JKH Q3 profits up 8% to Rs. 2.89 b

John Keells Holdings PLC (LKH) Chairman Susantha Ratnayake said that the cumulative profit attributable to equity holders for the nine months ended 31 December 2012 at Rs. 6.97 billion.

This reflects an increase of 28 per cent over the corresponding period in the previous year, while the profit attributable to equity holders for the third quarter at Rs. 2.90 billion reflects an increase of 8 per cent over the same period last year.

Susantha Ratnayake

The cumulative Group profit before tax (PBT) for the nine months ended 31 December 2012 at Rs. 8.97 billion was an increase of 27 per cent over the PBT of Rs. 7.06 billion recorded in the corresponding period in the previous year.

Group PBT at Rs. 3.58 billion in the third quarter represented an increase of 8 per cent above the Rs. 3.33 billion recorded during the same period last year.

The cumulative revenue for the nine months ended 31December 2012 at Rs. 62.20 billion represented an increase of 13 per cent over the Rs. 54.92 billion recorded in the corresponding period last year. The revenue for the third quarter at Rs. 21.51 billion was a marginal increase over the Rs. 21.41 billion revenue recorded in the same period last year.

The company PBT for the nine months ended 31 December 2012 of Rs. 3.93 billion was an increase of 69 per cent over the Rs. 2.33 billion recorded in the corresponding period of the previous year.

The Group’s quarterly results reflect the challenges that we continue to face in a volatile macro-economic environment. The Transportation industry group PBT of Rs. 844 million was in line with the third quarter PBT of the previous year mainly on account of exchange losses in the bunkering business as a result of the appreciation of the Rupee. The new domestic aviation associate of the Group, operating under the brand name ‘Cinnamon Air’, completed the purchase of two Cessna amphibian aircrafts. Operations of the airline are scheduled to commence during the fourth quarter of the financial year 2012/13, which we believe will be an important addition to the tourism infrastructure within the country.

The Leisure industry group PBT of Rs. 1.34 billion was an increase of 33 per cent over the third quarter of the previous year [2011/12 Q3: Rs. 1.00 billion]. The growth in PBT was predominantly driven by City Hotels.

Sri Lankan Resorts was impacted by lower than expected occupancies as a result of a drop in our traditional markets, combined with aggressive marketing by competing destinations. We continue to reiterate the importance and urgency of creating greater awareness of Sri Lanka as a travel destination, to ensure that the country fully realises the substantial multiplier effects to the economy from this important industry.

The Property group PBT of Rs. 180 million for the third quarter was a decrease of 44 per cent over the PBT recorded in the corresponding period of the previous year, primarily as a result of the revenue recognition cycle.

The progress of ‘OnThree20’ is on schedule and construction has progressed up to the 28th floor.

The 140,000 square foot ‘K Zone’ mall in Kapuwatte will commence operations in February 2013.

The Consumer Foods and Retail industry group PBT of Rs. 186 million was a decrease of 65 per cent over the third quarter of the previous year mainly due to a non-recurring income of Rs. 120 million in the corresponding quarter of the previous year.

Ice cream, soft drink and processed meat volumes were below expectations while overall profitability was negatively impacted by excise and duty increases and other cost escalations during the quarter under review.

The Retail sector is seeing benefits arising from the implementation of the new way forward strategy and witnessed growth in footfall and basket values. The imposition of the value added tax (VAT) of 12 per cent with effect from January 1, 2013 on retail businesses with turnover exceeding Rs. 500 million per quarter is expected to have an impact on the margins of the Retail sector.

Whilst we support the principle of broadening the tax base, the fact that no transitional provisions were made available to allow for the claim of input VAT on the closing stocks as at 31st December 2012 was disappointing. This will result in a significant ‘one-off’ impact on profitability in the next quarter.

The Financial Services industry group PBT of Rs. 734 million was an increase of 27 per cent over the third quarter of the previous year. Nations Trust Bank was the primary contributor to growth.

Union Assurance raised Rs. 750 million through a rights issue to strengthen its capital base.