The John Keells group leisure arm, John Keells Hotels PLC (KHL) saw its net profits for the quarter ended June 30, 2016 (1Q17) declining by as much as 36 percent year-on-year (YoY) to Rs.83.9 million over poor growth in tourist arrivals to the region, the interim results released to the Colombo Stock Exchange showed.
The earnings per share dropped to just 6 cents from 9 cents a year ago. The group profit was hurt the most by the steeper fall in the Maldives operations as the profit after tax fell by 33 percent YoY to Rs.135.9 million.
The KHL group owns and manages hotel properties both in Sri Lanka and the Maldives.
The Sri Lankan operations continued to remain in red but the losses were contained to Rs.52.5 million from Rs.72.6 million incurred during the same period a year ago but the revenues were up by 8.0 percent YoY to Rs.1.06 billion.
The Maldivian hotels and resorts recorded a revenue of Rs.1.45 billion, virtually flat from the same period a year ago.
The group revenue rose by 5 percent YoY to Rs.2.48 billion, while the cost of sales increased by 6 percent YoY to Rs.842.40 million, resulting in gross profits of Rs.1.64 billion, up 4 percent from a year ago.
The quarter saw a one percent YoY decline in tourist arrivals to the Maldives over April and May, while the tourist arrival growth rate in Sri Lanka moderated to an 8.03 percent growth over the three months in 2016, compared to a 14.83 percent growth in 2015.
Meanwhile, the administrative expenses of the group rose by 7 percent YoY to Rs.1.12 billion while the distribution expenses rose by 43 percent YoY to Rs.91.37 billion.
The finance income rose by a strong 45 percent YoY to Rs.41.4 million.
During the period, the group invested Rs.168.0 million on property, plant and equipment in equal proportions in two geographical segments.
KHL may have faced a further dive in profits had the government enacted the 17.5 percent tax rate increase from the prevailing 12 percent through parliament.
“If the proposed tax rates were applied in computing the tax expense (including deferred tax), the group’s tax expense for the quarter, would have increased by approximately Rs.54 million,” KHL said.
As of June 30, 2016, the parent John Keells Holdings PLC held an 80.32 percent stake in the company.
Meanwhile, the state-controlled private sector pension fund, the Employees’ Provident Fund held a 5.39 percent stake being the second largest shareholder of the company.