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In the first quarter ended June 30, 2003 John keells holdings (JKH) maintained the growth momentum seen in the last financial year, with a 26 per cent increase in revenue, a 81 per cent growth in Group Operating Profits and a 60 percent growth in pre tax profits prior to "exceptional" items, relative to the corresponding period in 2002/2003, chairman Vivendia Lintotawela said.

Improved levels of economic activity and enhanced business confidence resulted in good performances from most of our core operations, particularly the transportation leisure and financial services sectors.

Ceylon Cold Stores implemented a Voluntary Retirement Scheme at a cost of Rs. 675 million with an estimated payback of 2.5 years. This resulted in the profit attributable to the group being 82 percent lower than the corresponding quarter in the previous year, which also enjoyed a Rs. 103 million exceptional profit from discontinued operations.

The food and beverage sector and the Group is well poised to benefit from the substantial operating cost savings consequent to the VRS that will arise in the ensuing nine months and periods thereafter.

JKH re-Tax profits improved by 139 percent helped mainly by higher dividend income from Group companies.

The Food and Beverage Sector registered a marginal improvement in operating profit, pre VRS, compared to last year. Contributions from carbonated Beverages at Ceylon Cold Stores dropped due to business interruption during the implementation of the VRS. This was partially offset by significant growth in the ice creams segment with the introduction of new flavours, which were well received by consumers.

The latest VRS, which retired 691 staff members, will enable the company to move the entirety of its production to the Kaduwela plant, thereby enabling the attainment of operating efficiencies. Keells Food Products and Keells Restaurants were also beneficiaries of the improved overall economic activity. The first Elephant House supermarket was opened in Wellawatte and there are plans to open several more during this financial year.

The transportation sector registered a 43 per cent growth in pre tax profits, mainly boosted by a healthy contribution from Lanka Marien Services (LMS). Notwithstanding the market situation arising as a result of the exclusive terminal Services Agreements signed by the SLPA with a number of shipping lines, and a lower tariff structure, SAGT performed above expectations. SAGT has also continued to increase its operating efficiency levels and is well positioned to take advantage of growth volumes at the Port.

The Leisure Sector saw a significantly improved performance over the corresponding quarter in the previous year. Despite SARS fears impeding arrivals from the South East Asian Region, average occupancy levels at the local hotels improved". With Sri Lanka increasingly being perceived as an attractive destination, we believe that it is opportune for us to review and revise our operating and pricing strategy with a view to attracting higher spending tourists.

Profits from our Maldivian Hotels were similar to the corresponding quarter in 2002/2003 and occupancy levels remained well above the national average. Destination Management Companies enjoyed higher levels of profitability during this quatre as a result of increased activity. Present trends in this sector augur well for the Group, Lintotawela said.

The Plantation Sector had a mixed performance as a drop in tea prices was offset by an increase in rubber prices. The company will continue to look towards crop diversification and the reduction of operating costs to enhance the profitability of the sector.

The Information Technology Sector pre tax profitability was at levels similar to the corresponding quarter in 2002/2003 on the back of good performances from John Keels Office Automation and the Software segment.

The Financial Services Sector, witnessed exceptional growth with the gradual return in business confidence. The Colombo Bourse generated its highest ever monthly turnover in June, while the All Share Index reached a nine-year high. John Keells Stock Brokers generated strong returns while maintaining its leading position. Nations Trust Bank and Union Assurance saw improved profitability in the quarter. During the quarter JKH increased its stake in Union Assurance from 24 percent to 36 percent.

Given JKH's exposure to key sectors of the economy, JKH is a beneficiary of the improved economic environment. "This coupled with our constant crusade to reduce operating expenditure and make our assets more productive and the inculcation of a spirit of innovation in our businesses will enable us to sustain the momentum created in the first quarter", he said.

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