JKH Group records Rs 5.12b profit in 1Q

The John Keells Group has reported a Group profit after tax of Rs. 5.12 billion in the first quarter of 2008.

Group revenue has increased by 27 per cent to Rs. 41.81 billion and Group profit before tax grew by 37 per cent to Rs. 6.58 billion.

Chairman of John Keells Susantha Ratnayake said the Group performed commendably in revenue and profit growth even in the face of the challenging macro environment that confronted them during the financial year.

“It is in response to these macro challenges, that we adopted a simple, but determined, approach of doing what we do, better than we already do. This has helped us to pursue our long to medium term goals whilst realising our short term objectives.

Having experienced the power of such an ethos, we believe it is also an appropriate theme for our Annual Report this year, “he told shareholders.

Earnings per share of the Group has increased by 32 per cent to Rs. 8.00 - Dividend payout increased by 29 per cent from 62.8 per cent to 81.0 per cent. Net cash flows from operating activities increased by 174 per cent to Rs. 6.91 billion. Cash EPS increased by 27 per cent to Rs. 9.54.

Pre tax return on capital employed increased to 13.7 per cent from 13.6 per cent in the previous year.

“We were unable to fully achieve the high goals we had set for ourselves in substantially increasing our local and regional investments.

Operating assumptions and hurdle rates for local investments were difficult to establish because of the myriad of uncertainties surrounding the local operating environment, Ratnayake said.

The prevailing interest rates, anticipated inflation and industry risk premiums made the determination of discount rates extremely challenging.

In the case of the regional investments, we explored several opportunities but were reluctant to invest in what we perceived to be an overheated environment and in hindsight we were proved right with significant corrections taking place post the sub-prime crisis.

Some of the opportunities which were available to us did not meet our requirement of scale while in many others the reward factor for operating in unfamiliar territories were not commensurate with the associated risks,” he said.

‘As for the “ups” we focused on building better internal structures and processes and refined our compensation and benefit schemes to attract and retain the talent required for our future plans.

A number of our businesses and functions achieved significant milestones in productivity enhancement and organic expansion under the defined strategy. “We gained domain knowledge and insights in to identified regional countries and have created networks that would facilitate a smooth and successful entry into such countries.

In the prevailing volatile global capital market conditions, we secured long term funding from the International Finance Corporation (IFC) on terms that recognised the strength and potential of the group.

“Despite these adverse factors, it is pleasing to note that the country’s reported GDP growth for the calendar year 2007 at 6.8 per cent was not a significant slow down from the previous year’s 7.7 per cent, “the Chairman said.