Pegasus Hotel becomes debt-free company

Pegasus Hotel was considered the first Five Star Hotel.

According to the recently released financial report it has recorded a net profit of Rs 4.5 m for the quarter ended December 31, 09 compared to a loss of Rs 4.1 m for the corresponding period 2008.

Accordingly net profit growth has been commendable with an increase of 208 percent. Revenue has recorded a growth of 35 percent from Rs 36 m to Rs 49 m.

The company is expected to repeat the performance this quarter too due to unusual high occupancy and a net profit of around Rs 10 m expected to be earned during the current financial year.

A sum of Rs 189 m as recorded under the current assets of the balance sheet represents approximate compensation receivable from the Government for the acquisition of 10 acres of unutilized land in May 2008, out of which 2.2 acres reserved for green cover to retain the beauty of the hotel surroundings.

The company presently has 13.2 acres enough for further expansion too. On receipt of compensation, the company would be in a position to repay the total debt of Rs 139 m and the excess sum appr. Rs 50 m could be invested for a reasonable return.

Since the land has been acquired nearly two years back the compensation is long overdue and will make the company one of the very few debt free companies in the Stock Market and the only company in the hotel sector.

The above land has been acquired for a massive ultra modern harbour project with Dutch funding of Euro 44 m (Rs 7,040 m) mainly for local and foreign trawlers, multi-day boats which would lead to a massive infrastructure development and increased economic activity in the surrounding areas.

It is estimated that due to debt free position, return of Rs 50 m investment and high occupancy the company will be in a position to record net profits of around Rs 40 m to 50 m during the 2010/11 financial year.

- K.A.S. Perera