High five at JKH

*Premier blue chip posts Rs. 5 b pre-tax profit in 1H, up 167% with Rs. 1.8 bcapital gain boost

*Excluding gains from sale of stakes pre-tax profit higher by 71%

*Net profit attributable to equity holders up 221% to Rs. 4 b

*2Q pre-tax profit up 281% to Rs. 3.45 b and net up by 409% to Rs. 3 b

*Group revenue up 26% to Rs. 26.8 b in 1H and 24% to Rs. 14 b in 2Q

Sri Lanka’s premier blue chip yesterday announced stellar results with consolidated pre-tax profit of near Rs. 5 billion for the first half and a net profit attributable to equity holders amounting to Rs. 4 billion.

The first half figures reflect a whopping 167% and 221% increase respectively in comparison to the last year’s corresponding period performance.

The latest results have been boosted by an estimated Rs. 1.8 billion capital gains windfall following the sale of part stakes in Asia Hotels and Properties Plc and John Keells Hotels. However excluding that the JKH’s core performance had been robust with first half bottom line up 71% and second quarter figure higher by 83% as against comparative periods of 2009/10 financial year.In the second quarter of 2010/11 financial year JKH posted a pre-tax profit of Rs. 3.45 billion up by 281% over a year ago. Net profit for the quarter was almost Rs. 3 billion (Rs. 2.93 billion), up by 409%. Group revenues at Rs. 13.97 billion and Rs. 26.89 billion in the second quarter and the first half of 2010/2011 were higher 24% and 26% respectively.

At company level, profit before tax (PBT) of Rs. 2.31 billion for the quarter and Rs. 3.33 billion for the first six months of 2010/2011 reflect an increase of 1,330% and 70%. This was aided by capital gains.

Released after the Bourse was closed, analysts said that the impressive results of JKH are certain to give a much needed fillip to investor sentiments on Wednesday. In line with a lackluster Bourse JKH closed yesterday, down by Rs. 1.90 to Rs. 300.

Transportation PBT of Rs. 1.36 billion for the first six months of 2010/11 was an increase of 18%, over the first six months of 2009/10 which recorded Rs. 1.16 billion. The quarterly PBT decreased by 11% to Rs. 556 million [2009/10 Q2: Rs. 627 million.] While SAGT performed to expectations, the Airlines and Logistics business units, in particular, performed significantly above the corresponding period in the previous year.               

The bunkering business, whilst maintaining market leadership, was adversely affected by volatile world oil prices during the quarter.

In line with expectations, Leisure recorded a PBT of Rs. 323 million for the first six months of the financial year compared to a loss of Rs. 174 million recorded in the same period last year, despite the full and partial closure of some hotels for refurbishment and upgrades. The second quarter PBT was

Rs. 337 million [2009/10 Q2: Loss Rs. 127 million]. This improvement in performance is mainly due to better results achieved by both the Sri Lankan resorts and our city hotels, Cinnamon Grand and Cinnamon Lakeside.

Coral Gardens has been closed for a complete refurbishment and is scheduled to be re-opened as Chaaya Tranz in Winter 2011/12. The construction of the new hotel in Beruwela – Chaaya Bey –is progressing as planned.

The Chaaya Lagoon Hakuraa Huraa in the Maldives has been operational since September 2010 after the completion of its refurbishment.

During the quarter, JKH also exited the loss making Cinnamon Alidhoo and acquired the head lease of Chaaya Island, Dhonveli, which have and will substantially improve the profitability of the Maldivian resorts.

Group’s Property recorded a PBT of Rs. 290 million for the first six months, a 175% increase over the

Rs. 105 million recorded in the same period last year.

The PBT of Rs. 145 million for the quarter was an increase of 103% over the corresponding period last year [2009/10 Q2: Rs. 71 million].

“The cyclical nature of the revenue recognition of the projects is the main reason for the variances from the previous year,” JKH Chairman Susantha Ratnayake said in a statement accompanying interim results.

“At the end of October, we officially launched a 475 apartment development on Union Place in the heart of Colombo and market surveys indicate encouraging interest from potential buyers and expressions of interest have already been received for over 50% of the units,” he added.

Consumer Foods and Retail PBT of Rs. 307 million for the six months was 237% higher than the

Rs. 91million recorded in the same period last year. The PBT of Rs. 137 million for the quarter was an increase of 175% over the second quarter last year [2009/10 Q2: Rs. 50 million].

Ratnayake said the soft drinks, ice creams and processed meats businesses saw strong volume growth while the supermarket business had a significantly better quarter on the back of higher same store sales and better margins.

Financial Services PBT for the six months ended 30 September 2010 at Rs. 685 million was 79% higher than the Rs. 382 million recorded in the same period last year. The PBT of Rs. 308 million for the quarter is a 87% increase over the same period last year [2009/10 Q2: Rs. 165 million]. John Keells Stock Brokers and the Group’s banking associate, Nations Trust Bank were the main contributors to this increase. The contribution from Union Assurance (UA) was in line with expectations.

Profits of the life segment are recognised only at the end of our 3rd quarter, which is the end of UA’s financial year.

JKH’s Information Technology (IT) had an improved performance for the first six months on the back of an improved performance by the Office Automation and BPO segments. IT recorded a PBT of Rs. 35 million for the first six months, compared to the loss of Rs. 35 million in the corresponding period in the previous year. The second quarter PBT of Rs. 34 million was a significant improvement over the same period last year [2009/10 Q2: Loss Rs. 3 million].

“The acquisition of a number of new customers by the BPO business, which though resulting in extra costs due to relocation and associated expenditure in the next two quarters, augurs well for the future,” JKH Chief said.

Other sectors of JKH, comprising of Plantation Services, John Keells Capital and the Corporate Centre recorded a PBT of Rs 1.98 billion for the six month period, which is 484% higher than the Rs. 339 million PBT recorded in the same period last year. The gain on the sale of shares of KHL and AHPL during the quarter, contributed towards this significant growth. The second quarter PBT was Rs. 1.93 billion [2009/10 Q2: Rs. 122 million].