Financial Times

Harry J eyeing Hilton?
Big dividend expected from Distilleries
By Duruthu Edirimuni
The cash-rich Distilleries Company of Sri Lanka Ltd., (DCSL), owned by tycoon Harry Jayawardena is expected to shortly announce dividends that company officials said would at least be on par with that declared in the last financial year.

"We will be announcing dividends very soon," Damian Fernando, Finance Director, DCSL told The Sunday Times FT, adding that the percentage is not decided upon as yet. "It will be more or less in the same region as last year."

DCSL has maintained a consistent dividends policy for more than 10 years and they will definitely be announcing it within the next two weeks, he said. His remarks came amid speculation by brokers of a hefty dividend by the distiller which they said is believed to be accumulating money for acquisitions.

"DCSL is a cash rich company and the fact they have not released their annual accounts for FY04 and not announced dividends indicates that Harry Jayawardena is looking to accumulate cash for further investments," an analyst said.

Usually DCSL releases its annual report in July or early August. Analysts speculate that DCSL dividends might increase up to 70 percent since dividends by Jayawardena's Aitken Spence conglomerate increased by 33 percent this year.

"As opposed to 45 percent last year, Aitken Spence paid 60 percent dividends this year," an analyst said. The provisional accounts DCSL has released show that it has done extremely well, through consolidating the profits of Sri Lanka Insurance Corporation and disposals of their strategic investments.

DCSL net profits have risen 152 percent to Rs. 2.2 billion this year in the FY ended March 2004 compared to last year's Rs.880 million. The company has made Rs. 600 million through divesting their strategic investments such as stakes in John Keells Holdings. Last year DCSL paid a dividend of 45 percent.

Brokers also speculate that Jayawardena is eyeing a government stake of 64 percent in The Colombo Hilton which the government plans to divest.

Market analysts said the government will introduce 'all or none parcels' to the market of The Colombo Hilton's owning company, Hotel Developers Lanka Ltd., (HDL) which makes it compulsory for a buyer to purchase the stake in its entirety.

Nihal Sri Ameresekere, Chairman, Public Enterprise Reforms Commission (PERC) told The Sunday Times FT that PERC is working towards selling off the government's share in HDL.

"PERC is finalising the divestiture of the government shareholding," Ameresekere said. He said it will be a transaction on the Colombo Stock Exchange (CSE).

HDL is currently facing a derivative action filed in 1990, together with several other law suites. Ameresekere said that a committee which was appointed by the former secretary to the Treasury and which has been reconstituted by the new secretary, Dr. P.B. Jayasundera is looking into the court cases.

"The committee has authorised the Attorney General to undertake the matters revolving HDL and to resolve them without litigation," he said. Brokers said they believe Jayawardena might be trying to build a conglomerate with Distilleries as the holding company.

The fact that Aitken Spence Holdings does not have a five star city hotel has intensified speculation about Jayawardena's interest in the Colombo Hilton. Stockbrokers said that there are a lot of interested parties might bid for the hotel, including foreign buyers.

Sometime ago, there was speculation that John Keells might bid for Hilton, but this was dismissed because the conglomerate already has two city hotels; The Colombo Plaza and Trans Asia with 800 rooms in total.

"There is no need of another city hotel for John Keells," a stock analyst remarked. Analysts said other possible contenders are Ravi Thambiah of Renuka City Hotel and the MJF Group.

"MJF Group was very interested in Lighthouse Hotel sometime ago," an analyst said adding that they are keen to venture into the leisure sector, as it has become a lucrative avenue with tourism booming in the country.

Meanwhile, HDL has been on the default board of the CSE since June 2001, since it has not submitted annual reports for the past 14 years due to the court cases.

"They are in danger of being delisted from the CSE because the company has not submitted a balance sheet since 1994," a stock analyst said. Under CSE rules listed companies must submit quarterly (interim) and annual accounts. If they fail to do so for three years consecutively, they will be delisted.

However, CSE authorities said that Hilton will not be delisted till the court cases are resolved.

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