JKH June net profit up 2%

Premier blue chip John Keells Holding PLC (JKH) saw its net profits improving only 2 percent for the quarter ended June 30, 2015 (1Q16) to Rs.2.2 billion from a year ago as the leisure, property and plantation segments recorded negative performances, the interim results released to the Colombo Stock Exchange showed. 

The earnings per share was Rs.1.91. After the earnings release, the JKH share lost Rs.1.40 or 0.71 percent to close at Rs.197.00 last Thursday. 

The group has interest in transportation, leisure, property, consumer foods & retail, financial services, information technology and plantation. 

The group revenue rose by just 1 percent year-on-year (yoy) to Rs. 21 billion and the gross profit rose by 9 percent yoy to Rs.5.7 billion. 

The leisure sector, the second largest business segment by revenue, saw its net profit narrowing 18 percent yoy to Rs. 478.3 million. This is despite the 3 percent yoy rise in revenue to Rs.4.65 billion.  Commenting on the performance, JKH Chairman Susantha Ratnayake said the decline in occupancies in city hotels (due to partial closure of Cinnamon Lakeside), the current slowdown in business travelers and increased supply of room inventory within Colombo had a bearing on the performance. 

“However, Cinnamon Red continued to perform above expectations with average occupancies exceeding 75 percent in the period under review,” Ratnayake said.

The property segment closed the quarter with both top and bottom line declining by 1 percent and 3 percent yoy to Rs.770 million and Rs.192 million, respectively. 

This was mainly on account of lower revenue recognition of the ‘OnThree20’ residential development project which reached completion in the previous financial year. 
According to Ratnayake, the construction of the ‘7th Sense’ residential development is nearing completion with all 66 units being reserved as of the end of the first quarter of 2015/16. 

During the period, the company finalized its US $ 350 million syndicated loan facility with Standard Chartered Bank, completing the required debt financing for its US $ 820 million ‘Waterfront Project’. 

Meanwhile, the group’s largest, consumer foods and retail segment increased its revenue by 16 percent yoy to Rs.8.4 billion while net profit surged by 86 percent yoy to Rs.627 million due to growth in consumer spending. 

“The retail sector reported a strong performance aided by an increase in footfall which contributed towards a year-on-year growth in same store sales, whilst average basket values remained stable,” Ratnayake added. 

The transport segment posted a net profit of Rs.545 million, up 20 percent yoy, amid improved margins in the group’s bunkering business and the performance of South Asia Gateway Terminals, where an encouraging growth in higher yielding domestic TEUs contributed positively towards its profitability. 
The group’s logistics business did well due to growth in its active customer base and the improved operational efficiencies. 

However, the transport segment’s revenue declined by 11 percent yoy to Rs.3.3 billion. 

The financial services segment increased its net profits by 20 percent yoy to Rs.262 million, primarily driven by its associate company, Nation Trust Bank PLC’s performance. 

Besides, the group’s insurance unit, Union Assurance PLC too appears to have contributed positively. 

“The overall insurance industry benefited from the increase in disposable incomes with both the Life and General Insurance businesses recording an encouraging growth in gross written premiums,” Ratnayake observed. 

However, the financial services segment top line declined by 34 percent yoy to Rs.1.6 billion during the quarter. 

Meanwhile, the IT segment increased its net profits to Rs.57 million from just Rs.5.7 million a year ago due to growth witnessed across few large clients under business process outsourcing operations and cost management initiatives. 

All other segments classified under ‘others’ saw its net profit plunging by 55 percent yoy to Rs.237. 5 million. This was mainly due to a Rs.389 million gain on disposal of the investment in Expolanka Holdings PLC in the previous financial year. Besides, the plantation segment was negatively impacted by the continuing low tea prices. 

The group’s other operating income rose by 21 percent yoy to Rs. 448.4 million, but the operating expenses were well contained during the quarter. 

Finance cost and finance income declined by 53 percent and 28 percent respectively to Rs.105.6 million and Rs.1.6 billion. During the period, the company re-paid long term loans amounting to Rs.2.7 billion and disposed short term investments amounting to Rs.2.9 billion. 

By June 30, 2015 S.E Captain held 10.6 percent stake (down from 11.1 percent three months ago) in the company while Broga Hill Investments Limited and Paints & General Industries Limited held 10.4 percent and 7.8 percent stake respectively,  being the second and the third largest shareholders. 

Employees Provident Fund held 0.8 percent stake, becoming the 20th largest JKH shareholder.