Annual Report 2024/2025

A Carson Cumberbatch Company

Annual Report 2024/25

CONTENT

Chairman's Statement 2

Management Discussion & Analysis 4

Directors Profiles 7

Risk Management 10

Annual Report of the Board of Directors on the Affairs of the Company 13

Nominations and Governance Committee Report 31

Related Party Transactions Review Committee Report 37

Audit Committee Report 40

Financial Calendar 45

Independent Auditor's Report 46

Statement of Profit or Loss and other Comprehensive Income 50

Statement of Financial Position 51

Statement of Changes in Equity 52

Statement of Cash Flows 53

Notes to the Financial Statements 54

Five Year Summary 107

Statement of Value Added 109

Information to Shareholders and Investors 110

Notice of Meeting 112

Form of Proxy 115

Corporate Information IBC

This report can be accessed online at https://www.carsoncumberbatch.com

CHAIRMAN'S STATEMENT

Dear Shareholders,

On behalf of the Board of Directors, I am honoured to welcome you to the 59th Annual General Meeting of Pegasus Hotels

of Ceylon PLC. It is my pleasure to present to you, the annual report and financial statements of the Company and the Group for the financial year ended 31st March 2025.

The year under review saw Sri Lanka's tourism sector posting record growth numbers, rebounding from the setbacks caused by consecutive calamities in recent years. Tourist arrivals exceeded 2 Mn in 2024, generating USD 3.17 Bn in tourism revenue, an impressive 53% increase over the prior year.

The recovery was driven primarily by visitors from key source markets including India, the United Kingdom, Germany and Russia. The 38% increase in Indian tourists over the prior year was particularly notable, supported by improved air connectivity and visa-on-arrival facilities. European markets

also reported strong growth, incentivi sed by Sri Lanka's unique blend of cultural heritage, wildlife experiences and scenic coastlines.

Sri Lanka is on the path to economic recovery with the stabili sation of the macroeconomic environment and reduced domestic uncertainties. Since 2022, Sri Lanka has made

key reforms aiming to restore economic stability, gaining acknowledgement and approval by International Monetary Fund (IMF) for the third review of its Extended Fund Facility (EFF) programme. Improved foreign exchange inflows from tourism and foreign remittances led to a 10.7% appreciation of the LKR against the US dollar by end-2024, while easing inflation reduced cost pressures and boosted consumer confidence.

In this backdrop, the financial year 2024/2025 began on a positive note for us, marked by growth in business, especially from India and other emerging markets, reflecting the wider trend of tourist arrivals to the county as explained previously. The weddings segment recorded modest growth, reflecting evolving consumer behaviour and a shift toward smaller, more intimate celebrations. We adapted our service offerings in response to changing customer preferences and increased price sensitivity, to maintain our competitive position. The MICE (Meetings, Incentives, Conferences, and Exhibitions) segment posted positive performance, with a rise in corporate events, day outings, and banquet functions. However, pricing flexibility remained constrained due to intense rate competition among peers.

Amidst the active efforts of our teams to strengthen relationships with key stakeholders, and the continuous investments in marketing initiatives, the Company recorded an occupancy of 63% for the year. This compares with an occupancy rate of 47% in the previous year and demonstrates

the Group's steady progress towards pre-pandemic occupancy levels. However, intense competition continued to weigh

on the room rates as well, affecting the Company's overall performance in the year. The year closed with a consolidated revenue of LKR 1.14 Bn marking a YoY growth of 23%. The consolidated EBITDA for the year amounted to LKR 45.5 Mn a notable improvement from the previous year.

During the financial year, the Company divested its entire holding in Equity Hotels Limited (Giritale Hotel) for a consideration of LKR 243.5 Mn. This decision was made following careful evaluation to focus resources on our core asset. Giritale, as a destination, has been losing its appeal in comparison to more favoured tourist hubs such as Sigiriya and Habarana, further reinforcing the strategic rationale for the exit. Given the significant capital investment required to maintain competitiveness and its relatively small scale, the divestment will enable us to optimi se operational efficiencies and strengthen the balance sheet, thereby enabling more sustainable and meaningful future growth.

With the expansion of highway networks and a growing preference for newer urban properties, the traditional transit hotel model is gradually losing its appeal among contemporary travellers. To capitalise on this shift, the Company has embarked on a refurbishment plan to further strengthen its position as a city resort destination. Part of the funds from the Giritale Hotel divestiture, alongside a portion of the proceeds obtained from the Rights Issue carried out in 2023, are being allocated to support these initiatives.

The hospitality industry is facing growing pressure from the rise of homestays, other unregistered tourist establishments, and specialised event venues. Many of these operators function outside formal regulatory frameworks, often without proper licensing or tax contributions, creating an uneven playing field for compliant businesses and potentially affect the country's reputation as a reliable and quality tourism destination.

This structural challenge is compounded as the sector continues to grapple with a shortage of skilled workers, with many experienced professionals seeking better prospects overseas. This talent gap has placed added pressure on service standards, whilst consumer expectations continue to grow more sophisticated and personalised.

Fully cognizant of these converging forces, we have navigated the evolving environment by staying closely attuned to emerging consumer trends and adapting our offerings to remain relevant and responsive.

While we acknowledge the importance of catering to value-conscious travellers, we also believe that sustainable growth in the sector lies in attracting higher-spending tourists, who appreciate bespoke experiences and are willing to invest in quality service and authentic hospitality. We believe that it is in this segment that true long-term value can be found, both for the industry and the broader economy.

Despite the challenges, the outlook for Sri Lanka's tourism industry remains positive, underpinned by growing regional interest and the rising popularity of Asia as a preferred travel destination. Sri Lanka, with its diverse offerings and unique cultural appeal, is well-positioned to benefit from this momentum. To capitalise on these trends and in driving future growth, sustained efforts by stakeholders to enhance

infrastructure, diversify experiences, and strengthen marketing will be critical. As the hospitality industry continues to evolve, we remain focused on aligning our portfolio with emerging market dynamics and long-term value creation.

In closing, I extend my heartfelt gratitude to all my fellow Board members whose unwavering support and counsel have been instrumental in our continued progress. I would also like to thank all our business partners, guests, dedicated employees and other stakeholders for their respective support extended throughout the year. A special note of appreciation goes to

Mr. S. R. Mather, who is stepping down from the Board this year, for his invaluable contributions, strategic insights, and dedication to our organisation's growth over the years. At the same time, I warmly welcome our incoming directors, Mr. A. S. Amaratunga, Mr. S. Marimuthu and Mr. D.R.P. Goonetilleke, whose diverse skills and fresh perspectives will undoubtedly strengthen our Board's capability to navigate

future opportunities and challenges. Finally, I wish to thank all our shareholders for your continued trust, cooperation, and confidence in our vision as we move forward together.

(Sgd.)

M. Dayananda Chairman

25th June 2025

MANAGEMENT DISCUSSION & ANALYSIS

GLOBAL CONTEXT

The global tourism industry rebounded strongly in 2024, nearing pre-pandemic levels with 1.4 Bn tourists traveling internationally. The Middle East saw remarkable growth, while Europe and Africa also surpassed pre-pandemic figures. This recovery was fuelled by increased travel demand, market improvements, and growing outbound travel from emerging economies like India. Key trends include a rising preference for cultural and immersive experiences. Technology continues to reshape the industry through AI-driven recommendations,

seamless mobile bookings, and real-time updates for improved traveller personalisation and convenience.

LOCAL CONTEXT

Sri Lanka's economy showed strong recovery in 2024 with a 5.0% GDP growth, driven by agriculture, industry, and services. Effective fiscal policies, the International Monetary Fund's (IMF) Extended Fund Facility, and the completion of the country's external debt restructuring fuelled this rebound, boosting investor confidence. Inflation picked up in early 2024 but turned deflationary by September, aided by lower electricity tariffs

and global commodity price moderation. The Central Bank of Sri Lanka (CBSL) streamlined monetary policy framework, introducing a single policy rate of 8.0% in November to stimulate lending and support economic growth.

Sri Lanka's tourism sector experienced a significant resurgence during 2024, marking its strongest performance since 2019. The influx of tourists was driven by improved global air connectivity, with India remaining the top source market. Other significant contributors included Russia, the UK, Germany, and China.

Sri Lanka aims to attract 3 Mn tourists in 2025 and eventually reach 5 Mn annual visitors, generating USD 8.5 Bn in revenue.

The focus is on enhancing tourism quality, increasing daily spending, and promoting sustainable practices. Strategic investments in regional diversification, targeted marketing, and high tourism standards are crucial to sustaining growth trends and overcoming challenges, thereby positioning Sri Lanka as a key global travel destination.

OUR OPERATIONAL CONTEXT

The enhanced performance of traditional and online tour operators played a significant role in boosting occupancy of Pegasus Reef Hotel (the Company) throughout the year. To sustain this upward trend, the Company prioritised building strong relationships with key stakeholders through targeted efforts, including strategic visits to important source markets. In alignment with these market development strategies, we also introduced specialised staff to our culinary team. This step demonstrates the Company's commitment to personalisation and cultural resonance in enhancing guest satisfaction.

Amid increasing price sensitivity, shifts in consumer behaviour, particularly the inclination toward smaller-scale functions, remain a notable concern. In response, the Company leveraged its distinctive offerings, particularly outdoor garden and beach venues, to remain competitive against standalone banquet halls. To further cater to evolving consumer preferences, diversified package offerings were introduced, garnering significant traction. The period also saw a notable increase

in guests visiting for day outings and other functions by 25%, supported by large-scale events hosted by our esteemed corporate clientele.

FINANCIAL PERFORMANCE

In March 2025, we concluded the divestment of the entire stake in our sole subsidiary, Equity Hotels Limited (Giritale Hotel). The transaction was valued at LKR 300 Mn, of which LKR 56.5 Mn was directly infused by the buyer to settle the

Giritale hotel's outstanding borrowings, resulting in a net equity value of LKR 243.5 Mn. This decision reflects our disciplined approach to capital allocation, redirecting resources toward opportunities that offer better returns on invested capital and stronger growth prospects. Giritale Hotel recorded a revenue of LKR 169.6 Mn during the year under review, supported by an occupancy level of 55%.

During the year under review, the Pegasus Reef Hotel recorded a revenue growth of 25%, reaching LKR 968.7 Mn, primarily driven by the improved occupancy levels. Food and beverage revenue increased by 14.3% to LKR 515.6 Mn, benefiting from higher wedding, MICE, and special event activities. In tandem with higher activity levels and increased personnel costs, direct costs increased by 12.1% or LKR 70.1 Mn to LKR 649.4 Mn, while the reduction in electricity costs by LKR 30.1 Mn, due to tariff adjustments, partially offset these increases.

During the year, the Company achieved an occupancy of 63%, nearing pre-pandemic levels. However, pricing power remains constrained due to intense competition from both formal

and informal accommodation providers, limiting our ability to pass on the steep cost escalations stemming from inflationary pressures and exchange rate depreciation in the past. The Average Room Rate (ARR) experienced a modest increase of 6% during the year, inadequate to counteract the impact of rising operating costs. As a result, profitability continued to lag behind pre-pandemic levels despite occupancy reaching near pre-pandemic levels. Looking ahead, restoring historical profit margins will remain a challenge, and we continue to pursue targeted value additions and differentiated offerings to strengthen pricing and improve profit margins. However, these initiatives require upfront investments, which will place temporary pressure on short-term earnings.

In line with this strategy, having deferred significant property investments during the challenging operating environment of recent years, we are now prioritising property refurbishments and facility upgrades to elevate guest experience and ensure our assets remain competitive and attractive. As a result, this year's maintenance expenses rose by LKR 25.2 Mn, while

we invested a total of LKR 16.9 Mn in soft refurbishment of 21 of our rooms. Following the completion of this phase, refurbishment work has already commenced on an additional 31 rooms, which are scheduled to be completed by July 2025. The much-needed restaurant refurbishment is progressing as planned to our signature 'Rasaketha' restaurant, as a part of our comprehensive property enhancement strategy. We also made investments of LKR 19.4 Mn in health and safety enhancements during the year, guided by our commitment to the well-being of our people and guests. On a prudent basis most of these costs were expensed to the Profit or Loss Statement, ensuring a more transparent view of our financial

performance. While this decision has had a short-term impact on earnings as aforementioned, we believe it reflects our commitment to operating with integrity and prioritising longterm sustainability over short-term gains.

During the year, the Hotel's administration expenses increased by 26.5%. Personnel costs, which constitute the largest share of administrative expenses, rose by LKR 31.6 Mn, reflecting

the ongoing investment in our people, ensuring they have the support, training, and rewards they deserve for their dedication to excellence. Attracting and retaining experienced talent continues to be challenging and costly, given the ongoing talent shortage in the hospitality sector and rising competition from new and upcoming properties. In addition to the above, a one-time ex-gratia payment was made to the staff of Giritale Hotel in recognition of their dedicated service as they transitioned out of the Carsons Group. While not mandatory, this gesture reflects our commitment to treating people with dignity and respect and reinforces our value-driven culture.

During the year under review, we continued investments on brand-building and customer engagement initiatives, resulting in a LKR 18.9 Mn increase in advertising and promotional expenses. Consequently, sales and distribution expenses rose to LKR 70.0 Mn, up from LKR 38.4 Mn in the previous year - an 82% increase.

Despite rising costs, operational performance showed significant improvement, with the Company reporting an operating loss of LKR 11.6 Mn, a 76% reduction compared to the previous year's loss of LKR 48.4 Mn. When adjusted for one-off expenses, the ex-gratia payment and soft refurbishment costs, the Company's adjusted operating profit amounted to LKR 18.1 Mn.

The lower interest rate environment that prevailed throughout the year led to a marginal decrease in interest income by 5% even amidst an increase in fixed deposit investments. However, as a result, the finance cost reduced by 37% further supported by the settlement of borrowings. Exchange losses also reduced to LKR 1.1Mn from LKR 6.2Mn in the previous year, primarily due to more stable exchange rates on our foreign currency deposits. The divestment of Giritale Hotel resulted in a disposal loss, including all related transaction costs, of LKR 21.8 Mn

at Company level and a gain of LKR 6.6 Mn at Group level. Adjusting for this one-off loss, the Company's loss before tax marked an improvement by 69% from the previous year. The deferred tax expense recognised during the year primarily stems from taxable profits generated in the current period and the write-off of expired tax losses.

The Company's earnings adjusted for extraordinary items that affected this year's results as aforementioned offer a better reflection of our underlying earning capacity, recognising

that the expenses incurred this year are investments that will benefit future performance and profitability of the Company.

During the year, we managed to strengthen our cash position due to improved operational results, while also actively investing in capital expenditure. Consequently, the Company's net debt was reduced by 50% to LKR 42.2Mn. Our cash position further strengthened following the disposal of Giritale Hotel.

FUTURE OUTLOOK

The outlook for the tourism and hospitality sectors in Sri Lanka appears promising, fuelled by strategic initiatives and strong market performance. We remain cautiously optimistic about the year ahead, supported by the continued recovery of Sri Lanka's tourism sector and growing demand from key regional markets. Continuing strategic investments in service excellence and experiential offerings will remain a priority for us, as we aim to strengthen our competitive positioning while navigating an evolving operating environment. While these investments will exert some pressure on short-term margins, we believe they are critical to positioning our assets for sustained competitiveness and relevance in an increasingly discerning market.

Carsons Management Services (Private) Limited

25th June 2025

DIRECTORS PROFILES

MAHENDRA DAYANANDA - CHAIRMAN

Mahendra Dayananda is a Non-Executive Director of Bukit Darah PLC and Pegasus Hotels of Ceylon PLC and was also an Independent, Non-Executive Director of Nestle Lanka PLC and resigned from the company with effect from 1st February 2024. He was a former Non-Executive Director of Delmege Ltd and Chairman of Lewis Brown & Company Ltd. An expert on the Tea Industry and economic issues, he was until recently the Chairman of the Sri Lanka Business Development Centre and former Chairman of the Colombo Tea Traders Association.

He was until recently the President of the Sri Lanka Japan Business Council, former President of the Sri Lanka Institute of Directors and past Chairman of the Ceylon Chamber of Commerce and also chaired the Monetary Policy Consultative

Committee - Central Bank of Sri Lanka for a period of 09 years.

He was also the former Chairman of Indo Asia Teas (Private) Limited and continues to chair Total Tea Concepts (Private) Limited.

He was the former Honorary Consul for the Republic of Benin in Sri Lanka until October 2019.

Earlier he was a Founder Managing Director commencing 1st January 1980 and subsequently the Chairman of Tea Tang (Private) Limited.

KRISHNA SELVANATHAN

Krishna Selvanathan serves as a Director of Carsons Management Services (Private) Limited and is the CEO of Guardian Fund Management Limited. He also serves as a Director of Lion Brewery (Ceylon) PLC and Pegasus Hotels of Ceylon PLC.

He holds a BA Degree in Accounting & Finance and Business Administration from the University of Kent, U.K.

SUJENDRA MATHER

(Resigned w.e.f. 31st July 2024)

Sujendra is currently the CEO and Head of Investment Banking at Asia Securities Holdings Pvt. Ltd., a leading Investment firm in Sri Lanka covering Equities, Asset Management and Investment Banking. Prior to this, he was a co-founder and Managing Director of York Street Partners Pvt. Ltd., a leading boutique Investment Banking firm in Sri Lanka. Previously, Sujendra has

had over 15 years of international Investment Banking and Corporate Finance experience working with Houlihan Lokey Howard & Zukin, John Keells Holdings PLC and Deloitte & Touche Corporate Finance in the US, Sri Lanka and Singapore respectively.

Sujendra has successfully managed and lead several billion dollars of Mergers & Acquisitions, Fund Raising, Restructuring and Strategic Advisory transactions in the North America and Asia Pacific regions across the Consumer, Retail, Financial Services, Manufacturing, Real Estate, Hospitality, Infrastructure, Technology and Mining sectors. He has acted both as a key strategic advisor to CEO's and entrepreneurs as well as a principal investor throughout his career.

Also, Sujendra is a board member of several publicly listed and private companies in Sri Lanka and overseas.

Sujendra received a B.A. in Economics-Mathematics from Claremont McKenna College in California, USA and recently completed a Wharton Executive Education Program on Economics of Blockchain and Digital Assets.

MICHAEL ELIAS

Michael Elias is an international consultant in Tourism & Hospitality Management with over 40 years of experience in every segment of the Tourism industry.

He was a Vice President of John Keells Holdings PLC and Executive Director/Chief Executive Officer of six Leisure Sector companies of the John Keells Group, including Sri Lanka's

only previously SEC listed Destination Management Company, Walkers Tours Ltd. The multi award winning company Nature Odyssey (Pvt) Ltd was conceptualised and created by him.

He is a Past President of the Sri Lanka - Germany Business Council of the Ceylon Chamber of Commerce, a Past President of SLAPCEO (Sri Lanka Association of Professional Conference and Exhibition Organisers) a former Board Member of SLAITO (Sri Lanka Association of Inbound Tour Operators) a former Committee Member of the PATA Sri Lanka Chapter (Pacific Asia Travel Association), an Executive Council Member of the

Benelux Business Council of the Ceylon Chamber of Commerce and headed non-trade associations related to Education and Social Service.

Michael Elias is a Graduate of the University of Western Sydney and holds a Masters Degree in Business Administration from the Sydney Graduate School of Management. He has a Diploma in Strategic Management from the Wharton School, University of Pennsylvania, has the Certificate in Marketing of the Chartered Institute of Marketing (UK) and is a Certified Event Manager of IAPCO (International Association of Professional Conference Organisers).

SIVANANDAN MARIMUTHU

(Appointed w.e.f. 31st July 2024)

Siva Marimuthu is a Director of Equity One Limited, Equity Two PLC, Pegasus Hotels of Ceylon PLC, Industrial Asphalts (Ceylon) PLC, Knightsbridge Technologies (Pvt) Ltd. and Silverfalls (Pvt) Limited.

Siva is a career banker with over 25 years of experience having served international banks in senior leadership capacities. He holds a Masters in Business Administration from the University of Wollongong - Australia, a Bachelor of Commerce from Loyola College, India and is also a CIMA Passed Finalist.

Siva's experience in the banking sector is extensive, being a part of the country management team for Standard Chartered Bank Sri Lanka. He has contributed across all key functions such as Retail Banking, Banking Operations, Operational

Risk Management, Compliance and Assurance, Project Implementations, Administration and Audit. He also has headed the Country Audit and Operational Risk Function for Standard Chartered Bank, Sri Lanka.

Siva played a key role in ensuring bank's risk and compliance processes are in order, having implemented the operational risk framework, customer due diligence, anti-money laundering processes, design of risk assessment tools and core bank system implementations at Standard Chartered bank.

Currently, Siva consults SME's and shares his extensive experience with them.

DILUKSHAN RANIL PIERIS GOONETILLEKE

(Appointed w.e.f. 31st July 2024)

Mr. Ranil Goonetilleke is a Fellow of the Chartered Institute of Management Accountants, UK. Consequent to initial training at KPMG, he has held various positions in the mercantile sector in the field of Finance and counts over 35 years' experience.

He joined the Carsons Group in 1998 as a Financial Controller and in 2005 was appointed as Finance Director of Brewery Sector, which post he held until his retirement in December 2023. He is the immediate past Chairman of the Exporters Association of Sri Lanka of the Ceylon Chamber of Commerce. He serves on the Boards and Audit Committees of Lion Brewery Ceylon PLC, Pegasus Hotels of Ceylon PLC, Namunukula Plantations PLC & Ceylinco Holdings PLC and is also Director at Carsons Management Services (Private) Ltd. He also serves as

a Board Member of the National Council for Child and Youth Welfare.

AMITHA SAKTHA AMARATUNGA

(Appointed w.e.f. 25th September 2024)

Mr. Saktha Amaratunga is an Independent, Non-Executive Director of Bukit Darah PLC, Carson Cumberbatch PLC and in several companies of the Carson Cumberbatch Group, Chairman - Audit Committees of the Carson Cumberbatch Group and is also a Commissioner of PT Agro Indomas

Indonesia, a subsidiary of the Carson Cumberbatch Group. He is also an Audit Committee Member of MAS Holdings Ltd.

Previously, Regional Audit Controller (Asia Pacific) for British American Tobacco, he has more than 20 years' experience with British American Tobacco, having performed senior finance roles for the Group in Sri Lanka and the United Kingdom, and also being the Finance Director of British American Tobacco Operations in the Czech Republic, Sri Lanka, Switzerland, Japan and Malaysia (IT Shared Services Organisation). He was also

an Independent Non Executive Director and Chair of the Audit Committee at Hemas Holdings till November 2024.

He has many years of experience in Strategy Development, Business Restructuring, Risk and Governance, International Finance and People Development. He is a Fellow Member of the Chartered Accountants of Sri Lanka, Associate Member of the Chartered Institute of Management Accountants, UK and also a Member of CPA Australia

VIBATH WIJESINGHE

Vibath Wijesinghe is the Director - Finance of Carsons Management Services (Private) Limited, the management support service provider to the Carson Cumberbatch Group on Sri Lankan business operations.

Vibath began his career at M/s. KPMG, Sri Lanka and has over 20 years of experience in the fields of finance, corporate finance and auditing and has spearheaded assignments on business restructuring, business acquisition and investment transactions. He joined the Carson Cumberbatch Group in 2004.

He is an Associate Member of the Institute of Chartered Accountants of Sri Lanka, Chartered Institute of Management Accountants (UK) and of the Society of Certified Management Accountants of Sri Lanka. He also holds a Masters Degree in Business Administration from the Postgraduate Institute of Management - University of Sri Jayewardenepura, Sri Lanka.

RISK MANAGEMENT

Risk management is a fundamental aspect of our business operations. While risks are inherent in any enterprise, we have established an effective system of internal controls and risk management practices to identify and mitigate these risks and to ensure smooth operations of the entity.

Our group-wide risk management framework provides reasonable assurance that potential events or circumstances are identified, measured, and addressed proactively. This process allows us to minimise significant impact of risks that could impact our ability to deliver value to our stakeholders.

The risk management mechanism is integrated into our decision-making processes. It plays a proactive role in identifying and assessing key risks associated with our business activities. Identified risks are then managed and mitigated until they are within our defined risk appetite. This approach enables us to explore opportunities to create shareholder value, while also addressing potential threats in a timely and appropriate manner.

Through continuous monitoring and re-assessment, we ensure that our risk management practices remain effective and responsive to the evolving business environment.

In the implementation of business plans, the Company incorporated the enterprise risk management process to its business activities. The risk management process supports the following;

• Corporate Governance

• Quality of business planning

• Audit planning

• Project planning and implementation

• Building confidence of various stakeholder groups

Risk management process revalidates the internal control systems and provides assurance to the management and the Board of Directors on the effectiveness of the established processes.

ENTERPRISE RISK MANAGEMENT PROCESS

Treat & Assign

Establish Context

Review

&

Assess & Prioritise

Monitor

Identify Risks

Analysis

Our risk management framework is supported by a robust governance structure that enables effective oversight and reporting. This allows our Board to fulfil its supervisory role and strengthen our corporate governance practices.

We believe Risk Management is a key element in sustaining our operation and have identified the following risk profiles that could impact the hotel. The principal risks thus identified are considered and continuously reviewed at various stages of our business processes.

ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

The Board of Directors of Pegasus Hotels of Ceylon PLC have pleasure in presenting to the shareholders their Report together with the Audited Financial Statements for the year ended 31st March 2025.

The details set out herein provide the pertinent information required by the Companies Act, No. 07 of 2007, Listing Rules of the Colombo Stock Exchange and are guided by recommended best Accounting Practices.

The Annual Report was approved by the Board of Directors on 25th June 2025.

1. GENERAL

   Pegasus Hotels of Ceylon PLC (the "Company") is a public quoted Company with limited liability incorporated in Sri Lanka in 1966.

2. PRINCIPAL ACTIVITIES OF THE COMPANY

   The principal activities of the Company is to engage in hoteliering and leisure related activities.

   There were no significant changes in the nature of the principal activities of the Company during the financial year under review except for divestment of total shares of its subsidiary, Equity Hotels Limited, as detailed in note 11 of this report.

3. REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS

   The Chairman's Statement and the Management Discussion & Analysis provide an overall assessment of the business performance of the Company and the Group and its future developments.

   These reports together with the audited consolidated financial statements reflect the state of affairs of the Company and the Group.

4. FINANCIAL STATEMENTS

   The consolidated financial statements which comprise of the Statement of Profit or Loss and Other

   Comprehensive Income, Statement of Financial Position, Statement of Cash Flows, Statement of Changes in Equity and Notes to the Financial Statements of the Company and the Group for the year ended 31st March 2025 are set out on pages 50 to 106. These financial statements do comply with the requirements of the Companies Act, No. 07 of 2007.

   1. Revenue

      Detailed analysis of revenue of the Company and the Group are set out in note 11 to the Financial Statements.

   2. Financial results and appropriations

      An abridgement of the financial performance of the Company and the Group is presented in the table below.

      (In Rupees thousands) For the year ended 31st March	Company 2025 2024		Group 2024
      Loss for the year	(51,289)	(47,763)	(99,520)
      Other comprehensive income/ (expense) for the year, adjusted for revaluation of property, plant and equipment and related tax	(4,598)	(5,469)	(6,923)
      Total comprehensive income / (expense) for the year	(55,887)	(53,232)	(106,443)
      Expenses on rights issue of shares	-	(2,121)	(2,625)
      Retained earnings / (accumulated losses) as at the beginning of the year	(122,072)	(66,836)	(203,865)
      Forfeited dividends	116	117	117
      Accumulated losses as at the end of the year	(177,843)	(122,072)	(312,816)

      ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

   3. Material accounting policies

      The significant accounting policies adopted in the preparation of these financial statements are given on pages 54 to 70.

   4. Property, plant and equipment

      Details of property, plant and equipment are given in note 17 to the financial statements.

      1. Market value of freehold properties

         The carrying value of its land and buildings in the Statement of Financial Position is recognised at revalued amounts in accordance with Sri Lanka Accounting Standard (LKAS 16) - 'Property, Plant and Equipment'.

         A professional valuation was performed as at 31st March 2024 by Mr. S. Sivaskantha, F. I. V (Sri Lanka) of Perera Sivaskantha and Company, incorporated Valuers. The details of the movements in fair value of Land and building of the Group and the Company during the year and their carrying values as at 31st March 2024 are presented in note 17 to the financial statements.

   5. Capital expenditure

      The details of capital additions are given in note 17 to the Financial Statements.

   6. Reserves

      The movements of total reserves are set out in the Statement of Changes in Equity on page 52.

5. STATEMENT OF DIRECTORS RESPONSIBILITIES

   The responsibilities of the Directors in relation to the financial statements are detailed in the following

   paragraphs, whilst the responsibilities of the Auditors are set out in the Independent Auditors' Report.

   According to the Companies Act, No. 07 of 2007 and the Sri Lanka Accounting and Auditing Standards Act, No. 15 of 1995, the Directors are required to prepare financial statements for each financial year, giving a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the performance for the said period.

   The financial statements comprise of inter alia:

   • Statement of Financial Position, which presents a true and fair view of the state of affairs of the Company as at end of the financial year,

   • A Statement of Profit or Loss and Other Comprehensive Income of the Company, which presents a true and fair view of the financial performance of the Company and the Group for the financial year.

     In preparing these financial statements the Directors are required to ensure that:

   • Appropriate accounting policies have been selected and applied consistently, while material departures, if any, have been disclosed and explained,

   • All applicable Accounting Standards have been complied with,

   • Reasonable and prudent judgments and estimates have been made and

   • Provides the information required by and otherwise comply with the Companies Act, No. 07 of 2007 and the Listing Rules of the Colombo Stock Exchange.

   The Directors are responsible for ensuring that the Company and the Group maintain sufficient accounting records to disclose with reasonable accuracy, the financial position of the Company and the Group in order to ensure that its financial statements have been prepared and presented in accordance with the Sri Lanka Accounting and Auditing standards Act, No. 15 of 1995 and meet with the requirements of the Companies Act, No.07 of 2007.

   They are also responsible for taking reasonable measures to safeguard the assets and in this regard to give proper consideration to the establishment and effective operation of appropriate systems of internal

   control with a view to prevent, detect and rectify frauds and other irregularities.

   These financial statements have been prepared on a going concern basis since the Directors are of the view that the Company has adequate resources to continue in operation in the foreseeable future from the date of approving these financial statements.

   The Directors are also of the view that they have discharged their responsibilities as set out in this statement.

6. INTERESTS REGISTER

   The Company maintains an Interests Register conforming to the provisions of the Companies Act, No. 07 of 2007.

   All Directors have made declarations as provided for in Section 192(2) of the Companies Act aforesaid.

   The relevant details as required by the Companies Act, No. 07 of 2007 have been entered in the Interests Register during the year under review.

   The Interests Register is available for inspection as required under the Companies Act.

   1. Remuneration of Directors

      Directors' remuneration for the financial year ended 31st March 2025 is given in note 13 to the financial statements.

   2. Directors' interest in contracts and shares Directors' interests in contracts of the Company and the Group are disclosed in note 35 to these financial

      statements and have been declared at meetings of the Directors. The Directors have had no direct or indirect interest in any other contracts or proposed contracts in relation to the business of the Company and the Group other than those disclosed in note 35 while they had the following interests in the ordinary shares of the Company as shown in the table below.

      Directors	No. of shares as at 31st 31st March March 2025 2024
      Mr. M. Dayananda (Chairman)	-	-
      Mr. M. T. L. Elias	-	-
      Mr. K. Selvanathan	-	-
      Mr. S. R. Marther (Resigned w.e.f. 31st July 2024)	-	-
      Mr. S. Marimuthu (Appointed w.e.f. 31st July 2024)	400	-
      Mr. D. R. P. Goonetilleke (Appointed w.e.f. 31st July 2024)	-	-
      Mr. A. S. Amaratunga (Appointed w.e.f. 25th September 2024)	-	-
      Mr. V. R. Wijesinghe	-	-

7. DIRECTORS

   The names of the Directors who served during the year are given under Corporate Information provided in the inner back cover of the Annual Report.

   1. Changes in the Directorate

      Mr. S. Mather Independent Non-Executive Director of the Company resigned from the Board of Directors of the Company with effect from 31st July 2024.

      Mr. S. Marimuthu was appointed as an Independent Non-Executive Director of the Company with effect from 31st July 2024.

      Mr. D. R. P. Goonetilleke was appointed as a

      Non-Executive Director of the Company with effect from 31st July 2024.

      Mr. A. S. Amaratunga was appointed as an Independent Non-Executive Director of the Company with effect from 25th September 2024.

      ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

      Considering the 'Criteria for determining independence' provided under Rule 9.8.3, Mr. M. Dayananda, who was an Independent Non-Executive Director of the Company was designated as a Non-Executive Director of the Company with effect from 25th September 2024.

   2. Re-appointment of Directors who are over 70 years of age

      Mr. M. Dayananda - Non-Executive Director who was

      over 70 years of age was appointed as a Director of the Company in terms of Section 210 of the Companies Act, No.07 of 2007 at the EGM held on 25th February 2025 for a further period of one year commencing from 25th February 2025 or until the forthcoming Annual General Meeting of the Company, whichever comes first.

      In terms of Rule 9.11.5 (ii) of the Listing Rule of the Colombo Stock Exchange, the Nominations and Governance Committee recommended the re-election of Mr. M. Dayananda who is over 70 years of age. Further, in terms of Rule 9.7.2 of the Listing Rules of the Colombo Stock Exchange the Board has ensured that Mr. M. Dayananda is fit and proper based on the 'Fit and Proper Criteria' stipulated in the Listing Rules.

      Accordingly, Mr. M. Dayananda who is over 70 years of age is to be reappointed as a Director of the Company for a further period of one year from the conclusion of the Annual General Meeting and that the age limit stipulated in Section 210 of the Companies Act, No.07 of 2007 shall not be applicable to him.

   3. Retirement by rotation and re-election

      In terms of Rule 9.11.5 (ii) of the Listing Rule of the Colombo Stock Exchange, the Nominations and Governance Committee recommended the re-election of Mr. M. T. L. Elias who retires by rotation. Further, in terms of Rule 9.7.2 of the Listing Rules of the Colombo Stock Exchange the Board has ensured that Mr. M. T. L. Elias

      is fit and proper based on the 'Fit and Proper Criteria' stipulated in the Listing Rules.

   4. Re-election of newly appointed Directors, since the last AGM

   In terms of Rule 9.11.5 (ii) of the Listing Rules of the

   Colombo Stock Exchange, the Nominations and Governance Committee recommended the re-election of Messrs. S. Marimuthu, D. R. P. Goonetilleke and A.S. Amaratunga who were appointed to the Board since the last Annual General Meeting. Further, in terms of Rule

   9.7.2 of the Listing Rules of the Colombo Stock Exchange the Board has ensured that Messrs. S. Marimuthu,

   D. R. P. Goonetilleke and A.S. Amaratunga are fit and proper based on the 'Fit and Proper Criteria' stipulated in the Listing Rules.

   Accordingly, in terms of Article 68 of the Articles of Association of the Company, shareholder approval is sought to re-elect Messrs. S. Marimuthu,

   D. R. P. Goonetilleke and A.S. Amaratunga at the Annual General Meeting to be held on Wednesday, 23rd July 2025.

8. CORPORATE GOVERNANCE

   The Board has ensured that the Company has complied with the Corporate Governance Rules as per the Listing Rules of the Colombo Stock Exchange (CSE).

   1. Board of Directors

The following Directors held office during the period under review and their brief profiles are given on pages 7 to 9 of the Annual Report.

Directors

Executive/

Non-Executive/ Independent

Mr. M. Dayananda - Chairman Independent

Non-Executive (until

25th September 2024) Non-Executive w.e.f. 25th September 2024

Mr. K. Selvanathan Non Executive

Accordingly, in terms of Articles 72, 73 and 74 of the Articles of Association of the Company, shareholder approval is sought to re-elect Mr. M. T. L. Elias, who

Mr. S. R. Mather (Resigned w.e.f. 31st July 2024)

Independent Non-Executive

retires by rotation and, being eligible, offer himself for re-election.

Mr. M. T. L. Elias Independent Non-Executive

Directors

Executive/

Non-Executive/ Independent

Mr. S. Marimuthu (Appointed w.e.f. 31st July 2024)

Mr. D. R. P. Goonetilleke (Appointed w.e.f. 31st July 2024)

Mr. A. S. Amaratunga (Appointed w.e.f. 25th September 2024)

Independent Non-Executive

Non-Executive

Independent Non-Executive

Mr. V. R. Wijesinghe Executive

Each of the Independent Directors of the Company have submitted a signed declaration on Independence/ Non Independence as per Rule 9.8.5 of the Listing Rules of the Colombo Stock Exchange (CSE). The said

declarations were tabled at a Board Meeting of the Board of Directors of the Company held on 13th June 2025,

in order to enable the Board of Directors to determine the Independence/ Non-Independence of each of the Independent Directors, in terms of Rule 9.8.3. of the Listing Rules of the CSE.

Mr. M. T. L. Elias 4/5

Mr. V.R. Wijesinghe 5/5

In accordance with Rule 9.3.1 of the Colombo Stock Exchange, the Company established its own

Sub-Committees effective from 25th September 2024. Each Sub-Committee operates under the oversight of its respective Chair and functions in alignment with its approved Committee Charter.

8.6. 1 Remuneration Committee Committee composition

Carson Cumberbatch PLC (CCPLC) is the Parent Company of Pegasus Hotels of Ceylon PLC. In accordance with the Listing Rules of the Colombo Stock Exchange (CSE) prior to the amendments to Rule 9.3.1 effective from 01st October 2024, each listed entity was not required to maintain a separate Remuneration Committee.

Accordingly, the Remuneration Committee of CCPLC functioned as the Remuneration Committee of the Company until 25th September 2024 and comprised of the following members.

Member

Independent Non-Executive / Non-Executive

Member

Independent Non-Executive / Non-Executive

Mr. M. T. L. Elias (Chairman) Independent Non-Executive Mr. S. Marimuthu Independent Non-Executive Mr. D. R. P. Goonetilleke Non-Executive

Meeting attendance

From 01st April 2024 to 25th September 2024, the Carson Cumberbatch PLC Remuneration Committee which functioned as the Remuneration Committee of the Company until 25th September 2024 did not meet.

From 25th September 2024 until the reporting date, the Pegasus Hotels of Ceylon PLC Remuneration Committee

Mr. T. de Zoysa (Chairman)

Independent Non-Executive Director of CCPLC

met three times (3). The attendance of the Pegasus Hotels of Ceylon PLC Remuneration Committee Members at these meetings was as follows:

Mr. R. Theagarajah Independent Non-Executive

Member

Independent Attendance Non-Executive /

Non-Executive

Director of CCPLC

Mr. W. M. R. S. Dias Independent Non-Executive

Director of CCPLC

Mr. D. C. R.

Gunawardena

Non-Executive Director of CCPLC

Mr. M. T. L. Elias (Chairman)

Independent Non-Executive

3/3

Following the regulatory amendment, effective 01st October 2024, which mandates that each listed entity must establish and maintain its own Remuneration

Mr. S. Marimuthu Independent

Non-Executive

3/3

Committee, the Remuneration Committee of CCPLC ceased to function as the Remuneration Committee of Pegasus Hotels of Ceylon PLC with effect from 25th

Mr. D. R. P.

Goonetilleke

Non-Executive 3/3

September 2024.

In terms of Rule 9.12 of the Listing Rules of the Colombo Stock Exchange (CSE), the Remuneration Committee

of Pegasus Hotels of Ceylon PLC was formed w.e.f. 25th September 2024. As at the reporting date, the Remuneration Committee consists of the following Members;

Remuneration Policy Statement

Pegasus Hotels of Ceylon PLC has implemented a formal Remuneration Policy to ensure transparent and equitable compensation. The policy applies to Executive Directors, Non-Executive Directors, and Chief Executive Officers (CEOs). For the purposes of this policy, "remuneration" encompasses both cash and non-cash benefits received by these individuals. The Remuneration Committee, comprising Non-Executive and Independent Directors,

is responsible for overseeing the implementation and