Access group profits up 15% in December as construction activities resume

The leading infrastructure developer, Access Engineering PLC (AEL), performed better during its December quarter due to the rebound in construction activities, but the steeper rise in tax expenses took the glow out of otherwise excellent results, the interim accounts filed with the Colombo Stock Exchange showed.  
The Access group reported earnings of 63 cents a share for the December quarter, against 54 cents a share year-on-year (YoY) – that is, Rs.630.2 million in net profit, an increase of 15.3 percent from a year ago.  The Access share however ended in red after it fell 20 cents yesterday to close at Rs.24.50. 
Access is a battered stock since early 2015 when the good governance regime suspended many infrastructure development projects pending alleged graft by the previous regime and environmental clearing. 
The group profit was however eroded by the higher tax expense, which rose by as much as 190 percent YoY to Rs.279.1 million, due to the higher deferred tax provision resulting from the removal of the concessionary tax rate on construction activities from the recent budget, effective from April 1, 2017. 
Revenue rose by just under 25 percent YoY to Rs.5.29 billion mainly bolstered by the group’s construction-related material and construction activities segments. 
The group also has interests in telecom, power and renewable energy, water projects, information technology, healthcare, education and property development. 
In January, the company invested Rs.3.0 billion in return for a 51 percent stake in Hotel 10 (Private) Limited, a joint venture between Mustafa’s (Pvt.) Limited and China Harbour Engineering Company (Lanka) Limited, to build a 250,000 square feet commercial and residential development with 1,000 dwelling units in Colombo 15, overlooking the Colombo Port. 
The total investment for the project is estimated at Rs.10.0 billion. 
Further, in May 2016, the company bought a 50 percent stake for Rs.800 million in Blue Star Constructions Private Limited to develop a condominium on a one-acre land in Rajagiriya. 
Meanwhile, for the nine months ended December 31, 2016, the group reported an earning of Rs.1.87 a share against Rs.1.83 a share a year before. The net profit rose by a little over 2.0 percent YoY to Rs.1.88 billion. 
The group revenue for the period rose by 16.8 percent YoY to Rs.15.3 billion. 
The group’s automobile unit, though increased revenues by 41 percent YoY to Rs.3.85 billion, the net profit fell by almost 40 percent YoY to Rs.150.7 million. 
As of December 31, 2016, Group Chairman Sumal Perera held a 25 percent stake in the group while the state-controlled private sector pension fund, the Employees’ Provident Fund, held a 2.05 percent stake being the 11th largest shareholder.