‘There is much to be done by all stakeholders to capitalize on
historic opportunity’ says JKH chief

Sri Lanka’s premier blue chip John Keells Holdings (JKH) which posted what it described as “above expectation” second quarter results said however that there was much to be done by all for the country to capitalize on historic post-war opportunity.

Susantha Ratnayake

The profits attributable to Equity Holders of JKH for the six months, ended 30 September 2009, of Rs. 1.22 billion, reflected a decrease of 34% compared to the same period last year and the quarterly results of Rs. 575 million, reflects a decrease of 43% compared to the corresponding period in the previous year.
Profit Before Tax (PBT) for the six months and quarter ended 30 September 2009, were Rs. 1.86 billion and Rs. 905 million respectively, these being decreases of 38% compared to Rs.3.01 billion and 51% compared to Rs. 1.86 billion respectively. Premier blue chip posts ‘above
expectations’ 2Q results; Sounds
bullish about emerging prospects in post-war era
The revenue of Rs. 21.30 billion for the first six months of the year was 2% below the Rs. 21.82 billion recorded in the corresponding period of the previous year, while the revenue of Rs. 11.23 billion for the quarter, ended 30 September 2009, was 5% above the revenue of Rs. 10.73 billion in the corresponding period of the previous year
“Though our results were not as good as last year, they are well above what was expected at the beginning of the year, given the improved environment. We are confident that the full potential that this opportunity affords us will be realised in the near future. However, there is much to be done by all stakeholders to capitalize on this historic opportunity afforded to our country,” JKH Chairman Susantha Ratnayake said in his review to shareholders.
Reiterating his comments made in the first quarter review, JKH chief said the potential that has emerged as a result of the end of the conflict offers unprecedented opportunities to all our businesses.
“Given our exposure to key segments of the economy and our strong balance sheet, we are well positioned to benefit from the opportunities that the new environment presents. We have already invested in increasing our presence in the North-East in the Consumer
Foods and Retail Industry Group and the Financial Services Industry Group and will be upgrading the Club Oceanic Hotel commencing 1 December 2009,” he added.
He also said that tourism has rebounded relatively quickly, with arrivals increasing year on year by 34.3% and 28.6% in August and September respectively.
“On the basis of our predictions for the tourism industry, several projects are being evaluated, details of which will be unveiled shortly,” Mr. Ratnayake revealed.
According to him JKH is pleased with the results of the “smart” cost measures it has taken in the past two years in that “our “like” with “like” fixed costs (after allowing for the newly consolidated UAL) have been well contained.”
Transportation PBT of Rs. 1.16 billion was a decrease of 21% for the first six months of 2008/09 compared to the Rs. 1.47 billion recorded in the same period last year. However, the quarterly results increased by 15% to Rs. 627 million compared to the same period last year [2008/09 Q2: Rs. 545 million.] South Asia Gateway
Terminals (SAGT) saw volumes rise for a fourth consecutive month and in August set a record with a throughput of 163,024 TEUs.
Leisure recorded a loss of Rs. 174 million for the first six months of the financial year compared to a loss of Rs. 581 million recorded in the same period last year. The second quarter was a loss of Rs. 127 million [2008/09 Q2: Loss Rs. 223 million].
“This improvement in performance is mainly due to better results achieved by the Maldives and Sri Lankan resorts,” Mr. Ratnayake said.
JKH’s flagship city hotel, Cinnamon Grand, also performed well. The former Trans Asia Hotel was re-launched on 1 September 2009 as Cinnamon Lakeside. This new product has been well received and is well positioned to increase the Groups dominance in the City, he added.
JKH’s Property recorded a PBT of Rs. 105 million for the first six months, a 63% decrease compared to the Rs. 287 million recorded in the same period last year. The PBT for the quarter saw an overall decrease of 34% to Rs. 71 million compared to the corresponding period last year [2008/09 Q2: Rs. 108 million] due to the cyclical nature of the revenue recognition.
Consumer Foods and Retail PBT for the six months at Rs. 91 million was 22% higher than the Rs. 74 million recorded in the same period last year. The PBT for the quarter showed a decrease of 33% to Rs. 50 million compared to the second quarter last year [2008/09 Q2: Rs. 74 million] .While the soft drinks and ice cream business saw higher profits due to increased volumes in the North and East with the strengthening of our distribution network, the retail and processed meats businesses were lower than last year.
Financial Services PBT for the six months ended 30 September 2009 at Rs. 382 million was 40% higher than the Rs. 272 million recorded in the same period last year. The PBT of Rs. 165 million for the quarter is a 91% increase compared to the same period last year [2008/09 Q2: Rs. 86 million]. John Keells Stock Brokers and the banking associate of the financial services group, NTB were the main contributors towards this increase. The contribution from Union Assurance (UAL) was in line with expectations given that profits of the life segment are recognized only at the end of our 3rd quarter, which is the end of UAL’s financial year.
Information Technology saw an improved performance by the BPO business which had higher revenue from an increased number of revenue generating seats. The Information Technology Group recorded a loss of Rs. 35 million for the first six months compared to the loss of Rs. 18 million last year and a loss of Rs. 3 million in the quarter compared to last year [2008/09 Q2: Loss Rs. 2 million].
Others comprising of Plantation Services, Strategic Investments and the Corporate Centre recorded an overall decrease in PBT for the first six months by 78% to Rs. 339 million compared to the Rs. 1.51 billion recorded in the corresponding period of the previous year. The PBT for the quarter was a decline of 90% to Rs. 122 million [2008/09 Q2: Rs. 1.28 billion]. The figures in Q2 2008/09 included the capital gains from the AMW divestment.