Financial Times

Group to have own hotel chain
Audit committees at JKH firms
By Feizal Samath
John Keells Holdings, striving to keep ahead of the times, is bringing in changes inclusive of independent audit committees and non-executive directors to its listed subsidiaries, in the overall structure in line with imminent SEC guidelines.

"These (rules) from the SEC (Securities and Exchange Commission) are imminent. So in making other changes to the overall structure we are giving due recognition to the SEC guidelines too," said Susantha Ratnayake, John Keells Holdings (JKH) Deputy Group Chairman in an interview.

Ratnayake, in a wide-ranging discussion about JKH's recent past and near-term future, dealt with many issues including the creation of the group's own branding and positioning of hotels; improvement in the transportation business; and possible new lines of business. (See Page 15 for more on the interview).

On last week's announcement of a re-organisation of the operating structure, he said that this came due to the need to expand the Group Executive Committee (GEC) and find new designations for those who came on board.

"Earlier those in the GEC were executive directors. So we had to find new designations. But we didn't do it ad hoc. We looked at it from the point of view of the group going forward. We have a large group; the boards are getting larger and possibly cannot continue in the current mode. We looked at changes with the incoming SEC regulations as well in a forward-looking structure," he said.

The SEC guidelines for listed companies in respect of audit and audit committees were issued in June last year but are to be made mandatory in two stages commencing from April 2005.

Ratnayake, preparing to take over as chairman on January 1, 2006 from Vivendra Lintotawela, said in addition to audit committees to the group's listed subsidiaries, at least three non-executive directors would soon be appointed to these companies. Non-executive directors are now part of the main JKH board.

He said JKH looked at various models including the system in the US vis-à-vis a non-executive chairman and an executive President but decided against that. "We debated this. We looked at the models and felt that John Keels because of the complexity of its diversity, needs to continue with an executive chairman who is independent."

In line with the past, the executive chairman will not run any businesses directly which will be handled by the presidents. On the leisure sector, Ratnayake said the ultimate aim is to set up a two-tier product (city and resort hotels) and launch the group's own brand of hotels and positioning.

Happy with the progress at the Colombo Plaza, the JKH Deputy Chairman said they had big plans for the leisure sector and considered the tsunami just a temporary setback to the industry. The refurbished Colombo Plaza is scheduled to open its full complement of 501 rooms by November.

Ratnayake feels that due to the impact of the tsunami on the leisure sector, the contribution by the transportation sector to the group's profits will be much higher than the current 35-40 percent. "This is an uneven situation because tourism has been affected. But that's how the sector would show on our books." Leisure is also a big contributor to group profits.

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