Friday, 8 November 2013 00:00
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The revenues at Rs. 21.08 billion and Rs. 41.09 billion in the second quarter and the first half of the financial year 2013/2014 were 2% and 1% above the Rs. 20.68 billion and Rs. 40.70 billion recorded in the corresponding periods in the previous year.
The Group profit before tax (PBT) at Rs. 2.65 billion in the second quarter of the financial year 2013/14 was a decrease of 12% on the Rs. 2.99 billion recorded in the corresponding period in the previous year. The cumulative PBT for the first half of the financial year 2013/14 at Rs. 4.85 billion was a decrease of 10% on the PBT of Rs. 5.39 billion recorded in the same period in the previous year.
The profit attributable to equity holders for the second quarter at Rs. 2.06 billion reflects a decrease of 15% on the previous year while the first half performance at Rs. 3.65 billion reflects a decrease of 10% on the corresponding period in the previous year.
The Group incurred a non-cash charge of Rs.72 million during the quarter for Employee Share Option Plans (ESOPs) under the Sri Lanka Accounting Standards; SLFRS 2 on Share Based Payments and a nonrecurring impairment charge of approximately Rs. 141 million for the quarter on account of the demolition of buildings at Glennie Street and Justice Akbar Mawatha.
The Waterfront Project
The Waterfront Project, an integrated resort which I referred to in my previous message, is still to receive all its approvals. The Project which had received Cabinet approval under the Strategic Development Projects Act was presented to Parliament and was subsequently withdrawn by the Government. However, we are confident that the requisite approvals will be forthcoming shortly.
Your company received shareholder approval for investment in the Waterfront Project as a major transaction under the Companies Act No. 7 of 2007. The company also announced a Rights Issue of two shares for every 13 shares held at Rs. 175 per share with attached warrants.
I am pleased to advise you that the issue was oversubscribed, affirming the support and trust you have placed in your company. The Rs. 23.10 billion raised via the rights will be utilised to fund the company’s equity contribution into the Waterfront Project Company.
Macroeconomic conditions
From a macroeconomic perspective, in spite of the reduction in interest rates and continued stable inflation, we are yet to see the full impact of these benefits flow through to the real economy. As a result, we continue to witness relatively dampened consumer sentiment and challenging macroeconomic conditions.
The uncertainty created through the events in the global economy has compounded the volatility faced by emerging markets. We however remain confident of the future considering the strong fundamentals of the Group which will enable us to weather periods of uncertainty.
Transportation
The Transportation industry group PBT of Rs. 745 million in the second quarter of 2013/14 was a decrease of 27 per cent compared to the corresponding quarter of the previous financial year [2012/13 Q2: Rs. 1.02 billion].
The decline in PBT is mainly attributable to the lower contribution from the ports and bunkering businesses on the back of lower volumes and margins although container throughput over Colombo has remained fiat as against the previous year. Although the drop in the ports business was the result of a recent re-alignment of some services, the overall outlook remains stable with volumes over Colombo expected to grow strongly in the medium term.
Leisure
The Leisure industry group PBT of Rs. 1.14 billion in the second quarter of 2013/14 was an increase of 20% compared to the second quarter of the previous financial year [2012/13 Q2: Rs. 945 million] due to both the Sri Lankan and Maldivian resorts performing better than the previous year. The performance of city hotels and destination management remained in line with expectations.
Property
The Property industry group recorded a loss before tax of Rs. 45 million for the second quarter compared to a loss of Rs. 258 million recorded in the corresponding period of the previous year. Results for the second quarter of 2013/14 include a non-recurring charge of Rs. 152 million on account of the demolition of property, plant and equipment located at the Glennie Street site which will be used for the development of the Waterfront Project.
Revenue recognition on ‘7th Sense,’ of which 50% has been sold off plan, commenced during the quarter and contributed towards the growth in revenue. Both ‘7th Sense’ and ‘OnThree20’ are progressing as per schedule.
Consumer Foods and Retail
The Consumer Foods and Retail industry group PBT of Rs.253 million in the second quarter of 2013/14 was a decrease of 12% over the second quarter of the previous financial year [2012/13 Q2: Rs. 288 million]. The soft drinks volumes fell during the quarter under review on the back of an overall reduction in market volumes.
However, the frozen confectionary segment registered a year on year increase in profits during the quarter. An enhanced market share and improving margins at Keells Food Products resulted in an improved performance. The retail business improved its financial performance on the back of same store sales growth.
Financial Services
The Financial Services industry group PBT of Rs. 305 million in the second quarter of 2013/14 was a decrease of 6% over the second quarter of the previous financial year [2012/13 Q2: Rs. 323 million]. The reduction in PBT recorded by the banking and stock-broking businesses was partially compensated for by the higher PBT generated by the insurance business.
The primary reason for the reduction in the performance of the banking business was due to the continued slow loan growth rates coupled with the nonrecurring costs in relation to the implementation of its positioning strategy.
Information Technology
The Information Technology industry group PBT of Rs. 43 million in the second quarter of 2013/14 was a decrease of 24% over the second quarter of the previous financial year [2012/13 Q2: Rs. 56 million], mainly on account of the decrease in profits of the office automation business due to increased costs arising from exchange rate fluctuations, despite the increase in overall revenue. The Business Process Outsourcing operation in India witnessed growth in revenue and as a result bettered its profitability.
Other, including Plantation Services
Other, comprising of Plantation Services and the Corporate Centre, recorded a PBT of Rs. 209 million for the second quarter of the financial year 2013/14 [2012/13 Q2: Rs. 620 million]. The higher PBT in the previous financial year was on account of one-off gains from the disposal of Quattro FPO Solutions and the partial divestment of the freight forwarding business.
Sustainability Initiatives
The Group’s environmental sustainability indicators recorded quarter on quarter increases on the back of increased activity in the Resorts sector compared to the corresponding period in the previous year, with the overall carbon footprint increasing by 9% to approximately 18,855 MT and water withdrawal increasing by 7% to an estimated 431,600 cubic meters.
The Group maintained the proportion of waste that is recycled, reused and recovered at approximately 42% though the total volume of waste generated increased. The Group’s labour related sustainability indicators witnessed an improvement with occupational injuries falling to 47 this quarter, compared to 52 occupational injuries recorded in the second quarter of 2012/13 and training hours being maintained at approximately 14 hours per employee for the quarter.
Corporate Social Responsibility
The pre-intermediate level course of the English Language Scholarship Program commenced during the period under review covering 200 children in 16 locations across 15 districts. The John Keells Foundation successfully conducted the ‘English Day 2013,’ enabling the participants of the scholarship program to showcase their learning.
Under the John Keells HIV and AIDS Awareness Campaign, a total of 1,249 persons were educated via 14 sessions, including corporate staff and members of the armed forces.
The John Keells Vision Project conducted three eye camps during the quarter covering 575 registered patients of whom 130 patients underwent cataract operations.
