- Says too early to predict long-term outlook
- Temporarily ceases inbound tour operations
- In discussion with lenders to secure govt. relief measures
Diversified conglomerate Aitken Spence PLC expects a significant negative impact on its revenue and profits in the first and second quarters of the financial year 2020/21, due to the adverse impacts stemming from the COVID-19 pandemic, in particular on the tourism sector.
In addition to the tourism sector, the group noted that its maritime and freight logistics sector, power generation, garments, printing and elevator segments, more or less are impacted by the pandemic.
The group has operations in 16 segments under four main sectors in Sri Lanka and overseas.
“The global situation is extremely volatile at present and since the impact of the pandemic on the group’s business is closely linked to customers, principals and suppliers in other countries, an estimate of the long-term outlook may not be realistic at this stage.
However, we will continue to monitor the developments, both locally and globally and take timely action to mitigate any risks to the financial stability of the group,” Aitken Spence PLC said in a filing to the Colombo Stock Exchange (CSE).
According to the CSE filing, the group’s tourism sector has been severely impacted as the government moved to impose stringent measures to contain the spread of the virus in the country, together with the closure of its main airport in mid-March.
Aitken Spence PLC Deputy Chairman and Managing Director Dr. Parakrama Dissanayake highlighted that the group’s inbound travel segment, which has been responsible for bringing in the largest share of tourists to the country over several years, has been compelled to temporarily cease operations.
The group’s hotels in Sri Lanka, the Maldives and Oman, remain temporarily closed while very limited operations are taking place in the hotel in India. Most of the segments in Aitken Spence’s maritime and freight logistics sector are currently operating on a reduced scale as essential services in the supply chain while the port management operations in Fiji and Mozambique are continuing to function.
Further, the construction of the waste-to-energy plant, which was nearing completion, has been delayed due to the pending arrival of some of the contractor’s technical experts from overseas for the testing phase.
However, the group’s power generation segment is continuing to operate on a 24-hour basis, supplying power to the national grid.
Similarly, Dr. Dissanayake noted that the plantations segment is in operation as permitted by the government, albeit with certain restrictions.
The group’s insurance and money transfer business are continuing their operations, while the elevator segment has temporarily ceased work on new installations and is carrying out maintenance work only if required.
Considering the impact on the performance and cash flows of the company in the first quarter of the current financial year, the management has introduced several measures to cut costs, including voluntary salary reductions across all sectors, commencing with the board of directors and the leadership team and applied on a sliding scale to all grades of employees.
The group is also in discussion with the several lending institutions to receive the relief measures announced by the Central Bank (CB) to support certain sectors, which have been affected by the pandemic, with moratoriums on the servicing of debt.
“This would relieve the group of the cash constraints that would be borne during the next few months,” Dr. Dissanayake said.
He anticipates that the cost reduction methods, which are currently being implemented, the new ways of doing business and the support offered by lenders, would help to mitigate the adverse impact on the profitability and cash flows of the group.
Aitken Spence plans to resume operations in all sectors other than the hotels, once the curfew is lifted, with arrangements to permit only the staff whose physical presence is required to come to the workplace with others working from home on a roster basis, in keeping with the directives of the government.
The group is expected to issue an updated disclosure after resuming its operations with the lifting of the curfew and when the current environment becomes more stable.