Diversified blue chip Aitken Spence PLC saw its net profit for the quarter ended June 30, 2016 (1Q17) declining as much as 41 percent year-on-year (YoY) to Rs.249 million amid lower returns from tourism operations and higher costs, the interim financial accounts released to the Colombo bourse showed.
The earnings per share for the quarter deteriorated to 61 cents from Rs.1.04.
Tourism operations, the highest revenue earner for the group, saw its revenue edging up only 1.6 percent YoY to Rs.2.8 billion. The segment reported a loss after tax of Rs.198.8 million against a post-tax profit of Rs.337.2 million in the same quarter of the previous year (1Q16).
“Low returns from the Maldives operation as a result of stagnant tourist arrivals and dilution of rates together with investments made towards a number of new projects have adversely affected the returns of the first quarter,” the company said in a press release.
Aitken Spence is currently the largest international hotel operator in the Maldives with four properties.
During the previous financial year and the beginning of this financial year, the group invested in two new Maldivian islands—Aarah and Raafushi.
Construction has begun on a 150-room five-star property on Aarah, which is due for launch in winter 2017, while plans are being finalized for a resort on Raafushi.
However, the group was able to post a healthy top line growth as net revenue rose 29.8 percent YoY to Rs.7.4 billion. “The top line growth is the result of strong contributions from a number of sectors including the recommenced power operation in Embilipitiya during the first quarter,” the statement said.
Yet, the group’s operating profit fell 21.8 percent YoY to Rs.555 million amid increases in both direct and indirect costs. The costs on raw materials and consumables used during the quarter rose 222.6 percent YoY to Rs.1.6 billion. This could be due to the resumption of operations at the Embilipitiya diesel-powered power plant. The group also incurred a net finance expense of Rs.170.4 million for the quarter, up from Rs.34 million in the corresponding quarter of the previous year, which negatively affected the group’s profit before tax (PAT).
“Investments in the hotel sector projects such as Heritance Negombo, Turyaa Chennai and RIU Ahungalla and the related debt servicing costs alongside diminished returns from hotel operations in the Maldives and the garment sector, negatively affected pre-tax profits,” the company statement said.
Both maritime and logistics and strategic investment segments of the group showed excellent results, with PAT increasing 123 percent and 521 percent YoY to Rs.385 million and Rs.112.3 million, respectively on the back of higher revenue.The group’s port management and maritime education operations boosted the maritime and logistics sector, while the recommencement of operations at the Embilipitiya power plant and healthy contributions from printing operations improved the strategic investment segments. Aitken Spence is the majority shareholder of CINEC, which is Sri Lanka’s largest private sector maritime and higher education campus. It also has extensive operations in Fiji in ports management and maritime education. The group invested as much as Rs.10 billion in new ventures both local and overseas during the last financial year, while another Rs.2.8 billion had been committed on property plant and equipment.
As at June 30, 2016, business magnate Harry Jayawardena’s investment vehicle, Melstacorp Limited, which is soon to become the ultimate parent for all his investments, held a 43.96 percent stake in Aitken Spence. Rubicond Enterprises Limited, a party which is believed to be related to Jayawardena, held a 16.25 percent stake as the second largest shareholder.
The state-controlled private sector pension fund, the Employees’ Provident Fund, held a 5.79 percent stake in the company, being the fourth largest shareholder.