Higher costs weighed on Sri Lanka’s Access group during the December quarter (3Q18), as the leading infrastructure developer reported significantly lower profits for the period, despite a positive top line performance.
The group reported 30 cents a share or Rs.304.5 million in total earnings for 3Q18, against 63 cents a share or Rs.629.9 million in earnings, marking a 58 percent decline from the same period last year. The Access share ended 10 cents or 0.43 percent lower at Rs.23.10 on Friday.
The group top line however rose by 31 percent year-on-year (YoY) to Rs.6.91 billion but the gross profit ended 30 percent lower as the construction segment costs rose substantially.
The net finance cost more than doubled to Rs.118.9 million during the quarter under review from Rs.49.9 million YoY as the group added Rs.2.64 billion in short-term borrowings during the 12 months to December 31, 2017.
Meanwhile, for the nine months ended on December 31, 2017, the group reported earnings of Rs.1.20 a share or Rs.1.2 billion in after-tax profits, registering an increase of 36 percent against a profit of Rs.1.87 a share or Rs.1.87 billion for the similar period in 2016.
In January, the company approved the payment of second interim dividend of Rs.30 a share.
The segmental results for the period showed the group’s key construction segment increasing its top line by 10 percent YoY to Rs.10.7 billion but the segment’s profit plunged 129 percent YoY to Rs.699.4 million.
The automobile segment represented by the Access group subsidiary Sathosa Motors PLC, the franchise holder for Isuzu vehicles and spare parts in Sri Lanka and SML Frontier, a 50 percent-owned subsidiary of Sathosa Motors, which is the authorized distributor of Land Rover and Range Rover vehicles in Sri Lanka, reported a 60 percent YoY increase in revenue to Rs.6.1 billion for the nine months and the profits rose by 138 percent YoY to Rs.359.2 million.
The Access group’s property development business also fared well with its top and bottom lines rising in triple digits during the nine months.
The property unit’s revenue rose by 145 percent YoY to Rs.335.9 million, while the bottom line rose by 133 percent YoY to Rs.281.5 million.
In January 2017, Access Engineering committed little under Rs.3.0 billion 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 in Blue Star Constructions Private Limited for Rs.800 million to develop a condominium on a one-acre land in Rajagiriya.
As of December 31, 2017, Access Group Chairman Sumal Perera held 25 percent of Access Engineering PLC.
Norges Bank, the central bank of Norway, has increased its stake to 2.91 percent, being the seventh largest shareholder. The foreign funds, T Rowe Price and Tundra Frontier, have also increased their holdings in the company during the third quarter.
The Employees’ Provident Fund, Sri Lanka’s private sector pension fund, has a 2.05 percent stake being the 12th largest shareholder of Access Engineering.