Sri Lanka’s John Keells Holdings Sept net down on Easter Sunday hit, taxes
ECONOMYNEXT- John Keells Holdings (JKH), Sri Lanka’s largest listed conglomerate, said its net profits for the September quarter fell 55 percent from a year earlier to 2.3 billion rupees amid weaker tourism and a tax charge.
Earnings per share for the quarter were 1.74 rupees, interim financials showed. For the first six months of the 2020 financial year, JKH posted 2.49 rupees in earnings per share. The JKH share closed flat at 157 rupees on Friday.
Revenue for the September quarter grew 3 percent from a year earlier to 33.7 billion rupees, while cost of sales grew at a faster 5 percent to 27.6 billion rupees, leading to gross profits falling 3 percent to 6.1 billion rupees.
JKH Chairman Krishan Balendra said that the downturn in Sri Lanka’s tourism sector following the Easter Sunday terror attacks dragged revenue down for the quarter, but going forward, the sector will recover further.
“Forward bookings for the Sri Lankan hotels have witnessed an upward trend and we expect occupancy in the peak season to be in line with the previous year, albeit at a moderately lower room rate,” he said.
The JKH property Cinnamon Grand was one of the hotels targeted by terrorists in April.
JKH’s finance costs for the quarter fell 44 percent to 423.3 million rupees, while finance income fell 28 percent to 2.5 billion rupees due to investments of cash in new investments, and lower exchange gains on foreign currency holdings.
The group’s long-term borrowings doubled to 53.4 billion rupees at end-September from 21.3 billion rupees at the start of the year 6 months ago while short-term borrowings fell to 10.5 billion rupees from 13.2 billion rupees.
JKH’s profits fell due to a 1.9 billion rupee transfer of insurance contract liabilities to the life fund at the subsidiary Union Assurance, compared to a 368.5 million rupee hit a year earlier.
The tax expense for the quarter was 359.6 million rupees, compared to a reversal of 632.5 million rupees a year earlier at Union Assurance.
JKH’s leisure arm made 618.7 million rupees in losses after tax for the quarter from a 397 million rupee profit a year earlier on the back of revenue which fell 32 percent due to the Easter attacks.
The newly renovated Bentota Beach Hotel is expected to reopen in December, while a new group-managed hotel was opened in the Maldives in the September quarter.
Transportation profits after tax (PAT) fell 6.4 percent to 987.2 million rupees while revenue fell 5 percent to 5.8 billion rupees.
Balendra said despite a growth in the bunkering business, operations at the group’s Colombo Port container terminal were disrupted in August.
The consumer foods segment, which includes processed meats, confectionary and soft drinks, posted PAT growth of 20.7 percent to 332.9 million rupees on revenue which grew 1 percent to 4.3 billion rupees.
Balendra said sales were muted due to disruptions to distrubtion of products in September due to adverse weather conditions across the country.
Ice cream and soft drink sales were strong, he said. A new ready-to-eat instance rice product, branded “Ezy Rice” was launched during the quarter, he said.
JKH’s retail segment, which operates the Keells supermarket, posted 95.3 million rupees in PAT, up from a 112.4 million rupee loss, while revenue grew 20.7 percent to 16.3 billion rupees.
“Two new outlets were opened during the quarter, increasing the store count to 100,” Balendra said.
He said same-store sales were up 5.1 percent and customer footfall was up 5.7 percent from a year earlier.
Financial services sector profits fell 70.9 percent to 440.6 million rupees despite revenue growing 8.5 percent, due to the performance of Union Assurance, while Nations Trust Bank recorded higher profitability with lower bad loans, Balendra said.
Norges Bank, which controls the world’s largest sovereign fund, increased its shareholding in JKH to 1.9 percent in the September quarter from 1.7 percent three months earlier.