Access Engineering June quarter dented by higher tax expenses

Construction giant and the diversified conglomerate, Access Engineering PLC (AEL) saw its June quarter (1Q17) net profit narrowing 12.6 percent to Rs.524.4 million from a year ago as its performance was hit by higher corporate tax and to a lesser degree by overhead costs.
The earnings per share lost 8 cents to 52 cents a share by June 30, 2016 from a year ago.  AEL, which has interests in the construction, automobile, education, property development and healthcare sectors saw its group topline rising by a modest 9.5 percent year-on-year (yoy) to Rs.4.6 billion. 
The group’s gross profit margin stood at 23.8 percent for the quarter, the company said.  But the key segment, construction, saw both its topline and bottom line narrowing 13 percent and 13.5 percent to Rs.2.26 billion and Rs.354. 2 million, respectively. 

oduction business also saw its bottom line falling 15.4 percent yoy to Rs.70.8 million but the topline soared110 percent yoyto Rs.416.7 million. 

Since the coalition government came into power on January 8, 2015, many infrastructure development projects, where some of which AEL had been acting as the main contractor were stalled pending clearance. But some of the projects have now been recommenced. 
However, the group’s performance was hurt the most by the hefty corporate income tax charged at the new rate of 17.5 percent applicable to construction activities and also due to one-off tax adjustment, a statement from the company said. 

The tax charge for the quarter was Rs.228.9 million for the quarter in comparison to the Rs.97.4 million charged during the same period last year. 

As a result, the profit before tax for the group was up only by 3.4 percent yoy to Rs.760.1 million. 
Meanwhile, a rise in administrative expenses of 21.4 percent yoy to Rs.355.4 million also weighed on the bottom-line. 
The net finance income during the corresponding period last year turned a net finance cost of Rs.11.5 million due to rising interest rates as there was little change in the debt position of the group during the period. 
In November 2015 the company raised Rs.5.0 billion via a senior debenture issue with yields between 10.51 percent to 11.25 percent. 
In recent times the AEL saw making inroads into related as well as unrelated business segments via acquisitions. 
The group forayed in to higher education sector last November 2015 with its 92 percent acquisition of Horizon Knowledge City Ltd for Rs.575 million. 
A month later the group bought 70 percent stake in Ninewells Hospital (Private) Limited, a specialized mother and baby care hospital. 
Entering the booming property development sector, the company also bought 50 percent stake in the property developer, Blue Star Constructions (Pvt) Limited for a consideration of Rs.800 million in May 2016. 
The latter has been in business since 2007 and own one acre of property in Rajagiriya. The company is planning a condominiumon this land at present. 
The company also invested Rs.300 million in its subsidiary, Access Realities (Private) Limited during May 2016. 
Access Realities saw its June bottom-line rising 12 percent yoy to Rs.41.4 million on a topline of Rs.45. 2 million, up 15 percent yoy. 
Meanwhile, the group’s automobile sales unit, Sathosa Motors PLC saw its net profit contracting by 51 percent yoy to Rs. 42.3 million while the topline grew by 56 percent yoy to Rs.1.2 billion. 
The group’s 80 percent owned subsidiary, Access Projects (Private) Limited made a net profit of Rs.25.6 million, up 27.4 percent yoy on a revenue of Rs.719. 3 million, up 19 percent yoy. 
As of June 30, 2016 AEL Group Chairman, Sumal Perera had 25 percent stake in the company and the state controlled private sector pension fund, Employees’ Provident Fund held 2.23 percent, being the eleventh largest shareholder.