JKH in solid start for FY2012

Premier blue chip John Keells Holdings (JKH) has begun the 2012 financial year on a solid note with its bottom line up 35% to Rs. 1.37 billion and Group pre-tax profit up 23% to Rs. 1.88 billion over the corresponding period of last year.

Group revenue at Rs. 15.69 billion in the first quarter ended on 31 June, 2011 was 21% above the Rs. 12.92 billion recorded in the corresponding period of FY2011.

The first quarter is generally a subdued period for most diversified blue chips hence analysts termed the results as impressive. Unaudited accounts were released after the market was closed and when it opens today market will get an opportunity to assess how investors react to JKH earnings. Yesterday the stock price gained by 80 cents to Rs. 186.50.

At Company level JKH’s Profit Before Tax (PBT) of Rs. 1.02 billion for the quarter was marginally above the Rs. 1.01 billion recorded in the corresponding period in the previous year.

Transportation PBT of Rs. 742 million was a decrease of 7% over the first three months of 2010/11 [2010/11 Q1: Rs. 802 million], mainly due to the impact arising from a stronger Sri Lankan rupee.

JKH Chairman Susantha Ratnayake in a review accompanying interim results said SAGT has ordered two new super  post panamax cranes (to be delivered in the fourth quarter) which will further enhance its capability to handle the larger modern vessels, which in turn will increase productivity and  therefore capacity.

         The Airline and Bunkering business units performed well above the corresponding period in the previous year, with the bunkering business seeing higher volumes and margins compared to the corresponding quarter in the previous year.

John Keells Logistics and USAID, in partnership, have jointly committed an investment of more than Rs.400 million to implement a cold chain for agricultural and fisheries products in the North and East of Sri Lanka.

The Leisure industry group recorded a significant improvement in the first quarter with a PBT of Rs. 374 million [2010/11 Q1:  loss of Rs. 14 million]. The City Hotels – Cinnamon Grand Colombo and Cinnamon Lakeside Colombo saw strong growth and the Maldivian resort hotel sector also saw an improved performance compared to the loss it had made in the first quarter of last year.

The rebranding and repositioning of Cinnamon Lakeside, in September 2009, has resulted in the hotel winning the Presidential Award for the best 5 star hotel in the city. The Cinnamon Grand has been inducted into the Presidential “Hall of Fame” following three consecutive awards for the best 5 star city hotel. The Cinnamon properties in the city continue to command premium room rates and above average market occupancies. Chaaya Tranz and Chaaya Bey are ahead of schedule and on budget and are expected to be operational in November 2011 and June 2012 respectively, adding 357 rooms to JKH resort hotel inventory. The refurbishment and expansion of Chaaya Wild (formerly the Yala Village Hotel) is underway and the hotel will re-open in November 2011.

“The total investment, both incurred and committed, in Leisure since the end of the conflict in May 2009 has been approximately Rs. 7 billion and, given the buoyancy of the Leisure Industry, in Sri Lanka, we are confident that these investments will provide the necessary returns,” JKH Chief said.

Property recorded a PBT of Rs. 85 million for the quarter, a decrease of 41%over the corresponding period last year [2010/11 Q1: Rs. 145 million]. The cyclical nature of the revenue recognition of the property group’s projects is the main reason for the variance from the corresponding period in the previous year. The Emperor project is scheduled for completion in September this year. The construction of the Rs. 7.8 billion apartment block, “OnThree20”, commenced in April this year, with over 65%of the apartments sold off plan. The recent  sale of property in the city to Shangri-la and CATIC of China have  set a new benchmark for property prices in Colombo and this  has resulted in a significant enhancement of the value of our land  bank in the city. During the quarter, we acquired a block of 6.5 acres in a prime suburb of Colombo. Plans for a large scale development on one of our city properties are also well advanced.

Consumer Foods and Retail PBT of Rs. 207 million for the quarter was an increase of 22% over the first quarter last year [2010/11 Q1: Rs. 169 million], primarily due to volume increases in the ice creams and soft drinks businesses.

“Since the rebranding of Elephant House, our entry into the cola segment and the commissioning of the ‘on premise’ ice cream production facility, we continue to be market leaders in both categories with increased market shares. The retail business saw improved margins with higher basket values and customer numbers. We have, in the calendar year 2011, added in excess of 60,000 square feet of retail space to our portfolio and locations have been identified for more large format stores and malls,” Ratnayake said.

Financial Services PBT of Rs. 422 million for the quarter is a 12%increase over the same period last year [2010/11 Q1:  Rs. 377 million], mainly as a result of a significantly better performance by the banking associate Nations Trust Bank. The insurance business, Union Assurance is also seeing strong growth, with life business premiums growing by 34 percent in Q1. The investment banking arm, John Keells Capital, accounted under ‘other’, executed a number of mandates during the quarter.

The Information Technology Group recorded a loss of Rs. 20  million for the three months, compared to the performance over  the same period last year [2010/11 Q1: Rs. 0.8 million] due to  costs associated with the transition of the BPO business to a  new facility. The Office Automation business continues to see growth and the BPO business has acquired a number of new high profile customers and plans are in place to lease a second facility in Gurgaon. The business is well positioned to achieve steady growth during the remainder of the year.  

Other comprising of Plantation Services, John Keells Capital and  the Corporate Centre recorded a PBT of Rs. 74 million for the  three month period, an increase of 43 percent when compared  to the corresponding period last year [2010/11 Q4:  Rs. 52 million].

A biodiversity conference was organised by the John Keells Foundation (JKF) in collaboration with the International Union for the Conservation of Nature (IUCN) and the Ceylon Chamber of Commerce, on the sustainable use of biodiversity for economic development. The goal of the conference was to increase awareness and understanding on the importance of biodiversity and its preservation, which is a vital tool for sustainable economic development and poverty alleviation in Sri Lanka.

English Day 2011, which showcases the skills and talents of the John Keells English Language Scholarship winners from across the island, was successfully held in Colombo during the quarter with the participation of approximately 500 children. The event was organised by JKH in collaboration with the Gateway Language Centre.

Mangalagama – the border village in Ampara which is being developed by JKF under the village adoption project saw the successful completion of the tank rehabilitation project and the first phase of the school development project covering the refurbishment of a derelict school building, the renovation of the present teachers’ quarters and purchase of the pre-school playground equipment. The second phase of the school project comprising the construction of teacher dormitories is also underway.

As part of its vision project, JKF donated 477 spectacles and sponsored 289 cataract surgeries during the quarter. 197 of the cataract surgeries were conducted in Kilinochchi under the patronage of the Ministry of Health. The John Keells HIV and AIDS awareness campaign educated 1,193 persons including members of the armed forces, during the quarter.