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John Keells Holdings Limited (JKH) has recorded 'exceptionally well' financial results for the year ended March 31, 2003.

Chairman Vivendra Lintotawela said that 'the financial year 2003 has been a year of exceptional achievement. "Amidst an improving economic backdrop, it was a year that saw our prudent but astute decisions of the past bear fruit, re-affirming that the JKH business model works and that the team at JKH delivers," he said in the annual report 2003 released yesterday.

JKH's consolidated net profits grew by 143.6% to Rs. 1.3 billion, a record so far. Although revenue increased by 42.5% to Rs. 16.8 billion, operating profits grew by 75.6% to Rs. 17 billion highlighting a strong improvement in operating margins. Pre-tax Return on Capital Employed also improved to 14.4% from 9.2% last year while the company's Return on Equity increased to 14.6% from 6.7%.

Peace negotiations between the Government and the LTTE have already contributed significantly towards healing the economic woes of the recent past. Economic growth rebounded to 4% in 2002 and defence spending has fallen, interest rates have eased and tourist arrivals have also risen sharply.

These are merely a few glimpses of what peace could offer, Lintotawela said in the report.

Strong contributions to profit growth were witnessed from virtually all sectors in the financial year under review. "The strength of the Keells and Elephant House brands was manifest in the steady performance of the food and beverage sector. The successful bid for Lanka Marine Services and increased capacity at SAGT were the key drivers behind the more than doubling of profits in the transportation sector.

The Leisure sector enjoyed the dividends of the ongoing ceasefire and the IT and Financial Services sectors also returned to profitability.

The Plantation sector however, remained depressed due to wage issues and unfavourable tea prices.

"Given our presence in the key growth sectors of the local economy, we are ideally poised to reap the benefits of an economic resurgence.

Our leisure sector is well positioned with a number of resorts in strategic locations. We are present in virtually all facets of international transportation and the sector will undoubtedly be a key beneficiary of the likely pick up in trade activity and business confidence.

Moreover, owning two of the best known food and beverage brands in the country, the pick up in consumer demand has a naturally positive impact on our bottom line while our presence in the country's financial services sector also continues to grow.

As a conglomerate, the Group has an unmitigated responsibility to generate steady returns, irrespective of broader economic conditions.

As we pledged in last year's report, the Group has attempted to skew the portfolio towards the less cyclical areas of the economy.

"Despite many conglomerates resorting to focus strategies, we are confident that diversification will remain our formula for generating superior shareholder returns," the chairman said.

"We believe our strength lies in identifying under-performing acquisition targets and converting these into significant value creators. Our track record proves this. We also recognise that active portfolio management is the key to successful diversification. Notwithstanding the record profits earned this year, we mandated the Boston Consulting Group (BCG) to help institutionalise portfolio evaluation and improve our internal operating model."

Referring to Good Governance in the Group, he said: "JKH perceives good corporate governance as being integral in building credibility and trust with all stakeholders and reducing the cost of capital. "Corporate governance may seem like a buzzword to many, but for us it is a way of life.

We also recognise that the well-being of our community and the broader environs in which we operate, are inexorably linked with the fortunes of our corporate existence," he said.

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