61) 173 (94) 78 0.04
2009 2,748 401 3,149 (2,359) 790 (628) 162 43 (307) (102) (46) (32) (180) (50) (229) (0.10)
Changes -8% +3% -7% +3% -27% +24% -72% +50% +12% -131% -51% -48% -204% -47% -393% -391%
Note: *Details are explained in later section of this report.
The Erawan Group Public Company Limited
CFO’s Report
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Income In line with our diversification strategy, the composition of our total income has changed over the years with the most significant growth from “Economy Hotels” segment as illustrated in the table below. 2007 2008 2009 In Baht Million Baht Million % Total Baht Million % Total Baht Million % Total
Luxury Central Bangkok Hotels Luxury Resorts Midscale Hotels Economy Hotels Income from Hotel Properties Rent from Office Space Rent from Retail Space Others (food court, parking, etc.) Income from Rental Properties Other Income Gains from Sales of Investment Total Income
2,528 189 31 - 2,748 178 164 104 446 25 172 3,391
74.6% 5.6% 0.9% 0.0% 81.0% 5.2% 4.8% 3.1% 13.2% 0.7% 5.1% 100.0%
2,482 187 261 58 2,987 159 141 89 389 28 9 3,413
72.7% 5.5% 7.6% 1.7% 87.5% 4.7% 4.1% 2.6% 11.4% 0.8% 0.3% 100.0%
1,997 182 272 297 2,748 172 144 84 401 43 0 3,192
-6%
3,192
Remark: No contribution from Amarin Plaza from the first quarter of 2007 onwards. Baht Million
3,500 Other income Retail Office Economy Hotels (6) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2)
3,220
+6%
3,405
3,000 2,500 2,000 1,500 1,000
Numbers of hotels, if more than one, are in parentheses.
Annual Report 2009
500 0
2007
2008
2009
62.6% 5.7% 8.5% 9.3% 86.1% 5.4% 4.5% 2.6% 12.6% 1.3% 0.0% 100.0%
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CFO’s Report
“Suc c e ss wit h Int e g r i ty”
Operating statistics and analysis on income from all our properties, including 3 new hotels, for 2009 are as follows: • Luxury Hotels Our two luxury hotels in Bangkok, Grand Hyatt Erawan Bangkok Hotel (“GHEB”) and
JW Marriott Hotel Bangkok (“JWM”), experienced a drop of 9 percent in average occupancy and 14 percent
in average room rates (“ARR”). This resulted in a 25 percent decrease of revenue per available rooms (“RevPar”)
and the combined room revenues from these two flagships. Nevertheless, GHEB and JWM continued to demonstrate their competitiveness against their peers with GHEB maintaining its No. 1 RevPar ranking in the CBD and JWM’s RevPar ranked No. 4 regardless the tough business environment. For resort destinations, Phuket remained stronger than Samui. Our Renaissance Koh Samui Resort and
Spa (“RKS”) closed the year with 11 percent lower occupancy and 17 percent lower ARR which resulted in
a 31 percent drop of RevPar and room revenues. As for our ultra-luxury Six Senses Destination Spa Phuket (“SSP”), fully opened in Dec-08, its RevPar improved almost double in 2009 which was its first full year of operation with occupancy up by 8 percent y-y as driven by the promotional prices given throughout the year.
Average Room Rate (ARR) Revenue per available room (RevPar)
Note: Six Senses ARR is based on Spending/Room.
Baht/room/night 40,000 36,000 32,000 28,000 24,000 20,000 16,000 12,000 8,000 69% 6,334 4,000 4,394 0 2008
4%
Occupancy rate
12% 42,345 24,558 59% 5,589 3,305
75% 5,304 3,955
2009
2008
Grand Hyatt Erawan
66% 4,470 2,943
2009
JW Marriott
66% 6,192 4,099
2008
55% 5,163 2,835
2009
1,524
2008
2,834
2009
Renaissance Samui Six Senses Destination Spa Phuket
In total, income from the four luxury hotels dropped 18 percent from a year ago to Baht 2,203 million in 2009 which mainly caused by a 24 percent decrease of combined room revenues while income from food & beverage
(“F&B”) dropped only 9 percent. The lower drop of F&B was mainly due to the fact that our F&B operations at GHEB and JWM normally supported by local customers than hotel guests, thus not much dependent on hotel occupancy. The income breakdowns for our 4 luxury hotels in 2009 are in the diagram as follows:
The Erawan Group Public Company Limited
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CFO’s Report
Baht Million
From other operations From food & beverages operations From room sales
1,400
1,338
1,200
106
1,000 800
80 621 570
600 400
Note: Standalone basis (excluding the effects of eliminations for consolidated accounts).
1,109
200 0
611
458
2008
2009
Grand Hyatt Erawan
1,167 110
913 73
419
366 638
474
2008
2009
JW Marriott
169 38 117
2008
118 29 81
17
2009
2008
63 16 33
2009
Renaissance Samui Six Senses Destination Spa Phuket
• Midscale Hotels We now have 2 hotels under the midscale segment, Courtyard by Marriott Bangkok Hotel (“CYB”) in its second year of operation and the newly opened Holiday Inn Pattaya (“HIP”). As a result of industry softness, CYB recorded 20 percent lower RevPar in 2009 as compared to the same period a year ago.
HIP which offered promotional rates during its first three months of operations was able to command 61 percent occupancy. Their statistics in 2009 or since openings are as follows: Baht/room/night 3,500 3,000 Average Room Rate (ARR) Revenue per available room (RevPar)
2,500
70%
2,000
2,394
1,500 1,000
Note: Standalone basis (excluding the effects of eliminations for consolidated accounts).
500 0
1,686
2008
65% 2,067
1,342
2009
Courtyard by Marriott Bangkok
Annual Report 2009
Occupancy rate
61% 1,968
1,203
Oct-Dec 2009
Holiday Inn Pattaya
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CFO’s Report
“Suc c e ss wit h Int e g r i ty”
Our midscale hotels recorded total income of Baht 274 million in 2009, a 4 percent increase from last year despite an 18 percent drop of CYB’s total income. This was mainly contributed from HIP which had only three months of operation during the fourth quarter of 2009. The income breakdowns for our 2 midscale hotels in 2009 are in the diagram below. Baht Million
400 350 From other operations From food & beverages operations From room sales
300 250 200
261 12 54
150 Note: Standalone basis (excluding the effects of eliminations for consolidated accounts).
100 50 0
195
2008
215 10 50
155
2009
Courtyard by Marriott Bangkok
57 15 41
Oct-Dec 2009
Holiday Inn Pattaya
• Economy Hotels Our properties under this segment are all under “ibis” brand. At the end of 2009,
we had total of 6 economy hotels which proven to be the most resilient segment providing the highest growth y-y. Our first 4 ibis hotels opened in 2008 including ibis Phuket Patong (“IPK”), ibis Pattaya (“IPT”), ibis Bangkok Sathorn (“IST”) and ibis Samui Bophut (“ISM”) had their occupancy and RevPar grew significantly y-y while the newly opened ibis Bangkok Nana (“INN”) led the pack with highest occupancy (77 percent) and RevPar and ibis Phuket Kata (“IKT”) in its first month of operation achieved 58 percent occupancy with the highest ARR as Phuket moved toward its
high season in Dec-09. The diagram below provides their 2009 statistics.
The Erawan Group Public Company Limited
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CFO’s Report
Average Room Rate (ARR) Revenue per available room (RevPar) Note: Standalone basis (excluding the effects of eliminations for consolidated accounts).
Baht/room/night 2,500 2,250 2,000 1,750 1,500 30% 1,250 1,000 750 1,168 500 250 355 0
Occupancy rate
12%
64% 1,136 726
28% 885 248
May-Dec 2009 2008 ibis Phuket Patong
Jul-Dec 2008
39% 64% 790 502
2009
ibis Pattaya
24%
60%
1,062
948
418
565
1,286
155
1,147
77%
58%
1,024
1,203
788
694
272
Sep-Dec 2009 2008
Oct-Dec 2009 2008
Mar-Dec Dec 2009 2009
ibis Bangkok Sathorn
ibis Samui Bophut
ibis ibis Bangkok Phuket Nana Kata
The six ibis hotels combined to generate Baht 297 million in revenue in 2009, a 411 percent increase y-y. Majority of their revenue came from room sales. Revenue breakdown by property and by type of income are listed below. Baht Million 90 80 70 60 From other operations From food & beverages operations 50 From room sales 40 30 20 Note: Standalone basis (excluding 10 the effects of eliminations for consolidated accounts). 0
83 2 13 58 1 10 27 1 4
36 2 8
68
22
May-Dec 2009 2008 ibis Phuket Patong
Annual Report 2009
56 2 6
56 2 10
14 2 12
Jul-Dec 2008
47 10 1 9
2009
ibis Pattaya
44 5 1 4
26
48 7 1 6
Sep-Dec 2009 2008
Oct-Dec 2009 2008
Mar-Dec Dec 2009 2009
ibis Bangkok Sathorn
ibis Samui Bophut
ibis ibis Bangkok Phuket Nana Kata
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CFO’s Report
“Suc c e ss wit h Int e g r i ty”
• Rental Properties Our 2 rental properties, Ploenchit Center (“PC”) and Erawan Bangkok (“EB”), continued to generate steady income growth to the group with higher rental rates continuously y-y. The statistics are in the table below: PC EB
Occupancy Average Receipt (Baht/sqm/month)
2008
96.1% 452
2009 % change
93.5% 496
-2.6% +10%
2008
89.8% 1,206
2009
92.7% 1,223
% change
+2.9% +1%
The combined income from rental business (including those from shops in GHEB’s arcade) in 2009 was Baht 401 million representing an increase of 3 percent from last year. PC’s income grew 4 percent to Baht 289 million
and EB’s income also increase 3 percent to Baht 98 million as our tenants were renewing rental agreements at higher rates during the year. Breakdown of income from PC and EB over the past 2 years are in the diagram below:
Others Retail Office
Baht Million 325 300 275 250 225 200 175 150 125 100 75 50 25 0
277 71 48
159
2008
289 69 48
172
2009
Ploenchit Center
95 13
98 11
83
86
2008
2009
Erawan Bangkok
The Erawan Group Public Company Limited
CFO’s Report
022
Profit from Operations
Our Earnings before Interest, Tax, Depreciation and Amortization (“EBITDA”) excluding other income and
non-recurring items was down to Baht 790 million in 2009. We also recorded a lower EBITDA margin of 25 percent in 2009 vs. 32 percent in 2008 which was mainly due to revenue contraction of the pre-2008 hotels as the new hotels opened during 2008 and the rental properties all showed both EBITDA and margins improvement from 2008. With the addition of 3 new hotels in 2009 and the 5 new hotels opened in 2008 were in their full year of operations in 2009, our Depreciation and Amortization (“D&A”) increased by Baht 123 million or 24 percent from
last year to record at Baht 628 million for 2009. With the said EBITDA above, our consolidated operating profits stood at Baht 162 million for 2009 or a drop of 72 percent from a year ago. The diagram below shows by-property profits excluding allocation of head-office’s selling and administrative expenses:
EBITDA Operating Profit
* Standalone basis (excluding the effects of eliminations for consolidated accounts and head office expenses).
Baht Million 500 450 472 400 350 436 300 250 318 301 200 358 150 299 170 100 161 187 169 50 83 60 63 96 104 61 49 49 0 32 10 36 39 17 20 2008 2009 2008 2009 2008 2009 2008 2009 2009 2008 2009 2008 2009 Grand Hyatt Erawan
Annual Report 2009
JW Marriott
Renaissance Courtyard 6 ibis Koh Samui by Marriott Bangkok
Ploenchit Center
Erawan Bangkok
023
CFO’s Report
“Suc c e ss wit h Int e g r i ty”
Finance Costs Our average cost of funding maintained within the same range of 4 percent as the year before. Total interest expenses increased 12 percent to Baht 307 million in 2009 which was mainly due to the recognition of interest charges on our 3 new hotels opened this year and the effects of full year operations from those opened in 2008.
The 5 new hotels opened in 2008 which had Baht 36 million of interest payments during 2008 recorded Baht 91 million in 2009 while the 3 new hotels opened in 2009 added another Baht 19 million. Interest charges of the
pre-2008 properties in 2009 were actually lower than those in 2008. Non Recurring Items Non-recurring items for 2009 were mainly pre-opening expenses from new hotels prior to their openings.
The net amount this year is a negative Baht 50 million (mainly from ibis Bangkok Nana opened in Mar-09, Holiday Inn Pattaya opened in Oct-09 and ibis Phuket Kata opened in Dec-09). These costs are booked under “Selling and administrative expenses” in our P&L. For the year 2008, the net amount in our P&L is a negative Baht 94 million which resulting from a combined pre-opening expense of Baht 103 million and Baht 9 million additional gains from the Sale of Amarin Plaza (although transaction was completed in 2007, gradual completion of due diligence process resulted in this Baht 9 million additional gains in 1Q08 and was booked as “Other income” in our P&L). (B) Financial Status
Capital Expenditure We recorded total assets of Baht 13,289 million as of 31 December 2009, an increase of 5 percent from
Baht 12,630 million at the end of 2008. This is a result of Baht 1,373 million capital expenditure occurred during the year, majority of which were for the 3 new hotel projects already opened in 2009 and one new project (the ibis Riverside) under construction due to open in 2010. Sources of funding to support this capital expenditure were project loans drawn during the year and our cashflow from operation. At the end of 2009, we already completed 10 hotels of our Phase I expansion which initially targeted to add 14 hotels to our investment portfolio to become one of the leading players in Thailand’s hospitality business. The remaining 3 ibis hotels in Hua Hin, Krabi, and Sriracha which
we have already secured land and project financing remained on hold at the end of 2009. The 3 projects are expected to require additional Baht 880 million in total should we decide to resume.
The Erawan Group Public Company Limited
CFO’s Report
024
The breakdown of 2009 capital expenditure is as follows:
20%
1%
Holiday Inn Pattaya ibis #1 - 6 ibis #7
47%
5%
Pre-2008 Hotels Rental properties & Others
27%
Leverage Total liabilities of the Company increased 9 percent from Baht 8,872 million as of 31 December 2008 to Baht 9,750 million as of 31 December 2009. This is mainly from the project loan drawdown for new projects, since we did not have to pay back long term loan principal in 2009, total existing long term loans remained the same as 2008 while the additional drawn down of project loans led to an increase of total interest-bearing debts increase to Baht 8,570 million at the end of 2009 vs. Baht 7,705 million in Dec-08. On the other hand, total equity was thinner from a net loss incurred in 2009. As a result, debt-to-equity ratio (D/E) increased to 2.7 times at the end of this year. Despite this high leverage, we believe that our liquidity is still at a manageable level on several accounts. All project loans have over
2 years’ grace period and the repayments have been designed to gradually match with the expected cash flow generated by each project especially during its first three year ramp up period. In the next three years (2010 - 2012), only 25 percent of total loan outstanding will be repaid. Additionally, our interest coverage is still high at 2.4 times
while Baht 1,732 million out of total credit lines of Baht 1,939 million short-term loan facility remained unused at end
of 2009. Kamonwan Wipulakorn Chief Financial Officer Annual Report 2009
025
Report of the Audit Committee to Shareholder “Suc c e ss wit h Int e g r i ty”
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. In 2009, the Audit Committee met four times to consider the following: 1. To review the quarterly financial statements and the 2009 financial statements where it exchanged views with the auditor, Executive Vice President, Treasury Department, 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 interests of 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; to review an annual budget and to supervise and evaluate the Internal Audit Department’s performance. The Audit Committee, having reviewed the 2010 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 Miss Boonsri Chotpaiboonpun, CPA No. 3756 and/or Mr. Charoen Phosamritlert, CPA No. 4068 and/or Miss Vannaporn Jongperadechanon, CPA No. 4098 of KPMG Phoomchai Audit Ltd. as the Company’s auditor. Mr. Sansern Wongcha-um Chairman of the Audit Committee 19 February 2010 The Erawan Group Public Company Limited
026
Report of the Board’s Responsibility in the Financial Statements
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 31 December 2009. Mr. Prakit Pradipasen Mr. Kasama Punyagupta Chairman of the Board of Directors President and Chief Executive Officer Annual Report 2009
027
“Suc c e ss wit h Int e g r i ty”
ABOUT ERAWAN
Grand Hyatt Erawan Bangkok
The Erawan Group Public Company Limited
028
Corporate Profile
The Erawan Group Public Company Limited: Established on 29 December 1982 and continue to develop various real-estate (Hotels and Rental Properties) over the past 28 years.
1991 Grand Hyatt Erawan Bangkok
1985
Amarin Plaza
1988
Company registered on Stock Exchange of Thailand
Annual Report 2009
1996 Ploenchit Center
1991
Grand Hyatt Erawan Bangkok
1994
Converted in to a Public Company
1997 JW Marriott Hotel Bangkok
1996
Ploenchit Center
1997
JW Marriott Hotel Bangkok
029
Corporate Profile
“Suc c e ss wit h Int e g r i ty�
2008 Six Senses Destination Spa Phuket
2004
Erawan Bangkok
2005
Renaissance Koh Samui Resort and Spa
2008 - 2009 6 ibis Hotels
2007
Amarin Plaza Sold Courtyard by Marriott Bangkok
2008
Six Senses Destination Spa Phuket
2009 Holiday Inn Pattaya
2008
4 ibis Hotels: - ibis Phuket Patong - ibis Pattaya - ibis Bangkok Sathorn - ibis Samui Bophut
2009
Holiday Inn Pattaya 2 ibis Hotels: - ibis Bangkok Nana - ibis Phuket Kata
The Erawan Group Public Company Limited
030
Properties in Operation
Our main business objective is to invest in and develop hotel properties that are strategically located to cater to demand from diverse consumer segments. We currently have 12 hotels in operations which represent our core assets. We also own and manage 2 rental properties. The details of these properties are as follows:
Hotels and Resorts
Grand Hyatt Erawan Bangkok Rating : Luxury Hotel Number of rooms : 380 rooms Location : Ratchadamri Road, Bangkok Remaining on the current lease: 32 years www.bangkok.grand.hyatt.com
JW Marriott Hotel Bangkok Rating : Luxury Hotel Number of rooms : 441 rooms Location : Sukhumvit Soi 2, Bangkok Remaining on the current lease: 35 years www.marriott.com/bkkdt
Renaissance Koh Samui Resort and Spa Rating : Luxury Hotel Number of rooms : 45 deluxe rooms and 33 pool villas Location : Lamai Beach, Koh Samui, Surat Thani www.marriott.com/usmbr Annual Report 2009
031
Properties in Operation
“Suc c e ss wit h Int e g r i ty”
Courtyard by Marriott Bangkok Rating : Midscale Hotel Number of rooms : 316 rooms Location : Soi Mahadlekluang, Ratchadamri Road, Bangkok Remaining on the current lease: 28 years www.courtyard.com/bkkcy
Six Senses Destination Spa Phuket Rating : Luxury Destination Spa Number of rooms : 61 pool villas Location : Koh Naka Yai, Phuket www.sixsensesdestinationspas.com
Holiday Inn Pattaya Rating : Midscale Hotel Number of rooms : 367 rooms Location : No. 1 Beach Road Pattaya, Chon Buri www.holidayinn.com/pattaya
ibis Phuket Patong Rating : Economy Hotel Number of rooms : 258 rooms Location : Patong Beach, Phuket www.ibishotel.com
The Erawan Group Public Company Limited
Properties in Operation
ibis Pattaya Rating : Economy Hotel Number of rooms : 259 rooms Location : Second Road, Nhongprue, Bang Lamung, Pattaya, Chon Buri www.ibishotel.com
ibis Bangkok Sathorn Rating : Economy Hotel Number of rooms : 213 rooms Location : Soi Ngam Duphli, Rama IV Road, Bangkok Remaining on the current lease: 28 years www.ibishotel.com
ibis Samui Bophut Rating : Economy Hotel Number of rooms : 258 rooms Location : Bophut Beach, Koh Samui, Surat Thani www.ibishotel.com
ibis Bangkok Nana Rating : Economy Hotel Number of rooms : 200 rooms Location : Sukhumvit Soi 4, Bangkok Remaining on the current lease: 29 years www.ibishotel.com
Annual Report 2009
032
033
Properties in Operation
“Suc c e ss wit h Int e g r i ty”
ibis Phuket Kata Rating : Economy Hotel Number of rooms : 258 rooms Location : Kata Beach, Phuket www.ibishotel.com
Rental Properties
Ploenchit Center Office Building : 34,490 sq.m. Location : Sukhumvit Soi 2, Bangkok Remaining on the current lease: 15 years
Erawan Bangkok Retail Shops: : 6,680 sq.m. Location : Ploenchit Road/ Ratchadamri Road, Bangkok Remaining on the current lease: 32 years www.erawanbangkok.com
The Erawan Group Public Company Limited
034
Properties under Development
ibis Bangkok Riverside Rating : Economy Hotel Number of rooms : 267 rooms Location : Charoen Nakhon Road Soi 17, Chaophraya River, Bangkok Target customer : Leisure Remaining on the current lease: 25 years www.ibishotel.com ibis Hua-Hin Rating : Economy Hotel Number of rooms : 200 rooms Location : Khao Takiap, Hua-Hin, Prachuap Khiri Khan Target customer : Leisure www.ibishotel.com ibis Krabi Rating : Economy Hotel Number of rooms : 200 rooms Location : Plot of Iand on Ao-Nang, Krabi Target customer : Leisure www.ibishotel.com
Ibis Sriracha Rating : Economy Hotel Number of rooms : 200 rooms Location : Central Commercial of Sriracha, Chon Buri Target customer : Business www.ibishotel.com
Annual Report 2009
035
Capital Structure & Management “Suc c e ss wit h Int e g r i ty”
Capital Structure
As at 30 December 2009, the company’s paid up capital is Baht 2,244,779,001 divided into: 2,244,779,001 ordinary shares at par value Baht 1 per share. Top ten shareholders holding the highest number of shares as of
30 December 2009 are as follows: Shareholder’s name 1. Mr. Sukakarn Wattanavekin 2. City Holding Co., Ltd. 3. Mitr Phol Sugar Co., Ltd. 4. Mrs. Wansamorn Wannamethee 5. SKANDINAVISKA ENSKILDA BANKEN A/S 6. Mr. Isara Vongkusolkit 7. MBK Company Limited 8. STATE STREET BANK AND TRUST COMPANY 9. PAN-ASIA SUGAR FUND LIMITED 10. Mr. Supol Wattanavekin Total top ten shareholders holding
Number of shares 379,185,716 243,481,318 131,353,314 120,683,649 105,423,400 101,257,910 96,605,538 78,315,700 73,000,000 58,698,916 1,388,005,461
% of total shares 16.89% 10.85% 5.85% 5.37% 4.70% 4.51% 4.30% 3.49% 3.25% 2.61% 61.82%
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 Foreign Custodian Accounts Group Local Funds Group Insurance Co. Group Company’s executives Others Total
Number of shares 871,077,021 698,966,657 1,570,043,678 271,747,020 45,585,598 1,409,400 20,922,417 335,070,888 2,244,779,001
% of total shares 38.80% 31.14% 69.94% 12.11% 2.03% 0.06% 0.93% 14.93% 100.00%
The Erawan Group Public Company Limited
Capital Structure & Management
036
Directors that represent the major shareholders are as follows: Director’s Names 1. Mr. Vitoon Vongkusolkit 2. Mr. Chanin Vongkusolkit 3. Mr. Krisda Monthienvichienchai 4. Mr. Supol Wattanavekin 5. Mrs. Panida Thepkanjana
Groups of Major Shareholders Vongkusolkit Group Vongkusolkit Group Vongkusolkit Group Wattanavekin Group Wattanavekin Group
Management Structure
The Board of directors consists of the twelve (12) directors as bellowing, the Board has appointed four different committees in a move to clearly define duties and responsibilities namely: The Audit Committee (AC), The Financial
and Risk Management Committee (FRC), 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 • Master of Business Administration (MBA),
and Independent Director Wayne State University, Michigan, U.S.A. 2. Mr. Sansern Wongcha-um Independent Director • Master Degree of Business Economics, and Chairman of University of Bridgeport, Connecticut, U.S.A.
the Audit Committee 3. Assoc. Prof. Manop Pongsadadt Independent Director • Master of Architecture (M.Arch), and Member of Kansas State University, U.S.A. the Audit Committee 4. Mr. Dej Bulsuk Independent Director • Bachelor of Business Administration, and Member of Thammasat University the Audit Committee 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 Annual Report 2009
037
Capital Structure & Management
“Suc c e ss wit h Int e g r i ty”
Name Title Education 7. Mr. Vitoon Vongkusolkit Director • Bachelor of Science, Chulalongkorn University 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. Krisda Monthienvichienchai Director • Master of Business Administration (MBA), Chulalongkorn University 12. Mr. Kasama Punyagupta President and Chief • Master of Business Administration Executive Officer (International Business), University of Bridgeport, Connecticut, U.S.A. Company Secretary: Miss Kanokwan Thongsiwarugs Authority to Sign on Behalf of the Company Two of the following four; namely, Mr. Vitoon Vongkusolkit or Mrs. Panida Thepkanjana or Mr. Kasama Punyagupta
or Mr. Krisda Monthienvichienchai, 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)
The Erawan Group Public Company Limited
Capital Structure & Management
038
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 and 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 Pongsadadt 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 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.
Annual Report 2009
039
Capital Structure & Management
“Suc c e ss wit h Int e g r i ty”
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. 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 Financial and Risk Management Committee consists of six 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 Financial and Risk Management Committee’s roles and responsibilities are: 1. To supervise financial operations of companies within the group. 2. To supervise, screen, approve and monitor approved investment projects. 3. To assess and formulate a systematic, clear-cut and efficient risk management plan. 4. To supervise and monitor risk assessment tasks as well as to adjust and develop the risk management on
a regular basis.
The Erawan Group Public Company Limited
Capital Structure & Management
040
Term of Financial and Risk Management Directors: 3 years each term. The Nominating and Corporate Governance Committee consists of three members as follows: 1. Mr. Prakit Pradipasen Chairman 2. Mrs. Panida Thepkanjana Member of the Committee 3. Mr. Chanin Vongkusolkit Member of the Committee 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 strategies. Term of Nominating and Corporate Governance Directors: 3 years each term. The Management Development and Compensation Committee consists of three members as follows: 1. Mr. Supol Wattanavekin Chairman 2. Mr. Vitoon Vongkusolkit Member of the Committee 3. Mr. Banyong Pongpanich 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.
Annual Report 2009
041
Capital Structure & Management
“Suc c e ss wit h Int e g r i ty”
Term of Management Development and Compensation Directors: 3 years each term. Independent Directors, who account for 50 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 Pongsadadt Independent Director 4. Mr. Dej Bulsuk Independent Director 5. Mr. Banyoung Pongpanich Independent Director 6. Mr. Ekasith Jotikasthira Independent Director The Company’s Executives consist of: 1. Mr. Kasama Punyagupta President and Chief Executive Officer 2. Mrs. Kamonwan Wipulakorn Executive Vice President, Chief of Financial Officer 3. Mr. Petch Krainukul Executive Vice President 4. Mrs. Varisara Gerjarusak Executive Vice President 5. Mr. Apichan Mapaisansin Assistant Executive Vice President 6. Mr. Suchai Wuthworachairung Assistant Executive Vice President 7. Mr. Surapon Jaimsuwan Vice President 8. Mr. Viboon Chaisutyakorn Vice President 9. Ms. Pakinee Pramtade Vice President Duties and Authorities of President and Chief Executive Officer 1. To collaborate with the Board to formulate the company’s visions and missions. 2. To formulate business plans and both short and long-term strategies to achieve the goals; to formulate risk
management plans. 3. To formulate an annual budget and to allocate resources that in line with strategic plans. 4. To manage human resources starting from recruiting to setting salaries, wages, compensations and
benefits; to set evaluation methods and to allocate special welfare and benefits; to appoint, remove and
transfer staff and to issue rules, regulations and announcements as deemed appropriate. 5. To design the management structure; to determine roles, duties and approval authorities. 6. To build and nurture our corporate culture to support our operations. 7. To develop various systems to ensure effective and efficient operations. 8. To develop skills, knowledges and data bases for the purposes of management and decision making.
The Erawan Group Public Company Limited
Capital Structure & Management
042
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.
Annual Report 2009
043
Shareholding of the Board of Directors and Management
Name
1. Mr. Prakit Pradipasen 2. Mr. Sansern Wongcha-um 3. Assoc. Prof. Manop Pongsadadt 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 12. Mr. Kasama Punyagupta 13. Mrs. Kamonwan Wipulakorn 14. Mr. Petch Krainukul 15. Mrs. Varisara Gerjarusak 16. Mr. Apichan Mapaisansin 17. Mr. Suchai Wuthworachairung 18. Mr. Surapon Jaimsuwan 19. Mr. Viboon Chaisutyakorn 20. Ms. Pakinee Pramtade
Title Chairman of the Board of Directors Director Director Director Director Director Director Director Director Director Director President and Chief Executive Officer Executive Vice President Executive Vice President Executive Vice President Assistant Executive Vice President Assistant Executive Vice President Vice President Vice President Vice President
“Suc c e ss wit h Int e g r i ty”
Number of shares As of 31 Dec. 2009 As of 31 Dec. 2008
Change +(-)
150,058 - 319,729 660,000 3,001,500 - 11,457,870 58,698,916 5,493,550 3,693,416 -
150,058 - 319,729 1,162,916 3,001,500 - 11,457,870 58,698,916 5,493,550 1,278,916 -
-
- - (502,916) - - - - - 2,414,500 -
11,510,211 - 839,082 -
11,510,211 - 839,082 -
- - - -
1,000,000
-
1,000,000
1,825,716 - 1,088,697 -
1,825,716 - 1,088,697 -
- - - -
Note: From report of securities held by the Company’s directors as of 30 December 2009.
The Erawan Group Public Company Limited
044
BUSINESS OVERVIEW
Annual Report 2009
Holiday Inn Pattaya
045
Hotel Industry “Suc c e ss wit h Int e g r i ty�
Outlook of the Tourism Industry
In 2009, it was an extremely challenging year for Thai tourism due to the world economic slowdown, after effect of the airport closure in late 2008, political unrest during Songkran Day and the H1N1 influenza epidemic in Q2 to which the World Health Organization (WHO) elevated the situation to Level 5 at that time. The average occupancy rate of hotels all over the country recorded low at 48 percent in 1H09, which was even lower than the rate in 1H03 when there was a SARS epidemic. The number of international tourist arrivals decreased to 6.6 million in 1H09, or -16 percent compared to the same period last year. However, during the second half of 2009, both tourist arrivals and hotel occupancy rate slightly increased. In the last quarter, the number of tourists arrivals was closed to the same period of 2007, which was a year before the crisis. As a result, the number of tourist arrival recorded at 14.1 million in 2009 full year, which decreased only 3 percent from 2008. Based on the Tourism Authority of Thailand (TAT),
the number of international passengers in the last quarter of 2009 increased 31 percent from the previous year.
There was a growth in demand from domestic market due to campaigns initiated by the TAT and public sectors through various projects such as the Thais-Travel-Thailand campaign, the Traveling-Thailand-Joyfully campaign,
the Thais-Travel-Thailand for Economic Stimulus campaign and the 12 Months-Seven Stars-Nine Suns campaign.
In addition, government agencies were urged to organize seminars locally. As a result, the TAT expected the Thais to hit 87 million trips as targeted.
Percent change Number of tourist arrival
Remark: Tourism Authority of Thailand, Ministry of Tourism and Sports
H1N1
Politics
Tsunami
18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0
SARS
International tourist statistics
Coup
Millions
25% 20% 15% 10% 5% 0% -5% -10%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010F
The Erawan Group Public Company Limited
Hotel Industry
046
In 2010, Thai tourism industry is expected a growth from various factors ranging from the better world economic outlook, consumer price index that continues to rise, positive sign of Thai and overseas tourists arrivals from late last year and tourism promoting policies from both public and private sectors. The TAT estimates that the number of tourist arrivals will be 15 - 15.5 million or the expected revenue of Baht 600 billion in 2010. The TAT will continue focusing on its “Amazing Thailand, Amazing Value� campaign, bringing roadshows to newly-emerging markets and developing other markets based on their specific interests. Other factors that help promoting tourisms are economic growth in Asia, which will attract Asian tourists especially from China and India to come to Thailand.
In addition, low-cost airlines also expand their strategic alliance, making the cost of travelling in the region even lower. However, negative effects that may hinder the 2010 tourism industry are political instability, risk from the H1N1 influenza and cost of fuel that may increase. Regarding domestic market, the TAT plans to launch more marketing campaigns to promote local tourism, in order to meet the target of 97 million trips. This expects to generate at
least Baht 430 billion. As for marketing activities to promote local tourism, the TAT will do through the
Thais-Travel-Thailand campaign, the Two Wonders of Southern Coast campaign, the Amazing I-San Fair campaign and the One Night One Price campaign. Supply of hotel rooms in 2010 is not to increase much from the previous year as various hotel projects in Bangkok and the provinces are stalled or postponed due to economic crisis during the past year. It is expected to take a long time before these hotels could open and operate, making the already-opening hotels reap more profit from the delay of new supply coming into the market. Yet, pricing competition is expected to remain intense. We expect to see a better prospect for the Thai tourism industry in 2010 from various supporting factors and Thailand’s competitive advantage over other countries due to good reputation in Thai hospitality, the diversity of tourism attractions and value for money. We strongly believe that, in the long term, Thai tourism will be able to grow strongly in a sustainable manner.
Number of domestic tourism Remark: Tourism Authority of Thailand, Ministry of Tourism and Sports
H1N1
Politics
Coup
100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0
SARS
Domestic tourist statistics
Tsunami
Times
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010F
Annual Report 2009
047
Rental Property “Suc c e ss wit h Int e g r i ty”
Industrial Outlook and Business Competition
During Q1 and Q2 of 2009, local political condition and the world’s economic slowdown still continued to make renting of office space quite sensitive. Based on CB Richard Ellis (Thailand) Co., Ltd.’s marketing report, tenants preferred to renew the spaces in order to streamline their costs rather than moving out to new premises. In addition, rents in Grade A and Grade B buildings also fell from the previous year. In Q3, the situation remained unchanged without any significant improvement. Demands hardly rose to an expected direction while supply in the market remained limited. For Q4, the current worldwide economic situation in general started to recover, many projects initiated by the Thai government to stimulate the local economy turned to be in a concrete manner, which has boosted a certain level of investment confidence. Office Buildings The availability of total office space for rent during the last quarter of 2009 was 7.98 million square meters compared to 7.66 million square meters from the year before. From overall space available above, 3.9 million square meters were in the Central Business District (CBD) areas where 3.39 million square meters had been rented, which accounted for 86.7 percent. Another 0.52 million square meters or 13.3 percent remained vacant. Rental Rates of office building from the last two quarters of 2009 continued to slide from the same period a year before. An average rate of Grade A office buildings fell from Baht 744 per square meter to Baht 685 per square meter accounted for 7.9 percent. For Grade B buildings (to which our office building belongs) in the CBD area, an average rent per square meter fell as much as 14 percent to Baht 503 from Baht 585 a year earlier. The important factor that drove the rental rate to fall in comparison to the previous year was less demands according to local political and economic climate that did not allow for expansion. Tenants either downsized their spaces or negotiated to lower their rents to minimize costs which affected directly to landlords. In late Q4 of 2009, there has been 1.19 million square meters remaining supply of office space on delayed or postponed projects and another 79,464 square meters of increasing space in 2010, all of which are in CBD area.
As the world’s economy seemed to pick up, the currently stalled investment plans will be moving ahead which should further support the overall economy and expected that rental demand for office space will improve in 2010. Yet local political condition remains a very important factor for foreign investors to invest in Thailand. Shopping Centers At the end of 2009, the total supply of shopping center space is 5.38 million square meters, increasing 0.34 million square meters which accounted for 6.7 percent from the previous year. Of all the increased space, 36.1 percent is in the CBD area while the rest is around the heart of the city and Bangkok parameters. Moreover, the commercial spaces have been developed to Community Malls offering products and services to specific groups. Rental rates on ground floor of Grade
A shopping centers start from Baht 1,200 to Baht 3,200 per square meter. As for Grade B, an average ground floor rental rates per square meter are around Baht 1,000 to Baht 2,500. Throughout 2009 retail market was impacted because of
the overall economic downturn and the local political uncertainties. As a result, consumers were more cautious on spending.
In the last quarter, as the worldwide economic situation started to recover, this would send a signal to retailers to decide whether to expand or invest appropriately in new business. And it is expected that demands of space renting will gradually increase in 2010.
The Erawan Group Public Company Limited
048
Risk Factors
Our board of directors has appointed some of its members to the Financial and Risk Management Committee (“FRC”). The responsibilities of this subcommittee are to supervise and evaluate the risk management strategies to ensure that they are systematic, clear, and effective. The highest ranked officer of each department is the “risk owner”. Their responsibilities are then 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 We have no policy to manage hotels by ourselves. International hoteliers are hired to utilize their reputations, experiences and expertise in managing and administering the hotels we have invested and developed. These hotel operators are Hyatt International, Marriott International, Accor Hospitality, Six Senses Resorts and Spas, and IHG InterContinental Hotels Group. The management agreements are long-term thereby exposed to the risk that the brand reputation and the operator’s capability to compete may decline. Performances of our hotels may not reach the level desired. Nonetheless, the operators we have selected are among the worlds largest with proven track record, tested systems, reputations, and strong financial positions. We then believe that the chance of such deterioration of performances is minimal. The diversifications in terms of hotel operators also help mitigate this risk. In addition, if the situation prolongs, each of the agreements has exit clause in case the hotel operator needs to be changed. 2. Risk from Increasing Supplies The unbalanced of supply and demand will cause a high competition in the market which may affect incomes and operating profits. However, our hotel business has been managed by well-recognized and highly-experienced hotel management groups which can provide competitive advantage such as, wide-range of customer base to ensure certain level of demand, proactive crisis management under unpredictable situation, etc. In addition, we also have
a strategy to diversify our investment portfolio in luxury, mid-scale and economy hotel in various tourist destinations. Regarding the office building and shopping center business, although the competition is intense, demands for space remain quite strong especially for that in the CBD area and the shopping district, which are exactly where the Company’s premises are located. The risk is therefore minimal and manageable. 3. Risk from External Factors Effected Property Damage and Business Management Risk from external factors such as terrorism, political unrest, environment impact or natural disaster that may affect retail building are inevitable and unpredictable. However, apart from implementing securities and other preventive measures based on international standard practice to reduce these risks, we also take all-risk, terrorism and business interruption insurances to cover the aforesaid risks if it occurs directly to our properties.
Annual Report 2009
049
Risk Factors
“Suc c e ss wit h Int e g r i ty”
4. External Risk Factors Affecting Hotel Business Performance External factors affecting Hotel Business performance, such as political unrest or epidemic, are beyond our control and prevention. Abnormal circumstances such as these lead to sudden drop in number of foreign tourist arrival, and in turn directly impact on company’s earnings. Nevertheless, historical evidences proved that these impacts are short term (3 - 9 months). Our risk management strategy is flexibility and responsiveness of our systems. Sales and Marketing structures allow 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. As of 31 December 2009, approximately 97 percent of our long term loans were subject to a floating interest rate, most of which apply a Minimum Lending Rate (MLR) minus 1.5 - 2.0 percent and the remaining apply
6-month Fixed Deposit Rate plus 2.0 percent. We have a policy to reduce the interest rate risk by converting
a portion of float rate to fix rate. However, the hedging expenses remain at uneconomical level. We continue to vigilantly monitor market conditions and will arrange risk prevention measures to defer the risk when related expenses fall to a proper level. 6. Human 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, we have changed and recruited employees and managements in key departments and provide continuous training and development. More importantly, we develop 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 professional run structure, we operate under efficient system and do not rely on capability or decision of single person. We also decentralize authority to various levels under the supervision of the Board of Directors. These structures of management will help reduce risk from loss of key personnel. In addition, our key corporate cultures including “Team spirit” and “With integrity”, will also draw a capable professional persons with integrity to join our company. Lastly, our competitive compensation and benefits, bonus scheme which links to corporate strategy map as well as long term stock option plan for executive management also create commitment and loyalty to our employees which will help them work more efficiently. This structure will also help to retain quality employee with the company.
The Erawan Group Public Company Limited
050
GOOD CORPORATE GOVERNANCE
Annual Report 2009
Six Senses Destination Spa Phuket
051
Corporate Governance Policy “Suc c e ss wit h Int e g r i ty”
The Erawan 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 aspects 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 have set up four sub-committees to help supervising each task or the fact that our board consists of as much as 50 percent of independent directors out of the entire board. With regard to corporate governance, the Erawan 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 President and Chief Executive Officer (President and CEO) has been directed to promote corporate governance among staff at all levels. The President and CEO requires the Code of Conduct be made for employees of all levels to be 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 work 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 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. The Erawan’s corporate governance activities 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, society and environment.
The Erawan Group Public Company Limited
Corporate Governance Policy
052
Board of the Year for Distinctive Practices 2006/2007
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 President and 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 President and Chief Executive Officer. The total number is 12. 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, whom 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; 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 Financial and Risk Management Committee (FRC) This Committee consists of no fewer than six 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 three 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 three 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. Annual Report 2009
053
Corporate Governance Policy
“Suc c e ss wit h Int e g r i ty”
Excellent CG Report 2009
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. 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, Auditor, or of other professions such as being
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.
The Erawan Group Public Company Limited
Corporate Governance Policy
054
Board of the Year for Distinctive Practices 2006/2007
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 (To be
count on related person). • 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. • 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)
Annual Report 2009
055
Corporate Governance Policy
“Suc c e ss wit h Int e g r i ty”
Excellent CG Report 2009
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 have met Executive officers lower is President and Chief Executive Officer’s duty. 5. Board of Directors’ Meeting
The company sets the number of both 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.
The Company also sets to have agendas’ Board of Directors’ Meeting every year so that all directors (11) not within President and Chief Executive Officer, Management’s duty and Company Secretary. In 2009, the company organized 6 Board of Directors’ meeting, 4 Audit Committee’s meetings, 6 Financial
and Risk Management Committee’s meetings, 3 Nominating and Corporate Governance Committee’s meetings and
2 Management Development and Compensation Committee’s meetings (two ordinary meetings and one extraordinary meeting). 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:
The Erawan Group Public Company Limited
Annual Report 2009
Name
Title
Term - 1/1 3/3 4/4 4/4 - - - - - - - -
100%
2/2 5/6 6/6 6/6 6/6 5/6 3/4 6/6 6/6 6/6 5/6 6/6 6/6
94.44%
94.44%
- - - - - 4/6 - 6/6 6/6 6/6 6/6 - 6/6
Financial and Board of Directors Audit Committee Risk Management Committee
100%
2/2 1/1 - - - - - - - 3/3 3/3 - -
Nominating and Corporate Governance Committee
100%
- - - - - 2/2 - 2/2 2/2 - - - -
Management Development and Compensation Committee
Times of attendance/Number of total attendance
Note: On 29 April 2009, Mr. Luen Krisnakri, Independent Director resigned from the Chairman of the Board. The Board appointed Mr. Prakit Pradipasen as the Chairman effective on 29 April 2009
and appointed Mr. Ekasith Jotikasthira as the Independent Director effective on 29 April 2009.
1. Mr. Luen Krisnakri Chairman Apr. 2008 - 2009 2. Mr. Prakit Pradipasen Chairman Apr. 2009 - 2012 3. Mr. Sansern Wongcha-um Independent Director Apr. 2009 - 2012 4. Assoc. Prof. Manop Pongsadadt Independent Director Apr. 2009 - 2012 5. Mr. Dej Bulsuk Independent Director Apr. 2009 - 2012 6. Mr. Banyong Pongpanich Independent Director Apr. 2007 - 2010 7. Mr. Ekasith Jotikasthira Independent Director Apr. 2009 - 2011 8. Mr. Vitoon Vongkusolkit Director Apr. 2008 - 2011 9. Mr. Supol Wattanavekin Director Apr. 2007 - 2010 10. Mr. Chanin Vongkusolkit Director Apr. 2007 - 2010 11. Mrs. Panida Thepkanjana Director Apr. 2008 - 2011 12. Mr. Krisda Monthienvichienchai Director Apr. 2007 - 2010 13. Mr. Kasama Punyagupta President Apr. 2008 - 2011 and Chief Executive Officer Percent of directors’ attended
Times of Attendance 2009
Corporate Governance Policy
Board of the Year for Distinctive Practices 2006/2007
056
057
Corporate Governance Policy
“Suc c e ss wit h Int e g r i ty”
Excellent CG Report 2009
6. Evaluation of the Board’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, more than 94 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.
90 percent agreeing with the Board understood its independence in making decisions without being influenced by anyone. Meanwhile, 91 percent agreed that matter regarding the number of meetings, 93 percent acknowledgement when the meeting would be held and the getting of documents in advance was getting much better than before.
95 percent agreed that there was a good relationship with the Management Team and directors could directly discuss with the President and Chief Executive Officer. 90 percent agreed that better self-development among directors, better understanding about business and their duties and responsibilities. Details are in the following:
Avg. (%) 100
94
90
91
Rule, Duties & Responsibility
BOD’s Meeting
93
95
90
80 60 40 20 0
BOD Structure & Componant
Relations with Directors’ Director Executive Improvement Fiduciary Management & Management Duty
The Erawan Group Public Company Limited
Corporate Governance Policy
058
Board of the Year for Distinctive Practices 2006/2007
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. In 2009, our directors nominated a total of 6 nominees to the Nominating and Corporate Governance Committee in order to replace independent directors and to fill vacancies due to resignations. The selection was independently conducted without being subject to anyone’s influence. Nominees were submitted to the Board’s meeting on
28 April 2009, which unanimously agreed to appoint Mr. Ekasith Jotikasthira as our independent director (11 votes from
11 directors). The Management conducted a two-hour orientation session for him and arranged for management team to meet the new director so that he learned about the company, got access to corporate information, business directions 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-æ -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 to seek its approval on an annual basis.
Annual Report 2009
059
Corporate Governance Policy
“Suc c e ss wit h Int e g r i ty”
Excellent CG Report 2009
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 corporatelevel strategies to lower levels; namely, from corporate strategy, to departmental and section strategies; 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 31 December 2009 1. Remunerations of directors of the Company’s Board of Directors and Committees, totaled Baht 4,347,500.00 2. Remunerations of directors of the Company’s subsidiary, totaled Baht 2,0850,000 3. Remunerations, which are total wages of the nine (9) executives paid by the Company and its subsidiaries,
totaled Baht 29,122,937.04 4. Provident fund of the executives under item 3 above, totaled Baht 922,848.00
The Erawan Group Public Company Limited
Annual Report 2009
Name
Title Financial and Board of Directors Audit Committee Risk Management Committee
Nominating and Corporate Governance Committee
Management Development and Compensation Committee
Total (Baht/year)
Note: On 29 April 2009, Mr. Luen Krisnakri, Independent Director resigned from the Chairman of the Board. The Board appointed Mr. Prakit Pradipasen as the Chairman effective on 29 April 2009
and appointed Mr. Ekasith Jotikasthira as the Independent Director effective on 29 April 2009.
1. Mr. Luen Krisnakri Chairman 100,000 - - 30,000 - 130,000 2. Mr. Prakit Pradipasen Chairman 280,000 25,000 - 15,000 - 320,000 3. Mr. Sansern Wongcha-um Independent Director 240,000 75,000 - - - 315,000 4. Assoc. Prof. Manop Pongsadadt Independent Director 240,000 80,000 - - - 320,000 5. Mr. Dej Bulsuk Independent Director 240,000 80,000 - - - 320,000 6. Mr. Banyong Pongpanich Independent Director 240,000 - 180,000 - 22,500 442,500 7. Mr. Ekasith Jotikasthira Independent Director 160,000 - - - - 160,000 8. Mr. Vitoon Vongkusolkit Director 240,000 - 240,000 - 22,500 502,500 9. Mr. Supol Wattanavekin Director 240,000 - 180,000 - 30,000 450,000 10. Mr. Chanin Vongkusolkit Director 240,000 - 180,000 33,750 - 453,750 11. Mrs. Panida Thepkanjana Director 240,000 - 180,000 33,750 - 453,750 12. Mr. Krisda Monthienvichienchai Director 240,000 - - - - 240,000 Do not get 13. Mr. Kasama Punyagupta President 240,000 - - - 240,000 paid as and Chief Executive Executive Officer Total 2,940,000 260,000 960,000 112,500 75,000 4,347,500
Compensation in cash for member of the Committee
Remunerations for the Board of Directors and the Committees in the Year Ending 31 December 2009
060
Remuneration of the Board of Directors and Management
061
Corporate Social Responsibility “Suc c e ss wit h Int e g r i ty”
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 Shareholders 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 31 January 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, President and Chief Executive Officer (President and CEO) and Chief of 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 three years (2007 - 2009), 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.
The Erawan Group Public Company Limited
Corporate Social Responsibility
062
Board of the Year for Distinctive Practices 2006/2007
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: 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 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 go to 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 2009, we conducted the survey by distributing questionnaires to analysts at the Quarterly Meeting held in November 2009, which was a quarterly analyst’s meeting and also the last meeting of the year.
All respondents were within a target group. 54 percent of the respondents had monitored our information for no less than 3 years. 99 percent of the respondents said they were satisfied with the information. In 2009, we were nominated by the Stock Exchange of Thailand (SET) as one of the three listed companies of which market capitalization was not over Baht 10 billion under Group 1 for the IR Excellence Awards, among other SET Awards we achieved in 2009. 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
Annual Report 2009
063
Corporate Social Responsibility
“Suc c e ss wit h Int e g r i ty”
Excellent CG Report 2009
our office, No. 2, Ploenchit Center Building, 6th Floor, Sukhumvit Road, Klongtoey District, Bangkok; or at Office of Corporate Governance, email: GCG@TheErawan.com. All information is treated confidential and will be directly forwarded to the Board. 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.
The Erawan Group Public Company Limited
Corporate Social Responsibility
064
Board of the Year for Distinctive Practices 2006/2007
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.
Annual Report 2009
065
Corporate Social Responsibility
“Suc c e ss wit h Int e g r i ty”
Excellent CG Report 2009
Responsibilities to Social and Environment The Erawan formulates a clear-cut policy for social, community and environmental causes. It plans to implement “the Erawan 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. We support corporate social activities to allow executive officers and employees to be a good citizen of our society. We continue to initiate projects that focus at sustainable development in our neighboring communities and that allow us to work with public and private counterparts. These are our main missions and we continued to do the following in 2009: • Love Charity Project - the company and our staff donated necessary items and provided financial
support to the lunch fund of the Foundation for Slum Child Care (FSCC) under the Royal patronage of HRH
Princess Galayani Vadhana every 3 months. We have a plan to extend this activity to other foundations. • Welcome Guide to Thailand Project where activity was held every 3 months. The aim of the project
is to promote tourism in Thailand by enhancing language skills to taxi and tuk-tuk drivers, who are major
forces behind the local tourism industry, in order to create a good impression among our visitors. • Blood Donation Project - together with the JW Marriot Hotel, which provided a location for our blood
drive, we coordinated with the blood center of the Rajavithi Hospital every 3 months.
The Erawan Group Public Company Limited
Corporate Social Responsibility
066
Board of the Year for Distinctive Practices 2006/2007
• Redeeming Garbage Project - wastes with chicken’s eggs Project - organized every 2 months,
the project allowed employees and the interested public to bring in their waste or any stuff they no longer
used to exchange for eggs. The idea of the project is to promote waste separation and ensure that waste
is re-used in a proper manner to help reduce the global warming. • The Let’s Green Project through which we published leaflets and brochures for tenants of the Ploenchit
Center Building to reduce their energy use. • Keep our Surrounding Nice and Neat Project - designed to raise awareness in keeping our home
clean, we collected waste around our office from areas stretching from Ploenchit Center to around
Duangpitak Road and Sukhumvit Soi 4. The event was participated by our employees, staff from our
subsidiaries and our suppliers. • Keep Our Neighbor Nice and Neat Project aimed to support communities where we also have our
business. Through this project, we gave 30 waste bins to Ao Por Beach in Phuket Province as part of the
Keep Ao Por Beach Clean Project. We also donated 50 waste bins to the Big Cleaning Day organized by
Phuket’s Patong Municipality.
Annual Report 2009
067
Corporate Social Responsibility
“Suc c e ss wit h Int e g r i ty”
Excellent CG Report 2009
• The Erawan Loves Elephant Project, which is an annual project held since 2005, aims to conserve
the Thai elephants. Events were organized to raise funds, which were subsequently donated to various
elephant foundations such as the National Elephant Institute, the Thai Elephant Conservation Center under
the patronage of HRH Princess Galayani Vadhana, the Thai Animal Guardians Association and the Friends of
the Asian Elephant Foundation. • The Education Support for Thai Children Project was designed to help our children by donating
stationary and improving school environment to keep it clean and sanitary for children. • Other projects such as a project to promote Thai culture through annual desk calendar. In addition, we also supported other social projects such as a project to build floating buoy at Ban Koh Naka Pier in Phuket Province to facilitate transportation of local produce of farmers and fishermen in the community. Currently, there are two projects we plan to do in the future; namely, the improvement of pedestrian’s footpath beneath the Chalerm Maha Nakhon Expressway (Sukhumvit), which we will collaborate with the Expressway Authority of Thailand and the Pathumwan District, and the beautifying of traffic islands in the middle of Nana-Ploenchit Road. The Erawan, to ensure the safety of our property and to lessen impacts to the environment, the Company has so far formulated a series of building management plans for its office building, shopping center and hotels.
The plan calls for changes of air conditioners that meet environmental standards and changes from electrical-based
or bunker oil-based hot water to the hot water Heat Pump system. In addition, the Company requires all of its
current and future hotels to save energy at a time oil prices were hiking and striving to become a green hotel by avoiding to release emissions. Besides, the systems of its buildings ranging from security to engineering,
fire protection and wastewater treatment systems have been upgraded to meet public building standards. (More detail in www.TheErawan.com). The Erawan Group Public Company Limited
068
Internal Control
In 2009, the Board of Directors convened 6 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 in 2009 to the Board of Directors on 23 February 2010 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.
Annual Report 2009
069
Internal Control
“Suc c e ss wit h Int e g r i ty”
3. Connected Transactions
The Erawan 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 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 2009 the Erawan 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 Receivables at end of period Banpu Plc. Group of Companies Revenue from Hotel Operation Receivables at end of period
Baht 2,610,376.45 Baht 797,523.99 Baht 629,915.25 Baht 332,307.22
The Erawan Group Public Company Limited
Annual Report 2009
1. 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. • The Vongkusolkit Family holds 38.80 percent in the Company’s shares. 2. IAG Insurance (Thailand) Co., Ltd. Type of business: non-life insurance Nature of relationship: • Mr. Vitoon Vongkusolkit, director, is director of IAG Insurance (Thailand) Co., Ltd. 3. Chai Talay Hotel Co., Ltd. (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. • The Wattanavekin Family holds 31.14 percent of the Company’s shares.
Agreement to rent Ploenchit Center’s space, 3-year lease agreement. • Rental and services incomes • Receivables at end of period • Payables of rent deposits Non-life insurance agreement fort the building and the hotel business between the Company and its subsidiaries • Insurance expenses • Insurance expenses paid in advance Agreement to lease office space and the service agreement with The Erawan Hotel Public Company Limited • Rental and service incomes • Receivables at end of period
29,462,885.94 745,417.25 8,122,908.83 979,839.60 - 2,578,087.93 159,484.08
Pricing policy and the Audit Committee’s opinions
A major tenant, the agreed price was not lower than the average price agreed 38,880,207.20 with other tenants based 596,469.30 on the business standards. 9,036,948.83 Selected on the basis of the service provider’s potential and in compliance with the Company’s 1,632,376.88 regulations. - Price agreed was a market price compared to space in nearby areas and not lower than the price offered to 2,826,315.31 other tenants or service 433,800.97 users compared to the standard of hotel business.
Connected transactions between businesses with the following relationships were executed: Transaction value (Baht) Person/entity with possible conflict of interest Description and nature of relationship 2008 2009
070
Connected Transactions
Agreement to rent Erawan Bangkok’s space, 3-year lease agreement. • Rental and service incomes • Receivables at end of period • Payables of rent deposit Agreement to rent Ploenchit Center’s space, 3-year lease agreement. • Rental and service incomes • Receivables at end of period • Payables of rent deposits
Description
672,390.71 5,527.62 196,311.80
2008
476,726.35 12,718.84 467,174.40
2,099,000.86 17,528.21 497,174.40
700,797.60 5,970.60 196,311.80
2009
Transaction value (Baht) 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. 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.
Pricing policy and the Audit Committee’s opinions
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 will consider the necessity and soundness of such contract based mainly on the Erawan’s 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 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 -None-
4. Minor Corporation Public Company Limited Type of business: Retail Sale of book, newspaper, stationery, ready-to-wear, cosmetics and spare parts Nature of relationship: • Mr. Prakit Pradipasen, director, is director of Minor Corporation Public Company Limited 5. Bualuang Securities Public Company Limited Type of business: Other financial intermediation Nature of relationship: • Mr. Sansern Wongcha-um, director, is Chairman of the Board of Bualuang Securities Public Company Limited
Person/entity with possible conflict of interest and nature of relationship
071 Connected Transactions
“Suc c e ss wit h Int e g r i ty”
The Erawan Group Public Company Limited
072
APPENDICES
Annual Report 2009
ibis Samui
073
Audit Report of Certified Public Accountant “Suc c e ss wit h Int e g r i ty”
To the Shareholders of The Erawan Group Public Company Limited I have audited the accompanying consolidated and separate balance sheets as at 31 December 2009, and
the related statements of income, changes in equity and cash flows for the year then ended of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively.
The Company’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.
The consolidated and separate financial statements of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively, for the year ended 31 December 2008 were audited by another auditor whose report dated 20 February 2009 expressed an unqualified opinion on those statements. I conducted my audit 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 audit provides 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 2009 and the results of operations and cash flows for the year then ended of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively, in accordance with generally accepted accounting principles.
KPMG Phoomchai Audit Ltd. Bangkok 23 February 2010
(Boonsri Chotpaiboonpun) Certffiied Public Accountant Registration No. 3756 The Erawan Group Public Company Limited
074
Audit Fee
In 2009, the audit fee paid to the external auditor of KPMG Phoomchai Audit Limited was Baht 3,600,000. (The Erawan Group Plc. Baht 2,145,000 and the Company’s subsidiary Baht 1,455,000). 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.
Six Senses Destination Spa Phuket Annual Report 2009
075
Balance sheets The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Assets
Current assets Cash and cash equivalents 6 277,488,552 416,081,404 201,834,559 314,664,590 Trade accounts receivable 5, 7 148,495,188 102,418,677 79,573,655 52,506,178 Inventories 8 78,247,461 47,986,509 33,792,403 13,164,149 Advances - construction 34,617,512 62,236,992 14,772,675 57,988,895 Value added tax refundable 198,001,782 216,159,467 78,120,621 92,849,446 Other current assets 5, 9 88,915,926 63,913,173 20,391,741 16,056,619 Total current assets 825,766,421 908,796,222 428,485,654 547,229,877 Non-current assets Investments in subsidiaries 10 - - 2,299,159,881 2,299,838,057 Investment in associate 11 338,271 338,271 338,271 338,271 Investments in other related parties 12 3,305,168 3,014,928 2,525,360 2,311,602 Long-term loans to subsidiaries 5 - - 745,745,622 516,790,794 Property, plant and equipment 13 10,406,634,932 9,625,568,502 6,459,617,393 5,739,417,019 Leasehold rights for land and buildings 14 1,712,926,169 1,782,157,846 857,138,383 899,986,969 Intangible assets 15 74,139,901 73,964,547 50,285,579 43,439,895 Deposits for lease of land, building and equipment 231,340,229 204,878,591 228,221,973 203,512,872 Other non-current assets 16 34,365,743 31,379,076 30,413,472 26,816,414 Total non-current assets 12,463,050,413 11,721,301,761 10,673,445,934 9,732,451,893 Total assets 13,288,816,834 12,630,097,983 11,101,931,588 10,279,681,770
The accompanying notes are an integral part of these financial statements. The Erawan Group Public Company Limited
076
Balance sheets (continued) The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Liabilities and equity
Current liabilities Short-term loans from financial institutions 17 207,200,000 1,030,050,000 152,200,000 897,550,000 Trade accounts payable 5, 18 230,684,342 134,915,345 75,101,006 58,354,680 Accounts payable - construction 100,481,328 145,001,459 59,303,424 120,343,958 Current portion of finance lease liabilities 17 25,701 27,942,746 25,701 27,942,746 Current portion of hire purchase payable 17 528,658 515,574 528,658 515,574 Current portion of long-term loans 17 697,250,000 514,000,000 371,000,000 245,000,000 Other current liabilities 19 366,065,534 373,990,030 151,988,590 138,068,224 Total current liabilities 1,602,235,563 2,226,415,154 810,147,379 1,487,775,182 Non-current liabilities Finance lease liabilities 17 - 25,701 - 25,701 Hire purchase payable 17 567,618 1,096,276 567,618 1,096,276 Long-term loans from a subsidiary 5, 17 - - 55,131,790 24,744,952 Long-term loans from financial institutions 17 7,665,467,051 6,161,417,051 5,370,900,000 3,848,100,000 Accounts payable for land leasehold rights 360,000,000 360,000,000 360,000,000 360,000,000 Deposits from lessees 103,452,269 101,781,042 102,033,939 100,189,494 Deferred income 20 18,135,126 20,949,454 18,135,126 20,949,454 Total non-current liabilities 8,147,622,064 6,645,269,524 5,906,768,473 4,355,105,877 Total liabilities 9,749,857,627 8,871,684,678 6,716,915,852 5,842,881,059
The accompanying notes are an integral part of these financial statements. Annual Report 2009
077
Balance sheets (continued) The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Equity Share capital 21 Authorised share capital 2,244,779,001 2,281,143,099 2,244,779,001 2,281,143,099 Issued and paid-up share capital 2,244,779,001 2,244,779,001 2,244,779,001 2,244,779,001 Premium on shares 23 358,142,539 358,142,539 358,142,539 358,142,539 Unrealised deficits of fair value changes on investments (191,098) (476,618) (108,143) (321,901) Retained earnings Appropriated Legal reserve 23 78,840,000 79,300,000 66,890,000 66,890,000 Unappropriated 724,826,403 976,224,811 1,715,312,339 1,767,311,072 Total equity attributable to equity holders of the Company 3,406,396,845 3,657,969,733 4,385,015,736 4,436,800,711 Minority interests 132,562,362 100,443,572 - - Total equity 3,538,959,207 3,758,413,305 4,385,015,736 4,436,800,711 Total liabilities and equity 13,288,816,834 12,630,097,983 11,101,931,588 10,279,681,770
The accompanying notes are an integral part of these financial statements. The Erawan Group Public Company Limited
078
Statements of income The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Revenues Revenues from hotel operations 2,748,087,145 2,986,499,727 1,254,911,502 1,216,352,143 Rental of units in buildings and related service income 5 400,945,926 389,477,331 388,885,008 375,239,837 Net foreign exchange gain 3,864,462 4,211,339 2,065,965 2,576,834 Dividend income 5 383,911 2,440,767 287,308 172,437,798 Interest income 5 357,904 745,762 28,295,440 17,058,927 Other income 5, 26 37,983,704 29,585,400 33,168,730 26,590,201 Total revenues 3,191,623,052 3,412,960,326 1,707,613,953 1,810,255,740 Expenses Cost of hotel operations 1,336,282,137 1,298,268,182 562,043,929 512,035,843 Cost of rental of units in buildings and related service 154,618,598 156,410,689 159,974,511 161,903,594 Depreciation and amortisation 627,780,673 504,623,725 353,932,033 278,985,321 Selling expenses 27 206,708,919 198,294,584 94,107,251 90,914,980 Administrative expenses 28 670,783,982 701,421,779 338,392,235 278,108,232 Management benefit expenses 29 40,238,236 47,551,389 38,333,236 45,496,389 Loss from decline in value of investment in subsidiary 10 - - 804,524 656,500,000 Total expenses 3,036,412,545 2,906,570,348 1,547,587,719 2,023,944,359
The accompanying notes are an integral part of these financial statements. Annual Report 2009
079
Statements of income (continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Profit (loss) before finance costs and income tax expense 155,210,507 506,389,978 160,026,234 (213,688,619) Finance costs 5, 30 (306,846,197) (273,872,602) (189,577,331) (155,243,468) Profit (loss) before income tax expense (151,635,690) 232,517,376 (29,551,097) (368,932,087) Income tax expense 31 (45,656,292) (92,937,349) - Profit (loss) for the year (197,291,982) 139,580,027 (29,551,097) (368,932,087) Attributable to: Equity holders of the Company (229,410,772) 78,328,428 (29,551,097) (368,932,087) Minority interests 32,118,790 61,251,599 - Profit (loss) for the year (197,291,982) 139,580,027 (29,551,097) (368,932,087) Earnings (loss) per share 32 Basic (0.10) 0.04 (0.01) (0.17) Diluted (0.10) 0.04 (0.01) (0.17)
The accompanying notes are an integral part of these financial statements. The Erawan Group Public Company Limited
Annual Report 2009 Premium on share
The accompanying notes are an integral part of these financial statements.
Unappropriated
Total equity attributable to equity holders of the Company Minority interests
Total equity
(Unit: Baht)
- - - - 79,300,000 - - - (460,000) 78,840,000
(476,618) 285,520 - - - (191,098)
(1,263,299) 78,328,428 (133,292,005) 64,804,900
(27) 61,251,599 (61,950,117) -
(1,263,326) 139,580,027 (195,242,122) 64,804,900
285,520 (229,410,772) (22,447,636)
- 32,118,790 -
285,520 (197,291,982) (22,447,636) 460,000 - - - 724,826,403 3,406,396,845 132,562,362 3,538,959,207
- (229,410,772) (22,447,636)
976,224,811 3,657,969,733 100,443,572 3,758,413,305
- 78,328,428 (133,292,005) -
79,300,000 1,031,188,388 3,649,391,709 101,142,117 3,750,533,826
(1,263,299) - - -
786,681
Legal reserve
Retained earnings
Consolidated financial statements Unrealised surpluses (deficits) of fair value changes on investments
Balance at 1 January 2008 2,214,574,625 323,542,015 Unrealised deficit of fair value changes on investments - - Profit for the year - - Dividend 33 - - Issue of ordinary shares 21 30,204,376 34,600,524 Balance at 31 December 2008 and 1 January 2009 2,244,779,001 358,142,539 Unrealised surpluses of fair value changes on investments - - Profit (loss) for the year - - Dividend 33 - - Transfer legal reserve of a subsidiary to retained earnings - unappropriated - - Balance at 31 December 2009 2,244,779,001 358,142,539
Note
Issued and paid-up share capital
The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008
Statements of changes in equity
080
Note
Issued and paid-up share capital Premium on share
The accompanying notes are an integral part of these financial statements.
Unappropriated
Total equity attributable to equity holders of the Company
- - 213,758 - (29,551,097) (29,551,097) - (22,447,636) (22,447,636) 66,890,000 1,715,312,339 4,385,015,736
(946,969) (368,932,087) (133,292,005) 64,804,900
213,758 - - (108,143)
- (368,932,087) (133,292,005) -
66,890,000 1,767,311,072 4,436,800,711
- - - -
66,890,000 2,269,535,164 4,875,166,872
Legal reserve
Retained earnings
(Unit: Baht)
(321,901)
(946,969) - - -
625,068
Unrealised surpluses (deficits) of fair value changes on investments
Separate financial statements
Balance at 1 January 2008 2,214,574,625 323,542,015 Unrealised deficit of fair value changes on investments - - Loss for the year - - Dividend 33 - - Issue of ordinary shares 21 30,204,376 34,600,524 Balance at 31 December 2008 and 1 January 2009 2,244,779,001 358,142,539 Unrealised surpluses of fair value changes on investments - - Loss for the year - - Dividend 33 - - Balance at 31 December 2009 2,244,779,001 358,142,539
The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008
Statements of changes in equity (continued)
081
“Suc c e ss wit h Int e g r i ty�
The Erawan Group Public Company Limited
082
Statements of cash flows The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
Cash flows from operating activities Profit (loss) for the year Adjustments for Depreciation and amortisation Doubtful debts expense (reversal) Loss from decline in value of investment in subsidiary Allowance for 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 Loss (gain) on disposal of property, plant and equipment, intangible assets and leasehold rights Finance costs Income tax expense
2009
2008
2008
(197,291,982)
139,580,027
(29,551,097)
627,780,673 851,763
504,623,725 (3,314,273)
353,932,033 1,314,166
278,985,321 (3,565,227)
-
-
804,524
656,500,000
1,496,186
2,368,450
1,256,544
1,826,811
(3,140,513)
(3,806,779)
(3,140,513)
(3,806,779)
(680,661) (383,911) (357,904)
(683,546) (2,440,767) (745,762)
(680,661) (287,308) (28,295,440)
(683,546) (172,437,798) (17,058,927)
(14,870,147) 114,873 306,846,197 273,872,602 45,656,292 92,937,349 765,905,993 1,002,505,899
(12,815,570) 189,577,331 - 472,114,009
183,987 155,243,468 - 526,255,223
The accompanying notes are an integral part of these financial statements. Annual Report 2009
2009
(368,932,087)
083
Statements of cash flows (continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Changes in operating assets and liabilities Trade accounts receivable (48,520,383) 65,461,396 (29,973,752) 12,832,519 Inventories (20,197,890) (5,831,940) (10,565,192) (32,795) Advances - construction 27,619,480 61,282,915 43,216,220 44,657,533 Value added tax refundable 18,157,685 (54,873,443) 14,728,825 (34,498,889) Other current assets (27,932,924) 11,657,945 (8,328,428) 19,268,172 Deposits for lease of land, building, and equipment (26,461,638) 3,390,859 (24,709,101) (2,078,886) Other non-current assets 9,921,545 498,571 9,396,549 19,913,932 Trade accounts payable 95,768,997 (39,718,289) 16,746,326 (10,065,675) Other current liabilities 9,964,022 3,229,785 16,017,955 23,960,201 Deposits from lessees 3,589,521 4,849,162 3,762,739 5,227,571 807,814,408 1,052,452,860 502,406,150 605,438,906 Income tax paid (75,722,398) (109,509,884) (14,250,151) (12,928,328) Net cash provided by operating activities 732,092,010 942,942,976 488,155,999 592,510,578 Cash flows from investing activities - - (228,981,950) 97,443,136 Decrease (increase) in long-term loans to subsidiaries Increase in investments in other related parties (4,720) - - - Increase in investments in subsidiaries - - - (428,999,970) Net cash payment from the business transfer 4 - - - (1,437,817,467) Cash receipt (paid) from the return of share capital of a subsidiary - - (126,348) 1,479,662,826 Acquisition of property, plant and equipment (1,348,767,100) (2,763,403,233) (1,066,443,492) (2,034,795,901) (3,879,077) (20,370,246) - (29,843,151) Acquisition of leasehold rights for land and buildings Acquisition of intangible assets (20,310,177) (40,536,072) (19,326,732) (25,860,332) Proceeds from sales of property, plant and equipment, and intangible assets 27,789,366 3,502,673 24,711,907 1,981,295 Dividend received 383,911 2,440,767 287,308 172,437,798 Interest received 357,904 745,762 28,322,562 15,406,994 Net cash used in investing activities (1,344,429,893) (2,817,620,349) (1,261,556,745) (2,190,384,772)
The accompanying notes are an integral part of these financial statements. The Erawan Group Public Company Limited
084
Statements of cash flows (continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Cash flows from financing activities Increase (decrease) in short-term loans from financial institutions (822,850,000) 609,600,000 (745,350,000) 522,100,000 Finance lease payments (27,942,746) (7,892,747) (27,942,746) (7,892,747) Payment for hire purchase payable (515,574) (1,330,915) (515,574) (1,330,915) Increase in long-term loans from a subsidiary - - 30,386,838 24,744,952 Cash receipt from long-term loans 1,687,300,000 4,114,959,464 1,648,800,000 3,571,150,000 Repayment of long-term loans - (1,823,750,000) - (1,640,000,000) Repayment of debentures - (300,000,000) - (300,000,000) Proceeds from issue of ordinary shares 21 - 64,804,900 - 64,804,900 Finance costs paid (339,799,013) (337,769,217) (222,360,167) (191,669,212) Dividend paid (22,447,636) (133,292,005) (22,447,636) (133,292,005) Dividend paid to minority interests - (61,950,117) - - Net cash provided by financing activities 473,745,031 2,123,379,363 660,570,715 1,908,614,973 Net increase (decrease) in cash and cash equivalents (138,592,852) 248,701,990 (112,830,031) 310,740,779 Cash and cash equivalents at beginning of year 6 416,081,404 167,379,414 314,664,590 3,923,811 Cash and cash equivalents at end of year 6 277,488,552 416,081,404 201,834,559 314,664,590 Non-cash transactions Offsetting rental deposit received from lessees with accounts receivable 1,592,109 5,391,390 1,592,109 5,069,148 Vehicles purchased under hire purchase contract - 1,021,500 - 1,021,500 Acquisition of plant and equipment, intangible assets and leasehold rights for land and buildings for which payment has yet to be made 93,925,423 135,515,382 55,423,761 112,470,989
TThe he accompanying notes are an integral part of these financial statements. Annual Report 2009
085
ห ม า ยNotes เ ห ตุ ป รtoะ กthe อ บ งfinancial บ ก า ร เ งิ น statements The Erawan Group Public Company Limited and its Subsidiaries สำหรับแต่For ละปีtheสิ้นyears สุดวันended ที่ 31 ธั31นวาคม 2552 2009 และ 2551 December and 2008
“Suc c e ss wit h Int e g r i ty”
These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Company’s Board of Directors on 23 February 2010.
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 9 branches in Bangkok, Chon Buri, Phuket and Surat Thani.
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 building rental business, and in hotel business. Details of the Company’s subsidiaries and associate as at 31 December 2009 and 2008 were as follows: Name of the entity
Type of business
Country of incorporation
Direct subsidiaries Erawan Hotel Public Company Limited Hotel Thailand Erawan Chaophraya Company Limited Hotel Thailand Erawan Rajdamri Company Limited Hotel Thailand Erawan Phuket Company Limited Hotel Thailand Erawan Samui Company Limited Hotel Thailand Erawan Naka Company Limited Land owner Thailand The Reserve Company Limited Real estate development Thailand Erawan Ploenchit Company Limited Dissolution Thailand Indirect subsidiaries Erawan Hotel Public Company Limited Hotel Thailand Erawan Chaophraya Company Limited Hotel Thailand Associate Rajprasong Development Company Limited Service Thailand
Ownership interest (%) 2009
2008
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
1.05 4.22
1.05 4.22
48.00
48.00
The Erawan Group Public Company Limited
Notes to the financial statements 086
2. Basis of preparation of the financial statements
The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the
Thai language. The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) and Thai Financial Reporting Standards (“TFRS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand. On 15 May 2009, the FAP announced (Announcement No. 12/2009) the re-numbering of TAS to the same numbers as the International Accounting Standards (“IAS”) on which the TAS/TFRS are based. The Group has adopted the following revised TAS/TFRS and accounting guidance which were issued by the FAP during 2008 and 2009 and effective for annual accounting periods beginning on or after 1 January 2009:
TAS 36 (revised 2007)
Impairment of Assets
TFRS 5 (revised 2007)
Non-current Assets Held for Sale and Discontinued Operations (formerly TAS 54)
Framework for the Preparation and Presentation of Financial Statements (revised 2007) (effective on 26 June 2009)
Accounting Guidance about Leasehold Right (effective on 26 June 2009)
Accounting Guidance about Business Combination under common control
The adoption of these revised TAS/TFRS and accounting guidance does not have any material impact on
the consolidated or separate financial statements. The FAP has issued during 2009 a number of new and revised TAS which are not currently effective and
have not been adopted in the preparation of these financial statements. These new and revised TAS are disclosed in note 38. The financial statements are presented in Thai Baht, rounded in the notes to the financial statements to
the nearest thousand unless otherwise stated. They are prepared on the historical cost basis except as stated in
the accounting policies. The preparation of financial statements in conformity with TAS and 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.
Annual Report 2009
087
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty”
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 statement is included in
the following notes:
Note 36 Provisions and contingencies
Note 17 Lease classification
3. Significant accounting policies
(a) Basis of consolidation The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interests in associate. During the year of 2008, the Company changes from an indirect shareholding to a direct shareholding
in the subsidiaries and additional shareholding in a subsidiary as discussed in note 10. 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 are the same with the policies adopted by the Group. Associate Associate is the entity 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. The consolidated financial statements include the Group’s share of the income, expenses and equity movements of associate 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.
The Erawan Group Public Company Limited
Notes to the financial statements 088
(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 the statement of income. (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. (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 available-for-sale monetary items, are recognised directly in equity. Impairment losses are recognised in the statement of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the statement of income. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the statement of income.
Annual Report 2009
089
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
(g) Property, plant and equipment Owned assets Lands are stated at cost. Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. 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 statement of income. Depreciation Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part 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
No depreciation is provided on freehold land or assets under construction.
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. (h) Leasehold rights Leasehold rights are recorded at cost less accumulated amortisation and impairment losses.
Amortisation Leasehold rights are amortised on a straight-line method over the terms of the leases.
(i) Intangible assets Intangible assets that are acquired by the Group, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. The estimated useful lives are as follows:
Computer softwares
5 - 10 years
The Erawan Group Public Company Limited
Notes to the financial statements 090
(j) Impairment The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ 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 the statement of income. 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 that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the statement of income even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the statement of income is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the statement of income.
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 asset’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 recognised. For available-forsale financial assets that are equity securities, the reversal is recognised directly in equity. 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 asset’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.
Annual Report 2009
091
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
(l) Provisions A provision is recognised when the Group has a present legal or constructive obligation as a result of
a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation. If the effect is material, 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, where appropriate, the risks specific to the liability. (m) 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 the statement of income on an accrual basis. Interest income and dividend income Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group’s right to receive payments is established. (n) Deferred income The Company recognises deferred rental income as income using the straight-line method over the terms of contracts. (o) Expenses Operating leases Payments made under operating leases are recognised in the statement of income on a systematic basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease payments made. Finance costs Interest expenses and similar costs are charged to the statement of income in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. The interest component of finance lease payments is recognized in the statement of income using the effective interest rate method. (p) Income tax Income tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date.
The Erawan Group Public Company Limited
Notes to the financial statements 092
4. Transfer of all business of a subsidiary to the Company
A meeting of the Board of Directors of the Company approved the transfer of the entire business of Erawan Ploenchit Company Limited. Such transfer of business includes the transfer of all assets, employees and liabilities
as at 31 December 2007. The Company executed the transfer during the year of 2008 and payment has been made. In addition, pursuant to the above resolution, the Company notified the Revenue Department of the transfer in order to request the tax privileges available for a business transfer. On 2 July 2008, the Company received a letter of notification to support the tax exemption from the Revenue Department. During the first quarter of 2008, the subsidiary transferred all of its business to the Company, with assets and liabilities transferred at their net book values. Details of the transfer of business can be summarised as follows: (Thousand Baht)
จำนวนเงิ Amount น Cash and deposits at financial institutions Trade accounts receivable Inventories Other current assets Investments in subsidiary Long-term loans to subsidiary Building and equipment Intangible assets Leasehold right for land Other non-current assets Trade accounts payable Accounts payable - construction Current portion of long-term loans Other current liabilities Long-term loans from parent company Accounts payable for land leasehold rights Other non-current liabilities Transfer price - net book value Transfer price Less Cash and deposits at financial institutions of subsidiary Net cash payment from the business transfer
Annual Report 2009
42,053 58,277 13,131 30,264 222,001 399,867 2,321,556 11,306 569,841 189,799 (56,237) (4,766) (1,580,000) (83,251) (186,791) (360,000) (107,179) 1,479,871 1,479,871 (42,053) 1,437,818
093
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty”
5. Related party transactions and balances
Related parties are those parties linked to the Group and the Company as shareholders or by common
shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices. Relationships with related parties that control or jointly control the Company or are being controlled or
jointly-controlled by the Company or have transactions with the Group were as follows: Name of entities
Country of incorporation/ nationality
Nature of relationships
Erawan Hotel Public Company Limited Thailand Subsidiary, 72.59% direct shareholding Erawan Chaophraya Company Limited Thailand Subsidiary, 95.77% direct shareholding Erawan Rajdamri Company Limited Thailand Subsidiary, 99.99% direct shareholding Erawan Phuket Company Limited Thailand Subsidiary, 99.99% direct shareholding Erawan Samui Company Limited Thailand Subsidiary, 99.99% direct shareholding Erawan Naka Company Limited Thailand Subsidiary, 99.99% direct shareholding The Reserve Company Limited Thailand Subsidiary, 99.99% direct shareholding Rajprasong Development Company Limited Thailand Associate, 48.00% direct shareholding, some common directors Rajprasong Square Company Limited Thailand Related company, 23.29% direct shareholding Chai Talay Hotel Company Limited Thailand Related company, director is closed relative to a Company’s director Panel Plus Company Limited Thailand Related company, some common directors Petro Green Company Limited Thailand Related company, some common directors Mitr Phol Sugar Company Limited Thailand Related company, some common directors Phu Khieo Bio-Energy Company Limited Thailand Related company, some common directors Banpu Public Company Limited Thailand Related company, some common directors The Syndicate of Thai Hotels & Tourists Enterprises Limited Thailand Related company, some common directors IAG Insurance (Thailand) Limited Thailand Related company, some common directors
The Erawan Group Public Company Limited
Notes to the financial statements 094
The pricing policies for particular types of transactions are explained further below: Transactions
Pricing policies
Subsidiaries Interest income At the rate of 4.15% - 5.05% per annum (2008: at the rate of 4.91% - 5.63% per annum) Dividend income According to the shareholders’ approval Utilities income Contractually agreed prices Rental and service expenses Baht 17 million per annum Interest expenses At the rate of 4.15% - 5.05% per annum (2008: at the rate of 4.91% - 5.63% per annum) Associate Management fee
At cost - allocated in proportion to shareholding
Other related parties Rental and services income Baht 540 - 610 per square meter per month (2008: Baht 350 - 560 per square meter per month) depending on location Utilities income Contractually agreed prices Other service income Fair price under the best conditions Land rental Baht 11 million per annum Insurance expenses Fair price under the best conditions
Significant transactions for the years ended 31 December 2009 and 2008 with related parties were as follows: (Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
Subsidiaries Interest income - - 28,173 Dividend income - - - Utilities income - - 1,995 Rental and service expenses - - 16,472 Interest expenses 30 - - 1,502
Annual Report 2009
2008 16,890 170,608 2,155 16,617 1,729
095
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Other related parties Rental and services income 41,295 30,526 38,469 27,948 Utilities income 3,271 2,724 3,271 2,724 Other service income 3,240 3,414 2,715 3,233 Land rental 10,920 10,920 - - Management fee 1,600 1,009 1,600 1,009 Insurance expenses 1,632 980 982 603
Balances as at 31 December 2009 and 2008 with related parties were as follows: (Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Trade accounts receivable
from related parties
Subsidiaries Erawan Hotel Public Company Limited - - 105 100 Erawan Rajdamri Company Limited - - 672 768 Erawan Samui Company Limited - - 273 122
Other related parties Mitr Phol Sugar Company Limited 907 534 867 534 Banpu Public Company Limited 325 - 325 - Petro Green Company Limited 280 7 280 7 Panel Plus Company Limited 191 55 191 55 Phu Khieo Bio-Energy Company Limited 16 149 16 149 Chai Talay Hotel Company Limited 434 160 - - Other companies 31 24 31 24 Total 2,184 929 2,760 1,759 The Erawan Group Public Company Limited
Notes to the financial statements 096
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Other receivable - related party Subsidiary
Erawan Chaophraya Company Limited
-
-
-
143
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Prepaid expense - related party Other related party The Syndicate of Thai Hotels & Tourists Enterprises Ltd. 5,460 5,460 - - (Unit: Thousand Baht)
Interest rate (% per annum)
2009
2008
Consolidated financial statements
2009
2008
Separate financial statements
2009
2008
Loans to related parties
Long-term loans Subsidiaries Erawan Samui Company Limited 4.15 5.63 Erawan Naka Company Limited 4.15 5.63 Erawan Phuket Company Limited 4.15 5.63 Erawan Chaophraya Company Limited 4.15 5.63 The Reserve Company Limited 4.15 5.63 Total
Annual Report 2009
- - - - - -
- 73,500 69,524 - 16,909 16,730 - 484,973 294,038 - 26,968 9,888 - 143,396 126,611 - 745,746 516,791
097
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
Movements during the years ended 31 December 2009 and 2008 of loans to related parties were as follows: (Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
Loans to related parties Short-term loans Subsidiary At 1 January - Increase - Decrease - At 31 December -
2009
2008
- - - -
- 88,489 (88,489) -
14,059 (14,059) -
Long-term loans Subsidiaries At 1 January - - Increase - - Decrease - - At 31 December - -
516,791 269,662 (40,707) 745,746
399,506 1,022,646 (905,361) 516,791
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
Trade accounts payable-related party Subsidiary Erawan Hotel Public Company Limited - - 200
2008
223
The Erawan Group Public Company Limited
Notes to the financial statements 098
(Unit: Thousand Baht)
Interest rate (% per annum)
Loans from a related party Long-term loans Subsidiary Erawan Rajdamri Company Limited
2009
2008
Consolidated financial statements
2009
2008
Separate financial statements
2009
2008
55,132
24,745
4.15
5.63
-
-
Movements during the years ended 31 December 2009 and 2008 of loans from related parties were as follows: (Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Loans from a related party Short-term loans Subsidiary At 1 January - - - Increase - - - 198,010 Decrease - - - (198,010) At 31 December - - - Long-term loans Subsidiary At 1 January - - 24,745 Increase - - 72,102 86,455 Decrease - - (41,715) (61,710) At 31 December - - 55,132 24,745
Annual Report 2009
099
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
6. Cash and cash equivalents
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Cash at banks and on hand Highly liquid short-term investments Total
277,489 - 277,489
122,396 293,685 416,081
201,835 - 201,835
50,077 264,588 314,665
Cash and cash equivalents of the Group and the Company as at 31 December 2009 and 2008 were denominated in Thai Baht.
7. Trade accounts receivable
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
Related parties 5 Other parties Less allowance for doubtful accounts Total Doubtful debts expenses (reversal) for the year
2009
2008
2009
2008
2,184 148,969 151,153 (2,658) 148,495
929 103,296 104,225 (1,806) 102,419
2,760 78,944 81,704 (2,130) 79,574
1,759 51,563 53,322 (816) 52,506
852
(3,314)
1,314
(3,565)
The Erawan Group Public Company Limited
Notes to the financial statements 100
Aging analyses for trade accounts receivable were as follows: (Unit: Thousand Baht)
Related parties Outstanding: Less than 3 months Other parties Outstanding: Less than 3 months 3 - 6 months 6 - 12 months Over 12 months Less allowance for doubtful accounts Net Total
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
2,184
929
2,760
1,759
147,152 1,345 246 226 148,969 (2,658) 146,311 148,495
99,010 3,238 154 894 103,296 (1,806) 101,490 102,419
77,833 639 246 226 78,944 (2,130) 76,814 79,574
48,022 2,796 70 675 51,563 (816) 50,747 52,506
Trade accounts receivable of the Group and the Company as at 31 December 2009 and 2008 were denominated in Thai Baht.
Annual Report 2009
101
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
8. Inventories
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
Food and beverage Operating supplies Real estate for sale 13 Others Total
9. Other current assets
2009 35,071 12,044 23,254 7,878 78,247
2008
2009
25,779 10,776 - 11,432 47,987
2008
9,215 237 23,254 1,086 33,792
9,276 518 3,370 13,164
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
Prepaid expenses 5 Other advances Other receivables 5 Undue input value added tax Others Total
2009 30,827 30,891 3,055 9,914 14,229 88,916
2008
2009
21,336 25,980 1,380 11,943 3,274 63,913
7,190 4,669 128 7,333 1,072 20,392
2008 6,786 329 452 8,259 231 16,057
The Erawan Group Public Company Limited
Annual Report 2009
Company’s name
2009
- - - - - -
- - - - - -
68,000
1,000
300
1,000
300
376,858 376,858
582,001 582,001
451,291 451,291
68,000
819,710 819,710
- (656,500) - 678 - (656,500) 2,299,160 2,299,838
-
-
-
-
-
-
-
-
170,608
- - 170,608
-
-
-
-
-
-
-
2008
Dividend income
2008 2009
At cost - net
2008 2009
Impairment
2008 2009
Cost method
2008 2009
Paid-up capital (Million Baht)
2008 2009
Ownership Interest (%)
Separate financial statements
(Unit: Thousand Baht)
Investments in subsidiaries as at 31 December 2009 and 2008, and dividend income from those investments for the years then ended were as follows:
Subsidiaries Erawan Hotel Public Company Limited 72.59 72.59 119.50 119.50 819,710 819,710 Erawan Chaophraya Company Limited 95.77 95.77 71.00 71.00 68,000 68,000 Erawan Rajdamri Company Limited 99.99 99.99 450.00 450.00 451,291 451,291 Erawan Phuket Company Limited 99.99 99.99 550.00 550.00 582,001 582,001 Erawan Samui Company Limited 99.99 99.99 330.00 330.00 376,858 376,858 Erawan Naka Company Limited 99.99 99.99 7.50 7.50 300 300 The Reserve Company Limited 99.99 99.99 1.00 1.00 1,000 1,000 Erawan Ploenchit Company Limited - 99.99 - 2,011.69 - 657,178 2,299,160 2,956,338 Total
10. Investments in subsidiaries
Notes to the financial statements 102
103
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty”
During the first quarter of 2008 the Company received the transfer of the entire business of Erawan Ploenchit Company Limited. The subsidiary subsequently registered the dissolution with the Ministry of Commerce. In addition,
a meeting of the Board of Directors of the subsidiary approved the return of share capital to the shareholders prior to liquidation at the rate of Baht 7.36 per share, totalling Baht 1,480.3 million, and such amount has already been paid.
The Company set up a loss from diminution in the value of investment in the subsidiary of Baht 656.5 million in statement of income. However, on 4 April 2008, the Company returned to the subsidiary a portion of Baht 0.0032 per share, totalling Baht 0.6 million, of the amount that the Company received in advance, without waiting for the completion of the liquidation process. On 11 December 2009 the said subsidiary registered for dissolution. The Company received the rest of capital and recognised loss from written off investment in the said subsidiary in the amount of Baht 0.8 million. The Company received the transfer investment in Erawan Phuket Company Limited valued at Baht 222.0 million. This consists of 189,994 ordinary shares of such company. In addition, on 3 March 2008, a resolution of the Extraordinary General Meeting of the shareholders of Erawan Phuket Company Limited authorised a plan to increase that subsidiary’s share capital from Baht 190.0 million to Baht 550.0 million through the issue of 0.4 million additional ordinary shares, with a par value of Baht 1,000 each. The Company purchased all of the additional shares. As a result of the acquisition, the Company’s indirect equity interest of 99.99% in that company has changed to a direct equity interest of 99.99%. On 3 March 2008, a resolution of the Extraordinary General Meeting of the shareholders of Erawan Chaophraya Company Limited authorised a plan to increase that subsidiary’s share capital from Baht 3.0 million to Baht 71.0 million through the issue of 0.7 million additional ordinary shares, with a par value of Baht 100 each. The Company purchased all of the additional shares. As a result of these transactions, the Company’s indirect equity interest of 99.99% has changed to an indirect equity interest of 4.22% and a direct equity interest of 95.77%. On 8 April 2008, the Annual General Meeting of the shareholders of Erawan Hotel Public Company Limited approved the payment of a dividend of Baht 2.95 per share to the shareholders of 79,666,667 shares totalling Baht 235.0 million, in respect of the 2007 income. The dividend was paid on 11 April 2008. On 19 August 2008, a resolution of the meeting of the Financial and Risk Management Committee of the Company authorised investment in 99,997 ordinary shares of The Reserve Company Limited with a par value of Baht 10 each.
As a result of this transaction, the Company has a direct equity interest of 99.99%.
The Erawan Group Public Company Limited
Annual Report 2009 2008 2009
-
-
2008 2009
338
-
-
2008
Dividend income 2008 2009
At cost - net 2008 2009
Impairment 2008 2009
Cost method
2008 2009
Paid-up capital (Million Baht)
Associate Rajprasong Development Co., Ltd. 48.00 48.00 1.00 1.00 338 338 - - 338
2009
Ownership Interest (%)
Separate financial statements
(Unit: Thousand Baht)
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.
338
2008
Dividend income
2008 2009
At equity - net
2008 2009
Impairment
2008 2009
Equity method
Consolidated financial statements Cost method
2008 2009
Paid-up capital (Million Baht)
2008 2009
Ownership Interest (%)
2009
(Unit: Thousand Baht)
Investments in associate as at 31 December 2009 and 2008, and dividend income from the investment for the years then ended were as follows:
Associate Rajprasong Development Co., Ltd. 48.00 48.00 1.00 1.00 338 338 338 338 - - 338
11. Investment in associate
Notes to the financial statements 104
105
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
The following summarised financial information on associated companies 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: Thousand Baht)
Ownership interest (%)
Total assets
Total liabilities
Total revenue
Net loss
2009 Rajprasong Development Co., Ltd. 48.00 2,998 1,953 3,206 (41) 2008 Rajprasong Development Co., Ltd. 48.00 1,127 123 2,007 (12) 12. Investments in other related parties
(Unit: Thousand Baht)
Equity interest (%) 2009
2008
Consolidated financial statements
2009
2008
Related company Rajprasong Square Co., Ltd. 23.29 23.29 206 The Asia Recovery 2 Fund 0.17 0.17 3,290 Less allowance for change in value (191) Total 3,305
206 3,285 (476) 3,015
(Unit: Thousand Baht)
Equity interest (%) 2009
2008
Separate financial statements
2009
Related company Rajprasong Square Co., Ltd. 23.29 23.29 206 The Asia Recovery 2 Fund 0.13 0.13 2,427 Less allowance for change in value (108) Total 2,525
2008 206 2,427 (321) 2,312
The Erawan Group Public Company Limited
Annual Report 2009
Building and improvements
Furniture, fixtures and equipment Vehicles
1,428,990 1,920,071 (1) (2,252,004) - 1,097,056 837,342 - (1,773,615) (13,191) - 147,592
163,578 48,397 - 3,519 - - 215,494
Assets under construction
(23,254) (83,152) 13,447,019
12,201,081 1,354,373 (465) (1,564)
9,565,952 2,663,545 62 (4,669) (23,809)
Total
(Unit: Thousand Baht)
103,232 50,766 - 9,580 -
Operating equipment
Consolidated financial statements
Cost At 1 January 2008 1,289,549 5,385,202 1,291,201 67,778 Additions 362,451 49,009 270,226 11,022 Adjustment - - 63 - Transfers - 2,131,500 99,137 7,118 Disposals - (1,744) (20,702) (1,363) At 31 December 2008 and 1 January 2009 1,652,000 7,563,967 1,639,925 84,555 Additions 6,434 93,423 364,107 4,670 Adjustment - (105) (384) 24 Transfers - 1,736,755 31,471 306 Transfer to real estate for sale 8 (10,063) - - - Disposals - (1,747) (25,714) (55,691) At 31 December 2009 1,648,371 9,392,293 2,009,405 33,864
Note
Land
13. Property, plant and equipment
Notes to the financial statements 106
Accumulated depreciation At 1 January 2008 Depreciation charge for the year Disposals At 31 December 2008 and 1 January 2009 Depreciation charge for the year Adjustment Disposals At 31 December 2009
Note
Land
1,673,112 247,626 (1,000) 1,919,738 316,590 (2) (1,457) 2,234,869
- - -
- - - - -
Building and improvements
988,410 192,827 (8) (24,830) 1,156,399
862,750 143,876 (18,216)
Furniture, fixtures and equipment
45,771 13,063 3 (44,338) 14,499
31,668 15,079 (976)
Vehicles
Operating equipment
Consolidated financial statements
- - - - -
- - -
- - - - - - - -
Assets under construction
2,953,919 522,480 (7) (70,625) 3,405,767
2,567,530 406,581 (20,192)
Total
(Unit: Thousand Baht)
107 Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
The Erawan Group Public Company Limited
Annual Report 2009
Furniture, fixtures and equipment Vehicles
Operating equipment
Assets under construction Total
406,581 13,024 419,605 522,480 13,024 535,504
2009 Eliminate
10,041,252 365,383 10,406,635
10,041,202 50
Owned assets 1,648,371 7,157,424 852,956 19,365 215,494 147,592 Assets under finance leases - - 50 - - - Total at 31 December 2009 1,648,371 7,157,424 853,006 19,365 215,494 147,592 Eliminate Depreciation for the year 2008 Eliminate
Net book value Owned assets 1,652,000 5,644,229 651,446 20,428 163,578 1,097,056 9,228,737 Assets under finance leases - - 69 18,356 - - 18,425 Total at 31 December 2008 1,652,000 5,644,229 651,515 38,784 163,578 1,097,056 9,247,162 Eliminate 378,407 9,625,569
Note
Land
Building and improvements
Consolidated financial statements
(Unit: Thousand Baht)
Notes to the financial statements 108
Furniture, fixtures and equipment Vehicles
Operating equipment
-
-
-
-
-
31,407
60,418
Assets under construction
31,407
60,418
Total
The gross amount of the Group’s fully depreciated plant and equipment that was still in use as at 31 December 2009 amounted to Baht 823.9 million (2008: Baht 681.5 million).
Finance costs capitalised during 2009 30 Rates of interest capitalised during 2009 (MLR-1.50% per annum)
Finance costs capitalised Finance costs capitalised during 2008 30 - - - - - Rates of interest capitalised during 2008 (MLR-1.50% per annum)
Note
Land
Building and improvements
Consolidated financial statements
(Unit: Thousand Baht)
109 Notes to the financial statements
“Suc c e ss wit h Int e g r i ty”
The Erawan Group Public Company Limited
Annual Report 2009
Furniture, fixtures and equipment Vehicles
Operating equipment
Assets under construction Total
Cost At 1 January 2008 986,245 61,503 25,584 10,519 - 541,891 1,625,742 Additions 261,381 32,087 206,476 4,309 24,916 1,534,155 2,063,324 Transfers - 1,043,287 13,742 - 2,964 (1,063,431) (3,438) Disposals - (1,519) (7,920) (1,363) - - (10,802) Increase from business transfer - 2,907,053 405,633 53,124 44,486 18,897 3,429,193 At 31 December 2008 and 1 January 2009 1,247,626 4,042,411 643,515 66,589 72,366 1,031,512 7,104,019 Additions - 8,585 291,990 4,328 38,709 711,692 1,055,304 Adjustment - (105) 60 24 - - (21) Transfers - 1,634,039 30,480 - 573 (1,666,301) (1,209) Transfer to real estate for sale 8 (10,063) - - - - (13,191) (23,254) Disposal - (1,747) (12,167) (55,692) - - (69,606) At 31 December 2009 1,237,563 5,683,183 953,878 15,249 111,648 63,712 8,065,233
Note
Land
Building and improvements
Separate financial statements
(Unit: Thousand Baht)
Notes to the financial statements 110
Furniture, fixtures and equipment Vehicles
Operating equipment
Accumulated depreciation At 1 January 2008 - 13,340 16,535 6,398 - Depreciation charge for the year - 151,380 65,101 12,847 - Disposals - (843) (6,818) (975) - Increase from business transfer - 801,606 281,792 24,239 - At 31 December 2008 and 1 January 2009 - 965,483 356,610 42,509 - Depreciation charge for the year - 189,223 100,008 9,495 - Adjustment - (2) (4) 3 - Disposals - (1,458) (11,913) (44,338) - At 31 December 2009 - 1,153,246 444,701 7,669 -
Note
Land
Building and improvements
Separate financial statements
36,273 229,328 (8,636) 1,107,637 1,364,602 298,726 (3) (57,709) 1,605,616
- - - - - -
Total
- - -
Assets under construction
(Unit: Thousand Baht)
111 Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
The Erawan Group Public Company Limited
Annual Report 2009
Furniture, fixtures and equipment Vehicles
Operating equipment
Assets under construction Total
Owned assets Assets under finance leases Total at 31 December 2009
4,529,937 - 4,529,937
1,237,563 -
1,237,563
509,177
509,127 50 7,580
7,580 - 111,648
111,648 - 63,712
63,712 -
6,459,617
6,459,567 50
Net book value Owned assets 1,247,626 3,076,928 286,836 5,724 72,366 1,031,512 5,720,992 Assets under finance leases - - 69 18,356 - - 18,425 Total at 31 December 2008 1,247,626 3,076,928 286,905 24,080 72,366 1,031,512 5,739,417
Note
Land
Building and improvements
Separate financial statements
(Unit: Thousand Baht)
Notes to the financial statements 112
Furniture, fixtures and equipment Vehicles
Operating equipment
Assets under construction
-
-
-
-
-
31,366
31,366
33,516
Total
The gross amount of the Company’s fully depreciated plant and equipment that was still in use as at 31 December 2009 amounted to Baht 398.2 million (2008: Baht 290.5 million).
Finance costs capitalised during 2009 30 Rates of interest capitalised during 2009 (MLR-1.50% per annum)
Finance costs capitalised Finance costs capitalised during 2008 30 - - - - - 33,516 Rates of interest capitalised during 2008 (MLR-1.50% per annum)
Note
Land
Building and improvements
Separate financial statements
(Unit: Thousand Baht)
113 Notes to the financial statements
“Suc c e ss wit h Int e g r i ty”
The Erawan Group Public Company Limited
Notes to the financial statements 114
14. Leasehold rights for land and buildings
(Unit: Thousand Baht)
Consolidated financial statements
Leasehold Leasehold rights rights for land for buildings
Total
Cost At 1 January 2008 990,288 1,217,608 2,207,896 Additions 29,843 - 29,843 Disposals - (9,015) (9,015) At 31 December 2008 and 1 January 2009 1,020,131 1,208,593 2,228,724 Additions 1,650 2,241 3,891 Disposals - (6) (6) At 31 December 2009 1,021,781 1,210,828 2,232,609 Accumulated amortisation At 1 January 2008 251,610 118,210 369,820 Amortisation for the year 23,997 47,307 71,304 Adjustment - (1) (1) At 31 December 2008 and 1 January 2009 275,607 165,516 441,123 Amortisation for the year 26,226 47,342 73,568 At 31 December 2009 301,833 212,858 514,691 Net book value At 1 January 2008 744,524 1,043,077 1,787,601 Eliminated (5,443) 1,782,158 31 December 2009 719,948 997,970 Eliminated
Annual Report 2009
1,717,918 (4,992) 1,712,926
115
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
(Unit: Thousand Baht)
Separate financial statements
Leasehold Leasehold rights rights for land for buildings
Total
Cost At 1 January 2008 78,000 278,481 356,481 Additions 29,843 - 29,843 Increase from business transfer 737,802 - 737,802 At 31 December 2008 and 1 January 2009 845,645 278,481 1,124,126 At 31 December 2009 845,645 278,481 1,124,126 Accumulated amortisation At 1 January 2008 - 15,511 15,511 Amortisation for the year 20,245 20,422 40,667 Increase from business transfer 167,961 - 167,961 At 31 December 2008 and 1 January 2009 188,206 35,933 224,139 Amortisation for the year 22,483 20,366 42,849 At 31 December 2009 210,689 56,299 266,988 Net book value 31 December 2008 657,439 242,548 899,987 31 December 2009 634,956 222,182 857,138
The Group and the Company have mortgaged most of their and its leasehold rights for land, which have a net book value as at 31 December 2009 of Baht 703.4 million and Baht 635.0 million, respectively (2008: Baht 717.2 million and Baht 657.4 million, respectively), with banks to secure the loans.
The Erawan Group Public Company Limited
Notes to the financial statements 116
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Amortisation for the year 73,568 71,304 42,849 40,667 Less Capitalise amortisation (459) (459) - Eliminated (450) (450) - Amortisation expenses included in statements of income 72,659 70,395 42,849 40,667 15. Intangible assets
Computer software (Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
At 1 January Additions Transfers Disposals Increase from business transfer At 31 December
123,566 18,622 1,564 (563) - 143,189
83,030 35,867 4,669 - - 123,566
Accumulated amortisation At 1 January 49,601 34,977 36,590 15,794 Amortisation charge for the year 19,618 14,624 12,357 8,990 Disposals (170) - - Increase from business transfer - - - 11,806 At 31 December 69,049 49,601 48,947 36,590
80,030 17,994 1,209 - - 99,233
2008 30,832 22,648 3,438 23,112 80,030
Net book value At 31 December 74,140 73,965 50,286 43,440
Annual Report 2009
117
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
16. Other non-current assets
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Withholding tax deducted at source Others Total 17. Interest-bearing liabilities
2009 31,482 2,884 34,366
2008
2009
27,963 3,416 31,379
2008
30,413 - 30,413
26,816 26,816
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
Current Short-term loans from financial institutions secured 207,200 1,030,050 152,200 Current portion of long-term loans from financial institutions secured 697,250 514,000 371,000 Current portion of finance lease liabilities 26 27,943 26 Current portion of hire purchase payable 529 516 529 905,005 1,572,509 523,755
2008 897,550 245,000 27,943 516 1,171,009
The Erawan Group Public Company Limited
Notes to the financial statements 118
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Non-current Long-term loans from financial institutions secured 7,665,467 6,161,417 5,370,900 3,848,100 Long-term loans from related parties unsecured 5 - - 55,132 24,745 Finance lease liabilities - 26 - 26 Hire purchase payable 568 1,096 568 1,096 7,666,035 6,162,539 5,426,600 3,873,967 Total 8,571,040 7,735,048 5,950,355 5,044,976 The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities and hire purchase
payables, as at 31 December were as follows:
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
Within one year After one year but within five years After five years Total
904,450 4,881,150 2,784,317 8,569,917
1,544,050 3,963,317 2,198,100 7,705,467
523,200 3,362,532 2,063,500 5,949,232
2008 1,142,550 2,378,245 1,494,600 5,015,395
Under the loan agreements, the Group have 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.
Annual Report 2009
119
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
Secured interest-bearing liabilities as at 31 December were secured on the following assets: (Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
Property, plant and equipment - net Leasehold right for land - net Total
8,731,712 703,445 9,435,157
7,609,948 717,222 8,327,170
5,772,469 634,956 6,407,425
2008 4,765,199 657,439 5,422,638
As at 31 December 2009 the Group and the Company had unutilised credit facilities totalling Baht 1,049.6 million and 788.1 million, respectively (2008: Baht 2,086.9 million and Baht 2,086.9 million, respectively). Finance lease liabilities Finance lease liabilities as at 31 December were payable as follows: (Unit: Thousand Baht)
Consolidated financial statements/Separate financial statements
2009
Principal Within one year After one year but within five years Total
27 - 27
Interest (1) - (1)
2008 Payments 26 - 26
Principal Interest 29,323 27 29,350
(1,380) (1) (1,381)
Payments 27,943 26 27,969
Interest-bearing liabilities of the Group as at 31 December 2009 and 2008 were denominated entirely in
Thai Baht. In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgement regarding whether significant risk and rewards of ownership of the leased asset has been transferred, taking into consideration terms and conditions of the arrangement.
The Erawan Group Public Company Limited
Notes to the financial statements 120
18. Trade accounts payable
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
2009
2008
2009
2008
Related party 5 - - 200 223 Other parties 230,684 134,915 74,901 58,132 Total 230,684 134,915 75,101 58,355 Trade accounts payable of the Group and the Company as at 31 December 2009 and 2008 were denominated entirely in Thai Baht. 19. Other current liabilities
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
Management, royalty, marketing and other fees payable - hotel business 29,152 23,870 10,835 Retention 70,082 106,823 23,057 Advances from customers 19,420 16,900 6,755 Value added tax payable 7,000 5,006 - Accrued expenses 104,107 110,095 60,474 Income tax payable 27,678 43,340 - Deposits received - hotel business 54,017 28,225 22,204 Others 54,610 39,731 28,664 Total 366,066 373,990 151,989
Annual Report 2009
2008 7,104 54,841 6,579 41,340 6,604 21,600 138,068
121
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
20. Deferred income
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Leasehold rights - building, service and equipment - other parties Less accumulated amortisation Net book value
56,720 (38,585) 18,135
56,720 (35,771) 20,949
56,720 (38,585) 18,135
56,720 (35,771) 20,949
Amortisation expenses included in statements of income for the year
2,814
2,814
2,814
2,814
21. Share capital
Par value per share (Baht)
2009 Number (Thousand shares)
2008 Amount (Thousand Baht)
Number (Thousand shares)
Amount (Thousand Baht)
Authorised At 1 January Ordinary shares 1 2,281,143 2,281,143 2,281,143 2,281,143 Reduction of authorised shares 1 (36,364) (36,364) - At 31 December Ordinary shares 1 2,244,779 2,244,779 2,281,143 2,281,143 Issued and paid-up At 1 January Ordinary shares 1 2,244,779 2,244,779 2,214,575 2,214,575 1 - - 30,204 30,204 Increase from the exercise of ESOP At 31 December Ordinary shares 1 2,244,779 2,244,779 2,244,779 2,244,779
The Erawan Group Public Company Limited
Notes to the financial statements 122
During the year 2008, the Company received payment of additional share capital totalling Baht 64.8 million as a result of the exercise of share options by the directors and employees under the employee stock option plan scheme as follows: Date
1 February 2008 3 March 2008 3 March 2008 3 March 2008 2 June 2008 2 June 2008 1 July 2008 1 July 2008 1 August 2008 1 August 2008 1 September 2008 1 September 2008 1 September 2008 1 October 2008 1 October 2008 1 October 2008 1 October 2008 Total
Ordinary shares from the exercise (Shares)
Exercise price (Baht/share)
400,000 2.15 319,729 2.09 638,783 2.12 5,615,675 2.15 1,203,756 2.15 3,437,089 2.18 600,000 2.09 569,729 2.18 200,000 2.09 200,000 2.18 64,973 2.09 1,214,973 2.12 839,458 2.18 2,877,569 2.09 3,389,136 2.12 4,795,948 2.15 3,837,558 2.18 30,204,376
Amount (Thousand Baht) 860 668 1,354 12,074 2,588 7,493 1,254 1,242 418 436 136 2,575 1,830 6,014 7,186 10,311 8,366 64,805
The Company registered the increase in its paid-up share capital to Baht 2,244.8 million with the Ministry of Commerce on 10 October 2008. The Stock Exchange of Thailand approved the additional ordinary shares as listed securities on 17 October 2008.
At the annual general meeting of the shareholders of the Company held on 28 April 2009, the shareholders approved the reduction of authorised share capital from Baht 2,281.1 million to Baht 2,244.8 million by cancellation of unsold ordinary shares of 36,364,098 shares with a par value of Baht 1 each. The Company registered the reduction of authorised share capital with the Ministry of Commerce on 14 May 2009.
Annual Report 2009
123
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
22. Employee stock option plan (ESOP)
On 4 November 2004, the Extraordinary Meeting of shareholders No. 1/2547 approved the employee stock option plan. Under the plan, the Company is to offer 66,652,400 ordinary shares with a par value of Baht 1 each, equivalent to 4.59% of the total paid-up shares, to its directors and its employees and/or its subsidiaries. The plan is to cover a period of not more than 5 years from the date it is approved by the Securities and Exchange Commission (SEC). Directors and employees who are granted options can exercise one-quarter of the total options granted during each of four exercise periods.
Following the final exercise period, any remaining options will be deemed to have expired and no further exercise will be possible. In addition, at the Annual General Meeting of the shareholders of the Company held on 25 April 2006,
the shareholders approved the issuance of not more than Baht 18.26 million additional shares to support the adjustment of rights under the ESOP, as a result of the increase in the number of shares and the corresponding issuance of warrants. The new exercise price and the number of shares after adjustment are as follows:
Period
Exercise periods
1 2 3 4
29 September 2006 - 30 December 2008 29 September 2006 - 30 December 2008 1 June 2007 - 30 December 2008 1 June 2008 - 30 December 2008
Number of shares after adjustment (Shares)
Formerly exercise prices (Baht per share)
11,277,627 18,242,747 21,310,743 21,310,743
2.67 2.71 2.75 2.79
New exercise prices (Baht per share) 2.09 2.12 2.15 2.18
The directors and employees of the Company and its subsidiaries exercised their rights to purchase totalling 30,204,376 ordinary shares in 2008. During the year 2008, movements in the number of ordinary share options are as follows: Shares
Number of share options at the beginning of year Less exercised during the year Less number of share options cancellation since the directors resigned during the year Less number of share options expired during the year Number of share options at the end of year
43,326,525 (30,204,376) (319,729) (12,802,420) -
The Erawan Group Public Company Limited
Notes to the financial statements 124
23. Reserves
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.
Legal reserve The Public Companies Act B.E. 2535 requires that a 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.
24. Expenses by natures
Significant expenses by nature are as follows: (Unit: Thousand Baht)
Salary and wages and other employee benefits Costs of food and beverage Rental expenses
Consolidated financial statements Separate financial statements
2009 896,878 409,899 46,385
2008 710,839 417,215 45,677
2009 498,222 188,501 30,400
2008 324,796 188,637 29,035
25. Segment information
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.
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.
Annual Report 2009
125
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
Business segments The Group comprises the following main business segments: Segment 1 Building rental business Segment 2 Hotel business
Geographic segments Management considers that the Group operates in a single geographic area, namely in Thailand, and has, therefore, only one major geographic segment. Business segments results in the consolidated financial statements for the years ended 31 December 2009 and 2008 were as follows: (Unit: Million Baht)
Building rental business
2009
2008
Hotel business
2009
2008
Eliminations
2009
2008
Revenues from external 401 389 2,748 2,987 - - Inter - segment 20 20 - - (20) (20) revenues Total revenues 421 409 2,748 2,987 (20) (20) Segment profit 153 146 80 443 (13) (13) Unallocated income and expenses: Other income Depreciation and amortisation Selling expenses Administrative expenses Finance costs Income tax Net profit attribute to minority interests Profit (loss) for the year
Total
2009
2008
3,149
3,376
- 3,149 220
- 3,376 576
43
37
(10) (2)
(12) (2)
(95) (307) (46)
(93) (274) (93)
(32)
(61)
(229)
78
The Erawan Group Public Company Limited
Notes to the financial statements 126
Business segment financial position in the consolidated financial statements as at 31 December 2009 and 2008 were as follows: (Unit: Million Baht)
Building rental business
2009
Hotel business
2008 2009
Unallocated assets
2008 2009
Eliminations
2008 2009
Total
2008 2009
2008
Inventories - - 55 48 23 - - - 78 48 Property, plant and equipment 725 791 9,196 8,342 158 152 328 341 10,407 9,626 Leasehold rights for land and buildings 356 386 1,444 1,491 - - (87) (95) 1,713 1,782 Other assets 1,091 1,174 Total assets 13,289 12,630 (Unit: Million Baht)
Building rental business
2009
Hotel business
2008 2009
Unallocated liablities
2008 2009
Eliminations
2008 2009
2008 2009
Interest-bearing borrowings 480 480 8,561 6,929 330 838 (801) (541) Account payable for 180 180 180 180 - - - - land leasehold rights Other liabilities Total liabilities
Annual Report 2009
Total
2008
8,570
7,706
360 820 9,750
360 806 8,872
127
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
26. Other income
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Gain from sale of fixed assets Gain from sale of investment Income from additional capital paid up Income from property tax Others Total
2009 14,870 526 - 6,719 15,869 37,984
2008
2009
- 685 8,645 6,383 13,872 29,585
2008
12,816 506 - 6,531 13,316 33,169
- 588 8,645 6,263 11,094 26,590
27. Selling expenses
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
Marketing expenses Personnel expenses Total
150,608 56,101 206,709
151,533 46,762 198,295
2008
74,053 20,054 94,107
77,983 12,932 90,915
28. Administrative expenses
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
243,331 159,375 44,705 223,373 670,784
186,682 187,472 51,880 275,388 701,422
145,553 89,596 16,154 87,089 338,392
89,138 100,053 12,602 76,315 278,108
Personnel expenses Management and other fee Repair and maintenance expenses Others Total
The Erawan Group Public Company Limited
Notes to the financial statements 128
29. Employee benefit expenses
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Management Salary and wage and other benefits 39,145 46,508 37,240 44,453 Contribution to defined contribution plans 1,093 1,043 1,093 1,043 40,238 47,551 38,333 45,496 Other employees Salary and wage and other benefits 838,810 646,909 453,151 272,431 Contribution to defined contribution plans 17,830 16,379 6,738 6,869 856,640 663,288 459,889 279,300 Total 896,878 710,839 498,222 324,796 The defined contribution plans comprise provident funds established by the Group and Company 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 and Company at rates ranging from 3% to 10% of the employees’ basic salaries. The provident funds are registered with the Ministry of Finance as juristic entities and are managed by a licensed Fund Manager.
Annual Report 2009
129
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
30. Finance costs
(Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Note
Interest: Related parties 5 Financial institutions Transaction costs Capitalised as cost of assets under construction 13 Net 31. Income tax expense
2009
2008
2009
2008
- 337,750 503 338,253
- 334,291 - 334,291
1,502 219,401 40 220,943
1,729 187,030 - 188,759
(31,407) 306,846
(60,418) 273,873
(31,366) 189,577
(33,516) 155,243
The current tax expense in the consolidated statements of income more than the amount determined by applying the Thai corporation tax rate to the accounting profit for the year principally because the different treatment for accounting and taxation purposes of certain items of income and expenses. (Unit: Thousand Baht)
Consolidated financial statements Separate financial statements
Current tax expense Current year 32. Earnings (loss) per share
2009 45,656
2008
2009
92,937
2008 -
-
Basic earnings (loss) per share The calculations of basic earnings (loss) per share for the years ended 31 December 2009 and 2008 were based on the profit (loss) for the year attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the periods as follows:
The Erawan Group Public Company Limited
Notes to the financial statements 130
(Unit: Thousand Baht/Thousand Shares)
Consolidated financial statements Separate financial statements
2009
Profit (loss) for the year attributable to equity holders of the Company (basic)
(229,411)
Number of ordinary shares outstanding as at 1 January Effect of shares issued during the year Weighted average number of ordinary shares outstanding (basic) Earnings (loss) per share (basic) (in Baht)
2008
2009
2008
78,328
(29,551)
(368,932)
2,244,779 -
2,214,575 13,734
2,244,779 -
2,214,575 13,734
2,244,779
2,228,309
2,244,779
2,228,309
(0.10)
0.04
(0.01)
(0.17)
Diluted earnings (loss) per share The calculations of diluted earnings (loss) per share for the years ended 31 December 2009 and 2008 were based on the profit (loss) for the period attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the year after adjusting for the effects of all dilutive potential ordinary shares as follows: (Unit: Thousand Baht/Thousand Shares)
Profit (loss) for the year attributable to equity holders of the Company (dilute) Weighted average number of ordinary shares outstanding (basic) Effect of exercise of share options by the Group’s directors and employees Weighted average number of ordinary shares outstanding (dilute) Earnings (loss) per share (dilute) (in Baht) Annual Report 2009
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
(229,411)
78,328
(29,551)
(368,932)
2,244,779
2,228,309
2,244,779
2,228,309
-
8,233
-
8,233
2,244,779
2,236,542
2,244,779
2,236,542
(0.10)
0.04
(0.01)
(0.17)
131
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty”
33. Dividends
At the Annual General Meeting of the shareholders of the Company held on 28 April 2009, the shareholders approved the appropriation of dividends of Baht 0.01 per share, amounting to Baht 22.4 million. The dividend was paid to shareholders on 27 May 2009.
At the Annual General Meeting of the shareholders of the Company held on 22 April 2008, the shareholders approved the appropriation of dividends of Baht 0.06 per share, amounting to Baht 133.3 million. The dividend was paid to shareholders on 21 May 2008. 34. 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. 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 17). 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:
The Erawan Group Public Company Limited
Notes to the financial statements 132
(Unit: Thousand Baht)
Effective interest rate (% per annum) 2009 Loans receivable - related parties
4.15
Separate financial statements
Within 1 year
-
After 1 year but within 5 years
After 5 years
745,746
-
Total
745,746
2008 Loans receivable - relate parties 5.63 - 516,791 - 516,791
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: Thousand Baht)
Effective interest rate (% per annum)
Consolidated financial statements
Within 1 year
After 1 year but within 5 years
After 5 years
Total
2009 Loans payable - financial institutions
5, MLR-1.50, MLR-2.00, 6-month fixed deposit rate +2.00
4,881,150
2,784,317
8,569,917
2008 Loans payable - financial institutions
5, MLR-1.50, MLR-1.75, MLR-2.00, 6-month fixed deposit rate +2.00 1,544,050 3,963,317
2,198,100
7,705,467
Annual Report 2009
904,450
133
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty”
(Unit: Thousand Baht)
Effective interest rate (% per annum)
Separate financial statements
Within 1 year
After 1 year but within 5 years
After 5 years
2009 Loans payable - 4.15 - 55,132 - related party Loans payable - 5, MLR-1.50, financial institutions MLR-2.00, 6-month fixed deposit rate +2.00 523,200 3,307,400 2,063,500 523,200 3,362,532 2,063,500 Total
2008 Loans payable - related party 5.63 - 24,745 - Loans payable - 5, MLR-1.50, financial institutions MLR-2.00, 6-month fixed deposit rate 1,142,550 2,353,500 1,494,600 +2.00 Total 1,142,550 2,378,245 1,494,600
Total
55,132
5,894,100 5,949,232
24,745
4,990,650 5,015,395
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 Group’s customer base, Management does not anticipate material losses from its debt collection. The Erawan Group Public Company Limited
Notes to the financial statements 134
Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’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. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’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. Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The Board monitors the return on capital which is considered from operating activities divided by total shareholders’ equity, excluding minority interests and also considers the level of dividends to ordinary shareholders. 35. Commitments with non-related parties
(Unit: Million Baht)
Consolidated financial statements Separate financial statements
Operating lease commitments Within one year After one year but within five years After five years Total
Annual Report 2009
2009 36.0 3.4 - 39.4
2008 26.5 18.3 2.5 47.3
2009 28.2 3.2 - 31.4
2008
17.2 12.3 - 29.5
135
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
(Unit: Million Baht)
Consolidated financial statements Separate financial statements
2009
2008
2009
2008
Long-term lease commitments Within one year 43.2 After one year but within five years 195.6 After five years 2,224.2 Total 2,463.0
37.0 172.6 2,240.7 2,450.3
26.9 109.6 1,906.5 2,043.0
27.1 109.5 1,933.9 2,070.5
Other commitments Guarantee for bank credit facilities 750.0 Bank guarantees 31.0 Total 781.0
750.0 30.8 780.8
750.0 22.4 772.4
750.0 20.2 770.2
Capital expenditure commitments As at 31 December 2009, the Company and its subsidiaries have capital commitments of approximately Baht 400.9 million (31 December 2008: Baht 838.2 million and U.S. Dollar 0.2 million), relating to construction, interior design, renovation, and the purchase of hotel operating equipment. Long-term agreements The Company and its subsidiaries have entered into the following long-term lease agreements and several service agreements with third parties, local companies, overseas companies, and Government organisations: 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 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.
The Erawan Group Public Company Limited
Notes to the financial statements 136
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 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 consolidated
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 consolidated balance sheets. As at 24 December 2002, the subsidiary 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. 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, as mentioned in Note 4.
Annual Report 2009
137
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
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, as mentioned in Note 4. 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.
The Erawan Group Public Company Limited
Notes to the financial statements 138
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 a year of at least 10 years, dependent upon certain conditions specific 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, as mentioned in Note 4. 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 conditions specified in the agreements. In June 2006, Erawan Phuket Company Limited entered into agreements with the group of Six Senses Company which 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 term of the agreements is for 30 years, commencing from the resort operations, with an option to extend for further period, dependent upon certain conditions specified in the agreements.
Annual Report 2009
139
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
During June 2006 to March 2008, the Company and Erawan Chaophraya 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. 36. Contingent liabilities
Litigations
a) During the year 2008, a former 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. At present, the case is at the stage of investigating witnesses and
has not been finalised. However, the legal adviser of the Company expects that there will be no significant impact to the Company as a result of the case. b) In year 2009, the Company receives a summon to be co-defendant in a case where the plaintiff, a lessee of land together with building, sued the previous landlord who had sold the land together with building to the Company through the Civil Court for breach of a lease agreement and claimed compensation of approximately Baht 79.4 million. At present, the case is in the process of Court of First Instance and has not been finalised. However, the legal adviser of the Company expects that there will be no significant impact to the Company as a result of the case. 37. Events after the reporting period
On 23 February 2010, the meeting of the board of Directors passed a resolution to propose to the Annual General Meeting of the Company’s shareholders for their approval of no dividend distribution for the year 2009.
38. Thai Accounting Standards (TAS) not yet adopted
The Group has not adopted the following revised TAS which are relevant to the Company that have been issued as of the reporting date but are not yet effective. The revised TAS are anticipated to become effective for annual financial periods beginning on or after 1 January in the year indicated.
The Erawan Group Public Company Limited
Notes to the financial statements 140
TAS/TFRS
TAS 24 (revised 2009) TAS 40 (revised 2009)
Topic
Year effective
Related Party Disclosures (formerly TAS 47) Investment Property
2011 2011
Management is presently considering the potential impact of adopting and initial application of these new and revised TAS on the consolidated and separate financial statements. 39. Reclassification of accounts
Certain accounts in the 2008 financial statements have been reclassified to conform to the presentation in the 2009 financial statements as follows:
(Unit: Thousand Baht)
2008 Consolidated financial statements
Before reclass.
Reclass.
Separate financial statements
Before After reclass. reclass.
Reclass.
After reclass.
Balance sheet Value added tax refundable - 216,159 216,159 - 92,849 92,849 Advances - construction - 62,237 62,237 - 57,989 57,989 Other current assets 342,309 (278,396) 63,913 166,895 (150,838) 16,057 Investment in associate 544 (206) 338 544 (206) 338 Investments in other related parties 2,809 206 3,015 2,105 206 2,311 Deposits for lease of land, building and equipment - 204,879 204,879 - 203,513 203,513 Other non-current assets 236,258 (204,879) 31,379 230,330 (203,513) 26,817 Trade accounts payable and construction 279,917 (279,917) - 178,475 (178,475) - Trade accounts payable - subsidiaries - - - 223 (223) - Trade accounts payable - 134,916 134,916 - 58,354 58,354 Accounts payable - construction - 145,001 145,001 - 120,344 120,344 - -
Annual Report 2009
141
Notes to the financial statements
“Suc c e ss wit h Int e g r i ty�
(Unit: Thousand Baht)
2008 Consolidated financial statements
Before reclass.
Reclass.
Separate financial statements
Before After reclass. reclass.
Reclass.
Statement of income Net foreign exchange gain - 4,211 4,211 - 2,577 Dividend income - 2,441 2,441 - 172,438 Interest income - 746 746 - 17,059 Other income 36,983 (7,398) 29,585 218,664 (192,074) Cost of sales and direct costs of rental and services 1,454,679 (1,454,679) - 673,939 (673,939) Cost of hotel operations - 1,298,268 1,298,268 - 512,036 Cost of rental of units in buildings and related service - 156,411 156,411 - 161,903 Administrative expenses 748,858 (47,436) 701,422 323,420 (45,312) Other expenses 115 (115) - 184 (184) Management benefit expenses - 47,551 47,551 - 45,496 - -
After reclass. 2,577 172,438 17,059 26,590 - 512,036 161,903 278,108 - 45,496
The reclassifications have been made to comply with the classification set out in the Pronouncement of
the Department of Business Development Re: Determination of items in the financial statements B.E. 2552 dated
30 January 2009 and the new classification is more appropriate to the Group’s business.
The Erawan Group Public Company Limited
Notes to the financial statements 142
Corporate Information
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, 10 Chalermphrakiat Road, Patong, Katu, Phuket 83150, Thailand Telephone: 66 (0) 7630 3888 Fax: 66 (0) 7630 3889 Branch 4 ibis Pattaya, 463/79 Pattaya Second Road, Nongprue, Bang Lamung, Chon Buri 20150, Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189 Branch 5 ibis Samui, 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320, Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889 Annual Report 2009
Branch 6 ibis Sathorn, 29/9 Soi Ngam Duphli, Rama IV Road, Kwang Thung Mahamek, Khet Sathon, Bangkok 10120, Thailand Telephone: 66 (0) 2610 5188 Fax: 66 (0) 2610 5189 Branch 7 ibis 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 First Road, Nongprue, Bang Lamung, Chon Buri 20150, Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556 Branch 9 ibis Kata, 88/8 Kata Road, Karon, Mueang Phuket, Phuket 83100, Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489 Home page www.TheErawan.com
143
Notes to the financial statements Corporate Information
“Suc c e ss wit h Int e g r i ty”
Type of Business Invest and develop hotel properties strategically located to match travelers’ different demand. Company’s Capital as at 31 December 2009 Registered Capital Baht 2,244,779,001: 2,244,779,001 ordinary shares at par value Baht 1 per share. Paid-Up Capital
Baht 2,244,779,001: 2,244,779,001 ordinary shares at par value Baht 1 per share.
Other References
1. 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 2. Auditor • Mr. Charoen Phosamritlert Certificate Public Accountant (Thailand) No. 4068 • Ms. Boonsri Chotpaiboonpan Certificate Public Accountant (Thailand) No. 3756 • Ms. Vannaporn Jongperadechanon Certificate Public Accountant (Thailand) No. 4098 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
Head Office
• The Erawan Group Public Company Limited 6th 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 Hotel Business
• Grand Hyatt Erawan Hotel Bangkok 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, Surat Thani 84310, Thailand Telephone: 66 (0) 7742 9300 Fax: 66 (0) 7742 9333 www.marriott.com/usmbr • Six Senses Destination Spa Phuket 32 Moo 5, Paklok, Thalang, Phuket 83110, Thailand Telephone: 66 (0) 7637 1400 Fax: 66 (0) 7637 1401 www.sixsenses.com The Erawan Group Public Company Limited
Notes to theCorporate financial Information statements 144
• 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 Soi 1 Road, Nongprue, Bang Lamung, Chon Buri 20150, Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556 www.holidayinn.com/pattaya • ibis Patong 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 Second Road, Nongprue, Bang Lamung, Chon Buri 20150, Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189 www.ibishotel.com • ibis Samui 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320, Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889 www.ibishotel.com
Annual Report 2009
• ibis 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 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 Kata 88/8 Kata Road, Karon, Mueang Phuket, Phuket 83100, Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489 www.ibishotel.com Rental Property
• Ploenchit Center 2 Sukhumvit Road Soi 2, Klongtoey, Bangkok 10110, Thailand Telephone: 66 (0) 2656 8600-4 Fax: 66 (0) 2656 9899 • 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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1. Amphawa Floating Market, Samut Songkhram 2. Bang Phli Old Market, Samut Prakan 3. Sam Chuk 100 Years Old Market, Suphan Buri
4. Jet Samian Market, Ratchaburi 5. Taling Chan Floating Market, Bangkok 6. Ang Sila Old Market, Chon Buri
Designed by Plan Grafik Tel. : 0 2237 0080 # 300
12 Destinations of Traditional Thai Market
1. ตลาดน้ำอัมพวา จ.สมุทรสงคราม 2. ตลาดโบราณบางพลี จ.สมุทรปราการ 3. ตลาดร้อยปีสามชุก จ.สุพรรณบุรี
4. ตลาดเจ็ดเสมียน จ.ราชบุรี 5. ตลาดน้ำตลิ่งชัน กรุงเทพมหานคร 6. ตลาดเก่าอ่างศิลา จ.ชลบุรี 7. กาดกองต้า จ.ลำปาง
Annual Report 2009
The Erawan Group Public Company Limited The Erawan Group Public Company Limited
6th Floor, Ploenchit Center, 2 Sukhumvit Road, Klongtoey, Bangkok 10110, Thailand Tel. : 66 (0) 2257 4588 Fax : 66 (0) 2257 4577 Reg. No. 0107537001943 www.TheErawan.com
Annual Report 2009
The Erawan Group Public Company Limited