Investor Presentaiton
Cinnamon Life Integrated Resort
Change in the functional reporting currency of Waterfront Properties (Private) Limited (WPL)
John
Keells
Group
The functional reporting currency of WPL, the project company of the Cinnamon Life Integrated Resort, was changed from USD to
LKR given the impending transition of the project to operations next year.
The depreciation of the LKR against the USD post-transition resulted in a non-cash exchange loss of Rs.2.14 billion on the USD 225
million term loan facility at WPL, which is recognised under Finance Cost in the Leisure industry group.
Previously, under a USD functional reporting currency at WPL, the exchange rate exposure of the USD denominated loan was
matched against the USD denominated assets at WPL. This hedge ceases to operate on conversion to the LKR functional currency
as the asset values no longer benefit from the movement in exchange rates.
Taking a longer-term view, the overall financial performance of the Group, and WPL, will benefit from the conversion of the asset
to LKR at a point of time where the LKR is relatively strong.
Assuming the LKR will, on average, depreciate in the long-term, the conversion at this juncture results in a relatively lower LKR
carrying cost of the asset, thereby improving the Group's capital employed and returns. Similarly, the depreciation charge on the
entire asset will also be anchored to a lower LKR value, thereby having a positive impact on profitability in the long-term.
Whilst the exchange loss arising from the USD 225 million term loan facility will be ongoing under an LKR depreciation
environment, it is noted that the loan facility will mature in December 2026. Once operations commence, the business will
generate USD denominated streams of revenue through its hotel and conferencing facilities.
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