Diversified conglomerate Aitken Spence (SPEN) recorded strong growth during the June-September quarter (2Q18), with higher revenue across all sectors, and sale of a subsidiary contributing towards profits during the period despite escalating expenses.
Net profits for 2Q18 increased 8.04 percent year-on-year (YoY) to Rs. 583.88 million, with earnings per share increasing to Rs. 1.44 from Rs. 1.33 YoY. The SPEN share price remained unchanged at Rs. 60 on thin trading yesterday.
The largest impact on the bottom line came from the group’s power generation arm, which was re-activated after the government started to demand higher energy supply to the national grid to account for a major drought which left the country’s hydro-electricity resources performing at limited capacity.
In the tourism sector, the losses after tax amounting to Rs. 233.31 million made during the first quarter were nearly wiped out during the 2Q18, despite the challenging environment with low tourist arrivals.
Group revenue increased 24.53 percent YoY to Rs. 12.26 billion. Higher raw material costs, employee benefits and other operating expenses resulted in operating profits of Rs. 1.30 billion, an increase of 8.11 percent YoY.
However, this operating profit received a contribution from other operating income, which increased tenfold YoY to Rs. 382.15 million, due to the gains realized from the group divesting its subsidiary M.P.S. Hotels (Pvt) Ltd. which operated the Hotel Hilltop in Kandy, this September.
Net assets per share in the group balance sheet increased to Rs. 98.56 compared to Rs. 97.24 at the start of the financial year. The asset base fell to Rs. 91.34 billion from Rs. 95.30 billion during the 6-month period.
While long and short-term interest bearing liabilities marginally fell, the largest decline in liabilities came via bank overdrafts and other short-term borrowings, and payables to suppliers. Meanwhile, during the first half of the current financial year SPEN profits increased 18.90 percent YoY to Rs. 938.67 million. Revenue expanded 37.47 percent YoY to Rs. 23.90 billion, while operating profits increased 25.79 percent YoY to Rs. 2.21 billion.
During the first six months, owing to a strong performance in 2Q18, the tourism sector profits after tax fell to Rs. 38.09 million which was an improvement of 80.43 percent YoY. Revenue was up 34.92 percent YoY to Rs. 11.11 billion. “The hotels sector occupancy levels have improved over the past year, although yields have been challenging across the markets that we operate, especially in Sri Lanka and the Maldives,” Aitken Spence PLC Deputy Chairman and Managing Director J M S Brito said in an earnings release.
Revenue in the maritime and logistics sector increased 5.78 percent YoY to Rs. 5.10 billion, while profits after tax fell 24.56 percent YoY to Rs. 569.49 million.
The strategic investments arm, which mainly has the group’s power generation units, recorded a 63.69 percent growth in its profits after tax to Rs. 691.66 million, while Rs. 9.96 billion in revenue was recorded, up 30.13 percent YoY.
SPEN initiated a waste-to-energy project in August this year that would add 10 MW to the national grid in two years, in addition to providing a long-term solution to the garbage disposal problem in the Colombo Municipality.
Business tycoon Harry Jayawardena controlled Melstacorp Limited holds a 47.17 percent stake in SPEN, in addition to some minute portions of shares through other investment vehicles.
Rubicond Enterprises Limited owns 16.25 percent of SPEN shares, while the government has a 7 percent stake of SPEN through various state-controlled institutions.