Royal Palms Beach Hotels Ltd., among the newer five-star beach resort operators along the southern coast, has posted a net profit for the second successive year during the year ended March 31, 1998, which its chairman, Mr. George Ondaatjie, described as a year of "steady growth.''

He said that from 77 rooms the previous year, the hotel has commenced full operations with 120 rooms now being sold. All rooms except for four suites are now operational, Ondaatjhie said.

The turnover during the year under review was up to Rs. 135.6 million from the previous year's Rs. 49.2 million and the operating profit of Rs. 38.3 million was over double the Rs. 16.5 million earned a year earlier. Although interest charges had grown to Rs. 21.8 million from Rs. 12.6 million the previous year, the company had a net profit of Rs. 16.6 million, up from Rs. 3.9 million a year earlier.

The company which obtained a quotation on the Colombo Stock Exchange and made a successful initial public offer has fully settled a Rs. 100 million loan from the NDB on the IPO proceeds. It has also settled a US $ 1 million loan from the foreign currency banking unit (FCBU) of the Hatton National Bank in August.

Shareholders have been told that the company has negotiated an interest reduction to 15% on a Rs. 47.5 million loan from HNB with effect from June 1998.

Ondaatjie noted in his report to shareholders that tourist arrivals were up 21% last year and that visitors were becoming increasingly resilient towards incidence of violence outside the North and East. He was hopeful that the government's image building campaign would help increase the number of visitors.

He said that the East Asian financial crisis could adversely affect tourism in the context of devaluations of over 30% making destinations like Thailand, Malaysia and Indonesia cheaper for tourists. But within the South Asian region, Sri Lanka had various advantages on which it could capitalise as its image improves in major markets.

The chairman reported that their IPO offering 25% of the issued capital to the public was over-subscribed and the company is now listed on the second board of the Colombo Stock Exchange. Their ten-rupee shares were offered at a small premium of Rs. 1 above par. The NDB was a major subscriber to the IPO.

Ondaatjie said that the specialty restaurant named " The Orient'', a modern gymnasium/health club and a beauty salon have now been completed adding to the facilities offered by the hotel.

The directors have not recommended any dividend for the year. The company has an issued capital of Rs. 500.8 million and retained profits of Rs. 20.5 million on its books.

Part of the issued capital comprises Rs. 150 million worth of 15% preference shares redeemable in five equal annual installments of Rs. 30 million commencing Jan. 1, 2001. These shares have rights of cumulative preference dividends of 15% per annum. The cumulative preference dividends as at March 31, 1998, amounts to Rs. 33.8 million against a carry forward profit of Rs. 20.5 million.

"Hence if any dividends are declared by the directors, the carry forward profit will have to be utilised solely to pay preference shareholders,'' the report said.

The directors of the company are Messrs. George Ondaatjie, Naveen Rajapakse, Lucian. V. Perera, Gerard Ondaatjie, Ms. Angeline Ondaatjie, V. Balasubramaniam, A.R. Peiris, Sumith Adihetty, J.P. Van Twest, G.V. Divitotawela, Mihindu Keerthiratne, R.S. Weerawardene, A.N. Esufally, T.J. Ondaatjie, M.U. Manikku (alternate: M.M. Did), Merril. J. Fernando (alternated: D.C. Fernando).