John Keells demonstrates their resilience

Despite the volatile macro-economic environment, the performance of the John Keells Group demonstrates their resilience and our ability to adapt to changing circumstances, said Susantha Ratnayake Chairman JKH.

Chaya Transz Hotels Hikkaduwa

“The profit attributable to equity holders for the second quarter at Rs. 2.41 billion reflects an increase of 59 per cent over the previous year while the first half performance at Rs. 4.07 billion reflects an increase of 48 per cent over the corresponding period in the previous year,” he said in his financial review.

The Group profit before tax (PBT) at Rs. 2.99 billion in the second quarter of the financial year 2012/13 was an increase of 46 per cent above the Rs. 2.06 billion recorded in the corresponding period in the previous year. The cumulative PBT for the first half of the financial year 2012/13 at Rs. 5.39 billion was an increase of 44 per cent over the PBT of Rs 3.74 billion recorded in the same period in the previous year.

The revenue at Rs. 20.68 billion and Rs. 40.70 billion in the second quarter and the first half of the financial year 2012/2013 was 17 per cent and 21 per cent above the Rs. 17.63 billion and Rs. 33.51 billion recorded in the corresponding periods in the previous year.

The Company PBT for the first half of Rs. 2.22 billion was an increase of 57 per cent over the Rs. 1.41 billion recorded in the first half of 2011/12.

The Board of Directors have drawn comfort from a special purpose audit carried out by the Group Auditors of all quoted companies and selected subsidiaries for the 6 months ended 30th September 2012, to ensure a smooth transition of SLFRS/LKAS adoption.

Transportation The Transportation industry group PBT of Rs. 1.02 billion was an increase of 57 per cent over the second quarter of the previous year [2011/12 Q2: Rs. 653 million], with the bunkering and logistics businesses predominantly contributing to growth. The Group concluded the joint venture in respect of its current freight forwarding businesses in India and Sri Lanka with Norbert Dentressangle S.A. of France.

Leisure

Chairman JKH Susantha Ratnayake

The Leisure industry group PBT of Rs. 945 million was an increase of 42 per cent over the second quarter of the previous year [2011/12 Q2: Rs. 667 million]. The PBT was mainly driven by City Hotels and Maldivian Resorts. City Hotels increased market share while Maldivian Resorts witnessed higher occupancies. Sri Lankan Resorts and Destination Management were adversely impacted as a result of a disappointing summer. However, the impact of lower occupancies was somewhat offset by higher average room rates. We continue to reiterate the importance of a focused, Sri Lanka centric, destination marketing strategy to attract the relevant visitor segments in ensuring year-round occupancies and yields which justify continued investment in this industry.

Property

The Property industry group recorded a loss before tax of Rs. 258 million for the second quarter, as against a loss of Rs. 11 million recorded in the corresponding period of the previous year. This is as a result of provisioning against preliminary project development costs. The progress of ‘OnThree20’ is on schedule and construction has progressed up to the 17th floor. Construction of the 140,000 square foot ‘K Zone’ mall in Kapuwatta, Ja-Ela is nearing completion.

Consumer Foods and Retail

The Consumer Foods and Retail industry group PBT of Rs. 288 million was a decrease of 11 per cent over the second quarter of the previous year [2011/12 Q2: Rs. 324 million]. Volumes of carbonated soft drinks were lower than expected amidst challenging market conditions resulting in lower consumption while ice cream volumes witnessed marginal growth. During the quarter, both these businesses continued to invest in enhancing market penetration for their respective products. The acquisition of the meat processing facility of D & W Foods Limited was concluded during the quarter under review. The Rights Issue by Keells Food Products PLC to raise Rs. 1.02 billion to fund the acquisition and the expansion of the D & W facility was successfully completed. The Retail business witnessed revenue growth during the second quarter on the back of same store revenue growth and revenue from new stores following the rolling out of the way forward strategy. The ongoing costs associated with this implementation impacted the profitability.

Financial Services

The Financial Services industry group PBT of Rs. 323 million was an increase of 21 per cent over the second quarter of the previous year [2011/12 Q2: Rs. 268 million]. Nations Trust Bank continued to be the primary contributor to the group and maintained its growth momentum in the second quarter.

Information Technology

The Information Technology industry group PBT of Rs. 56million was an increase of 17 per cent over the second quarter of the previous year [2011/12 Q2: Rs. 48 million].

A John Keells Hotel in Maldives

This increase was largely as a result of the improved operations of the Business Process Outsourcing (BPO) operations in India compared with the corresponding industry period in the previous year. The BPO business continued to experience growth in revenue through the acquisition of new customers. The Group divested its stake in the Chicago based associate Quattro FPO Solutions (Pvt) Limited for a consideration of US Dollars 4.5 million.

Other, including Plantation Services

Other, comprising of Plantation Services, John Keells Capital and the Corporate Centre, recorded a PBT of Rs. 620 million for the second quarter of the financial year 2012/13 [2011/12 Q2: Rs. 107 million] as a result of the capital gains from the divestment of Quattro FPO Solutions and the partial divestment of the freight forwarding businesses to Norbert Dentressangle and higher finance income. Tea Smallholder Factories and the produce brokering business which benefited from the increase in tea prices performed well.

Sustainability Initiatives.

During the quarter, the Group launched an enterprise-wide Sustainability performance tracking system to monitor and track its Sustainability performance. The system will provide timely information to management with regard to the sustainability performance of the businesses and will enable proactive decision making and continuous improvement.

Furthermore, the Group will carry out internal Sustainability Assurances thus contributing to a higher quality of information and adherence to the established standard operating procedures.

A third-party external stakeholder engagement was commissioned during the quarter. The findings of this stakeholder engagement would enable the Group to reassess and identify the most material Sustainability indicators.

The Group also continued with its various Sustainability initiatives from last year, in the areas of environmental conservation and community development such as the solar power initiative at Halmillawe and the rainwater harvesting project at Mangalagama. Spear-headed and developed by the people at JKH, I am pleased to note, these efforts further reaffirm that Sustainability is now a part of the DNA of the Group.

CSR Initiatives

The ‘English for Teens’ Programme under the John Keells English Language Scholarship Programme targeting school children in 18 Districts is scheduled to commence in November. The Pre-Intermediate English Programme commenced, covering students representing 8 Districts. The English Day 2012, showcasing the talents of the John Keells scholars of 2011/12, was successfully held in Colombo.

The John Keells Foundation (JKF) launched a Book Donation Campaign named ‘Gift of Knowledge’, covering all Business Units across the Group to coincide with World Literacy Day which fell on 8th September. Books were handed over to the Principals of the five State schools in Colombo 2 supported by the JKF, as well as representatives of the schools in the adopted villages of Halmillawe and Mangalagama.

The John Keells Vision Project conducted a total of 5 eye camps while the HIV and AIDS Awareness Campaign successfully concluded 10 awareness sessions covering various private and government sector establishments, including the Sri Lanka Army.

Upon the successful execution of the Village Adoption Programme in Halmillawe and Mangalagama, plans are underway to select 3 more villages in the Northern and Eastern Provinces to embark on the next phase of the Village Adoption Programme.

Dividend

The Board declared a first Interim dividend of Rs. 1.00 for 2012/2013, to be paid on the 23rd of November.